My View: Can the City Find Ways to Build More Affordable Housing?

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One of the challenges that has become more clear in recent months is the challenge of building housing for families.  While some have argued for the need to develop smaller apartments – one to three bedrooms – which would accommodate families, the Vanguard has pointed out that market rate apartments are prohibitively expensive for families.

That means, in order to create affordable housing, we will need to go smaller and produce affordable-by-design apartments, which will also be challenging for families or subsidized “big A” affordable housing.

There are a lot of barriers to affordable housing in Davis, some of which were brought up at the October affordable housing workshop which the city council held.  The council made it clear that they preferred housing that is integrated.  As Brett Lee put it, there are problems with separate affordable and market rate developments.

He explained, “The social research that I’ve seen seems to indicate that…  when people are fully integrated it provides better outcomes for all involved.  So my strong preference would be, unless there’s a reason to not do that, (integration) would be my preference.”

But, while that sounds good, it also limits some of the options for affordable housing in town, as there are likely to be only limited numbers of housing sites that are buildable at this point, given
Measure R and other restrictions.

Council is also looking at affordable rental units rather than for-sale units.

As Robb Davis noted in October, in the past the city built larger housing developments which enabled them to have relatively large dedicated sites to build large “A” affordable housing.

“Those days now largely are done,” he said.  “We aren’t getting any large developments like that that lead to that kind of ability to create the affordable set aside inside.”

While the West Davis senior housing development would have a land dedication site, most of the newer developments do not have such sites.  That again limits the amount of affordable housing which can be built.

Then a final major challenge is money.  In October, Robb Davis has noted that the city used to get about $2 million a year from Redevelopment Agency funds which could support such affordable housing projects.  With the loss of RDA, that revenue stream is gone.

“We do need a revenue stream just to make sure we maintain some of the housing that’s aging now,” he said.

Where does that money come from?  Recently the city has been funding its affordable housing through in-lieu fees.  But council seems to want to move away from in-lieu fees and toward more onsite affordable housing.

Mayor Davis explained in October that he has been in favor of them because of our trust fund, but he wants to find other funding sources so they can move away from in-lieu fees.  “Just do away (with) in-lieu fees in my opinion,” he said, but we need to find a revenue stream and then set in-lieu fees really high to disincentivize their use.

Recently the state has created a funding source through SB 2.  Sponsored by Senator Toni Atkins, SB 2 would created a permanent funding source for affordable housing by imposing fees up to $225 on certain real estate transactions.  It is expected to collect $1.2 billion annually over the next five years, creating a $5.8 fund.  Also SB 3 would place a $4 billion housing bond on a future ballot that would pay for existing affordable housing programs in California that used to be supported by funds from the state’s RDA.

But the city is also looking for local funding, as those affordable housing programs are still not expected to replace RDA.

The $50 social services tax could generate $1.5 million and go to affordable housing and also homeless programs.

Mayor Davis explained this week that, while it will not fill the gap for the loss of RDA, “it provides critical resources for affordable housing and services for homeless and vulnerable individuals.”

How much would go to homeless services and how much to affordable housing is unclear.

He explained that “the revenue can support our housing trust fund to help maintain existing affordable housing stock in the city. The trust fund can also be leveraged to build new affordable units if and when land dedication sites come forward.”

Between the local sources and state funding from SB 2 and SB 3, if approved, the city could have a lot of the funding it lost under RDA.

But, even with funding, the challenges remain in finding the land and the developers to build the affordable housing we need.  Right now the city is relying on relatively small infill sites to build rental housing, in an attempt to provide for student housing and improve the vacancy rate.

Those who believe that we need more of a range of housing types need to understand that, at market rate prices, rental housing in Davis is largely out of the range of a family.  Affordable housing works.  I live in a small group of townhouses that are affordable and each one is occupied by families with children.  The problem is that we don’t have nearly enough of them – and, while we can solve the funding problem, solving the supply problem remains a challenge.

—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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63 thoughts on “My View: Can the City Find Ways to Build More Affordable Housing?”

