Housing and Homelessness

Funding Continums of Care Throughout California

The State legislature is continuing to make housing a priority throughout the state as recently evidenced by the 2018 Housing Package, which increases the funding originally requested in the budget, and also takes strides to make the process of solving for the homelessness crisis more efficient and streamlined.

The Housing and Homelessness package, expected to be adopted June 15, includes $500 million in emergency block grants, which is twice the amount that was originally expected after negotiations and revisions in May 2018. The General Fund block grants are for emergency aid to local governments responding to the homelessness crisis and will include $250 million for Continuums of Care (CoCs), $150 million in direct allocations to cities or counties with populations over 330 thousand, and $100 million allocated based on an area’s homeless population, also toward CoCs.

The choice to fund homelessness programs though CoCs will ensure funding is funneled toward local strategic efforts that comprehensively attempt to work to end the homeless crises specific to those communities. CoCs develop long-term strategic plans and manage year-round efforts to address the needs of the homeless in their specific geographic areas. Recognizing there are a wide variety of causes for homelessness, and thus a wide variety of solutions for homelessness, these continuums provide tailored solutions for their communities. Because of the way CoCs are designed, this emergency funding will be used efficiently as possible at the local level.

In addition to one-time grants for CoCs, the package also moves the Homeless Coordinating Council to the Business, Consumer Services and Housing Agency, and includes $500 thousand to fund the newly housed council, dedicating one third of its staff to homeless youth. It also provides $370 thousand from the Housing for Veterans Fund for two positions to execute loan closings and mitigate litigation costs related to the Veterans Housing and Homelessness Prevention Program.

The package continues to prioritize ensuring the sale of Department of Transportation (Caltrans) surplus property is maintained as affordable housing. This proposal supports Caltrans administration of the "Roberti Act" Affordable Sales Program on the State Route 710 corridor. Finally, the package provides $50 thousand for Gateway Cities Council of Governments for a housing strategy assessment.

The Depot at Santiago: A Great Example of Affordable Housing

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By Joseph Pangalinan, Analyst, and Dima Galkin, Associate

June 14 marked the grand opening of The Depot at Santiago, a 70-unit affordable housing complex with 15 one-bedroom units, 24 two-bedroom units, and 31 three-bedroom units, with 10 units reserved to house formerly homeless families. The project, three-and-a-half years in the making and developed by long-time, well-renowned affordable housing developer C&C Development, is located across the street from the Santa Ana Transportation Center. The Kennedy Commission, a group advocating for families in need of affordable housing, helped secure community approval for the project. The complex holds a community room, a laundromat open to the broader community, an outdoor play area for children, and a dance studio programmed by The Wooden Floor.

We attended the grand opening with Greg. The momentous occasion featured speeches from Santa Ana council members and award presentations with state and national legislators. The Depot at Santiago houses families who make 30% and 60% of the area median income (AMI). The exterior seems indistinguishable from newer market-rate housing in the area. The model unit that was made available for tours during the event showed that the families occupying these units will be able to reside in spacious, dignified housing that provides the same amenities as market-rate housing.

With 70 units and more than 1,800 applicants, the project represents a step in the right direction in addressing Southern California’s affordable housing shortage, but also highlights the long road ahead in providing an affordable place to live for those who need it. If you know of other great examples of new affordable housing developments, share them with us!

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Income Averaging

One of the most recent changes to TCAC’s regulations is allowing income averaging. For those that are unfamiliar with this change, below is a simple breakdown. Currently, TCAC limits affordability to 30-60% of the area median income (“AMI”). The AMI restricts how much the project can rent the units for. With the new regulations, projects can include limits that exceed 60% AMI, up to 80% AMI. However, the average AMI requirement for all units has not changed. So, developers will have to compensate the higher 61%-80% AMI units, with a lower AMI on other units.

