Compliance Monitoring Workshop - Sept. 25

RSG is hosting a compliance monitoring workshop on September 25th at 9:00 am to 1:00 pm in Irvine! It will be focused on basic compliance issues including file documentation and forms, and income and assets. Beneficial for all property managers, compliance staff, owners, and compliance directors. Lunch will be provided. 

Please click the button below to purchase your ticket for the event! 

 

Can Public Agency Land Use Help Save Us from the State Housing Crisis?

Along with being well known for its near perfect weather and plethora of offerings for tourists, California has now also become known for facing one of the worst housing crises in the nation.  A study done in 2016 by the McKinsey Global Institute found that California was ranked 49th out of all 50 states in housing units per capita and losing close to $140 billion per year due to the shortage of housing.  Based on California’s HCD Annual Progress Report data compiled in early 2018, more than 97% of the state’s jurisdictions are failing to meet the goals for developing affordable housing.  This harsh reality has left the state to ponder what resolutions could be utilized for tackling this dire dilemma.

Some recent proposed solutions to the housing crisis have come in the form of the 2017 Legislative Housing package signed into effect by Governor Jerry Brown in September of last year which includes 15 bills aimed at addressing the housing crisis.  However, with the housing crisis being as wide spread and serious as it is, it will likely require solutions in addition to recently passed legislature.  Circulate San Diego recently released a report examining the conversion of the underutilized Metropolitan Transit System parking lots into affordable housing as a solution to the state’s housing crisis.  Their report identified that this plan would not only generate up to 8,000 new homes with 3,000 of those designated for low income use, but the plan also aligns with similar policies and practices already in use by fellow transit agencies like the LA County MTA, Bay Area Rapid Transit and Santa Clara Valley Transportation Authority.

The report from Circulate San Diego begs the question: Could an answer to the state housing crisis lie in the use of other under used public agency land too?  In addition to transit systems, other public agency properties including school districts, utility districts and water districts, may provide some respite in the struggle to reign in the housing crisis.  This possible solution does not come without it’s fair share of challenges which may include the need to enhance or remove the existing infrastructure, zoning restrictions and community engagement of the surrounding area which for low income and affordable housing specific development may give way to objections from those with the “not in my backyard” perspective.  Despite the possible challenges that may lie ahead with the use of public agency land for housing development, state officials may find this a solution worth considering in the struggle to resolve the state housing crisis.

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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Tax Credits - 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.