Category Archive: Affordable Housing

  1. U.S. Senate Appropriations Committee Rejects Proposed Cuts to HUD Funding

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    The Senate Appropriations Committee on June 7 rejected the Administration’s proposed cuts to the U.S. Department of Housing and Urban Development (HUD) budget by advancing a bill that includes $44.5 billion in discretionary appropriations, increasing funding by $1.8 billion above FY 2018 levels.

    The Administration had proposed $41.2 billion in FY 2019 funding for HUD, which would have reduced funding by $11.5 billion over FY 2018, eliminated the Community Development Block Grant (CDBG) and HOME Investment Partnership programs, and instituted higher rent levels and work requirements for some programs. The Administration’s proposal also would have resulted in shifting more of the costs of building affordable housing to state and local governments.

    “This bipartisan bill is the product of considerable negotiation and compromise,” said U.S. Senator Susan Collins (R-Maine), chair of the Subcommittee in an official statement. “The funding in this legislation will allow us to invest in our nation’s infrastructure, while fully funding the renewal of housing assistance for low-income seniors and other vulnerable populations, such as teenagers and veterans who are homeless.”

    Rental Assistance

    The bill includes $42.8 billion in rental assistance funding, which currently supports an estimated 5 million families nationwide. The budget reflects modest increases for tenant- and project-based rental assistance programs, as well as public housing capital and operating funds. Included within the rental assistance funding is $40 million for new vouchers dedicated to homeless veterans. The Administration’s FY 2019 proposed cuts to all three programs and would have eliminated capital funds to repair and maintain public housing.

    The bill renews funding for Housing for the Elderly at the same level as FY 2018 and includes $51 million that would be used to produce new dedicated housing units for seniors. The bill also reduces the FY 2019 appropriation for Housing for Persons with Disabilities to $154 million; however, the decrease reflects on partial-year funding to reflect the time required to put an estimated 30,000 new vouchers funded in FY 2018 into circulation.

     Community Planning and Development

    Similar to the House bill, the Senate bill renews funding for community planning and development at $12.9 billion, and rejects the Administration’s proposal to eliminate the CDBG and HOME programs. These programs, which provide entitlement funds for state and local governments to build housing and address other development needs, continue to have strong bipartisan support.

    Other community development initiatives funded in conjunction with the HUD appropriation include the Choice Neighborhoods Initiative and the Neighborhood Reinvestment Corporation. The Senate bill provides $100 million for the Choice Neighborhoods Initiative, which provides funding for state and local governments to redevelop HUD-assisted housing. The bill reflects a $50 million funding cut from FY 2018, but does not eliminate the program as recommended in the Administration’s budget. The House bill proposed maintaining funding at FY 2018 levels and giving priority to previous planning grant recipients when awarding implementation grants.

    The Neighborhood Reinvestment Corporation, which supports an estimated 250 community development organizations nationwide that provide housing and counseling services through the NeighborWorks’ network, would see a budget increase of $7 million under the Senate appropriations bill. The Administration had proposed winding down the program over two years.

     Homeless Assistance

    The Senate bill maintains FY 2018 funding levels for the United States Interagency Council on Homelessness at $3.6 million, and increases funding for Homeless Assistance Grants by $100 million to $2.6 billion with an emphasis on housing and services for specific populations, including youth and survivors of domestic violence. Specifically, the bill includes $80 million to support Continuums of Care in developing comprehensive approaches to ending youth homelessness, and $20 million to fund 2,500 rental assistance vouchers for youth aging out of foster care. The bill also provides $50 million to assist an estimated 3,750 survivors of domestic violence to secure housing through Rapid Re-Housing programs.

    The bill also includes $40 million for the HUD Veterans Assistance Supportive Housing program, providing 5,100 new vouchers for veterans experiencing homelessness.

    The table below highlights how the Administration, House, and Senate FY 2019 budgets differ from the enacted FY 2018 budget:

    U.S. Department of Housing and Urban Development Program Budget

    Program

    FY 2018 Enacted

    FY 2019 Proposed

    FY 2019 House

    FY 2019 Senate

    Tenant-Based Rental Assistance Programs

    $22 billion

    $20.5 billion

    $22.4 billion

    $22.8 billion

    Project-Based Rental Assistance Programs

    $11.5 billion

    $11.1 billion

    $11.7 billion

    $11.7 billion

    Public Housing Operating and Capital Funds

    $7.3 billion

    $3.28 billion

    $7.3 billion

    $7.5 billion

    Housing for the Elderly

    $678 million

    $601 million

    $632 million

    $678 million

    Housing for People with Disabilities (Section 811)

