Monday, September 25, 2017

Cities not at fault for affordable housing gap

Cities not at fault for affordable housing gap

Photo by Jeff Gritchen, Orange County Register/SCNGAerial view of homes under construction in San Juan Capistrano, California, on Thursday, May 11, 2017.

September 14, 2017 at 7:00 am

As Gov. Brown closes in on the final year of his term in office, one of his stated goals is to mitigate the affordable housing crisis across the state. Even now, as the Senate and Assembly sessions come to an end with Sept. 15 as the last day for each house to pass bills, plans are in the works to present the governor with a package of legislative options for his signature.

Among the proposals are Senate Bill 2 and 3, which provide a reservoir of state dollars as permanent funding source solutions. SB2 proposes nearly $250 million a year in new funding for low income housing development through real estate document transaction fees. SB3 would create a $3 billion bond to spend on low income housing for voters to consider on the 2018 statewide ballot.

One of the most common rejoinders from both sides of the aisle on additional state spending to provide affordable housing, is that cities are not pulling their weight when it comes to authorizing developments. In fact, a third legislative “fix” — SB35 — proposes a new by-right process, which creates additional reporting requirements for cities. By-right zoning allows for the streamlined development of projects, which comply with the zoning standards, to receive local approval without a discretionary review process.

Unfortunately, punitive measures to force municipalities into action on affordable housing misses the mark on the real issue facing communities … the biggest barrier to affordable housing for cities is financing.

In Orange County, affordable housing is a particularly acute problem. According to the California Association of Realtors, the county is now the most unaffordable housing market in Southern California. Only 21 percent of households can afford a typical house payment on the median price of a single-family home. As multi-family developments become the only available option for residents, the necessity of delivering affordable units to the market is critical.

However, demand is far exceeding supply for multi-family residencies in the region. According to demographic projections, Orange County is facing a workforce housing shortage of between 50,000 and 62,000 units in the coming years. In order to maintain the economic vibrancy of the county, the talented workforce that businesses depend on must have far more affordable housing options to retain individuals locally.

It is not for a lack of effort that cities have been unable to effectively deliver more affordable housing to the regional landscape. There have not been significant, dedicated funding sources to ensure the production of subsidized housing since the loss of redevelopment agencies in 2012. Succinctly, cities do not have the financial resources to work with developers in offering below market rate housing without assistance at the state and federal levels.

Even when there is political will and agreement between a city council and a developer, the gap in funding often times exceeds what a city is able to finance from its own general funds, or “Low and Moderate Income Housing Funds,” resulting in missed affordable housing production opportunities.

So, while mandates such as SB35 posit a turn-key solution to clear the roadblocks for cities to provide affordable housing, the most critical component in the equation — dollars — remains unaddressed.

Take the city of Mission Viejo, which over the last eight years has three by-right sites, yet only one has actually been developed. The remaining two sites are languishing because of funding gaps between what the developer can offer and what the city can financially assist with.

There are numerous examples of cities across the county that are facing similar funding shortfalls.

In Anaheim, lack of money has delayed a 50-unit senior housing development, while in La Habra a 71-unit affordable housing project is in jeopardy, because of a $6.5 million lacuna. These scenarios are all too common. Typically, gaps in subsidies range from $1 million to $6 million.

Of course, there are successes too, notably the construction of 403 affordable housing units built in the city of Irvine in 2016. Interestingly, this development would not have passed the scrutiny of measures such as SB35 designed to quicken the process.

In the end, cities in Orange County are working diligently to expand affordable housing options. The reality is that sustainable financing channels must be in place for municipalities to meet the growing demand. The focus of affordable housing legislation should be on helping and incentivizing cities, not penalizing them. A comprehensive solution to the state’s affordable housing dilemma must include local governance in conjunction with a dedicated funding mechanism to promote and spur needed projects from concept to completion.

Working collaboratively, Orange County can serve as a model for communities across the state, in an overall effort to combat the predicament of affordable housing for residents and stakeholders.

Heather Stratman is CEO of the Association of California Cities-Orange County, an organization dedicated to representing the interests of Orange County’s 34 cities through education that empowers, policy that is collaborative, and advocacy that is service-oriented.

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