Affordable Housing

Point-Counterpoint!

And now let’s join RSG Principals Tara Matthews and Jim Simon do their impression of Jane Curtin and Dan Aykroyd debating the changes they’d like to see to help California communities, moderated by Suzy Kim, Senior Associate. 


Suzy:  So, we know the new “gigamajority” of Democratic control in the California State Legislature and a new governor have got people buzzing about more tax increment financing tools to bring capital back to local communities.  With EIFDs, CRIAs, NIFTI’s and other tools, does California really need “Redevelopment 2.0” and “Affordable Housing and Infrastructure Agencies” proposed by Assembly Bill 11 (Chiu), or Local-State Sustainable Investment Incentive Program proposed by Senate Bill 5 (Beall)?  We’ve asked two of our Principals to debate these questions.  First off is Tara Matthews, Principal from our Vista office.  Tara’s work tends to focus around the areas of affordable housing.  Tara is also a member of the San Diego Housing Federation.  Tara will be debating with Jim Simon, Principal from our Irvine office who is also an Advisory Boardmember and technical committee co-chair of the California Association for Economic Development (CALED).

Starting with you Tara, how do you feel the current tools available to communities meet the needs for affordable housing and economic developers?

Tara: What tools? Just kidding, there have been efforts to generate a permanent source of funding, but I honestly don’t think they are very effective which is why we haven’t seen them utilized by many communities.  Many of the tools double or even triple dip on revenue generated in communities, meaning that the “bucket of money” everyone is fighting for is very limited. This coupled with the costly process to get your hands on the bucket of money makes the tools very inefficient.
Jim: Like Tara, I’d agree that the current tools offer limited financial incentives to communities unless other agencies participate. 

Suzy: And why are these issues in your opinion?

Jim: Because we are asking a single taxing agency to bear the risk for stimulating economic growth that benefits all taxing agencies, as well as the state itself.  This is particularly true in the case of economic development investments that can expand the economic base, provide living wage jobs, and fund needed infrastructure investment.  As it stands now, communities with the greatest needs aren’t afforded any advantage over those that simply have the fortune of having a larger share of the property tax base.
Tara: Plainly stated, there is no great incentive to use these tools to address economic and housing issues. After you run the numbers and look at various legal requirements and restrictions, the drawbacks often outweigh the benefits.  Many of the other taxing agencies that have a greater share of the revenue just don’t want to part with it.

Suzy: What kinds of changes do you feel are needed to make these tools better?

Tara: Finding a way to make these tools benefit more of the taxing agencies and thus enticing more participation to reach common goals. One idea is to more clearly define a pass-through payment formula and removing “opt-in” provisions.  Thus, making it easier to create a permanent financing source for capital projects.
Jim: I think AB 11 needs to establish some formula for any pass-through negotiations, with either a fixed formula or a maximum share. 

Suzy: Ok, let’s talk about SB 5 and AB 11.  Do you feel that either of these bills is going the help communities with affordable housing or economic development?

Jim: I’m not sure yet.  I like the idea of the State finally getting involved in supporting community development again, but there are a lot of unknowns here.  
Tara: TBD. SB 5 is very intriguing since it’s the most different from existing tools and provides a clearer path to funding. But I agree with Jim that it is exciting to see the focus on community development again coming from the State Legislature.

Suzy: What would you like to see changed in SB 5 or AB 11 to improve the situation?

Tara: Lessen reporting requirements if the entities illustrate collaborative solutions or meet specific goals, such as creating affordable housing in proportion to RHNA requirements working in collaboration with County or State entities, while improving surrounding infrastructure.  I guess an easy way to say this is – reward good behavior.  Some of the administrative burdens placed on communities makes it difficult to administer and takes away funding that could be used towards completing projects.
Jim: First, it feels like the amount of oversight the State needs to play is a bit heavy to me.  I also think they need to give local communities an opportunity to make a program work by requiring some basic level of participation from at least a few taxing agencies. And, maintenance should be an allowable use of expenditures.

Suzy: Finally, how much should be set aside for affordable housing in your opinion?