  1. Don Shor

    The only way Davis will be able to provide more affordable housing is by annexing land and allowing a larger subdivision to be built, and mandating a certain percentage of it be affordable housing. The trust fund and state funding won’t provide anywhere near enough to develop affordable housing.  In the absence of public willingness to bring more land into the city, affordable housing will remain unattainable in any significant quantity. So the focus should be, as it is now, on adding rental stock as a means of providing lower-cost housing indirectly via the market.

      1. Mark West

        Is our goal to make housing more affordable for everyone, or to create expensive ‘Affordable Housing’ (and more City’s bureaucracy) in order to provide housing at an affordable rate to a select few? The City could supply more affordable housing options by changing zoning to allow for taller and denser construction, and by reducing the demands placed on developers of the high-density multi-family housing. Apartments, townhouses, and stacked flat condominiums could all provide lower cost options while also improving land-use efficiency.

         

        DG: “I don’t think you’re going to meaningfully reduce rental costs through internally added rental sites.”

        Supply/demand impact on housing costs works in Davis just as it does elsewhere.

        1. David Greenwald

          Supply and demand may work, but I would argue that demand is sufficiently high that we are not going to meaningfully reduce the demand simply by adding units internally.

    1. Jeff M

      It is the common sense point that has been missing from many people in Davis, including many that have denied it in the past and demanded that we proceed with our farmland preservation moat ringing the city.

      1. Don Shor

        The properties that would be suitable or likely for annexation and housing development have not been considered for ag conservation easements. Each has its own issues, but the properties west of the hospital and the Covell Village site would be the most likely.

  2. Howard P

    An inconvenient truth.  Affordability main driver is size.  Smaller houses on smaller lots, with smaller rooms, will lead to affordability for for-sale housing.

    Trade-offs…

    Watch ‘tiny house nation’ sometime.

    Seeing Friday’s real estate section in the emptyprize, the cost per sf is generally in the $325-400 range.

    The days of thinking you can have a 1350 sf 3/2 on a 1/6 Ac lot, may well have passed for “affordable” for-sale houses.

    MF rentals, with smaller units ( & smaller rooms), and less ‘amenities’ is the most likely the primary path to affordability of housing.  Smaller footprints for lots/private open space as well… trade-offs.

    Interest rates are likely to continue creeping up… those who truly need affordable housing are somewhat more likely to have lower credit scores… affecting the ability to buy.  Interest rates have a profound effect on ‘affordability’.  When we re-financed a few years ago, we got a 15-yr fixed rate at 2.85%…  when we bought our first house in 1980, 30 yr rates were running 12-14%.  now it’s running 3.5-4.5%.

    Just saying…

    1. Howard P

      The latter requires income/wealth re-distribution… who pays for the subsidies (which, in effect is what it would take as far as I can see)?

      Certainly an option, but remember that providing funds for someone else’s housing, lowers the availability of funds for your own.  Trade-off.  Still an option, but…

      Good question…

      1. David Greenwald

        I don’t think this is a great answer Howard.  I think the better answer is that efforts in the past to get lower/ middle income people into home ownership had a lot of problems at the dawn of the Great Recession.  It seems easier to tackle on the supply end, but the council is increasingly going away from ownership affordable housing towards rental.

        1. Howard P

          I question the societal “need” for home ownership by all who wish it… but you may have some ‘unconscious bias’.

          I also offered suggestions on the supply side.

          Crickets…

          We made our choices and were VERY stretched when we bought our first home… never thought of expecting help.

  3. Ron

    ”  . . . the Vanguard has pointed out that market rate apartments are prohibitively expensive for families.”

    Without evidence, of course.  And, has never actually defined “families” (or noted singles, couples and non-student roommates who don’t meet that description).  🙂

    1. Ron

      Quoting prices does not necessarily define “affordability”.  One would have to compare that to income (e.g., for working professionals/couples, etc.).

      Income levels vary, of course. Ask the Trackside developers if there’s “demand” for their product.

      As a side note, I would think that larger (2-3 bedroom units, suitable for small families, couples, and roommates) might be somewhat less-expensive, per bedroom. Probably depends upon which are of the city that’s referred to, as well.

        1. Ron

          Whatever it takes to pay that amount of rent.  (There are working couples/roommates, as well.) There are also folks with other sources of income. Not all of them want to buy a house in a somewhat cheaper area, for example.