    $229.6 million

    $140 million

    $154 million

    $154 million

    Community Planning and Development

    $7.7 billion

    $2.7 billion

    $7.6 billion

    $7.8 billion

    Community Development Block Grant

    $3.4 billion

    $3.4 billion

    $3.3 billion

    HOME Investment Partnerships Program

    $1.4 billion

    $1.2 billion

    $1.4 billion

    Housing Opportunities for Persons with AIDS (HOPWA)

    $375 million

    $330 million

    $393 million

    $375 million

    Choice Neighborhoods Initiative

    $150 million

    $150 million

    $100 million

    Neighborhood Reinvestment Corporation

    $140 million

    $27.4 million

    $150 million

    $147 million

    McKinney-Vento Homeless Assistance Grants[2]

    $2.5 billion

    $2.4 billion

    $2.5 billion

    $2.6 billion

    U.S. Interagency Council on Homelessness

    $3.6 million

    $630,000

    $3.6 million

    $3.6 million

    The Senate bill also includes $26.6 billion in FY 2019 discretionary appropriations for the U.S. Department of Transportation, $698 million less than the FY 2018 enacted budget. Congress must pass the FY 2019 appropriations before September 30 or issue a continuing resolution to avoid a government shutdown.

    Sources:

    U.S. House of Representatives Appropriations Committee. (2018). Departments of Transportation, and Housing and Urban Development, and Related Agencies Appropriations Bills, 2019 Report.

    U.S. Senate Committee on Appropriations. (2018). Subcommittee Approves FY 2019 Transportation, HUD Appropriations Bill.

    U.S. Senate Committee on Appropriations. (2018). Summary: Subcommittee Approves FY 2019 Transportation, HUD Appropriations Bill.

  2. California House, Senate Continue Efforts to Increase Supply of Affordable Housing

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    Picking up where they left off at the end of the 2017 legislative session, California lawmakers in both the House and Senate advanced several bills aimed at increasing the supply of affordable housing. These include efforts to modify laws related to the Regional Housing Needs Assessment (RHNA) and Housing Element, override local zoning requirements, and produce accessory dwelling units.

    RHNA/Housing Accountability

    SB 828 Land Use: Housing Element, authored by Sen. Scott Wiener (D-San Francisco), would require the State’s Housing and Community Development Department (HCD) to address the underproduction of housing.  This bill would require cities and counties to meet 125% of their RHNA requirements in their inventories.  Where that is not possible, cities and counties would be required to identify ways in which it will accommodate their RHNA, such as through rezoning. HCD would be required to complete a comprehensive assessment on the unmet needs for each region, and include the results of the assessment in regional allocations for the next housing element cycle. HCD would have to establish a methodology for the comprehensive assessment on unmet need that considers median rent or home prices and, in communities with high rates of income growth, sets a high rate of new housing production for all income levels to ensure equity and stabilize home prices. SB 828 would also prohibit a Council of Government (COG) from underestimating allocations for local jurisdictions based on predicted additional unmet need allocations.  This bill would require the final regional housing need plan to reflect equitable allocations for housing of all income levels, and not demonstrate disparities that promote racial or wealth disparities throughout a region.

    SB 1771 Planning and Zoning: Regional Housing Needs Assessment, authored by Sen. Richard Bloom (D-Santa Monica), would require jurisdictions to adopt long-term plans that address the development of land not only inside their jurisdiction, but in some cases, outside local boundaries as well.  As is currently the law, COGs would be required to create and adopt a “Final Regional Housing Needs Allocation Plan,” but which would now  be required to allocate housing needs according to certain specified objectives, including doing so in an equitable manner by dispersing housing typologies, affordability levels, and housing tenure  (whether owner or rental) across the region. It would also revise many of the current requirements of the RHNA plan.  Plans would be required to further objectives, rather than simply be consistent with them as is currently required.  COGs would be required to include data showing both the number of low-wage jobs within a jurisdiction as well as the number of housing units which are affordable to those workers.  In addition, COGs will be required to project the number of low wage workers and the number of housing units needed to house them during the planning period.   This would be a new focus on existing and projected demand, replacing the previous requirement to respond to housing demand. It would also limit the grounds upon which a jurisdiction could appeal to the COG to these three: the methodology was not informed by survey information submitted by the jurisdiction; the jurisdiction has undergone significant and unforeseen changes; and, the methodology used to calculate the RHNA was in violation of state law.

    AB 3194 Housing Accountability Act: Project Approval, authored by Assemblymember Tom Daly (D-Santa Ana), would prohibit a jurisdiction from disapproving, or placing infeasible conditions upon, a development of very low-income, low-income, or moderate-income housing (including emergency shelters), unless a preponderance of the evidence shows that the development would have a “specific, adverse impact upon the public health or safety.”  The State of California defines “preponderance of the evidence” as evidence that outweighs, not in its quantity but rather in its effect, the evidence of the other side.[1]  In 2017, AB 1515 (Daly) added the requirement for “substantial evidence,” which is defined as “being of ponderable legal significance,” and “which is reasonable in nature, credible, and of solid value.”[2] The proposed requirement for a preponderance of the evidence is a higher standard and could result in a higher number of housing developments being covered by the Housing Accountability Act (HAA). If approved, this bill would impart the protections of the HAA to projects that are both inconsistent with zoning and consistent with the objective general plan standards. Such projects would be deemed approved without having been rezoned.