Jim: I personally feel that anything more than 50% is too much.  There is very little funding available for local communities to create a sustainable economic development program to combat issues like gentrification, stagnant wages, and limited wealth building in communities. 
Tara: Well affordable housing is my passion and I would love to see as large of a set-aside as possible.  But I also recognize that the communities must balance multiple issues and failing infrastructure is a major issue. Additionally, once housing is built those residents need a thriving community to live in, meaning that economic development is also a critical need. So, I think I would be willing to say that a 50/50 split would be fair, though I’d like to see the 50% that isn’t set-aside for housing spent in or around areas that are serving affordable housing projects and housing development.

Suzy: So are you saying that affordable housing funding is a bigger priority than economic development?

Tara: Since you are putting me on the spot, I have to stay true to my passion…yes.  But I feel that a thriving community is at the intersection affordable housing, a strong business community, and workforce training options.  When it comes to economic development, everything is interlinked.
Jim: I believe affordable housing is a key aspect of a successful economic development program, but not the only one.

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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AB 1598: A New Affordable Housing Tool?

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On October 13, 2017, Governor Brown signed Assembly Bill (“AB”) 1598 into law. Legislators have said that the bill, which became effective on January 1, 2018, creates a new financing tool for affordable housing. But what is this new tool exactly?

In some ways, the tool isn’t really new at all, but rather the expansion of an old tool. Building upon AB 2 from 2015, which allowed cities and counties to create Community Revitalization and Investment Authorities (“CRIAs”), AB 1598 allows cities and counties to create “affordable housing authorities.” Affordable housing authorities are authorized to use property tax increment and sales tax revenue contributed by consenting taxing entities to finance low- and moderate-income housing and affordable workforce housing.  Authorities may issue bonds payable from the pledged revenues. Schools and successor agencies, however, are not permitted to contribute from their share of tax revenue.

Affordable housing authorities must adopt and then implement a detailed affordable housing program. Unlike former redevelopment agencies, the authorities are not required to spend proceeds only in “blighted” areas. However, housing funds expended must be spent in proportion to the city/county’s Regional Housing Need Allocation (RHNA) requirements. A board made up of elected officials and local residents or employees is required to oversee each affordable housing authority.

If you are interested in learning more about whether your community could benefit from forming an affordable housing authority, please contact us at RSG today. We’re happy to help.

Written by Dominique Clark, an Associate at RSG

CALIFORNIA LEGISLATURE PASSES BILLS DESIGNED TO COMBAT AFFORDABLE HOUSING CRISIS

More than a dozen bills designed to help communities in California combat an affordable housing crisis were approved by the California Legislature on Friday, September 15, 2017 and sent to the Governor for his approval.  This past year marks the Legislature’s “Year of Housing,” wherein more than one hundred housing proposals were introduced and debated in order to provide for assistance in funding for affordable housing development, streamlining local government approval of housing projects, restoring authority to impose inclusionary housing requirements on private housing developers, and creating more state-wide Anti-NIMBY laws.  Governor Brown is expected to sign at least three major bills in the package:  SB 2, SB 3 and SB 35.

SB 2, by Sen. Toni Atkins, D-San Diego, would provide for a “permanent source” of funds for affordable housing development through the creation of a $75 fee on most recorded documents (except for home sales).  This fee is expected to generate $200-300 million per year that can be used for affordable housing development.  Half of the funds generated in 2018 would be made available to local governments for updating planning documents and zoning ordinances in order to streamline housing production, and the other half would go to the state for homeless assistance programs.  Beginning in 2019, 70% of the funds would be directly allocated to local governments for a variety of affordable housing programs, and the other 30% would be used by the state for mixed income multifamily housing, farmworker housing and other programs.

SB 3, by Sen. Jim Beall, D-Campbell, would place a $4 billion statewide housing bond on the November 2018 state ballot, with bond proceeds to be used to fund a number of existing housing programs:  $1.5 billion of the funds would go to the state’s Multifamily Housing Program for affordable housing development loans, $1 billion of the funds would go to the state’s CalVet veteran’s home loan program, with the remainder of the funds allocated for the CalHome down payment, farmworker housing, transit-oriented development, mortgage assistance programs and infrastructure supporting infill housing. 