          In any case, that’s nothing, compared to the amount of rent in San Francisco, for example.  And, the difference in salaries doesn’t necessarily make up for that difference.

          Regarding Don’s $92,000 figure, not sure how that’s being calculated. But again, a single person (and sole source of income) is not likely to rent a 3-bedroom apartment.

          Again, I’d ask the Trackside developers if there’s “demand” for their product.

        2. David Greenwald

          Thanks Don.  So for most renters who are families and not splitting the rent, market rate apartments are not affordable.  And if you do make $92,000 why would you rent a $2300 a month apartment in Davis rather than buying a house in Woodland or Dixon?  A few people might, but a lot won’t and shouldn’t.

        3. Howard P

          Ron… you are a “numbers guy”?

          2,300 X 12 = 27,600

          If you use the standard estimate for what housing should cost (25-40% depending if you figure in utilities and taxes), 30% is a reasonable guesstimate…

          27,600 / 0.30 = 92,000

          Math is FUNdamental…

        4. Ron

          Well, a single person/source of income probably wouldn’t be renting a 3-bedroom market-rate apartment.

          Are there lots of couples/roommates these days, in which one person doesn’t work or have another source of income?

        5. Ron

          David:  It’s your blog, but I’m reporting that comment. Doesn’t seem to have any basis regarding what I stated, regardless.

          In any case, I have no idea what your overall “goal” regarding this article is.  We need more Affordable housing?  I’m all for including that, in new developments (including in “mixed use”, which is currently exempted). 

          But, I suspect that the “need” (depending upon how that’s defined, and what the goals are) will always be greater than the “supply”.

          In a larger sense, folks might ultimately have to accept that Davis (or any city) cannot be “everything, for everybody”. (Seems like that’s the root of the never-ending battle.)

        6. Howard P

          Yes, Ron, there are a lot of families who have small children where only one parent works, as those who need affordable housing the most, usually have income potential where the second parent’s income barely covers day-care.

          We were a two income couple when we married… a one income family when the kids were young… two income family when the kids were old enough.  Pretty typical…

          Fortunately, we never needed anything other than market-rate housing, although we were VERY stretched at times (particularly early on), and had to be damn frugal.  If it wasn’t a need it didn’t happen much.  That’s also what both I and my spouse grew up with.  We understood that ‘fact of life’.

          But, someone could argue that having children tends to make everything unaffordable, and besides more people is bad, right?

           

        7. Ron

          Howard:  I’ll try to avoid going down the “rabbit hole” about the choice to raise a family (without due consideration of financial resources), the “shortage” of new people in the world, and how subsidizing that choice relates to the “goal” of any particular city.  🙂

          Perhaps some will be happy that Senator Rubio insisted upon a $1,400 child tax credit, before agreeing to support the Republican tax bill.

          Regarding your experiences raising a family, it doesn’t sound much different from my own parents’ experiences.  (In those days, folks generally had a lot more kids to support, as well.  And, wives often stayed home indefinitely, taking care of the kids/house.)  My own parents were frugal in ways that folks might not fully understand or appreciate, these days.

          My god, they didn’t even have a cell phone!  (Just kidding.)

           

           

           

        8. Keith O

          Perhaps some will be happy that Senator Rubio insisted upon a $1,400 child tax credit, before agreeing to support the Republican tax bill.

          Try $2000 per child.  It beginning to look like the people who will make out on the GOP tax bill are families with a lot of kids and businesses.  Everyone else didn’t fair so well.

        9. Keith O

          Are there lots of couples/roommates these days, in which one person doesn’t work or have another source of income?

          No Ron, not too many that I know of.  I know my wife and I both had to work to get by to pay for our modest house.  Now you might have a couple where one earner makes a good wage so the other doesn’t need to work, but that’s not the norm.

          Good lord Ron, you’re dense sometimes.

          I didn’t see Ron’s response as being dense at all.  David, are you upset because Ron doesn’t see it the same way you do?

           

  4. Ron

    From article:  “Affordable housing works.  I live in a small group of townhouses that are affordable and each one is occupied by families with children.  The problem is that we don’t have nearly enough of them – and, while we can solve the funding problem, solving the supply problem remains a challenge.”