    Overriding Local Zoning Requirements

    AB 2923 San Francisco Bay Area Rapid Transit District: Transit-Oriented Development, introduced by Assemblymembers David Chiu (D-San Francisco) and Timothy Grayson (D-Concord) and coauthored by Kevin Mullin (D-San Mateo), Richard Bloom (D-Santa Monica), and Phil Ting (D-San Francisco), would require the board of the San Francisco Bay Area Rapid Transit District (BART) to adopt new TOD guidelines for certain BART-owned land.  The new guidelines would establish minimum zoning requirements for land within 1/2 mile of a current or future BART entrance, on contiguous parcels that are at least .25 acres in size.  The bill would also require the board to adopt streamlining measures for TOD projects, and require that projects within these areas include 20 percent affordable housing. The effect of this bill, if approved, could be that jurisdictions where BART stations are located would have little control over what is built in their communities.

    SB 827 Planning and Zoning: Transit-Rich Housing Bonus, authored by Sen. Wiener (D-San Francisco), the bill would have promoted multi-family housing near transit. Among other things, SB 827 would have allowed developers to circumvent zoning in transit areas, and build to height, parking, and density levels that exceed zoning limits. The proposed height limit would have been five stories in areas within a half mile of a transit or subway station, and developers would also have benefited from reduced parking and density restrictions. Advocates of the bill purported it to be a nail in the coffin of residential racial segregation, forcing housing into neighborhoods that were historically zoned low-density in order to perpetuate the segregation of race and class.  The bill failed to pass in the Committee on Transportation and Housing.

    Accessory Dwelling Unit Requirements

    Interior view of an accessory dwelling unitAB 2890, authored by Sen. Ting (D-San Francisco), would require local jurisdictions to consider permit applications for ADUs within 60 days of receipt.  Current law allows jurisdictions up to 120 days to consider such permits.  It would also require that jurisdictions that condition permits on owner-occupancy to not monitor those units more than once per year. This bill would expand the law to allow for ministerial approval of ADUs on both single-family and multifamily lots, and prohibit certain requirements such as lot coverage standards, minimum lot size, and floor area ratio. If passed, HCD would be required to proposed small building standards by 2020, which would provide further oversight into  local ordinances.  If an ordinance is found to be in violation of the law, HCD could additionally notify the Attorney General.

    SB 831 Land Use: Accessory Dwelling Units, introduced by Sen. Wieckowski (D-Fremont) and coauthored by Sen. Toni Atkins (D-San Diego), Sen. Nancy Skinner (D-Berkeley), and Sen. Wiener (D-San Francisco), would require jurisdictions to designate, in their ADU ordinances, any areas where ADUs would be excluded because of certain health and safety concerns.  It would delete the authority to include lot coverage standards.  It would also prohibit jurisdictions from taking the square footage of the proposed ADU into account when determining the allowable FAR or lot coverage. In addition, a permit for the development of an ADU would be automatically approved if not considered within 60 days of its submittal.  It would prohibit requirements to replace off-street parking that is lost due to the development of an ADU. It would also prohibit the use of any other local policy, ordinance, or regulation as a means to inhibit the development of ADUs. This bill would not only prohibit local ordinances from owner-occupancy conditions, but also make void any such existing requirements. It would also prohibit a jurisdiction from considering an ADU as a “new residential use,” for purposes of determining fees.  School fees would be an exception; however, they would be limited to $3,000.

    Artemis Spyridonidis, Senior Associate, covers housing policy issues, including structural solutions to the housing affordability crisis, consolidated plans, housing elements, accessory dwelling unit policy implementation, and regional issues across the state of California. For information about linkage fees and other housing policy issues, contact Artemis Spyridonidis, at artemis@lesardevelopment.com.

    [1] Glage v. Hawes Firearms Co. (1990), 226 Cal.App.3d 314, 325, quoting People v. Miller (1916), 171 Cal. 6149, 652.

    [2] Kuhn v. Department of General Services, (1994) 22 Cal.App.4th 1627, 1633, 29 Cal.Rptr.2d 191; Mohilef v. Janovici, (1996) 51 Cal.App.4th 267, 305, fn. 28, 58 Cal.Rptr.2d 721.

