Category Archive: Regional and Local Updates

  1. Opportunity Zones: An Investment in Smart Gentrification?

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    In October 2018, the Internal Revenue Service released regulations for investment in Opportunity Zones, a concept established in the Federal Tax Codes and Jobs Act of 2017. The zones are designed to spur private investment in economic and community developments in economically distressed communities. The State of California now has 890 designated Opportunity Zones out of 8,000 nationwide. The zones would function as a form of impact investing, where private investors are interested in two bottom lines: the capital impact and the social impact.

    Map of the San Diego Promise Zone, which includes the same Census tracts as the new Opportunity Zone

    Within California, Opportunity Zones have the potential to replace public redevelopment dollars lost by the dissolution of redevelopment agencies. Opportunity Zones also allow private investors to contribute to their local communities. The regulations released by the IRS in October were particularly investor-friendly and include a provision clarifying that all capital gains on investments made in Opportunity Zones before 2048 would be excluded from the capital gains tax. Investors may invest capital gains from an asset in a Qualified Opportunity Fund (QOFs) within 180 days of the transaction. The taxes on those gains are then deferred through the end of 2026.

    Given the incentives, investors’ interest in Opportunity Zone funds has grown rapidly. Community advocates, especially those concerned with equitable development, have expressed growing concerns about gentrification and displacement within the Opportunity Zones. Given that the tax subsidy grows as property values increase, investors in quickly gentrifying neighborhoods will receive the highest return on investment. The Brookings Institute suggests that with some guardrails, such as tenant protection policies, Opportunity Zones could lead to “smart gentrification,” or gentrification that does not displace existing residents. The long-term impact of Opportunity Zones is yet unknown, but housing advocates hope it could mean the return of redevelopment.

    Liz TraceyLiz 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.

     

  2. California Wildfires Increase Vulnerability to Homelessness

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    California’s efforts to tackle the affordable housing and homelessness crisis experienced yet another setback last month when two wildfires broke out in Northern and Southern California.  The Camp Fire, which engulfed parts of Butte County, quickly became the state’s deadliest and most destructive wildfire. Officials estimate that the fire consumed more than 150,000 acres, destroyed over 18,000 structures, and claimed 85 lives. The Woolsey Fire killed two people in Malibu and another in Agoura Hills and destroyed 1,452 structures while damaging another 337.

    The damage from this year’s Camp Fire surpassed that of last year’s Tubbs Fire, which killed 44 people and destroyed over 9,000 structures in Napa and Sonoma Counties. The City of Santa Rosa was the hardest-hit with entire neighborhoods destroyed.

    Fires Fuel Housing Instability

    Remains of a house in Santa Rosa, after the October 2017 Northern California wildfires.

    The wildfires highlight, and even exacerbate, the vulnerability and housing instability experienced by an increasing number of low- and moderate-income Californians. The town of Paradise, which lost 90 percent of its housing stock in the Camp Fire, had a median home price of $200,900, well below California’s median price of $578,850. The town’s residents—mainly lower-income workers and retirees—will struggle to find new housing amid California’s housing shortage and soaring housing costs. Moreover, many residents have lost their jobs due to the destruction of the town’s infrastructure. Without the means to leave the town, some will remain in evacuation shelters.

    Although the Red Cross set up six official shelters, a number of evacuees set up encampments elsewhere following a norovirus outbreak. Others found shelter in relatives’ homes, with as many as 20 people staying in one home at a time, creating severe overcrowding.

    Officials worry that, even with help from state and federal aid, a “secondary increase” in homelessness may occur due to added pressures on the area’s housing stock.  A rural community, such as Butte County, has a limited housing supply and the squeeze on resources will be severe. Ed Mayer, executive director of the Butte County Housing Authority, estimates that 6,000 to 7,000 displaced households will be unable to find housing in the county.[7] If the needs of these low- and middle-income survivors are not met, homelessness could increase. At greatest risk are low-income households who lack insurance and who could soon go from staying in hotels to living in their cars or on the streets.