SB 35, by Sen. Scott Wiener, D-San Francisco, creates a streamlined approval process for housing developments in communities that have not approved enough housing to keep up with regional fair share housing goals.  Eligible projects do not need to obtain conditional use permits and can take advantage of lower state-mandated parking standards.  To take advantage of this process, the proposed development must be on an urban infill site, the development must not be in the coastal zone, agricultural land or other sensitive areas.  Furthermore, the developer taking advantage of this streamlined process (an optional right for the developer) must pay prevailing wages and, in some cases, certify that it will use a “skilled and trained workforce” to complete the project.  Critics of SB 35 believe that it will impose extraordinary costs on affordable housing construction, thus hindering the legislature’s ultimate goal.

Governor Jerry Brown has until October 15, 2017 to sign or veto these bills.  Do you think these bills will adequately fix housing issues in your local community?  What are your local communities doing to address these issues, and how do these actions align or conflict with these proposed bills?  We would love to hear your thoughts.  Please share them with tmatthews@webrsg.com.

This blog was Co-Authored by Millay Kogan, RSG Analyst and Tara Matthews, RSG Partner

RDA Development and Disposition Deadline

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Warning! Your deadline may be just around the corner. Successor agencies have five years to develop land transferred from the former RDA. For many, this deadline is quickly approaching. Not only is it time to file for the five-year extension allowable by law, but it is also time to create a development and disposition plan for the remaining assets.

For example, the City of Pinole recently hired RSG to outline for them various funding options for their remaining former RDA housing assets. The City has over $1.0 million[DC1] , in addition to other real estate assets designated for affordable housing. Like most cities in California, Pinole is in need of additional affordable housing units, as well as upgrades to the existing affordable housing stock.

RSG presented seven options to Pinole that fit the community’s character and need. With the significant disparity between affordable and market rate rents, purchasing affordable housing covenants for 55 years would cost about $400,000 per unit! Thus, the $1.0 million could result in as little as three affordable units, making this option the least cost efficient of the seven options. The most cost effective option would be creating an affordable rehab program for seniors, as this would net the most affordable units[DC2] . This strategy would also address the need to upgrade the existing housing stock and help the City’s aging population. However, the option that leverages the City’s housing assets to the fullest extent is to combine the housing funds with an existing housing property. RSG is working with the City to explore this option further and potentially help them select a developer to build affordable housing units. 

Written by Greg Smith, an Associate at RSG, Inc.

TCAC Round 2 of 2017

A total of 91 proposed affordable housing projects are hoping to win 9% federal tax credits in California according to second round data from the California Tax Credit Allocation Committee (TCAC). In September, TCAC will announce the selected projects to receive financing from the largest source of affordable housing subsidies available in California.

Awards are typically provided based on tiebreaker scoring and allocations to certain targeted categories (or “buckets”), including rural and at-risk projects.   A senior project in the city of San Diego had the highest tiebreaker score at 76.166%. A senior project in the city of Placerville had the lowest tiebreaker score at 4.978%. This project competes in the rural bucket. The average score for the rural bucket is 25.175%. The rural set-aside has the lowest average score of all set-asides. The at-risk set-aside has the highest tiebreaker score at 60.300%.

Projects that do not win tax credits in set-aside buckets compete in geographic buckets. Of all geographic buckets, the South and West Bay Region was the most competitive. The average score in this bucket is 68.412%. The city of Los Angeles is the geographic bucket with the lowest score at 38.265%. This round the San Francisco County region had only one submission, despite being an area with great demand for affordable housing. On the other hand, the Central Valley Region had ten applications (the most of geographic buckets).

The largest development that was submitted is 180-units, and the smallest was 10-units. Seventy-six of the projects are new construction, and 12 are acquisition rehab. Most applications are spread throughout the geographic regions. However, several cities had more developments than others Los Angeles had 5 submissions, 4 in San Diego, and 3 in Santa Ana.

Although 91 projects submitted for tax credits this round, only a small portion will be funded this year. This does not seem like a lot given the serious need for housing and California’s significant low-income population. Hopefully, we will have greater success with State and Federal Legislatures doing more to provide subsidies and other incentives to build additional units.

