Promising Innovations: Shared Permanent Supportive Housing

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Across California, the heightened urgency associated with addressing the housing crisis has prompted a range of innovations. In Los Angeles, Flyaway Homes has become one of those innovators. They are using shipping containers – the corrugated steel metal boxes you see hauled around on semi-trucks and freight trains – to develop a model of shared-unit Permanent Supportive Housing (PSH) to reduce homelessness.

While shipping containers have been used for everything from boutique homes to commercial development, they have not factored significantly into efforts to reduce the slow pace and high cost of PSH development. Last month, LDC had an opportunity to attend an open house at Flyaway’s first shared-unit PSH development, located at 820 West Colden Avenue in Los Angeles. We got a feel for the place (it’s nice) and talked a little shop about how the model improves upon traditional PSH development.

Colden Avenue DevelopmentThe shipping containers, which are used for modular construction, are the most obvious innovation. This approach allows PSH units to be permitted prior to construction and assembled quickly, eliminating a portion of the soft costs associated with most new construction. For example, the Colden project took approximately 10 months to plan and develop, as compared to traditional approaches, which can take years.

The nine-unit development also uses a shared housing model, providing a home for 32 tenants (and an onsite property manager) who each have their own room and share a kitchen and bathroom with three other neighbors.

Shared housing is an important resource in the effort to reduce homelessness, but it’s rare to see a developer integrate the model into the budget and design of a newly-constructed property. Doing this has allowed the developer to finish the project at a similar price point to other PSH developments, but at a much lower cost per tenant – $109,000, including the cost of the land.

Flyaway COO Kevin HiraiFlyaway COO Kevin Hirai explained that to make the project financially sustainable the company secured a 20-year master lease with local homeless services provider the People Concern, which guarantees supportive services for the tenants and rental income for the property for the duration of the lease. The services will be paid for by the Los Angeles Department of Health Services’ Flexible Housing Subsidy Pool program, which offers versatile rental subsidies for individuals experiencing homelessness.

Flyaway’s model relies solely on private equity to fund development, another way it differs significantly from the majority of PSH development. For the Colden Avenue project, investors contributed to the $3.6 million budget with a guaranteed return of 4.5-5 percent, paid for with the rental income generated by the property. Hirai explained that this approach to financing allowed the company to raise the initial capital very quickly and avoid some of the red tape often associated with securing government funds.

With the low cost, rapid production time, and flexibility of the project, the most exciting aspect of Flyaway’s model is its potential scalability. Flyaway anticipates that using shared modular housing to produce PSH will become an important resource within the continuum of housing solutions for a significant portion of the population experiencing homelessness. If the model proves successful, Flyaway and other similar companies could build thousands of units relatively quickly. This is one project LDC will be watching closely.

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Flyaway Home’s Colden Avenue development combines several innovative approaches to housing people experiencing homelessness under one roof:

  1. Modular construction
  2. Private equity financing
  3. Shared housing
  4. Master leasing
  5. A flexible subsidy pool

 

Brian GrutersBrian Gruters, Associate, focuses on designing systems that respond to homelessness quickly and efficiently, emphasizing harm reduction and trauma‐informed care. Before joining LDC, Mr. Gruters led development of the City of San Diego’s coordinated entry system (CES) for the San Diego Regional Task Force on the Homeless. He has also worked for Breaking Ground (formerly Common Ground) and the Urban Homesteading Assistance Board in New York City, where his work centered on permanent supportive housing management. Mr. Gruters holds a master’s degree in Environmental Studies from the University of Waterloo, in Ontario, Canada, where he studied ecology and rural anti‐poverty movements. He can be reached at brian@lesardevelopment.com.

Proposition 10 Creates Local Rent Control Controversy

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Proposition 10: Rent Control aims to repeal a law that currently prevents city and county governments from enacting rent control. Known as the Costa-Hawkins Act, the law prohibits rent control on single family homes, new housing built after February 1, 1995, or when tenants first move into a unit. If passed, Proposition 10 would restore authority to city and county governments to determine whether they should enact rent control policies and limit how much landlords could raise the rent each year.