    “Honest” question: 

    How much Affordable housing is needed?  As much as possible?  Or, is there a goal (e.g., based upon a “percentage” of the total population of the city?)

    And, what are the fiscal ramifications of having an ever-increasing percentage of Affordable housing, assuming that it’s not subject to property tax?

  5. Ron

    By the way, it seems that the Republican tax bill might help “knock the stuffing out of” the housing bubble we’re in, which ultimately impacts renting, as well.  (Limitations on mortgage interest and property tax deductions, for example.  Coupled with a rise in the standard deduction.)

    Never understood why the government feels the need to subsidize home ownership, via several methods. This encourages sprawl, for one thing. It also discourages folks from easily moving to where jobs are actually located.

    I guess we’ll see what happens.

        1. Howard P

          If you really read the article you posted (I did!), you’ll readily see, as a “numbers guy” some logic flaws…

          The deduction is (tax bracket) * (mortgage interest). So if you’re in the 25% tax bracket and you pay $5,000 per year in interest, you save $1,250 on your taxes. If you buy a bigger, more expensive house and pay $10,000 per year in interest, you save $2,500.

          True, as stated, but, in the first case you spend $5,000 – 1,250 = $3,750 in interest (net), that comes out of your income… in the second case, you spend $10,000 – 2,500 = $7,500 in interest (net)… no savings, net loss.  Don’t see the “incentive”…

          Truth be told, even those in the marginal 25% tax rate, have an effective tax rate of ~ 18-20%… the article appears to assume all the “savings” (which are actually ‘losses’) come just from the marginal tax rate (you’re pretty well off if your effective tax rate is 25%)…

          Exact same thing is true as to property taxes, particularly the ad valorem…

          Economically, the argument fails or is highly suspect…

          Next point…

          It also encourages homeowners to lobby for regulations that increase their home’s value, because they are not taxed on increases in that value

          Partially true, partially false… increases of 2%/yr are the norm in CA.  AND, until you sell, it is a “paper gain”, not real as to cash flow while you own the house.

          In other words, if your home value increases by the same amount as some other investment, the home investment has a greater net return, because the tax burden is zero. This encourages people to funnel capital from other forms of investment towards housing.

          Depends on where your investments are… if in savings accounts, yes… if you are invested elsewhere, maybe, and if those investments are in a Roth IRA, maybe not… time and time again, the reputable advice is that you should not be looking to your house being a source of financial ‘gain’, even with ‘preferential’ tax treatment.

          There are problems with the full veracity of the article cited on the commercial side as well, but if I haven’t made the point, that the article cited is questionable, there is no point in ‘going there’…

          You were “numbers guy”, Ron?

           

        2. Ron

          Howard:

          I’m not here to “defend” the article (which I believe has three parts, regardless). It’s just something I posted, in response to David’s question. I also posted another article, in response to you (to which you haven’t responded).

          Just to clarify, your position is that the incentives that the government has put in place has no impact on the demand for single-family housing (and the industry’s response, in the form of sprawling developments)?

          Regarding the examples, the government is subsidizing loans for property.  Larger loans may, or may not reduce one’s taxable bracket.  However, by subsidizing the loans, it does allow buyers to purchase a more expensive property than one might otherwise purchase.  This results in leveraging the buyer’s purchase (and subsequent rise in value, on a more expensive property).

          It seems plausible that fewer would purchase single-family homes in far-flung locations, if the government was subsidizing the process. (In addition to tax breaks, there’s government support for mortgages.)

          Sure, increases in value are a “paper gain”, until property is sold.  Your point being that this isn’t of value?

          Also, why do you keep questioning whether or not I’m a “numbers guy” (your words). Seems like a lame attempt to discredit me in some manner.

        3. Howard P

          Just to clarify, your position is that the incentives that the government has put in place has no impact on the demand for single-family housing (and the industry’s response, in the form of sprawling developments)?

