My View: Affordable Housing is Now Driving the Boat

Affordable Apartments, Davis CA Davis Vanguard

Last month outgoing ASUCD President Josh Dalavai told the Vanguard that the push is now shifting to not only include a demand for student housing, but to make sure that that housing is affordable.

“We’re trying to hit really hard on affordability now,” he said.  “Now more so than ever because it doesn’t do students much good if we just erect like ten West Villages and no one can actually afford to live there.”

On Tuesday a number of student leaders and others came forward in support of the new Nishi project, but in many cases they did not support Nishi in 2016 – citing as a chief reason the lack of affordable housing in the project.

One of those was Sean Raycraft who told the council on Tuesday, “I opposed the original Nishi project.”

He said “I didn’t think it was a good project.  I didn’t think it was affordable for my members.  I campaigned against it.”

The big difference now is first that the developers worked to create on-site affordable housing.  He said, meanwhile, in the last two years, “the housing crisis has gotten worse.”

While there is no doubt that the housing crisis has gotten worse, and the market impact of supply and demand will help bring costs down if there is a glut on the market instead of a severe shortage, without the affordable housing component, many would not be favoring this project.

One of the big advantages of both Lincoln40, which should go before council shortly, and Nishi is that the affordable housing is geared toward helping make the rentals affordable for students.

Councilmember Lucas Frerichs pointed out, “This is an innovative path forward.”  He added that it is “trying to get the access and true affordability for students which has not been done before.”

For Aaron Latta, he said that the affordable housing plan for Nishi was “beyond my expectations” and he was “amazed by the affordable housing plan for Lincoln40.”

On Tuesday, prior to the Nishi discussion, the council passed the interim ordinance for affordable housing that creates the new 5-5-5 tier.  That sets the overall affordable housing rate at 15 percent of all units with the commitment to ensure that 5 percent is extremely low, 5 percent is very low and 5 percent is low.

Nishi slightly exceeds that by making it 5 percent extremely low and 10 percent very low.

On Tuesday, many were opposed to the council changing their ordinance that had required 35 percent of the units to be affordable.  The problem with that requirement, as City Attorney Harriet Steiner pointed out, is it was set when they had RDA (Redevelopment Agency) funding.

The city in the days of RDA got 10 percent of its increment solely for use on affordable housing – we no longer have that funding.  “We will never get that funding back,” Ms. Steiner explained.

“In the past, when we set the affordable inclusionary housing ordinance up, what we lacked at that point was land.  But we had money because we had the redevelopment money and there was also other housing money available.  The inclusionary housing ordinance was tilted towards requiring land because we felt we could build and did build a significant amount of affordable multifamily rental housing.”

With that funding now gone, the council can no longer provide local subsidies to developers to provide such a high amount of affordable housing.  That leaves open two possibilities.  One is to go the route of the West Davis Active Adult Center, have a land dedication site and apply for state and federal funding to subsidize it publicly.  The other possibility is to privately subsidize it as Lincoln40 and Nishi are doing.

The advantage to the private route is that it allows Lincoln40 and Nishi to serve the student population, whereas public subsidies would not be able to provide low income housing for students.

Is it a trade off?  You bet.

The council faced real criticism for their actions on Tuesday with regard to affordable housing.

Eileen Samitz, for example, pointed out that “for all the talk there’s been about the need for affordable housing – this really flies in the face of that.”  She said that “this is just an excuse to
get away with pushing these projects through without forcing them to have enough affordable housing that they clearly can afford.”

But I don’t think that’s a fair criticism of the council.  It once again ignores the loss of RDA money which was able to subsidize affordable housing prior to 2011.  It also ignores the fact that the beneficiaries of the affordable housing portion of the project were supportive of the Nishi project, not opposed.

Lack of resources means key trade offs.

The initial proposal was 6 percent extremely low income units and 6 percent very low income units.

Mr. Whitcombe offered to give the council a choice, they could keep the 6 and 6 or they could go 10 and 5.  Mind you, the 10 and 5 (five percent extremely low and 10 percent very low) is still better than the new standard adopted by council earlier in the evening of 5-5-5 (with the last five being simply low income).

By going to 10 and 5, the council was able to create nearly 100 additional affordable units, but reduce the overall number in the extremely low category by a small amount.

Rochelle Swanson, who made the motion, said, “Real affordable housing is so important.”  She said, “My only hesitation to change it… I don’t like the 3 to 1 swap out.”

She viewed 6 and 6 as helping “the most compromised and fragile amongst our students.”  She added, “You’re looking at a trade off between people who are more at risk than others.”

The numbers go from 132 to 110 in the extremely low category.  However, it goes from 132 to 220 on the very low.  So the overall total affordable units go from 264 to 330.

“Every one of those units represents a person,” Councilmember Swanson pointed out.

