State lawmakers passed a $122 billion budget today, but there’s still some unfinished business in Sacramento. Governor Brown still needs the Legislature to pass a housing proposal that would put $400 million toward low-income housing projects.
“I must say, this is really the first time [Brown] has talked about housing,” said Jacqueline Waggoner, VP and Southern California Market Leader of Enterprise Community Partners, Inc. which helps developers find funding for affordable housing projects. “It’s exciting.”
But there’s a catch. Governor Brown tied those funds to the Streamlining Affordable Housing Bill, which will allow developers to bypass much of the approval process for building new homes.
We’ve broken down what that means for developers, housing advocates, and the state’s efforts to get more Californians housed.
What does affordable housing have to do with the CA state budget?
Brown is linking the budget to his housing plan. A proposed $400 million in affordable housing funding would be available, if lawmakers accept his plan to make it easier on developers to build housing, as outlined in Brown’s Streamlining Affordable Housing Approvals bill.
But the streamlining bill has received some pushback, including a letter to state legislators signed by over 50 advocates who oppose it.
Why does Governor Brown want to streamline development?
Well, first, let’s talk about what streamlining means in this case. Basically, Governor Brown is proposing to let developers move forward with their projects more quickly if they promise to set aside 5 percent of their residential units as affordable housing. The thought, according to the Governor, is that streamlining the development process speeds up building, which gets more people into housing more quickly.
Ben Metcalf, director of California’s Department of Housing and Community Development, also said the longer it takes to get a project built, the more it costs.
Citing his own department’s research on state-funded housing development, he said the reviews and community approval processes added close to 12 percent more to the total cost of a project.
So, the governor’s office argues, time is money. The less time spent in the review process, the more time spent building — and the more that can be built.
And some affordable housing developers agree.
“We aren’t building them fast enough,” said Cristian Ahumada, executive director of Clifford Beers Housing, which builds affordable housing around Los Angeles County.
He said being able to build "by-right" — meaning with a greatly reduced review process — would incentivize him as developer to build more, faster.
Any additional funding he could get his hands on would help, too, he added.
“We need those dollars,” Ahumada said. “[We] try to align that with other public dollars.”
But if it the plan will create more housing like he says, why are some affordable housing advocates and community members against it?
Advocates say the streamlining process threatens to cut residents and neighbors out of the development process.
The details aren’t final yet, but the bill could either drastically shorten or cut the public comment period for developers who say they’ll set aside 5 percent of their units for affordable housing. During this period, community members and neighbors can negotiate with developers on things like size, layout, and land use.
In 2011, Gabriela Garcia, a longtime South L.A. resident, heard a new Geoffrey Palmer development was coming to her neighborhood. She and her neighbors quickly organized to try and stall the project, which was replacing the old Orthopaedic Hospital northeast of USC. They wanted to get affordable housing included in the development and also campaigned for space for health services to fill the hole the hospital was leaving.
“The proposed project was these luxury towers of unaffordable housing, so the message was that it wasn’t a project for us,” Garcia said of the Lorenzo, Palmer’s proposed 1000-unit complex marketed to students. After three months of negotiations, Garcia and her neighbors were able to get 46 units of affordable housing set aside in the Lorenzo, and also secured 20 years of rent-free occupancy for a health clinic in the development.
Garcia said that development in Los Angeles and California is necessary, but that it needs to be balanced with the needs of community stakeholders. Those needs are heard, she said, during the public comment period.
“Sure, there’s the entitlement process but at the end of the day folks standing up and saying ‘now I have to take two to three buses to get the same service that I got before’ [is effective.]”
If the bill passes and the public comment period is shortened, attorney Doug Carstens is worried people like Garcia and her neighbors won’t have time to organize and negotiate their needs and concerns with developers. Carstens represents community and environmental groups in land use cases.
“It’ll be disastrous. Projects will be proposed and essentially stuffed down the throats of people no matter whether it fits with their areas or not. There are impacts all across the board that could occur that right now are being prevented by the public review process,” Carstens said.
“This magic wand comes at the cost of only 5 percent to developers, so if they have a 100 unit development- market rate, luxury condominiums or housing- if they just set aside five of those, then they’re not subject to any other restrictions,” Carstens said.
L.A. County Supervisor Sheila Kuehl also opposes the bill and is making recommendations to amend it. “There’s something wrong with [Governor Brown’s] analysis at every single step,” Kuehl said.
She has authored a motion recommending changes be made to the bill including raising the threshold to 25 percent of units be set aside for affordable housing. She’s also advocating narrowing the definition of “affordable housing.”
“The problem with ‘affordable housing’ is that it’s normally identified as affordable based not on a percentage of a person’s income, but on what the median rental is in that area. So affordable housing in Santa Monica, for instance, would be $2,000 for a studio,” Kuehl said. She wants the bill to provide more housing for “very low income” Californians.
Kuehl also said she hoped Brown could find a compromise on the community input issue.
“You can set limits on reviews, say that people have to raise objections within a certain amount of time and that things have to be resolved within a certain amount of time,” she said, explaining that, as written, the law provides only a small sacrifice for developers and a huge loss for communities.
“He’s giving away a lot, and we don’t get hardly anything.”
Governor Brown is trying to sweeten the pot for housing advocates by attaching $400 million to the Streamline bill. So once that’s approved, that money will be distributed in housing grants across the whole state. But how much affordable housing could be built with $400 million state dollars?
Matt Schwartz, president of the California Housing Partnership, says it's difficult to give an average, but building one unit of affordable housing can cost approximately $350,000.
$70,000 of that can come from the state, and the developer cobbles together the other $280,000 through a combination of county, state, federal, and other funds and grants.
If Brown’s plan passes, there are about 10 programs that would be funded under the big umbrella of affordable housing. One of them is the Multifamily Housing Program.
Schwartz said it’s unlikely that all $400 million would be allocated towards the Multifamily Housing Program. But, if it were, then $400 million from the state would be able to fund 5,700 units of affordable housing across the entire state. If at least two people lived in each unit, that $400 million could house at least 11,400 people each year.
That’s a great first step, Schwartz said, but the demand for low-income housing across the state would still be quite high.
California Housing Partnership estimates that the Los Angeles area alone needs more than 549,000 more homes accessible to low-income renters.
Schwartz said he believes that the state funding number should be higher, given the demand.
“We think there should be at least $1 billion,” he told KPCC. “If they’re proposing $400 million as a down payment, great, but we think there needs to be a long term commitment.”
Why is building affordable housing so expensive?
Time is a big factor, but it’s not the only factor.
Alan Greenlee, executive director of the Southern California Association of Nonprofit Housing, said the competitive process for obtaining tax credits — which developers say can fund up to 75 percent of some projects — can make units more expensive to build. Units with sustainable features like solar panels or energy efficient windows can be more appealing in that competitive process, but they can be more costly up front.
Developers are also incentivized to pay premium wages for workers building the projects, which can also drive up costs, but according to Greenlee, these higher wages also benefit the community members employed.
At a recent Clifford Beers Housing project, for example, over 100 construction jobs and 3 permanent jobs were created during the development of a 30 unit building.