          I didn’t say that it has no impact… I do opine that it is insignificant to those who actually think… sprawl is a separate issue, and there, I opine that it is less than insignificant

          It seems plausible that fewer would purchase single-family homes in far-flung locations, if the government was subsidizing the process. (In addition to tax breaks, there’s government support for mortgages.)

          Nah, too easy.  Two levels…

          Also, why do you keep questioning whether or not I’m a “numbers guy” (your words). Seems like a lame attempt to discredit me in some manner.

          First sentence, no, am just holding up a mirror… you seem to ignore numbers when they don’t fit your ‘view’, or those of you you cite (even tho’ you frequently point out your background as “an auditor”.

          Second sentence, no attempt to discredit, just part of the mirror thing; as to “lame” it is not for me to judge.  But, you called my post “lame”… interesting adjective… ask folk with mobility issues how they feel about that term…

          Have a great weekend…

           

        4. Ron

          Just to clarify, I don’t “frequently point out” my experience as an auditor.  You’re the one who keeps bringing that up.  Apparently, for the sole purpose of discrediting it.

          Again, government support subsidizes home ownership.  It’s as simple as that.  And yes, the real estate industry frequently “touts” this benefit to potential home buyers.  In fact, many buyers wouldn’t even be able to get a loan without government support of mortgages and subsequent tax breaks.

          There’s also a strong “cultural” component regarding single-family home ownership, expressed as the “American Dream”. That’s also a large part of the reason that “suburbia” exists.

          The building industry responds by building massive numbers of houses, to respond to the artificially-supported demand.  They do so in the cheapest manner possible, by sprawling across undeveloped landscape.  (Also taking advantage of the freeway systems, until and beyond the point that gridlock occurs.)

          Let’s see what happens regarding the “housing shortage”, if/when the next downturn occurs.  (Which may be triggered by the Republican tax bill, as noted in the article I posted on this page.  It’s not difficult to find articles regarding the industry’s response.)

          Even though building will essentially stop during the next downturn, there won’t be much talk of a housing shortage at that time.

           

    1. Howard P

      Ron… from your 10:19 post… if you think the mortgage and property tax deduction limits will affect the cost of housing… well, that’s just ‘silly’ (to be very charitable)…

      Your tie between home ownership subsidies (the latter which I do not support)  and sprawl… is ludicrous (again, being very generously charitable in the adjective used).

      It also discourages folks from easily moving to where jobs are actually located.

      Like where?  Out of State?  Overseas?  Compensation level? There are many low skilled jobs available in Davis… service sector… generally, very low wages.  But we can’t have them living here, right?  Screws up our je ne sais quoi (ambience?)…

      Your arguments remind me of a famous individual… when asked, about the peasants who had no bread to eat (or perhaps, housing), said “Qu’ils mangent de la brioche“, en anglais, “let them eat cake” (or let them camp out?). 

      Since brioche was a luxury bread enriched with butter and eggs, the quote would reflect the author’s disregard for the “peasants”, or their poor understanding of their situation.  Vous, aussi.

      A ‘black hole’ is often associated with a ‘singularity’.  Black holes are probably the densest objects in the universe.  You singularly appear to like propelling a pasta product.

      But, thank you for your input/opinion… very valued…

       

      1. Ron

        Howard:

        Well, if you disagree with the article I posted above, below is another one from the NY Times:

        From article:  “Since the benefits of these deductions get bigger with larger and more expensive homes, the bulk of the benefits accrue to wealthier homeowners in pricier markets. This alters the landscape by encouraging more single-family homes and suburban sprawl.”

        https://www.nytimes.com/2017/12/16/business/economy/tax-bill-housing.html

         

      2. Ron

        Howard:  “Like where?  Out of State?  Overseas?  Compensation level? There are many low skilled jobs available in Davis… service sector… generally, very low wages.  But we can’t have them living here, right?  Screws up our je ne sais quoi (ambience?)…”

        Your statement above has no relationship to the comment I made.

        I simply noted that homeownership “ties” one to a particular area, more than renting does.  And, makes it more difficult and costly to move to pursue opportunities that arise elsewhere.  The manner in which you twisted that statement is on you, not me. (I wish you would avoid doing this type of thing, since it turns into a colossal waste of time, for you, me, and anyone reading this. Not the first time, either.)