With this flexibility the developer can get creative and potentially improve their projects financial feasibility. The new change can bring in more operating income. The additional income will support more debt and help close the gap in project financing, or reduce the soft financing that the project may require from a public jurisdiction. How the developer ultimately uses this regulation change to revise the projects affordability mix is up to them. However, this appears to be a very powerful tool for proposed developments with project-based vouchers.

 

Will Opportunity Zones Be the Key to Economic Development in Low Income Communities?

By Alex Ostrowski, Research Assistant, and Dima Galkin, Associate

The passage of the Tax Cut and Jobs Act of 2017 brought a new tax incentive program that may motivate taxpayers to increase their investments in distressed communities. This economic development tool allows each state to designate certain high poverty census tracts as Opportunity Zones and encourages taxpayers to invest in these zones through “Opportunity Funds,” offering three primary benefits.

The program is similar to earlier tax-incentivized programs, like empowerment zones and enterprise zones. First, taxpayers can defer paying tax on capital gains realized from the sale of an asset if it is reinvested in an Opportunity Fund. Taxpayers can also receive an increase in basis for capital gains reinvested, allowing them to exclude up to 15% of the original capital gain from taxation. Finally, a taxpayer can receive a permanent tax exclusion from capital gains realized from a sale or exchange of an investment in the Opportunity Fund if that investment is held for at least ten years.

Opportunity360 created a mapping tool to identify which census tracts have been designated as Opportunity Zones, including 879 in California. Recent opinions on the new program have been mixed, as seen in this list of commentaries gathered by James Brasuell of Planetizen.

It’s unclear what the lasting impact of Opportunity Zones will be for the designated census tracts, but there is hope that these low-income communities will see a heightened level of redevelopment investment in the coming years, stimulating an increase in tax revenue, subsequent long-term investment, and improved quality of life.

Does your community include an Opportunity Zone? What impact do you think the legislation will have on investment in low-income communities? Contact us to share your thoughts or to get more information.

Housing California Conference

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The affordable housing community showed up in droves to the 2018 Housing California Conference. With a record attendance, it was clear to everyone the affordable housing crisis has gained significant ground.

Six candidates for California State Governor attended this year’s conference. They are all fully aware of the affordable housing crisis. There was a variety of solutions. From expediting the development process to bringing back redevelopment. We will soon find out the State’s stance on tackling the affordable housing crisis.

This year’s conference was also an opportunity to brush up on the latest trends. The workshops were plentiful. It was a great opportunity to learn about new and upcoming funding sources. HCD has relief coming are way in SB2 and SB3. Plus, an additional $2 billion will be available for supportive housing. We may want to brush up on TCAC’s new Opportunity Map. Benefits to projects located within high opportunity areas include site amenity points, increase in threshold basis limit, and a tiebreaker increase.

From the coffee and conversation with California’s gubernatorial candidates to the variety of workshop sessions, 2018’s Housing California Conference did not disappoint. And let’s not forget about the Housers After Dark event…one of the best yet.  RSG would like to thank everyone for stopping by our booth and saying hello. And a big thanks to those who participated in our game. We posed the following questions to participants:

  • What Percentage of California renters are paying more than 30% of their income on housing? Answer: 50%
  • What percentage of California owner-occupied households are paying more than 30% of their income on housing? Answer: 32%
  • Which county in the most cost burdened? Answer: Los Angeles

Out of the many participants who guessed correctly, we chose one lucky winner. Congrats to Anna Lam who received a $100 Amazon Gift Card.  This year’s Housing California Conference was the perfect blend of innovation and education and we look forward to seeing what next year has in store.

Thinking Ahead: Housing Successor Needs

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California has an increasing need for affordable housing but not enough public dollars to fund that need.  In response to a growing affordability crisis, the State Legislature is paying closer attention to existing funding sources and housing assets.  This means housing successors are under increased scrutiny to maximize their assets on a local level.  Even agencies caught up with local reporting need to think ahead to leverage assets and remain in compliance. 