Supporters contend that California renters currently pay 50 percent more than counterparts in other states, straining households’ ability to cover the costs of other necessities such as food, childcare, education, transportation, and healthcare. A policy brief from the Urban Displacement project concludes that the proposition would be beneficial to Bay Area renters, particularly in terms of preventing displacement. It found that including single family homes in rent control ordinances, a policy not permissible under Costa-Hawkins, could have significant impact because they make up an increasing percentage of the area’s rental stock.

However, the brief also highlights the potential unintended consequences of repealing Costa-Hawkins. In particular, the brief addresses the possibility of units being removed from the rental market. A Terner Center brief highlights other possible consequences, including the possibility of slowing already lagging production. Housing construction in California has not met growing demands, and the report notes that further shortfall would only exacerbate the housing crisis.

The Terner Center brief also highlights a more nuanced perspective: Proposition 10 aims to increase tenant protections, a necessary action given the housing crisis, but those protections do not have to be implemented in a way that affects production. Instead, they suggest modifications to Costa-Hawkins, including an “anti-gouging” rent cap and further incentives for developers to include affordable units in their market-rate developments.

Estimating the true effects of Proposition 10 is difficult due to a lack of data surrounding rental units, landlords, and tenants. Additionally, Proposition 10 allows local governments to adopt rent control, but does not require these provisions. As such it is difficult to predict the specifics of the policy across the state. However, the repeal of Costa-Hawkins and implementation of rent control has some potential to negatively impact affordable housing. If Proposition 10 passes, careful consideration will need to be given to the development of specific local policies to truly protect California’s vulnerable communities.

Jennifer LeSarJennifer LeSar, President and CEO, has more than 30 years of experience in the real estate development and investment banking industries, and brings a diverse background to her work in community development and urban revitalization. Her technical expertise spans from policy and program development to comprehensive strategic planning for top executives and executive teams to the origination and underwriting of complex investments in equity funds, multi-family portfolios, historic, and low-income tax credit properties utilizing federal and state financing programs. She can be reached at jennifer@lesardevelopment.com.

No on Prop 6: Gas Tax

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Pumping GasProposition 6 seeks to repeal the fuel tax approved by the Legislature in 2017. While proponents of the repeal measure argue that the tax will cost families an average of $700 in additional costs annually, a Sacramento Bee article suggests the true cost to California families would fall in the range of $238 to $334 per year. While these costs are not negligible, opponents argue that a No vote is necessary to addressing the backlog of transportation infrastructure needs over the next decade.

Currently, the gas tax will provide an estimated $52 billion over the next 10 years for infrastructure needs with approximately half of those funds going directly to cities and counties to address local needs. In San Diego, Proposition 6 funding is being used to widen Interstate 5, increase public transit, and resurface streets. In Los Angeles, funds are being used for a variety of active transportation projects, such as bike lanes and trails, pedestrian walkways, and ADA accommodations. Information on projects in other communities statewide can be found on the Rebuilding CA Project Map.

Jennifer LeSarWith more than 30 years of experience in the real estate development and investment banking industries, Jennifer LeSar brings a diverse background to her work in community development and urban revitalization. Her technical expertise spans from policy and program development to comprehensive strategic planning for top executives and executive teams to the origination and underwriting of complex investments in equity funds, multi-family portfolios, historic, and low-income tax credit properties utilizing federal and state financing programs. Ms. LeSar’s educational achievements include two advanced degrees from UCLA – a Master of Business Administration in Real Estate, Finance and Nonprofit Management and a Master of Arts in Urban Planning. She received her Bachelor of Arts from Bryn Mawr College in Political Science and Economics. She can be reached at jennifer@lesardevelopment.com.

 

Yes on Props 1, 2: Ballot Measures Critical to Developing Housing

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San Diego Square Senior ApartmentsThis November, the decisions voters make about two ballot measures—the Housing Assistance Bond and No Place Like Home—the Proposition 1 Housing Assistance Bond and Proposition 2 No Place Like Home—have significant implications for California communities as they address housing affordability.