    Rebuilding Efforts Should Anticipate a New “Normal”

    Earlier this year, the Sonoma County Community Development Commission released a report that showed a six percent increase in homelessness in 2018 compared to the previous year, and 24 to 35 percent increase in first-time homelessness– indicating that the fires played a role in residents’ living situation.

    While rebuilding efforts in Northern California are only just beginning following last year’s blaze, the City of Santa Rosa reported 765 units were under construction and permits for another 181 units had been issued as of October 2017. [8] Diana Elrod, Principal, has been working with the Sonoma County Community Development Commission to create a strategic plan to move the county forward in the wake of the fires and secure funding to support the rebuilding plan.

    Given the effects of climate change, Californians should prepare for scenarios in which wildfire damage becomes the “new normal.” Technological advancements are also needed to help protect people living in fire-prone areas. Numerous reports from 2017’s wildfires recounted stories of people who struggled to open their garage doors manually, especially elderly victims. One example of an effort to increase protection from wildfire damage and injury is a new California law that requires automatic garage doors sold in the state to include a back-up battery that can provide power in the event of power outage.

    Last year’s wildfires also spurred new legislation to help homeowners rebuild. These laws give victims up to 36 months to rebuild their homes and businesses (SB 1772), allow homeowners with insufficient coverage to combine payments under other policy limits to cover rebuilding costs (SB 894), and permit policyholders to collect the full replacement cost of their home even if they choose not to rebuild or opt to relocate (AB 1800). Other new laws require insurers to follow specific guidelines for conducting replacement cost estimates (AB 1797) and prevent insurers from cancelling or not renewing policies in fire prone regions (SB 824).

    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.

    Diana ElrodDiana 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.

  3. Santa Cruz Affordable Housing Bond Ballot

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    Farmworker Housing CoastsideThis November, Santa Cruz County residents will vote on a  $140 million affordable housing bond ballot measure that will be funded through annual property taxes at an estimated $16.77 for each $100,000 of assessed property value. If passed, 75 percent of bond proceeds ($105 million) will be used for new construction of approximately 1,041 rental and accessory dwelling units for low- and moderate-income households, such as public servants, teachers, farmworkers, or people working in the tourism industry. Fifteen percent of the funds will provide shelter and supportive housing for individuals and households experiencing homelessness, and 10 percent will fund first-time homebuyer loans. A broad coalition of business and civic organizations, including the Santa Cruz Chamber of Commerce, the Farm Bureau, and the Monterey Central Labor Council, support the measure.

     

  4. Bay Area Housing Experts Consider Regional Housing Solutions

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    This month, the Committee to House the Bay Area (CASA) reached an important milestone. The CASA Technical Committee, a group of housing policy experts from throughout the Bay Area wrapped up development of dozens of action plans designed to tackle the housing and displacement crisis. Now, a subset of those plans will go before the CASA Steering Committee for review.

    For the last six months, members of the CASA Technical Committee drafted, vetted, and voted on ‘action plans’ designed to tackle CASA’s three goals, known as the “Three Ps”:  Protecting vulnerable populations from displacement; Producing more housing; and Preserving existing affordable housing stock. On July 18, the CASA Technical Committee wrapped up this process, having voted on a total of 36 action plans over the last several months.  The conclusion of the action plans’ development marks a significant milestone in the 16-month CASA process.

    Now attention turns to the CASA Steering Committee, comprised primarily of elected officials and other thought leaders, including the Mayors of San Francisco, San Jose, and Oakland.  The CASA Steering Committee will consider the action plans drafted by the Technical Committee over the next several months.

    On Wednesday, July 25, the Steering Committee considered four action plans proposed by the CASA Technical Committee. The four action ideas include efforts to prevent extreme rent increases, no net loss of affordable units, regional inclusionary zoning, and reductions to impact fees.

    Regionwide Rent Control Policy

    The Technical Committee considered several variations of a regional rent control policy to prevent burdensome rent increases. One version of the plan is modeled after existing rent control ordinances in cities like Oakland and San Francisco, which cap annual rent increases according to changes in the Consumer Price Index (CPI).  Under this plan, which would require enabling legislation, all municipalities in the Bay Area would be required to adopt a CPI-based rent control policy that meets minimum standards.