  3. San Diego City Council Drastically Reduces ADU Fees

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    The San Diego City Council voted unanimously on April 30 to drastically reduce permitting fees in the city for both accessory dwelling units (ADUs) and junior accessory dwelling units (JADUs).  LDC Senior Associate Artemis Spyridonidis attended the meeting to share the firm’s research findings and support the reduction in fees. LDC’s research on fees and production rates throughout California demonstrates a positive correlation between low permit fees and higher production of ADUs.

    Councilmember Scott Sherman lauded the reduction in fees: “It’s so hard in San Diego to find a place you can afford when you’re first starting out…This is a great first step. It’s not going to solve the problem overnight, but it’s going to make it a lot easier for people to afford to be able to build these, providing housing stock.”

    Councilmember Georgette Gomez celebrated the Council’s vote: “This will have a positive outcome at the end of the day…we’re going to see more of these permits being requested to develop these units that are going to be naturally affordable, that are going to help more San Diegans with a bit of income but also to make housing affordable…”

    The vote, which included both fee reductions and waivers, will help the city achieve the goal it adopted in March 2018 to build 6,000 ADUs in the next 10 years. Table 1 below compares the previous costs associated of permitting ADUs with the new cost structure approved by City Council on April 30:

    Table 1. REDUCED/WAIVED FEES[1] 

    Fee Type Previous ADU Fees

    Approved ADUs Fees(as of April 30, 2018)

    Water Capacity Fee $1,524 $0
    Sewer Capacity Fee $2,062 $0
    General Plan Maintenance Fee $275 $0
    Developmental Impact Fee $24,000-29,000

    $8,000-13,000

    Total Fees for Established Communities

    $27,861-32,861

    $8,000-13,000

    Proposed Facilities Benefit Fees*

    $44,000-49,000

    $8,000-13,000

    Total Fees for Newer Communities $76,681-81,681 $16,000-26,000
    *Levied only in newer communities

    To keep the City’s Development Services Department at full cost recovery, $100,000 will be transferred from the General Fund.

    Homeowner Elizabeth DeWitt spoke of the benefit to her family: “The $30,000 it costs now – they told me it might cost me about $50 to build the room – I can’t do that if the fees are $30,000.  We’re in a housing crisis in San Diego. This would help me with my son, and I’m sure it would help a lot of others.”  There were no speakers in opposition.

    [1] Additional fees, such as School Fees and SANDAG’s Regional Transportation Congestion Improvement Program Fees, are not included in this table.

    Artemis Spyridonidis, Senior Associate, covers housing policy issues, including structural solutions to the housing affordability crisis, consolidated plans, housing elements, accessory dwelling unit policy implementation, and regional issues across the state of California. For information about ADUs and other housing policy issues, contact Artemis Spyridonidis, at artemis@lesardevelopment.com.

  4. Changes to LIHTC and Updates from TCAC

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    When President Trump signed the Omnibus Spending Bill into law on March 23, 2018, the Low-Income Housing Tax Credit (LIHTC) Program experienced its first expansion in almost a decade. Last month’s newsletter provided a brief synopsis of the increase in tax credit allocations and the new “Income Averaging” provision. This month provides a more in-depth look at income averaging and relevant regulations changes proposed by the California Tax Credit Allocation Committee (TCAC).

    Understanding Income Averaging

    The new “Income Averaging” (IA) provision, which was originally introduced as part of the Affordable Housing Credit Improvement Act, creates a third set-aside option that allows affordable housing projects to use imputed income limitations assigned to the units rather than individual household incomes to qualify for tax credits. Specifically, projects need to set aside at least 40% of the units—25% in areas with high housing costs—for individuals with income levels equal to or less than the imputed income limitations assigned to the units.

    Federal law also requires that imputed income limitations should not exceed 60% of area median income (AMI) and that rents assigned to the units should not exceed 30% of the imputed rate. However, the IA provision allows units to be rented to households with income levels as high as 80% of AMI if the average overall household income for the units remains at or below 60% of AMI.

    Prior to the IA provision, only those units at 60% of AMI or below could receive a tax credit subsidy towards its development costs. As a result, developers and localities can plan a housing community with a greater mix of tenant incomes and still receive the full benefits of the tax credit subsidy, as long as the average AMI target for these units does not exceed 60% AMI.

    The IA provision allows projects to leverage tax credits for households across a broader socioeconomic spectrum, and the higher-rent units can offset the lower-rent units making those low-income units more feasible for developers.  The provision will also benefit renters at 60-80% of AMI who previously would not have qualified for LIHTC.

    Proposed Changes to TCAC Requirements

    The IA provision also prompted the California Tax Credit Allocation Committee (TCAC) to propose two regulation changes that would exceed the minimum federal standard. The proposed changes, as well as the rationale provided by TCAC staff and public comments, will be considered at the May 16, 2018, TCAC meeting. The proposed TCAC regulation changes are as follows:

    a.  To qualify for competitive 9% tax credits, the average imputed income for the units would not be allowed to exceed 50% of AMI in any project that includes low-income units for households above 60% AMI.

    b. To qualify for non-competitive 4% tax credits, projects that include units targeted at 60% to 80% of AMI would need to achieve average overall project targeting at or below 59% of AMI.