Proposition 1: Housing Assistance Bond, would allow the state to issue $4 billion in general obligation bonds to investors to fund existing affordable housing programs. Specifically, the bond would provide:

  • $1.8 million to build or renovate affordable multifamily housing;
  • $450 million for transit-oriented infrastructure development;
  • $450 million for down payment assistance or other funding to assist low- and moderate-income homebuyers;
  • $300 million for rental and owner-occupied housing for farmworkers; and
  • $1 billion for home loan assistance for veterans.

The measure, which qualified for the ballot based on a two-thirds vote from the Legislature and approval by Governor Jerry Brown as part of the 2017 Housing Package, would support an estimated 30,000 multifamily units, 7,500 farmworker households, 15,000 homebuyers, and 3,000 veterans. If passed, the measure would enable the state to provide grants or low-cost loans to local governments, nonprofits, and developers through a competitive process to fund a portion of construction costs. Interest on the bond would be repaid using the state’s General Fund at approximately $170 million annually for 35 years. While opponents chafe at the cost burden to taxpayers, supporters such as United Way, the League of Women Voters, the League of California Cities, and the California State Sheriffs’ and Firefighters’ Associations view Proposition 1 as a much-needed measure to address the affordable housing crisis and argue that a portion of the funds will be recouped as payments on home loans.

Proposition 2: No Place Like Home, if passed, would allow the state to redirect $140 million per year in Mental Health Services Act funding to repay up to $2 billion in bonds to fund permanent supportive housing for people experiencing or at-risk of homelessness who need mental health services. Counties would be able to use these funds to acquire, design, construct, rehabilitate, or preserve permanent supportive housing. Only those supportive housing developments that use low-barrier tenant selection practices and provide voluntary, individualized supportive services would be eligible for funding. Counties would also need to commit to providing mental health services and coordinating other supportive services as a condition of funding.

Currently, the state needs court or voter approval to use Mental Health Services Act funds for permanent supportive housing through No Place Like Home (NPLH). Counties will be able to apply to the California Department of Housing and Community Development for NPLH funds, which are categorized as loans repayable to the state, on either a non-competitive or competitive basis contingent on voter approval.

Research has shown that housing paired with treatment, commonly referred to as permanent supportive housing, helps people with severe mental illness live healthy, stable lives and reduces public health costs. Supporters of the measure include the California affiliate of the National Alliance on Mental Illness. Opponents argue that the measure, if passed, would shift funding away from treatment for people with severe mental illness to pay for housing and does not address restrictive zoning laws that make it difficult to build housing.

Together, Propositions 1 and 2 provide significant revenue streams to address California’s growing housing affordability and homelessness crisis and aim to produce housing types California’s private market has failed to adequately produce in California. The propositions have received widespread support from organizations and elected leaders statewide, including Assm. David Chiu (D-San Francisco) and Senate President pro tempore Toni Atkins (D-San Diego).

Diana Elrod, Principal, brings more than 30 years of consulting and public sector experience to her work co-leading LDC’s housing policy and real estate finance team. Before joining LDC, she provided strategic counsel and conducted research on Housing and Community Development for the Cities of Lafayette, Belmont, Palo Alto, San Jose, San Mateo, and the County of Santa Clara. She also has completed Housing Elements and Consolidated Plans for jurisdictions throughout California. She can be reached at diana@lesardevelopment.com.

2-1-1 Releases Data Dashboards

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In late August, 2-1-1 San Diego released a data dashboard tool designed to combine and analyze data from the agency and its many partner service organizations and transform it into easily accessible and actionable information on community assets and resources, needs, and trends used in planning.

Currently, the dashboard includes information on the activities carried out by 2-1-1 San Diego between August 2017 and July 2018, as well as information on demographics, resources, housing, nutrition, health, the social determinants of health, and utility and technology. The housing dashboard provides data on clients’ housing stability, current living situation, and the immediacy of their need for support or assistance.

Some of the housing data available through the dashboard will also be used to inform the City of San Diego FY 2020-2024 Consolidated Plan. This data should eventually be able to inform best practices in homelessness systems and public policy.