    Alternatively, the Technical Committee also considered an anti-gauging measure, which would prevent Bay Area landlords from increasing rent by more than 10 percent per year.  More lenient than CPI-based rent control, this policy is similar to the Emergency Anti-Gouging policy already in place in California, where landlords cannot gouge renters during times of emergency, such as the 2017 fires in Sonoma County.

    No Net Loss/First Right of Refusal

    The “No Net Loss” action plan pursues state legislation that mandates a 1:1 replacement of any rent-restricted or market-rate affordable unit that is demolished. The proposal would require that tenants who are displaced from their homes due to the demolition of affordable units would be granted the right of first refusal to the new units, which would be offered at their previous rental rate.

    Regional Inclusionary Zoning

    Though many Bay Area cities already have inclusionary zoning ordinances, this action plan creates a consistent, regional inclusionary zoning framework. Inclusionary zoning policies require developers to include a certain percentage of affordable units (typically 10-15 percent) in their developments. This policy is one method of creating mixed-income communities and increasing production of affordable units.

    Reduce Impact Fees

    This action plan requires state legislation to change the structure of impact fee imposition with the goal of reducing high costs and confusion in the development process. This legislation would include locking rules and fees at development application completion, changing the imposition calculation from a “per unit” basis to a “per square foot” basis, and reducing or eliminating impact fees on small middle-income developments or deed restricted units. This policy could significantly lower costs for developers while increasing feasible production at lower income levels.

    Next Steps for CASA

    Estolano LeSar Advisors will continue to facilitate the process through December, when CASA aims to compete a Regional Compact that incorporates the top policy recommendations emerging from the process. Visit the CASA website for more information.

    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.

  5. Berkeley to Vote on Affordable Housing Bond Measure

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    On July 10, Berkeley City Council members approved an affordable housing bond measure to be placed on the November 2018 ballot. If passed, the measure will authorize up to $135 million of general obligation bonds for the development of affordable housing, to be financed by taxes on all taxable properties. The tax burden for the city’s mean home valuation of $425,000 would be about $97, according to the City Council’s staff report. The funds will support housing development or preservation and will target a diverse group of incomes ranging from extremely low-income households to workforce housing, which extends up to 120 percent of the area median income. A March 2018 City of Berkeley Community Survey found that the two most important issues among likely voters is building affordable housing and addressing homelessness, with 58 percent of survey respondents indicating one of the two as their top issue facing the community.

  6. Housing Roundtable Highlights Need Across Income Spectrum

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    Official Photo of Assemblymember Todd GloriaThe San Diego Housing Federation recently hosted a housing roundtable on Building Across the Income Spectrum: Leveraging Resources to Meet a Range of Needs. The panel included Assemblymember Todd Gloria, along with local developers, advocates, and financiers of housing across the income spectrum. The experts addressed the lack of housing for middle-income San Diegans, and its effect on the supply of affordable housing to lower-income households. Some of the solutions outlined were to build more “micro-units” and increase density in urban areas. The panelists encouraged increased collaboration between nonprofit and market-rate developers to deliver more housing units, and to educate residents on the problem of and potential solutions to the housing crisis. Assemblymember Gloria introduced legislation to increase the supply of housing earlier this year. The legislation, AB 2372, would increase the number of affordable workforce and low-income housing units within transit priority areas.

  7. When Process Is Politics: 2018 California Primary Election Recap

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    When California adopted a primary system that advanced the top two vote-getters regardless of party to the November election, advocates anticipated that moderate candidates with broader appeal would benefit. Yet, news coverage leading up to and following the primary, which took place June 5, was dominated by concerns about the system’s real effect: splitting votes. In addition, same day registration and a glitch in Los Angeles County’s voter rosters added to concerns about how the voting process might impact the races.

