Redlands City Council approves 164-unit addition to The Venue at Orange and $1.5M loan

REDLANDS, Calif. — The City Council approved Phase 2 of The Venue at Orange housing project during their Oct. 1 meeting, which will add 164 apartment units to an existing 328-unit development at the southwest corner of Orange Avenue and Alabama Street. 

Why it matters: Of the new units, 50 will be designated as very low-income affordable housing for 55 years. 

Details: To support the project, the council approved a $1.5 million interfund loan from the city's general fund to its inclusionary housing fund, which currently has no money.

The loan is an incentive for the developer, LuxView Properties, to cover permit fees and other entitlement costs.

The project utilizes the state density bonus law to exceed normal zoning limits in exchange for providing affordable units.

"This is a pretty unusual opportunity," said Brian DeSatnik, Redlands’ development services director. "It doesn't happen very often that we get a developer who is trying to use the density bonus program the way to the extent that it's being proposed to be used here on this project.”

Several council members expressed concerns about the loan structure but ultimately supported the project due to the affordable housing component.

"I have some reservations and some risk in my decision," said Councilmember Mario Saucedo. "But weighing out what the possibilities are and the opportunity to gain more affordable housing, I'm still a yes vote."

The loan will be repaid with interest to the general fund once other approved projects pay into the inclusionary housing fund, likely within 1-2 years, according to staff.

However, some questioned the wisdom of loaning money from a fund with no current balance.

"I'm just not comfortable taking from Peter to pay Paul," said Mayor Pro Tem Paul Barich. "Maybe it's the same pair of pants, but you're taking out the left pocket, give it to the right pocket."

Developer representatives argued that financial assistance was necessary to make the 164-unit project viable with so many affordable units. An independent analysis determined there was a $1.59 million "gap" in project feasibility.

The feasibility study examined the difference between the cost of delivery of 114 market-rate units and 50 affordable units against the value of the 164-unit project. 

Some during the meeting questioned whether density bonuses should already offset affordable housing costs without additional city funding. The Planning Commission had raised similar concerns when reviewing the project in June. 

The study does not take into consideration the value of the developer’s original 328-unit development, through which the bonus density was calculated. 

“It's not just the density bonus that creates the value. It's the incentives,” said Kathleen Head, the president of Keyser Marston Associates, the organization that conducted the financial analysis. “A project that has 15% very low-income units is entitled to three incentives or concessions. In this case, one of those was the request for financial assistance, the $1.5 million.”

It is important to note that the density bonus statute says that cities are not required to offer financial assistance as one of the three concessions. If financial assistance is not provided, however, the city would then need to provide another concession of equal value to the project. 

Public commenters also voiced worries about increased traffic impacts, especially near local schools. The developer said previous traffic mitigation measures were implemented in earlier phases.

Council members emphasized the rare opportunity to secure 50 affordable units integrated throughout a market-rate development. The affordable units will be dispersed between the existing 328 units and the new 164 units.

The market rate for a one-bedroom unit is approximately $2,300, and $2,700 for a two-bedroom unit. The affordable rent at Venue at Orange would be $790 and $836, respectively. 

"I think it's incumbent upon us as a council to provide that to people who are in need, especially in our community," said Mayor Eddie Tejeda. “And if people in our community who need that can stand to benefit, why not move forward with this?”

City Manager Charles Duggan acknowledged that any loan comes with some risk but said staff believes the risk is minimal. 

“If there is a downturn, we do believe the development will happen in Redlands because there's such a need for housing that it would get paid back at some point, even if it didn't get paid back during the schedule.”

Moving forward: Construction is expected to begin in mid-2024 and take 18-24 months to complete. The loan funds will be provided when building permits are pulled.

The loan to the developer from the Inclusionary Housing Fund will be forgiven as long as the project remains in compliance with the affordability covenants.