Screenshot of 2-1-1 Data Dashboard

Councilmember Ward Calls for Recuperative Care Facilities

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Image of underutilized County Property at 3rd Street, Hillcrest, San DiegoOn Aug. 30, San Diego Councilmember Chris Ward stood in front of a vacant county-owned building in Hillcrest and called for a thorough review of vacant and underutilized city and county property that could be used for recuperative care and medical respite beds for people experiencing homelessness. Ward underscored the shortage of such facilities in a region where nearly 10,000 people are experiencing homelessness, many of them ages 55 or older with chronic health conditions. Currently, only 73 recuperative care beds, many of them designated specifically for veterans, are available countywide. Other community leaders who joined Ward at the press conference included Greg Anglea, CEO of Interfaith Community Services; Benjamin Nicholls of the Hillcrest Business Association; and Nathan Fletcher, former assemblymember turned candidate for the San Diego County Board of Supervisors.

LA County Commission Advances Tejon Ranch Proposal

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The Los Angeles County Regional Planning Commission voted on Aug. 29 to advance a proposal to develop a significant portion of Tejon Ranch, approximately 70 miles northeast of Los Angeles. Originally proposed by the Tejon Ranch Co. in 1999, the Centennial project would provide 19,000 homes, jobs, and infrastructure to the area. Opponents have raised concerns about the environmental impact of the project, as well as the risks associated with developing in a wildfire hazard area.

Cities Can’t Prosecute Homeless People for Sleeping Outside

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The U.S. 9th Circuit Court of Appeals ruled Tuesday, September 4, in Martin v. Boise to prohibit cities from prosecuting people for sleeping on public property or sidewalks when shelters are unavailable. The case was originally filed after six residents of the City of Boise were issued citations for violating the City’s Camping and Disorderly Conduct ordinances, which prohibited residents from sleeping in public places.

In an opinion written by Judge Marsha S. Berzon, the court found that the City’s rules constitutes cruel and unusual punishment under the Eighth Amendment. The court also took issue with rules limiting the length of shelter stays and requiring people staying in shelters to participate in religious programs.

The ruling is of particular interest in California, where high housing costs have contributed to housing instability and homelessness. For more information on the topic, read the following news articles:

  1. SF Court: Cities can’t prosecute people for sleeping on streets
  2. Homelessness: It’s not a crime to sleep on the street — absent other options, court says
  3. Homeless People Cannot Be Prosecuted by Cities for Sleeping Outside If There’s No Access to Shelter, Appeals Court Rules
  4. Cities may not prosecute homeless people for sleeping outside if they have no access to shelter, appeals court

HUD Proposes Revising Affirmatively Furthering Fair Housing Rule

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On Aug. 13, HUD announced that it is seeking public comment on potential amendments to its Affirmatively Furthering Fair Housing (AFFH) regulations. The advance notice of proposed rulemaking, published in the Federal Register, affirms that the regulations aim to help communities fulfill their fair housing obligations, but that the approach outlined in the regulations “proved ineffective, highly prescriptive, and effectively discouraged the production of affordable housing.” HUD also asserted that the AFFH Data and Mapping Tool contained errors and that local governments had difficulty using it, which resulted in the need for “an unsustainable level of technical assistance.”

“It’s ironic that the current AFFH rule, which was designed to expand affordable housing choices, is actually suffocating investment in some of our most distressed neighborhoods that need our investment the most,” said Carson. “We do not have to abandon communities in need. Instead we believe we can craft a new, fairer rule that creates choices for quality housing across all communities.”

HUD seeks to amend the proposed rule to create a process focused on accomplishing positive results and encouraging actions to increase housing choice while providing greater local control, minimizing regulatory burdens on communities, and making more efficient use of HUD resources.

The National Fair Housing Alliance (NFHA) stated that the AFFH changes would be “a significant setback for the millions of Americans that depend on our government to protect and enforce their civil rights.” NFHA also argued that the original AFFH rule provided a framework for jurisdictions to use federal funds to invest in affordable housing, transportation infrastructure, and other community amenities in neighborhoods that had previously experienced redlining and other discriminatory practices.[1]

[1] Statement from the National Fair Housing Alliance, et al. Concerning the Recent AFFH Ruling (August 17, 2018).