    State Office

    Lt. Gov. Gavin Newsom (D) beat out two fellow Democratic contenders, former Los Angeles Mayor Antonio Villaraigosa and California State Treasurer John Chiang, with 33.4% of the vote and will run against San Diego businessman John Cox (R), who earned 26.2% of the vote November. If elected, Newsom states he will focus on increasing investments in affordable housing, promote the use of Enhanced Infrastructure Financing Districts to fund infrastructure projects, and work with the private sector to create workforce housing. Cox aims to repeal the gas tax increase and reduce regulations on businesses as a path to stimulating economic growth.

    Two Democrats, Eleni Kounalakis and Ed Hernandez, will advance to the general election for lieutenant governor. Kounalakis, who previously served as the U.S. ambassador in Hungary, edged out Hernandez, a former state Assemblymember and Senator, as the top vote-getter. Prior to her appointment as ambassador, Kounalakis held the position of President of her family business, AKT Development, which develops housing for middle-class families.

    Secretary of State Alex Padilla, Controller Betty Yee, and Attorney General Xavier Becerra all advanced to the general election. Fiona Ma (D), who received 43% of the vote, will compete against Greg Conlon (R) to succeed John Chiang (who lost his bid to become Governor) as California State Treasurer.

    State Assembly

    Senate Democrats no longer hold the supermajority necessary to pass tax and fee increases following the defeat of Josh Newman, who lost the 29th District seat over a vote to raise gas taxes. Republican Assemblywoman Ling Ling Chang will now hold the office representing Orange County.

    U.S. Senate Races

    California Senate President pro Tempore Emeritus Kevin De Leon (D) advanced to the November election despite receiving only 11.3% of the vote against incumbent Sen. Diane Feinstein (D), who received 43.8% of the vote in a crowded field of 19 candidates. Feinstein has backed legislation to expand the definition of homelessness so that more children and families who currently do not qualify would have access to federal housing assistance.

    De Leon served as pro Tempore last year when Gov. Brown signed the historic housing package, and was one of the authors of SB 1206, which asks voters to approve the use of Mental Health Services Administration bond funds for the No Place Like Home program, which aims to dedicate $2 billion for permanent supportive housing for individuals with severe mental health issues who are experiencing or at risk of chronic homelessness.

    U.S. House Races

    In the Bay Area, House Minority Leader Nancy Pelosi (D) advanced easily to the general election in San Francisco (12th District) finishing ahead of Lisa Remmer (R) and five other candidates. Pelosi has a long history of supporting Low-Income Housing Tax Credits, the redevelopment of public housing, and programs that provide housing for individuals experiencing homelessness, especially those with HIV/AIDS. Remmer is running on a platform of school choice for parents, cutting H1B visas, and securing the nation’s borders to prevent illegal immigration.

    Rep. Mark DeSaulnier (D-11th District) also easily advanced to the November election, where he will face John Fitzgerald (R) to represent Contra Costa. DeSaulnier supports permanently expanding tax credits for low-income homebuyers, as well as programs to provide housing for homeless veterans and students.

    In San Mateo, Rep. Jackie Speier (D-14th District), who received 77.7% of the vote, will face Republican challenger Cristina Osmena in November. Rep. Eric Swalwell (D-15th District) of Hayward-Livermore, Rep. Ro Khanna (D-17th District) of Fremont-Milpitas, and Rep. Anna Eshoo (D-18th District) of Silicon Valley-Santa Cruz will all face Republican challengers in November Rep. Barbara Lee (D-13th District) ran unopposed in Berkeley-San Leandro, as did Rep. Zoe Lofgren (D-19th District), who represents San Jose.

    In the Los Angeles area, two Democrats are vying against each other in two races. Rep. Judy Chu is running against Bryan Witt in the San Gabriel Foothills (27th District). The closest runner-up to Rep. Nanette Barragan to represent South Los Angeles-Compton (44th District) was Compton Mayor Aja Brown who dropped out of the race in April. Barragan has supported efforts to protect seniors from losing their homes and introduced the Housing Homeless Veterans Act.

    Republicans finished first in two primary races. Rep. Steve Knight (25th District) is running against Katie Hill (D) to retain his seat, and Ryan Downing is challenging Rep. Linda Sanchez (38th District) in Eastern Los Angeles. Rep. Grace Napolitano (D-32nd District) of the San Gabriel Valley ran unopposed.

