Laguna Beach provides gap funding for affordable housing project on church property

Laguna Beach has pledged approximately $6.7 million in financial assistance for an affordable housing project to be built on the site of the Neighborhood Congregational Church.

The City Council action taken Wednesday comes ahead of a fast-approaching July 21 deadline, set by the California Tax Credit Allocation Committee, for applications to be submitted for projects seeking low-income housing tax credits.

Related California, the developer, initially submitted plans for a 43-unit development in March 2025. A revised, scaled-down project was submitted in December, including 29 units and a 41-space parking garage on the property at 340 St. Ann’s Drive.

Planning commissioners approved entitlements for the project on June 3. The City Council then approved a parcel map — merging four parcels into two — at its July 7 meeting.

The affordable housing project is to be built on one parcel, while the other will serve the religious institutional use of the Neighborhood Congregational Church and the continued use of a Montessori school.

Mayor Mark Orgill looked back on the timeline of the project, pointing to different community interests that included preserving the church buildings and the school, as well as mitigating impacts on the neighborhood. He raised concerns about the potential for builder’s remedy, which limits local control on approval of housing projects that meet affordability requirements, for communities found to not be making an effort to participate in building affordable housing.

“If we scrap this today and we walk away from it, does a developer come in next year and build a building that’s four or five stories tall, a big square, rip down the church, rip down the school?” Orgill posited. “Then where are we going to be? That means a lot to me … I would really hate to see that property overdeveloped, so I think that we’ve come to a place where we have a nice compromise. It is costing us money.”

City staff prepared a funding strategy that included a $2.5-million award from the California Department of Housing and Community Development. The city would provide a $2.5-million match via its housing and housing in-lieu funds.

Additionally, $740,471 would be offset by development fee waivers, with gap loans of $523,860 for the purchase of six public parking spaces in the garage and $443,190 for the deferral of Catalina Street widening and utility pole relocation making up the rest.

Laguna Beach is tasked with planning for 394 units in its regional housing needs assessment. The current housing element cycle runs from 2021 to 2029.

The project includes 28 income-restricted affordable units and one manager’s unit. That breakdown includes nine units for households earning up to 30% of the area’s median income (extremely low income), three units for those earning up to 50% (very low income), and 16 units for residents whose income is up to 60% of the AMI (low income), according to a staff report.

“The level of contribution … the staff report talks about a $230,000 per unit subsidy,” Councilmember Bob Whalen said. “... I think about it a little differently. Take out the state grant money, and then say, ‘What’s the subsidy?’ The subsidy, really, from everything else the city is doing, including the fee waiver and all of that, is more like $145,000 per unit. You’re not going to get affordable housing anywhere in the state of California for a per-unit subsidy lower than that. It just doesn’t happen.”

Councilman Alex Rounaghi, previously employed by Related California, did not participate in the special meeting, nor did City Manager Dave Kiff, who resides within the noticing area for the project.

The vast majority of public testimony on Wednesday fell in favor of the project, with several audience members holding up signs that read, “I’m a fan of affordable housing.”

While the revised design preserves the church buildings, including Bridge Hall and the sanctuary, there was concern from the public that the church would not commit to keeping the sanctuary for the long haul.

“The word that comes to mind for me is ‘protective,’” Mayor Pro Tem Hallie Jones said in supporting the project. “I think it is our role as council members to protect the city, and we’re protecting the city from these state mandates by building affordable housing, but we’re also protecting our community by making spaces for people who add to the fabric of our community, by making spaces for those folks to live.”

Jones expressed her enthusiasm that the project endeavors to protect “historic resources.” Church representatives have so far declined to put the sanctuary on the city’s historic register.

“I think it is the city’s legal and deeply moral obligation to contribute our resources to affordable housing, and I think that this is the right way to do it,” Jones said. “I’m concerned that the sanctuary, itself, will not be preserved long term. I want to look into how we do that. How do we make sure that this historic structure, that we have fought hard to protect and Related [California] has worked hard to build a project around, how do we make sure that is going to be protected long term?”

Pastor Rodrick Echols, of the Neighborhood Congregational Church, issued a statement after the city approved gap funding for the project.

“We are deeply grateful to the City Council for its support of this important community investment,” Echols stated. “This development reflects years of thoughtful planning by our members, and significant community engagement. The Council’s action brings us closer to sharing our land with those who help make Laguna Beach the vibrant and diverse community we all value.”