Written by Greg Smith, a Senior Associate at RSG, Inc.

Proposed Affordable Housing Bills

The affordable housing crisis in California is a well-known fact and over 130 bills have been proposed by State lawmakers to address and hopefully improve one of the State’s most urgent needs.  The link below to a recent Los Angeles Times article provides a brief and basic summary of all proposed bills:
http://www.latimes.com/politics/la-pol-sac-housing-bills-taxes-affordable-20170319-story.html
 

RSG Principal Hitta Mosesman Featured Speaker at Housing CA Conference (Sacramento) - March 2017

Housing California is the State’s leading housing organization with a mission to educate lawmakers and others on stabilizing housing, creating more housing opportunities, and implementing proven solutions that reduce the number of homeless men, women, and children in communities. The focus of Housing California is Land Use, Budget and Funding, and Homelessness.  The annual 2017 Housing CA conference, with over 1,400 in attendance, was “Block by Block – Improving Neighborhood Health.”   Workshops focused on all aspects of housing and homelessness, including financing, funding sources, policy, advocacy and new and emerging affordable housing solutions.

Hitta Mosesman, partner and principal with nearly 20 years of consulting experience in affordable housing, finance, real estate and community development, was a featured panel speaker on Community Land Trusts (CLTs) as an innovative method of ensuring affordable housing for generations.  The panel included Mark Asturias, Executive Director of the Irvine Community Land Trust (and City of Irvine’s Housing Manager), Jean Diaz, Executive Director of the San Diego Land Trust and Stephen King, Executive Director of the Oakland Land Trust.  The panel’s joint presentation focused on explaining CLT structures and benefits, as well as the different CLT models (home ownership, rental and co-op).  A link to the presentation is provided below.

https://media.wix.com/ugd/209952_d643b5c0976d49508c0e70fc98150613.pdf

 

Legislation Sets Deadline for Cities to Create Procedures for Processing Density Bonus Applications

 

Many around the state reacted strongly to the Governor’s May 2016 proposal for a by-right affordable housing production program, which was ultimately abandoned following pressure from special interests. Affordable housing advocates may find some solace during this legislative session in the form of three bills related to density bonus projects, as well as an added incentive to pursue infill development on City-owned property.

Assembly Bill (“AB”) 2501: Action Required by Cities to Create Procedures and Streamline Process

The most extensive of the three density bonus bills is AB 2501 (Bloom) which, among other things, eliminates requirements for developers to perform supplemental feasibility studies when requesting “off-menu” incentives for density bonus projects. Density bonus law previously provided up to three “by-right” or “on-menu” incentives, depending on the extent of affordability. Local agencies often allowed for additional incentives provided these could be justified, commonly in the form of feasibility studies prepared by the applicant. AB 2501 cuts out all of this, and instead compels the public agency to grant the concessions unless the agency itself can demonstrate that they are not required to make the project feasible.

While not all agencies are currently out of compliance with this provision, all will need to adopt procedures and timelines to process density bonus applications to comply with AB 2501’s provisions. RSG is assisting our clients in implementing these changes by drafting these procedures. Other changes under AB 2501 include the rounding up of any “fractional unit” computed from the density bonus calculation – effectively increasing affordable units by a nominal number.

AB 2442 and AB 2556: Additional Broadening of Density Bonus Law

AB 2442 (Holden) provides developers a 20% density bonus if the project includes at least 10% of units affordable at very low income levels to transitional foster youth, disabled veterans, and homeless persons. The affordability of the units must be maintained for 55 years.

AB 2556 (Nazarian) addresses how density bonus projects can be used to replace existing affordable units on the site, even if the income category of the households occupying the property is unknown.

AB 2208: More Future Housing Sites Designated in Housing Element

Current law provides that fulfillment of a community’s regional housing needs can be met through the production of residential property designated in the Housing Element Update. AB 2208 (Santiago) expands this by including airspace above sites owned or leased by a city or county. This nicely aligns with the increased desire of cities to leverage publicly held property to stimulate investment, and it provides more motivation to redevelop these sites with parking and residential uses.

Written by Jim Simon, a Principal at RSG