Monday Morning Thoughts: affordable v. Affordable Housing

Affordable Apartments, Davis CA Davis Vanguard

There seems to be some conflating of Affordable Housing (Big A or subsidized housing) with the issue of general affordability.

We saw this in Eileen Samitz’s comments that we highlighted yesterday.

“Affordable housing,” she said.  “What makes anyone think this is affordable?  What I saw in the newspaper is that it’s really $700 to $800 per bed.  Do the students really think that’s
affordable?  They keep on saying this is affordable housing, this does not seem affordable.  This is exactly what they are complaining about on campus is too expensive.”

She added, for the low income level, the developers are just going to be “bleeding out of the market rates.  Let’s talk about what will the market rate cost.”

I believe she is actually speaking to the market rate units, not the Affordable units.  But it seems important to put the numbers on the table in a clear way.

The Nishi affordable plan is calling for 5 percent to be extremely low income and 10 percent very low income.  That comes to 110 beds in the extremely low category and 220 beds in the low category.

At the extremely low level the rent is $404 and at the very low it will be $670.  The council repeatedly pointed out that the subsidy for the very low income rentals would be about $100 which would put market rate around $770 – though, as we have pointed out, that has not been determined yet.

As I pointed out yesterday, if the number of units comes online around 2020, it could generate a temporary glut in the market which could actually bring down the costs further.

But for purposes now, let us assume that the $700 to $800 is accurate.

In 2017, the average apartment according to the BAE report, rented for $1035 for a studio, $1270 for a one bedroom, $1660 for a two-bedroom and up to $2270 for a three-bedroom.  Assuming single occupancy, it would seem that a market rate three-bedroom is renting for just over $750 per person and a market rate two-bedroom for about $830 per person.

So that puts the cost estimate in line with market rate apartments.  A room at West Village is $1050.

And for a bed lease the average is $892 a month.

Keep in mind these appear to be based on a nine month (actually slightly less than nine month) schedule.

For single occupancy, the cost of a room and meals is nearly $1800 per month at Tercero.  That goes down to $1626 for double occupancy and $1473 for triple occupancy.

Is any of this really affordable for students?  The affordable housing offered at Nishi is not bad and the market rate seems in line with the cost of housing around the community.

None of these are luxury apartments.  Housing is expensive both on and on campus.  The only way to fix that is by providing enough supply to allow for a real vacancy rate.  We are moving in the right direction there.

—David M. Greenwald reporting



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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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34 thoughts on “Monday Morning Thoughts: affordable v. Affordable Housing”

  1. Ken A

    It is important to remember that it is not possible to have “new” apartments (or “new” cars) that rent (or sell) for low prices without subsidies.

    The problem is that most (but not all) poor people are not good at “gaming the system” and at the end of the day a (big A) Affordable project like New Harmony results in millions of tax dollars going to politically connected landowners, developers, contractors, unions, and property managers (who have spent years learning to “game the system”) while the  poor people that rent the units get a little cheaper rent each month (in some cases paying MORE than the rent of an older not as nice apartment in town).

    At “only” about $500K/unit New Harmony is not as bad as some of the (big A) Affordable projects in the Bay Area where the politically connected will get the politicians they pay off to spend twice as much per unit and only help half as many poor people.

    If local politicians really want to help the poor in town they could easily set up a “win win” where they allow the developers to build extra units on a site if they commit to give half the gross rents from the extra units to a fund that would help poor people with $100-$500 a month (going up every year forever like the rents) for as long as the apartments were standing and being rented.

    1. David Greenwald

      “It is important to remember that it is not possible to have “new” apartments (or “new” cars) that rent (or sell) for low prices without subsidies”

      A really important point

      1. Richard McCann

        And those subsidies are not coming the federal, and even the state, government in the current political climate. Unless City residents are ready to tax themselves for this, it’s not possible. Ken A’s solution might be one thought, although I’m not sure that it pencils out.

        1. Ken A

          The city and developer can take pencil to paper to come up with an exact number and maybe the city and county can kick in some of the extra tax money they will get each year if they allow extra units.

          If the city lets a developer build an extra 25 ~$300K/units that will be an extra ~$80K/year (going up by 2% a year) in property tax revenue that would not be coming in from a project with less units (that had a lower assessed value).