    Democrats finished first in six of seven races and will run against Republicans in the general election. Candidates include Rep. Adam Schiff (28th District) of Burbank-Glendale, Reps. Tony Cardenas (29th District) and Brad Sherman (30th District) of the San Fernando Valley, Rep. Ted Lieu (33rd District) of Coastal Los Angeles, Rep. Karen Bass (37th District), and Maxine Waters (43rd District).

    In the San Diego region, Diane Harkey (R) will advance with 25.5% of the vote in a bid to fill Rep. Darrell Issa’s seat in the 49th District. Harkey, who has represented Southern California as a member of the State Board of Equalization since 2014, emphasized streamlining tax laws and regulations during her campaign.

    Currently Democrats Mike Levin and Sara Jacobs are vying for the second spot, trailed by Democrat Doug Applegate and Republicans Kristin Gaspar and Rocky Chavez. Levin’s priorities include sustainable energy and environmental protection, providing affordable health coverage, and fighting for campaign finance reform. Jacobs’ platform include expanding access to affordable housing and protecting individuals from housing discrimination.

    Rep. Duncan Hunter (R-50th) also advanced with nearly 50% of the vote, and will defend his seat against Democrat Ammar Campa-Najjar (D) in November. A former Labor Department official with the Obama administration, Campa-Najjar worked to expand the nation’s apprenticeship program and help small businesses secure federal contracts.

    In Central and South San Diego County, Reps. Juan Vargas (D-51), Scott Peters (D-52), and Susan Davis (D-53) each won their races with more than 55% of the vote. All will likely face Republicans in the general election.

    Local Races

    In San Francisco, the Mayor’s race was still too close to call with ballots yet to be counted as long as they arrive by Friday, June 8. As of Wednesday evening, Mark Leno led Board of Supervisors President London Breed by less than a percentage point in the bid to replace Ed Lee as Mayor through ranked choice voting. Breed briefly held the position of Acting Mayor of San Francisco following Lee’s unexpected death in late 2017.

  8. Riverside City Council Adopts Housing First Strategy

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    The Riverside City Council voted unanimously on March 13 to adopt a Housing First strategy that aims to shift City resources from managing homelessness to ending it by increasing the availability of supportive housing options for people experiencing  homelessness. As part of the plan, the City adopted the Housing First model, made recommendations for operationalizing the model, and identified potential sites for development in each ward. The Housing First strategy builds on the region’s success of functionally ending Veteran homelessness in 2016 and lessons learned, including using Housing First, ensuring leadership, and acting with a sense of urgency. The City Council also authorized partnerships with the following entities:

    1. County of Riverside Department of Behavioral Health to be the applicant for No Place Like Home bond funds from the State to fund housing and support services to homeless individuals.
    2. County of Riverside Housing Authority to make 389 County-administered Housing Choice Vouchers available within the City for future Housing First developments.
  9. LA City Council Pledges to Build Housing for the Homeless in Each District

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    The Los Angeles City Council voted 14-0-1 in March to approve a pledge wherein each council member agrees to build 222 units of supportive housing in his or her district by July 1, 2020. The pledge, although not binding, is a public declaration in support of building supportive housing throughout the city. This is significant in Los Angeles, where a project cannot receive City funding for homeless or low-income housing until it receives a “letter of acknowledgement” from the council member in the corresponding district. This comes over a year after Los Angeles voters approved Measure HHH by 76%, approving the bond measure that will generate $1.2 million in bonds to house the homeless.

  10. Fruitvale Village Study Highlights TOD Benefits

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    A new study of Oakland’s Fruitvale Village conducted by the UCLA Latino Policy and Politics Initiative showed that transit-oriented development enhanced residents’ socioeconomic well-being without resulting in the displacement of Latino residents. The study highlights how BART worked with the local Unity Council to create a community-driven transit-oriented development plan that resulted in improved education outcomes and higher incomes and home ownership rates as compared to similar communities within the region and statewide. The study provides valuable insight for other jurisdictions planning transit-oriented development projects to address the housing crisis.