    These TCAC provisions allow for the flexibility in the unit mix as contemplated by the new federal rules, while ensuring that average affordability of projects remains low in order to serve the California residents with the greatest need.

    Liz Tracey, Senior Principal, is an expert on affordable housing and community development finance using tools such as the Low-Income Housing Tax Credit and New Markets Tax Credits. For information about community development financing resources, contact Liz Tracey at liz@lesardevelopment.com.

    Reza Mortaheb, Research Analyst, is an architect, urban planner, and urban researcher who monitors how federal and state housing policy affects housing affordability and community development. Reza can be reached at reza@lesardevelopment.com.

     

  5. Four Actions to Remedy Housing Segregation

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    “The Color of Law” Author Richard Rothstein with LeSar Development Consultants staff at “Charting the Course: Celebrating the 50th Anniversary of the Fair Housing Act”

    In The Color of Law: A Forgotten History of how our Government Segregated America, author Richard Rothstein tackles the misconception that private prejudice coupled with private lending practices led to racial segregation in America. Instead, he contends that government policies—including lack of enforcement of the Fair Housing Act—promoted the patterns of segregation that still exist today. At the San Diego Regional Alliance for Fair Housing Conference, which took place in early April, Rothstein recommended four action steps to reverse housing segregation in the United States:

    (1) Promoting the purchase of market rate homes by local government for sale at lower prices to populations affected by housing segregation

    (2) Withholding mortgage interest deductions from communities that refuse to desegregate;

    (3) Reforming low-income housing tax credits to promote development outside of low-income communities; and,

    (4) Enhancing Section 8 vouchers to allow renters to live outside of low-income communities.

    Promoting Local Government Purchase and Sale of Homes

    To increase residential integration, Rothstein suggests local governments could buy homes in predominantly white neighborhoods and offer them at a subsidized price to households affected by housing segregation.

    Withholding Mortgage Interest Deductions from Segregated Communities

    Although the tax reform bill that passed last year downsized the mortgage interest deduction, it is still regressive, benefitting wealthier households more than others. The deduction subsidizes homeownership, redistributing wealth to richer households, and encourages the construction of larger, more expensive housing. Additionally, the government spends four times more on subsidies for mortgages than supporting renters or people who live in affordable housing.[1] Rothstein suggested that communities that refuse to desegregate and continue to block low-income projects in their neighborhoods should have their mortgage income deductions withheld until residential integration in their community is implemented.

    Reforming LIHTC to Develop Projects Outside of Low-Income Communities

    Rothstein argues that federal subsidies such as the Low Income Housing Tax Credit program (LIHTC), which subsidizes the development of affordable housing, and Section 8 vouchers promote racial segregation in communities. A review of federal data by the New York Times found that in the nation’s largest metropolitan areas, low-income housing projects that use federal tax credits are disproportionality built in high poverty and high minority neighborhoods.[2]

    Enhancing Section 8 Vouchers

    Many of the 2.2 million households that receive Section 8 vouchers remain in low-income neighborhoods and are unable to rent in more affluent areas. Rothstein proposes reforming these federal programs to remedy segregation, by improving the Housing Choice Voucher Program to allow low-income renters to live in middle income neighborhoods.

    Whatever resolutions are proposed to address housing inequality, Rothstein argues that combatting deeply entrenched segregation will require a better public understanding that it is a result of decades of policymaking by local, state and federal governments. Only by accepting that segregation is a government-sponsored system can we create equally effective government policies to reverse it.

    Artemis Spyridonidis covers housing policy issues, including structural solutions to the housing affordability crisis, consolidated plans, housing elements, accessory dwelling unit policy implementation, and regional issues across the state of California. For information about linkage fees and other housing policy issues, contact Artemis Spyridonidis, at artemis@lesardevelopment.com.

    [1] https://www.citylab.com/equity/2015/04/the-us-spends-far-more-on-homeowner-subsidies-than-it-does-on-affordable-housing/390666/

    [2] https://www.nytimes.com/2017/07/02/us/federal-housing-assistance-urban-racial-divides.html?smid=tw-share&_r=1

  6. Bay Area Begins to Feel Effect of SB 35

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    Developers across the Bay Area have begun to leverage SB 35, one of the bills in the 2017 Housing Package, to accelerate housing production for households at all income levels across California. Authored by Sen. Scott Wiener (D-San Francisco) SB 35 provides for a streamlined and ministerial approval process for developments in jurisdictions that have failed to meet their Regional Housing Needs Allocation (RHNA) goals. To take advantage of SB 35, the development must be proposed for an infill site, comply with existing residential and mixed-use zoning, allocate at least 10% percent of its units to affordable housing, and conform to the prevailing union wage.[1]