           

        2. David Greenwald Post author

          You’re focused on the wrong thing here.  The problem here is a supply issue.  We don’t have enough.  The answer that some people have given is more on-campus housing.  What these numbers show is why students haven’t been that keen to push for more on-campus housing because it’s so expensive.

        3. Keith O

          Well, the students are also complaining that the “math” says that off campus housing is too expensive so they show up at council meetings making demands, why not the same for UCD?

           

        4. David Greenwald

          I think they’re mainly complaining that there isn’t enough off-campus housing.  But to the extent that it’s too expensive, more supply should help.

  2. Eileen Samitz

    First of all, I have seen the Vanguard avoiding talking about market rate costs at the mega-dorms so lets start with the fact that market rate beds at Lincoln40 are $1,000 per bed monthly (the developer only divulged this after being directly asked).

    The only reference I saw on Nishi was the Enterprise on Nishi market rate rent claiming to be $750 – $800 (not $700-$800). So since it would appear that Nishi 2.0 is seemingly coming up with a proposed lower rent per bed cost to look better than Lincoln40, so these Nishi numbers may not even be real. There is no commitment that I know of to this proposed Nishi rent cost and, but even it was, it does not seem all that “affordable” to students to me.

    Second, students I have spoken to say that $750-$1000 per bed  per month is too expensive for them. So, let’s just say that we are talking to different students with different opinions perhaps due to their different financial resources available to them.

    Third, I find it hard to believe David that you are trying to compare costs of student housing including meals with mega-dorm housing like Nishi and Lincoln40. Seriously? Or are Nishi and Lincoln40 now offering meals included with the rent? (I don’t think so…)

    This is not anything moving in the “right direction” as you try to claim, just another Vanguard shell-game.

    (Done for now with this since this article is just absurd.)

    1. David Greenwald

      Two things, one is that both the chart and my text label that the Tercero housing includes meals.  There’s no way around the fact that they are paying a lot more for meals than they would on their own.

      Second, as the council stated in their discussion, the $670 very low income rate’s subsidy is $100.  That being the case, the market rate should be $770.

      1. Eileen Samitz

        David,

        Again, your “analysis” makes absolutely no sense.  How can you possibly be trying to compare the cost of on-campus housing which includes meals, to this off campus housing which does not include meals? There is no logic to this desperate comparison of “apples to oranges”.

        And again, this also ridiculous “subsidy” argument to try to legitimize the now $770 monthly rent is just as absurd. Plus, there is zero evidence that even this newly invented $770 monthly rental cost would even materialize. There is nothing anywhere in the Nishi documentation saying what the market rate rental costs will be.

        The actual final monthly rent costs would not emerge until after the project would be built, and guess what? Those market rate costs are going to be raised to pay for any “affordable” unit “subsidies”.  So this fairy tale of even the $750-$800 monthly market rate rents has no evidence of materializing since there is no commitment to it anywhere.

        So, the Vanguard merry-go-round of “spin” continues. This is why you see fewer and fewer people posting because of the lack of credibility on the Vanguard.

        1. Alan Miller

          Those market rate costs are going to be raised to pay for any “affordable” unit “subsidies”.

          Welcome to economic reality, people.  A(a)ffordable housing prices out the lower-middle.

        2. David Greenwald Post author

          Eileen:

          “How can you possibly be trying to compare the cost of on-campus housing which includes meals, to this off campus housing which does not include meals? ”

          Because I know how much it costs to buy food for students? Best case scenario you’re looking at over $400 a month just for food. Students can and do pay less than half that a month. So not only is the cost of room expensive (at least $1050 for a single but the cost of food makes it worse, not better).

  3. David Greenwald Post author

    Eileen wrote: “And again, this also ridiculous “subsidy” argument to try to legitimize the now $770 monthly rent is just as absurd. Plus, there is zero evidence that even this newly invented $770 monthly rental cost would even materialize. There is nothing anywhere in the Nishi documentation saying what the market rate rental costs will be.”

    But apparently Eileen wasn’t paying much attention when this stuff came up…

    So here’s the math…

    $1536 is the annual subsidy per bed at very low, divide it by 12 = $128 add that to the $672 rent and you get $800

    $4752 is the annual subsidy per bed for the extremely low, divide it by 12 = $396, add that to the $404 rent and you get $800

    So the estimated market rate – PER THEIR DOCUMENTATION – is $800 (apparently council was rounding off when they said $100, but these exact figures put it in the right range).