  6. Todd Edelman

    Are there any difficult formal issues with building 4 or 5 stories of mixed-sized housing on top of huge parking lots such as the ones at Target, the Marketplace, University Mall, Oaktree Plaza and Oakshade?

    Some of the parking remains and perhaps not too much of it needs to be available for residents. Owners of the lots make $$$, right? There’s a good eminent domain argument given the housing crisis.

    Cars over people?
    It’s your right not to sell
    But we need people living over cars
    When housing is hell

    1. Howard P

      Todd… your concept has merit… why not start up an investor group to do that, and also compensate the owners at fair market value.   that’s one of the rules, under the Fifth Amendment, for eminent domain actions…

      Damn good idea!  Will look to you to lead the way!

      But, I cannot miss the chance to point out that you are literally proposing ‘people’ (housing units) over cars… which works…

  7. Ron

    Seems like the Vanguard got knocked off-line, for awhile.  “Divine intervention”?

    In any case, I’m wondering about the “need” to provide housing for 17,000 workers who are commuting from the Sacramento region to the Bay Area.  (It’s all so confusing! At least, for those who continously say they are trying to meet an “internal need” of some type or another.) 🙁

    http://www.sacbee.com/news/local/article190050994.html

     

     

    1. Ron

      And – no doubt there’s a similar pattern, between Davis and surrounding (less-expensive) areas.

      In all likelihood, this will not change. Neither will efforts by some to convince everyone otherwise.

      The battle will never end, even though individual arguments might evolve.

        1. Howard P

          Absolutely correct, Alan… those who seek battle, will find it… (particularly when they mask their true “agendas”)…

          A to ‘individual’ arguments, correct again… those who want to ‘do battle’, for any reason, tend to “group-think”, and make similar if not same arguments… time and time again… ad nauseum…

          Good post!  Spot on!

        2. Ron

          Regarding “arguments”, those who seek endless development will always try to find a justification for it.  Sometimes, those justifications become quite creative.

          Regarding “agendas” – there’s a lot of those, on the Vanguard.

          Regarding those who “seek battle”, some do so without acknowledging their own agendas/bias, and sometimes without making an actual point – other than to attack others.

      1. Ron

        Just wondering:  Are there mechanisms in place to ensure that Affordable housing is going toward those with a connection to Davis (e.g., in the local workforce)?  And, do they need to maintain that Davis connection?

        I’ll assume that tenants also need to keep their income below a certain level. If so, might that discourage them from taking a higher-paying job at some point? (Basically creating a permanent sub-class of low-wage workers, that employers can use to their advantage?)

        1. Ron

          Hmm.  Maybe there should be, if legal.  Otherwise, what is the point?  (Except to generally help those who might need it, regardless of local connection.) I guess one could argue that there’s a “regional” need, and that Davis should “do its part”.

          Perhaps it works out that way for the most part, anyway (regarding a Davis connection).

      1. Ron

        Don:  “Another good argument for vouchers instead of dedicated housing.”

        Funded by – wait-for-it – another parcel tax!  🙂

        Then, we can let builders focus on what THEY really want to build – luxury/high profit housing without those pesky low-income folks to worry about.

        1. Don Shor

          Funded by – wait-for-it – another parcel tax!

          No. I really have no idea how to fund affordable housing now. But if funds become available from the state or something, I’d say vouchers are likely to be more effective and efficient than trying to build anything.
          I have long stated here that I believe our current affordable housing policies are ineffective and should be completely abandoned, that we should start over completely in assessing how to provide affordable housing. The history of the program in Davis is murky, corrupt, and simply not cost-effective. But I have also long-since resigned myself to the reality that there are strong interest groups that favor the current approach and that changing it would probably not be worth the fight.
          To the extent that current policies become obstacles to the development of rental housing, I urge that they be set aside. The in-lieu fees are pointless. Contrary to popular opinion, developers are not endless sources of revenue for this. People want affordable housing for families, but not for students. And everyone wants someone else to pay for it.
          We are fortunate to have a few local developers who are willing to make less money building affordable housing now and then, so if we can find land for them to do so — great. Otherwise, the current system is a mess and isn’t likely to get any better.

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