Rents May Rise Without Redevelopment, Builder Says

A whole section of local government disappeared in February, and that could drive up the price for rental housing, according to one developer.

The South Orange County Economic Coalition met Friday morning in Aliso Viejo to discuss the elimination of redevelopment agencies and how it affects businesses and consumers.

When an estimated 400 California municipal redevelopment agencies were dissolved by the Legislature and a court decision Feb. 2, it trapped about $4 billion in city loans statewide, much of which cities may never recover.

About a fifth of that money would have been used as incentives to developers to build affordable housing units, said Sean Rawson, project manager for developer St. Anton Partners.

"The development climate has changed dramatically over the last six months," he said.

St. Anton specializes in mixed-income developments, and has relied on redevelopment money to help finance its projects.

Rawson predicts a wave of lawsuits against the state, like the one .

What that means for consumers is likely higher rent, Rawson said. The demand for rental homes, already strong, will increase without government incentives to build more, he said.

Every year, renters need 14,000 to 15,000 new homes in California. Over the last two years, developers have built about half that number, of which 5,000 were financed through redevelopment, he said.

That leaves renters scrambling for housing, Rawson said.

"Those people are still going to be forced to find other housing," he said, "whether that means roommate situations [or] household combining.”

St. Anton now has two projects affected by the redevelopment crunch, including a 150-unit project in Fullerton. Rawson counts his company as lucky, and said some developers have as many as 10 projects left in financial limbo.

The state requires local governments to provide affordable housing, but killing redevelopment agencies leaves them without a way to pay for them, said Michael Houston, a lawyer who advises both companies and governments in development and regulation.

He said the elimination of redelopment agencies has "significantly inhibited local governments” to provide state-mandated services.

Rawson said the state will probably fix its affordable housing funding policy, but it could take two to three years.