    Your turn Eileen

    1. Ron

      I’ll try a “turn”:

      “So the estimated market rate – PER THEIR DOCUMENTATION – is $800 (apparently council was rounding off when they said $100, but these exact figures put it in the right range).”

      This documentation you’re referring to – does it have much meaning?  How can Nishi – which has no access or infrastructure on/near the property – and requires mitigation to (hopefully) make it livable (in terms of air quality), estimate that rents will be cheaper than the multi-bedroom Lincoln 40?

      1. David Greenwald Post author

        I don’t know that the rents will be cheaper than Lincoln40. I have not seen similar documentation.

        What I do know is that the projected rent at Nishi is on par with the average per bed rent elsewhere.

        1. Ron

          I recall Lincoln40 rents being discussed on the Vanguard, but I don’t know its original source.

          Of course, Lincoln40 hasn’t been approved, at this point at least.

          1. David Greenwald Post author

            I have not seen anything official yet. At some point they will come before council and we will see what is ultimately approved. The Nishi numbers seem reasonably priced for the market and the Plescia report indicates they believe it is financially solvent but a close call.

        2. Ron

          Those estimates might be way off, regarding Nishi.

          If it’s approved, and if it’s subsequently built, they’ll charge whatever the market will bear for the market-rate units.

          Estimates at this point mean nothing.

          1. David Greenwald Post author

            It’s all just an estimate at this point. But again, if you see a few thousands units come on line in 2020 as expected, I think you’re going to see the costs go down, not up.

    2. Eileen Samitz

      Seriously David?

      So market-rate for Nishi is “estimated at $750-$800″  per bed monthly is just “talk”.  There is no commitment to that monthly rental cost for market-rate beds in writing, is there? So, there are 1,936 market rate beds which will be significantly higher in cost to help subsidize the 264 “affordable ” beds. This is not hard to understand.

      1. David Greenwald Post author

        ” There is no commitment to that monthly rental cost for market-rate beds in writing, is there? ”

        They did the best they could in this case – they estimated the market rate rental costs. It’s almost like you don’t know what market rate means. Seriously Eileen, if they lock in market rate rental costs, it’s no longer market rate.

  4. Tia Will

    I have a different perspective.

    But to the extent that it’s too expensive, more supply should help.”

    Because increasing supply of housing has worked so well to date ?  I moved here permanently when the second phase of North Star was under construction 25 years ago. We have had multiple “increases in supply” since that time, none of which have lowered the cost of housing. Now one can say that we simply haven’t built enough. With the ongoing influx of people from the Bay area ( and other locations), I would argue that we will never be able to build enough to drive and hold the housing prices down and this is merely a “build our way out of trouble” argument that historically does not hold.

    1. David Greenwald Post author

      “Because increasing supply of housing has worked so well to date ? ”

      Rental housing markets are very different and I would argue much more closed. And when have we last attempted to increase supply? It’s been a very long time.

      1. Ron

        David:  “Rental housing markets are very different and I would argue much more closed.”

        Not sure what you’re basing that on.  In general, renters move around much more than homeowners, and are much less “committed” to one geographic location.  (Such flexibility is one of the advantages of being a renter.)

        Of course, with students displacing local workers, . . .  (see previous comments).

        1. Ron

          Probably so, since there’s still no agreement with UCD regarding their plans and its impacts on the city. But, you didn’t actually address the point you made.

          If you’re stating that students are less likely than local (Davis) workers to rent in surrounding areas, then that may be true. So, the “plan” is likely creating a sub-class of local workers, who commute to Davis.

        2. David Greenwald

          Regardless of whether there is or is not an agreement with UC Davis (there was an MOU about 20 years ago or so that pledged to increase the on-campus housing share, it turned out to not be enforceable), there will be a substantial number of students living in rental housing off-campus.

  5. Tia Will

    there was an MOU about 20 years ago or so that pledged to increase the on-campus housing share, it turned out to not be enforceable”

    Questions about this.

    1. Did those drafting the MOU know that it would be “unenforceable” in advance, or were they truly operating in good faith.

    2. If the former, what assurance do we have that the same “playbook” is not being used now ?

    1. David Greenwald Post author

      Tia:

      I wasn’t involved so I don’t know the answer to one.

      We have no assurance that UC Davis will built the 8500 beds they’ve promised.

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