Councilmember Will Arnold took one more shot in the dark, asking Mr. Whitcombe if he could do 6 and 9 instead of 5 and 10.  However, he calculated that to be another $100,000 in annual costs, which he felt, given their thin margin to begin with, was not workable.

Will Arnold commented, “You miss 100 percent of the shots you don’t take.”

But the exchange shows us the tenuous nature of affordable housing without the previous funding mechanisms in place.  It is easy to call for more units, it is hard without a funding source to finance them.

The A. Plescia & Co. memo reminds us just how narrow a line this is.

The memo concludes: “Therefore, the requirement of payment for off-site infrastructure and provision of 12 percent of the beds for affordable housing suggests the developer will obtain a lower return on investment than is typically targeted for new development in Davis. Assuming the developer is willing to accept a lower return on investment, the proposed infrastructure and affordable housing requirements are reasonable.”

Everyone wants to be able to provide more in the way of affordable housing, but in order to provide it, there has to be a subsidy.  Some believe that RDA is gone forever, but if California wants to address affordability, they are going to need to find new funding mechanisms.

I’m reluctant to believe that the market alone is going to be able to solve the affordability problem, especially locally.

—David M. Greenwald reporting 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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12 thoughts on “My View: Affordable Housing is Now Driving the Boat”

  1. Jeff M

    Measure J/R and the reactionary change-blockers that exploit it have managed to create a situation where all significant development in and around Davis will be a social justice pursuit rather than a smart and comprehensive community benefit pursuit.

    There is a saying “lead, follow or get the hell out of the way.”

    Davis reverses this and puts the “get in the way people” in charge.  And with their success getting in the way, they have created a new development monster (aka affordable housing as a social justice cause) that they cannot stop.

  2. Tia Will

    Jeff

    significant development in and around Davis will be a social justice pursuit rather than a smart and comprehensive community benefit pursuit.”

    Some of us believe that “social justice” and “smart and comprehensive community benefit pursuits” are not mutually exclusive.

    1. Howard P

      Second sentence is correct…

      Where do interests of a landowner/developer fit in?  Is there a balance,  or do “social justice” and “comprehensive community benefit” represent the only values?

      Moi, I seek a balance… et vous, aussi?

      1. Tia Will

        Moi aussi.

        But there exists a problem with determining balance. We know the approximate cost to perspective renters/purchasers, we know generally, or can calculate what percentage of their assets their costs will represent. We can estimate what the cost/benefit to the city will be over time. The one thing that we are blinded to is what will “pencil out” for the developers/investors. Therefore we are blinded to the “fairness” or lack thereof for them. Hardly a balanced way of determining “balance”.

        1. Don Shor

          The one thing that we are blinded to is what will “pencil out” for the developers/investors.

          You keep asking for this, but I don’t think it will ever have a simple or satisfactory answer. I’m sure someone with greater expertise could outline all the parameters, but it depends at least in part on how they’re financing it, how much of their own money they’re putting up, whether they are using other properties to secure the lending, whether they need bridge loans for the construction period, and what their ultimate plans are for disposition of the property after development (sell vs hold it for the income). All of the different things Davis demands of developers increase the cost, which very likely increases the total that has to be financed. I can’t guess what kind of answer would be satisfactory to you.

        2. Mark West

           “I can’t guess what kind of answer would be satisfactory to you.”

          If developers are unable to earn a profit then projects won’t be built, and if the demands are too high upfront, they won’t even be proposed. The balance point is where we have multiple proposed projects to choose from in order to meet the community’s needs.

          The only reason to see the developer’s books is if you want to have control over their profits. It isn’t an issue of fairness at all, but rather the desire to control other people’s money and property rights.

        3. Ken A

          The problem is we will never really know how much most developers make since the more you learn about development in CA the more it reminds you of a third world country.  In addition to the huge amount of campaign and PAC contributions they make (every year even when not developing anything)  most developers are also forced to hire the friends and relatives of politicians as expensive subcontractors, fund pet projects and charities of politicians, bribe “activists” and in quite a few cases pass on envelopes and even shoeboxes filled with unmarked bills to “solve problems”…

      1. Jeff M

        Sorry I have been too busy to keep tabs on the conversation here.

        I think Nishi #1 was a much better project.  There was much more about it that benefited the entire community.   We have had other innovation park projects come to the table and then flee screaming because of the feedback from the Measure J/R-enabled anti-growth extremists and our weak-kneed city leaders backed by pension-focused, don’t-rock-the-boat, city employees.

        I support Nishi #2 because we need the housing… but it sucks.

        It sucks because we are getting something that now is serving an activist cause and not a smart development cause.

        This has nothing to do with “partisan crap”.  It has to do with a city that continues to miss out on opportunities to improve its weak-ass local economy due to the demographic of old change-averse academics that missed all their economic and accounting classes while learning to count all the invisible (and largely fake) molecules that might cause cancer.

        We are now being forced to approve sub-standard projects with the social justice gun to our head.

        That is not a good place to be in.  But is one we have earned.

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