Are you sure your housing successor complies with the law?  Are there outstanding items you need to address?  RSG will be sending each of our housing successor clients a Housing Diagnostic that evaluates your agency’s needs and identifies steps to maximize assets, assist low income households, and ensure future compliance.  Meeting income and age targets, taking action to dispose of or develop properties, spending funds to avoid an excess surplus, and SB 35 streamlining are a sample of the topics covered.  Producing results is more important than ever as HCD and State legislators take a closer look at existing housing funds.  If RSG does not consult your housing successor but you are interested in a diagnostic, contact Suzy Kim, Senior Associate, at skim@webrsg.com or (714) 316-2116.

Don't Miss out on Funding Opportunities - Complete your Housing Element Annual Progress Reports!

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With the passage of the 2017 Legislative Housing Package, the State has placed more importance on local government compliance with Housing Element regulations and the submission of Housing Element Annual Progress Reports (Annual Reports). Senate Bill (SB) 35 states that non-compliance with Annual Reports will now require cities and counties to use a streamlined and ministerial process for approving multi-family housing developments that satisfy the jurisdiction’s planning standards and requirements. Non-compliance occurs when either the jurisdiction has not issued enough building permits by income category to satisfy its regional housing need, or because it has failed to submit two consecutive Annual Reports.  Additionally, the California Department of Housing and Community Development (HCD) has indicated that non-compliant jurisdictions may not be eligible to apply and receive funding for affordable housing through State administered programs, such as the funding generated from SB 2: Building Homes and Jobs Act.

 

As of February 25, 2018, HCD has determined that ALL but 12 cities and counties are subject to SB35 streamlining provision. HCD updates this information at least quarterly to incorporate new or corrected data provided by jurisdictions.

 

Annual Reports are due to HCD by April 1st each year.  Although this deadline has passed, it is not too late to get into compliance.  Some cities are retroactively filing reports for 2015 through 2017.

 

Charter cities should note that even though charter cities were not required to complete Annual Reports until 2018, HCD believes that SB 35 streamlining requirement applies if a charter city has not completed an Annual Report for the last two years (2016 and 2017 ).  We recommend that if you have not met this requirement that you do so now.

Contact Suzy Kim, Senior Associate, at skim@webrsg.com or (714)316-2116, if you have questions or need assistance preparing your Annual Report to retain local control over housing development and avoid court sanctions.

 

Rolling up our Sleeves in 2018

We are excited to highlight RSG’s commitment to improving surrounding cities through our participation in a variety of professional organizations.  From positions of leadership to committee membership, RSG continues to find new ways to impart its insight and passion for helping and improving communities across California. 

California Association for Local Economic Development (CALED) -  RSG Principal Jim Simon serves as a committee member on CALED’s Legislative Action Committee and Tax Increment Financing Technical Committee.  Through his involvement with both committees, Jim has been instrumental in the drafting of proposed legislation in 2018 that may streamline and reduce costs for formation of enhanced infrastructure financing districts (EIFDs).  RSG Senior Associate Suzy Kim also serves as a member of CALED’s Tax Increment Financing Technical Committee.

San Diego Housing Federation (SDHF) – RSG Principal Tara Matthews has recently been appointed to the San Diego Housing Federation Policy Committee.  Through her contribution of leadership to the organization, Tara will be helping in the development and implementation of policies that cover a variety of topics from affordable housing in San Diego to local and state legislation.

Urban Land Institute (ULI) – RSG Principal Hitta Mosesman currently serves on ULI’s Women’s Leadership Initiative Council as a committee member.  Through her work with the organization, Hitta helps to further the organization’s overall mission of creating a path for the advancement of women in the real estate industry.  RSG Associate Dima Galkin is a member of ULI’s Public Realm Initiative Council, which aims to provide insight to all ULI members on best practices, case studies and innovations taking place within the industry. 