    In March, Blake Griggs Properties became one of the first developers to invoke SB 35 for a 260-unit housing project in Berkeley which has been delayed for almost five years by a lengthy environmental review. The proposed multifamily residential project would replace a parking lot and earmark 50% of the projected units for lower-income housing.[2]

    Sand Hill Property Company, another Bay Area developer, has used SB 35 to streamline the approval process for a redevelopment plan envisioned for the derelict Vallco Shopping Mall in Cupertino. The proposed project is a mixed-use complex that promises to set aside two-thirds of its development area to housing, and also designate half the projected 2,400 multifamily units as affordable housing. SB 35 requires the City of Cupertino to respond to the developer’s proposal within 180 days.[3]

    San Francisco-based nonprofit Mission Economic Development Agency (MEDA) also invoked SB 35 to build a 130-unit, 100% affordable housing project in San Francisco’s Mission District. Once a critic of SB 35, MEDA is now hoping that the law will override, or at least expedite, San Francisco’s cumbersome entitlement process for the proposed project.[4]

    While proponents are hoping that SB 35 would break through legislative barriers, cut lengthy approval processes, and trigger construction of badly needed affordable housing, critics have voiced concern that SB 35 decreases the authority of local governments over land use, deprives local communities of their rights to oppose a project, and increases the extent of state intervention in local affairs. Moreover, in many communities, the new development’s conformance with “neighborhood character” is still a controversial issue. Affordable housing advocates, MEDA included, render SB 35 as a “one-size-fits-all” policy, arguing that the bill requires a scant amount of affordable housing and it may even cause displacement and gentrification in low-income neighborhoods.[5]

    Artemis Spyridonidis, Senior Associate, covers housing policy issues, including structural solutions to the housing affordability crisis, consolidated plans, housing elements, accessory dwelling unit policy implementation, and regional issues across the state of California. For information about linkage fees and other housing policy issues, contact Artemis Spyridonidis, at artemis@lesardevelopment.com.

    [1] Leginfo, “Senate Bill No. 35,” Published on September 29,2017. Date of Access 04-24-2018. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180SB35. And, California Department of Housing and Community Development, “California’s 2017 Housing Package,” 2017, Date of Access 04-24-2018. http://www.hcd.ca.gov/policy-research/lhp.shtml

    [2] San Francisco Business Times, “Stalled for five years, 260-unit Berkeley housing project will be California’s first to use streamlined approvals,” Published March 8, 2018. Date of Access: 04-26-2018. https://www.bizjournals.com/sanfrancisco/news/2018/03/08/berkeley-housing-affordable-sb35-approval-wiener.html

    [3] Vallco Town Center, “The Future of Vallco,” April 2018, Date of Access: 04-25-2018. http://revitalizevallco.com

    [4] San Francisco Chronicle,” Mission housing project invokes law to exchange review for affordable units,” Published on April 7, 2018. Date of Access 04-24-2018. https://www.sfchronicle.com/politics/article/Mission-housing-project-invokes-law-to-exchange-12815332.php

    [5] Ibid.

  7. City of San Diego Explores Preserving Affordable Housing, Preventing Residential Displacement

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    The City of San Diego Smart Growth and Land Use (SGLU) Committee on April 18 held workshops on preserving at-risk and expiring affordable housing and preventing residential displacement.  Although the Committee took no action, scores of housing practitioners, community leaders, and residents attended, including many apartment owners and tenants who provided non-agenda public comment on rent control.

    Presentations by industry leaders and city staff outlined the need to preserve affordable housing.  Between 2000-2017, the County of San Diego lost a total of 1,236 affordable homes; of those, 701 were located in the City of San Diego.[1]  San Diego County currently has 2,306 units at high or very high risk of converting from affordable to market-rate.[2]  This loss is partially due to a steep decline in funding; between 2008 and 2015, state and federal housing for San Diego County declined by 69% from a combined $180 million to just under $60 million.[3] Specific recommendations to preserve affordable housing included hiring a Preservation Coordinator, strengthening regulatory protections for tenants, and increasing funding for preservation purchases.

    LDC alum and SGLU Committee Consultant Keryna Johnson presented on preventing displacement, which occurs when a household is forced to move, either because living there is impossible, they feel threatened, or because the home is no longer affordable.  In San Diego, where housing prices and homelessness continue to soar, concerns about displacement extend beyond moving from one home to another, less desirable home. Many San Diegans fear that displacement will also result in homelessness.

    Artemis Spyridonidis, Senior Associate, covers housing policy issues, including structural solutions to the housing affordability crisis, consolidated plans, housing elements, accessory dwelling unit policy implementation, and regional issues across the state of California. For information about linkage fees and other housing policy issues, contact Artemis Spyridonidis, at artemis@lesardevelopment.com.

