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Saturday, July 30, 2022

California cities have millions for affordable housing. The difficulty is spending it

Natalie Hanson

While California cities have more money than ever from the government for affordable housing, many struggle to get projects off the ground.

OAKLAND, Calif. (CN) — Affordable housing is at a premium across the country, but a crisis of demand in California has experts scratching their heads at how cities will navigate an increasingly expensive and time-consuming system to improve supply.

“If housing prices are high and no one is coming to you with a proposal, you are probably sending the message that you are not accommodating to development,” UCLA housing researcher Mike Manville says. He is one of several experts who say California cities may have piles of money to spend on the construction of affordable housing, but they have to make strategic policy changes if they really want to tackle their housing crises.

California is unique because cities needing affordable housing rely heavily on competitive federal and state funds. City leaders can apply for funding from the Community Development Block Grant Program — which awards housing grants annually — or allocated by the governor, depending on the projects they want to build. They also compete by demonstrating why and how they will address the need for housing in their community. The Legislature also recently freed hundreds of millions for affordable housing projects meeting certain criteria, adding another level of competition as the housing crisis worsens.

Some San Francisco Bay Area cities are pursuing aggressive policies to create restricted-price housing, combating a growing affordability crisis and historically exclusionary policies.

The Oakland City Council has approved about $60 million in state funding for affordable housing projects and $15 million from annual funding sources. The council recently voted to pursue $200 million in state affordable housing grants as well.

A table showing how many funding sources are being used is an example of how many pieces of funding come together into one proposal for affordable housing to qualify for using state dollars -- in this case, Oakland's Project Homekey proposal. (City of Oakland/Courthouse News)

Housing and Community Development director Shola Olatoye said the city has received about $322 million from the state since 2020. In two years, the city has leveraged about $1.8 billion with state and county money, tax credit bonds and private loans. The city has also discussed a ballot measure asking voters if the city should pursue $850 million to create public housing and improve city streets and facilities.

San Francisco has received at least $449 million in state funds for affordable housing since June 2021, Housing Department spokesperson Anne Stanley said. 

She said the city has streamlined how affordable building proposals move through the system, with requirements for developers to designate some units as below-market — or pay a fee or dedicate land for housing.

A graph demonstrates how disproportionate San Francisco's rate of building housing is across income levels, building more than the needed amount of homes priced for one income level, but well below the needed amounts for a range of lower income levels. (City of San Francisco / Courthouse News)

Sacramento has adopted a Housing Trust Fund using affordable housing dollars from a budget surplus. Community development spokesperson Kelli Trapani said the city invested $31.5 million in 2020 for 644 units that began taking shape in July. 

“These resources have helped projects obtain the necessary financing to start construction sooner and be more competitive for state and federal resources,” Trapani said. The city has also added policies to incentivize creating “naturally affordable” housing, where new construction spurs price drops.

It’s a common approach also seen in San Diego. Housing Commission vice president Scott Marshall said via email more than 2,000 affordable units were greenlit for financing last year, with about $16 million identified for more affordable rentals.

Experts say while these are good steps, the major question will be how quickly new housing appears with limited land available for traditional public housing.

Ryan Finnigan, senior research associate at Berkeley’s Turner Center, said research supports creating housing of all price levels to relieve pressure by opening up older housing. Cities must pair new housing with strong tenant protections to decrease displacement of people with lower incomes than those who move in. 

But in the Bay Area, resistance is high from residents who want their communities to look the same as they always have

“Anywhere you are, there’s going to be somebody that doesn’t want affordable housing,” Finnigan said, adding local debates about affordable housing seem to focus on finding only one “optimal strategy” — leaving many proposals dead in the water.

Manville, the UCLA researcher, agreed that while Senate Bill 9 — which among other things allows homeowners turn their single-family parcels into multiple units — was a good start, officials need to free up land to accommodate larger complexes with denser housing.

Berkeley lecturer David Garcia said because California cities can no longer leverage future tax revenues for affordable housing, many rely on passing ballot measures for subsidies.

He said research supports new housing as a way to slow displacement due to gentrification — when wealthier people move into historically low-income neighborhoods and residents are priced out. New housing can also help combat property companies that buy older buildings to raise rents, he said.

“The presence of market-rate housing actually stops displacement, because higher income folks would move to these vulnerable neighborhoods whether or not there’s new construction,” he said. 

Garcia praised San Diego and Sacramento for efforts to increase density, or how many units are on residential lots – compared to Bay Area cities, where land is extremely expensive and labyrinthian building processes may leave restricted-price units “stuck in the pipeline.”

(Image by David Mark from Pixabay)

And in California, anyone can object to projects for any reason, often paralyzing developments. “It is oftentimes the loudest voices who have the money to pay for attorneys, who end up stalling projects, despite strong approval from the community at large,” Garcia said.

Meanwhile, he said cities’ onerous processes to get housing projects off the ground indicate a failure to excise old policies that rooted in racism.

“Examining the utility of that policy today in the face of a staggering housing crisis, grappling with the nefarious origins, is to me a no-brainer,” he said.

Olatoye said Oakland is aware that like other Bay Area cities, it is not producing enough units to meet demand, especially for low-income renters. She said the city relied on tools like Newsom’s housing accelerator fund — a $1.75 billion bridge funding investment to move projects to house homeless and very low income people — to start projects which sat in a queue for years for lack of money.

Oakland is “a city of renters” with 60% of its residents living in rental units. It also has a much lower rate of homeownership among Black and Latino residents, Olatoye said, which underscores the need to build affordable housing throughout the city.

“That is the legacy of segregation and everyone is going to have their share of an economically diverse city,” Olatoye said. “East and West Oakland were the target of decades-long segregationist housing practices. Now we have an opportunity to both redress those practices and more equitably distribute housing throughout the city.”

Kevin Burke of the nonprofit East Bay for Everyone said the state’s many funding sources make it expensive and time-consuming to propose affordable projects. A bill to consolidate funding sources, Assembly Bill 2305, failed in the Legislature “because each agency doesn’t want to give up its pot.”

There may be other forms of relief coming through the Legislature.

California Housing Partnership president and CEO Matt Schwartz said Assembly Bill 2011 could streamline moving affordable developments into commercial and retail areas. He said a proposed amendment to the California Constitution could “correct” the state’s struggle to create ongoing funding sources for affordable housing. The state hands out pieces of funding from budget surpluses, which means nonprofit housing providers are never sure how much funding is on the table. 

This would set aside 5% of general fund revenues each year to use to combat homelessness and for permanent affordable housing,” Schwartz said of the proposed amendment. “They (developers) could move the pipeline forward, without the uncertainty and the ‘stop and start’ nature of what exists today.”

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