RSG Senior Analyst Brett Poirier serves as a member of ULI’s Young Leaders Group which looks to cultivate the use of ethical development practices and responsible land use in the industry’s up and coming leaders.  Brett is also a committee member of ULI’s Technical Assistance Panel, which performs outreach services through members volunteering their time to help address community land use issues.

Out and About

February 20-23rd - RSG will be continuing their presence this year at the annual CSMFO Conference being held in Riverside, California.  Hitta Mosesman, Principal, will be participating in a panel titled “Cannabis – Is it a solution to your General Fund Deficit?”  She, along with fellow panelists, will help shed some much-needed light on the decision for cities to utilize the recent law passage permitting the sale, cultivation and manufacturing of recreational cannabis to help subsidize funding for general fund budget deficits.  RSG will also host a booth in Exhibit Hall D where those interested can inquire about the various product and service lines we offer.

March 7-9th - RSG will be an exhibitor at the upcoming annual Housing California Conference in Sacramento, CA.  As a leader in the affordable housing industry, RSG looks forward to joining others at this event where industry leaders work together to make a collective positive impact in the housing industry.  Tara Matthews, Principal along with Greg Smith will be attending the conference and would love for you to stop by our exhibit to talk “housing”.

March 14-16th - RSG will be participating in CALED’s 38th Annual Training Conference held in Monterey, California as both a presenter and exhibitor.   The conference provides a collaborative space where leaders from California’s economic development industry can come together to network and learn new industry tools.  Jim Simon, Principal and CALED committee member will take part in a discussion titled “Do We Have Redevelopment Back?” in which the panel will discuss the tools available to economic developers on real estate projects and what lies ahead.    RSG’s Suzy Kim and Dominique Clark will also be present at our exhibit to discuss RSG’s strong presence in the Economic Development Industry as well as the products and services we offer. 

New Consequences for Housing Element Annual Reports

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The 2017 Legislative Housing Package passed 15 bills that enact new housing regulations in California.  Assembly Bill (AB) 879 and Senate Bill (SB) 35 placed increased importance on Housing Element Annual Progress Reports (Annual Reports) that are due to HCD by April 1 each year.  New consequences for failing to complete Annual Reports include court sanctions and losing local control over affordable multifamily housing development entitlements to a new streamlined approval process.   If your jurisdiction is behind on its Annual Reports, it could lose local control over affordable multifamily housing development entitlements as early as this year.

Charter Cities Must Complete Report

·         Charter cities used to be exempt from submitting an Annual Report.  They must now submit an Annual Report beginning with the 2017 report due April 1, 2018. 

Failure to Submit Annual Reports

·         Failure to submit an Annual Report within 60 days of the due date could result in court orders to compel compliance, and court sanctions if not completed as ordered.

·         Failure to submit the Annual Report for two or more consecutive years triggers SB 35 provisions streamlining affordable multifamily housing development approvals, losing significant local control over the entitlement process. 

New Annual Reporting Requirements

Local jurisdictions need to track new housing production data in 2018 to include in the Annual Report due April 2019, and ongoing years.  This includes data on:

·         Housing Development Applications and Approvals

·         Housing Production in progress (via entitlement, building permit, or certificate of occupancy)

·         Sites Identified or Rezoned to Accommodate RHNA Need (related to “No Net Loss” provisions passed by AB 166)

HCD will use new Annual Report data to determine if a locality has not issued enough building permits to satisfy its RHNA allocation by income category for a reporting period, subjecting it to SB 35 streamlining provisions until the next reporting period. 

Annual Reports due by April 1 must continue to include the Housing Successor Annual Report for redevelopment housing successors that are not Housing Authorities (Housing Authority reports are due by October 1 and December 31).

Contact Suzy Kim, Senior Associate, at skim@webrsg.com or 714.316.2116, if you have questions or need assistance preparing your Annual Report to retain local control over housing development and avoid court sanctions.

Written by Suzy Kim, a Senior Associate at RSG