    [1] California Housing Partnership, “Best Practices in Local Government Preservation Strategies”

    [2] California Housing Partnership, “Best Practices in Local Government Preservation Strategies”

    [3] California Housing Partnership, “Best Practices in Local Government Preservation Strategies”

  8. SD Board of Supervisors Examines Strategies to Address Housing Affordability

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    On April 18, the San Diego County Board of Supervisors voted 4-0-1 to direct the Chief Administrative Officer to investigate strategies for increasing housing production in the unincorporated region at all income levels through incentives and changes to regulatory policy. The analysis will focus on streamlining permitting, updating zoning regulations and parking requirements, decreasing production regulations, and exploring density bonuses and alternative housing types such as accessory dwelling units and prefabricated homes. The Chief Administrative Officer will provide recommendations on improving housing affordability to the Board of Supervisors within six months.

    Jessica Ripper, Senior Associate, covers issues at the intersection of housing, health, and human services, and also manages marketing and business development.

     

     

  9. Linkage Fees: Boom or Bust for Housing Production?

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    California cities are increasingly looking to linkage fees, which are paid by commercial and market-rate residential developers and also known as “impact fees,” to fund the increased demand for affordable housing created by new developments. In the Bay Area, the high demand for affordable housing has been fueled by an increase in low-wage jobs; the California Employment Development Department estimates more than 100,000 new jobs paying $15 or less hourly were added in the East Bay alone from 2009 to 2016.

    Recently, to address the demand, some East Bay cities have increased their linkage fees. The City of Hayward, for example, quadrupled its impact fees in November 2017 to $18 per square foot, a decision met with criticism from market-rate developers. Hayward’s City Council asserted that the previous fee was significantly lower compared to neighboring cities and that the city needed to increase its affordable housing stock.

    The use of linkage fees is hotly contested.  Developers state that the steep increase in fees will slow market-rate housing production. Chu Rao, founder of Pristine Homes LLC, said in an interview with the San Francisco Business Times that she likely wouldn’t have built her 200-unit development in Hayward had she faced the increased fee. Many argue that the fee increase was poorly timed, because the City of Hayward repeatedly has failed to meet its Regional Housing Needs Allocation goals.

    The problem with funding affordable housing by taxing market-rate housing is that these fees increase the cost of a project. While these fees may be feasible in higher-income projects, they make it more difficult to build lower- and middle-income projects. In addition, these fees can create perverse incentives for developers to avoid the taxes by building elsewhere, reducing the supply of housing available to both low- and moderate-income households.

    While impact fees have increased throughout the Bay Area, they have not always resulted in a decline in housing development. For example, Oakland did not see a drop in project proposals, indicating that the market can support the increase impact fees. In San Francisco, the number of proposals declined after the linkage fee increased, a sign that the city set its linkage fee too high for developers.

    The City of Fremont increased its affordable housing fees as of July 2017. Both non-residential and residential new development triggers these fees, but residential projects pay significantly higher rates. The fee differs by type of project, with the highest fees being paid for attached housing units that will be sold, not rented. A study by the Terner Center found that a multi-family home development in Fremont pays about $75,158 per unit in fees, of which the majority are impact fees. The study also found that these fees account for about 18% of a single-family home’s sale price, and may be artificially inflating rental and sale prices for market-rate developments.

    Linkage fees represent only one of many variables that contribute to the overall cost of housing development. However, the study shows that the variation in fees from city to city and lack of coordination across city departments when setting fees make it difficult for developers to accurately estimate project costs. Further transparency and the development and use of objective standards to determine, as well as more formalized estimating tools, may be necessary to help developers plan and implement market-rate projects.

    Artemis Spyridonidis covers housing policy issues, including structural solutions to the housing affordability crisis, consolidated plans, housing elements, accessory dwelling unit policy implementation, and regional issues across the state of California. For information about linkage fees and other housing policy issues, contact Artemis Spyridonidis, at artemis@lesardevelopment.com.

  10. Omnibus Bill Preserves Key Housing Programs, Strengthens LIHTC

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    Congress narrowly averted a government shutdown on March 23 when President Trump signed the $1.3 trillion Consolidated Appropriations Act of 2018, which funds the government through September 30, 2018. The bill, which covers a wide range of budget areas, increases defense spending by $66 billion and domestic spending by $52 billion.

    FY18 HUD Budget Appropriations

    The $42.7 trillion in net discretionary appropriations Congress allocated to the U.S. Department of Housing and Urban Development (HUD) represents a $3.9 billion increase over FY2017 and a major win for housing advocates who fought White House efforts to cut key housing programs. The final bill provides for the construction of housing, preservation of rental assistance, and economic development, and also funds HUD at higher levels than originally proposed by either the House or Senate.