What Should Every Homelessness Plan Include? Housing

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Image of Colorado Court _Affordable HousingEnding homelessness is simple: Provide people with a home.  While it is a straightforward solution, developing new housing takes time, is costly, and often faces community opposition. Within the existing rental market vacancy rates are low and housing is unaffordable to most, especially those at the lower end of the economic spectrum.

Recent data make a strong case that homelessness at its core is a housing issue, regardless of other complexities within the population. The June 2018 UCLA Anderson Forecast found strong correlations between high rent and home prices and the number of people experiencing homelessness. In addition, a 2017 Zillow report indicated that a 5% increase in rent in Los Angeles County would result in 2,000 additional people losing housing.

Recently, LeSar Development Consultants (LDC) worked with the San Gabriel Valley Council of Governments (SGVCOG) to assist 17 cities in creating city-specific plans to address homelessness.  The San Gabriel Valley, although just one Service Planning Area (SPA) in Los Angeles County, has nearly 4,300 people experiencing homelessness on any given night.[1] While small in comparison to the City of Los Angeles, the San Gabriel Valley’s homeless population is larger than those of 31 states nationwide.

In January 2018, LDC set out on a path to engage each community and their stakeholders to draft a plan for adoption by their city councils at the end of June.  The cities varied in size and demographic composition, as well as in their understanding of homelessness.  Some cities have been working proactively on the issue for years and already had solid strategies on which to build, while other cities were taking their first steps to tackle the issue. As with any project that involves people from diverse backgrounds, our team heard differing opinions on challenges, solutions, and best practices.

Throughout the process, LDC stayed focused on the vision that housing is the best remedy for homelessness and that cities play a crucial role in encouraging development across the socioeconomic spectrum.  Specifically, cities have a lot of control when it comes to land use, zoning, and siting affordable housing, supportive housing, and shelter. Our work in the San Gabriel Valley underscored the need for all three, both locally and countywide. In fact, in February 2018 the Los Angeles Homeless Services Authority (LAHSA) released a report that identified a gap of more than 21,000 supportive housing units, 10,446 Rapid Re-Housing spots, and just over 3,000 emergency shelter beds to meet the needs of single adults across Los Angeles County. While creating more affordable and supportive housing are no-brainers, I sometimes hesitate to encourage the creation of new shelter beds. Los Angeles County, however, is an anomaly compared to the rest of the country given the sheer number of people living outdoors. Currently, the San Gabriel Valley has only 1,200 temporary housing beds. Three-quarters of the homeless population lives unsheltered on the streets and in riverbeds and canyons.

It was exciting for our team to celebrate the adoption of the plans by each city council during the SGVCOG City Homeless Plan Summit on August 1st in San Dimas. At the summit, the SGVCOG highlighted the many cities that included strategies to address housing:

  • 16 cities included strategies for affordable housing.
  • 11 cities included strategies for supportive housing.
  • 13 included Rapid Re-Housing.
  • 8 plans included interim housing.

Obviously, plans are only effective if they are implemented, and cities will need assistance identifying and tapping into available resources to achieve the goals outlined in their plans. However, the planning process generated regional momentum to prevent and address homelessness, and I am optimistic that SPA 3 will see declines in homelessness across the area over the next several years. Remember, ending homelessness is quite simple in concept but hard to achieve.  And it’s a reminder to always ask yourself, “Without housing, where do people ultimately go?”

Headshot of LDC Principal Kris KuntzKris Kuntz, Principal, is passionate about creating innovative solutions to address homelessness. Prior to joining LDC, he performed agency-wide evaluation activities for San Diego’s largest homeless services agency, that included a drop day center, emergency shelter, transitional housing, rapid re-housing, permanent supportive housing, and a federally qualified health center.  He was an integral part of Project 25, San Diego’s successful homeless high utilizer project and worked with Managed Care Organizations to sustain the project after the United Way’s initial investment. To learn more about LDC’s work with homeless assistance systems, contact him at kris@lesardevelopment.com.

[1] 2018 Point-In-Time Count data includes the Pasadena Continuum of Care.