    The following FY18 HUD budget summary integrates data from a variety of sources to highlight key elements of the bill: [1], [2] , [3], [4]

    1. The bill provides $33.5 billion for Rental Assistance Programs, which will help meet the housing needs of 3.5 million households. Tenant-based rental assistance will increase 8.5% over FY17 to $22 billion, including $19.6 billion to fund the renewal of Section 8 Housing Choice vouchers. The bill provides $11.5 billion for project-based rental assistance programs.
    2. Public Housing Programs received $7.5 billion. The Operating Fund received $4.55 billion and the Capital Fund received, $2.75 billion, a 42% increase over FY17. The increase will primarily be used to expand the Rental Assistance Demonstration (RAD) program from 225,000 to 455,000 units and extend the program through 2024. RAD allows public housing authorities to leverage public and private debt and equity to fund capital improvements. The day before the budget passed, the Government Accountability Office released a study that found that HUD’s evaluation and monitoring procedures did not provide adequate data to assess RAD’s impact on housing authorities’ access to funding, resident safeguards, or the long-term affordability of housing units.
    3. Funding for the Community Development Block Grant program increased 7.8% to $3.3 billion, and the HOME Investment Partnership Program secured $1.36 billion, a 43.4% increase over the previous year.
    4. The bill provided $2.5 billion for McKinney-Vento Homeless Assistance Grants, which includes $2.1 billion for Continuum of Care and Rural Housing Stability Assistance, $270 million for Emergency Solutions Grants, $80 million for youth homelessness, $20 million for Family Unification vouchers, and $40 million for new VASH vouchers for homeless veterans. In addition, the bill reauthorizes the U.S. Interagency Council on Homelessness for two years.
    5. The bill included $907.6 million for the Housing for the Elderly and People with Disabilities, which represents a marked increase over FY2017. Specifically, the bill increases funding for the Housing for the Elderly by 35% to $678 million and funding for Housing for Persons with Disabilities by 57% to $230 million.
    6. The Native American Housing and Community Development program will receive $821 million.
    7. The Housing Opportunities for Persons with AIDS received a $19 million increase, bringing the total program budget to $375 million.
    8.  A $2 million increase to the Community Development Financial Institutions (CDFI) Fund, bringing the FY18 budget to $250 million. The CDFI Fund provides the financing to the New Markets Tax Credit program, among other economic development activities.

     

    While the FY18 budget demonstrates bipartisan Congressional support for housing programs, housing advocates are already gearing up to oppose the Administration’s FY19 budget, titled “Efficient, Effective, Accountable – An American Budget,” which aims to eliminate the Community Development Block Grant Program, HOME Investment Partnership Program, Choice Neighborhoods Initiative, and Self-Help Homeownership Opportunity Program. Eliminating these programs would shift the activities and associated costs to state and local governments.

    LIHTC Allocations Increased

    In an effort to attract private investment to affordable housing, the omnibus bill increased the Low-Income Housing Tax Credit allocations by 12.5% for four years. The increased cap aims to offset anticipated losses resulting from cutting the corporate tax rate from 35% to 21%. Accounting firm Novogradac & Company estimates that the increased allocations would result in an additional 28,400 rental homes. In California, the Tax Credit Allocation Committee will make the additional credits for this year available during the second round of competitive funding, which closes July 2, 2018.

    New LIHTC Income Averaging Provision

    The bill creates a third set-aside option for rental properties to qualify for LIHTC credits. Income averaging, an option originally introduced in 2016 as part of the Affordable Housing Credit Improvement Act, aims to promote development, neighborhood revitalization, and affordable housing preservation by making LIHTC properties available to households with a wider range of incomes. Specifically, income averaging would allow households earning up to 80 percent of the Area Median Income (AMI) to qualify for certain LIHTC units provided that 40% of the units are rent-restricted and the average household income for the project does not exceed 60% AMI.

    LDC will continue to follow how changes to federal program funding, as well as how the increased LIHTC allocations and income averaging option, impact housing and economic development statewide.

    Liz TraceyLiz Tracey is an expert on affordable housing and community development finance using tools such as the Low Income Housing Tax Credit and New Markets Tax Credits. For information about community development financing resources, contact Liz Tracey, Senior Principal, LDC at liz@lesardevelopment.com.

    [1] U.S. House of Representatives Committee on Appropriations – Democrats. (March 2018). FY2018 Omnibus Appropriations Act: Summary of Appropriations Provisions.

    [2] Congress.gov. (March 2018). H.R. 1625 – Consolidated Appropriations Act, 2018.

    [3] Novogradac & Company LLP. (March 2018). Congress Agrees to Historic Funding for HUD in Fiscal Year 2018 Omnibus Spending Bill.

    [4] U.S. House of Representatives Committee on Appropriations. (March 2018). FY2018 Omnibus – Transportation, HUD.