The city of Davis is clearly in need of more middle income housing, especially what might be termed workforce housing. In previous articles we have looked toward policies which aimed at people with middle incomes, 80 to 120 percent of median but mainly with rental housing rather than for-sale housing – which has had associated with it a host of problems.
In 2005, the city created middle income housing requirements with preferences for local employees. In the recession, for a variety of reasons, the council suspended the ordinance and has not reinstated it. While this has been mentioned at times as a possible remedy, our evaluation suggests otherwise, as will be explained shortly.
The staff report from May 19, 2009, explains: “In March, 2003, the City Council identified a priority to ensure adequately priced housing options for members of the local workforce. The goal was identified and pursued for the many beneficial effects of having local employees live locally.”
Thus on December 13, 2005, the city council adopted the middle income ordinance, whereby for-sale developments with more than 25 units are required to provide between ten and 20 percent of the units as “middle-income” units.
Wrote staff, “These middle income units are targeted at households of 120 to 180 percent of area median income, with an average affordability level required for households at 140 percent of median income.”
The middle-income requirement only applied to ownership housing projects and the affordable units were ownership rather than rental units. They came with deed restrictions requiring the owners to occupy the unit as their primary residence for the entire period of ownership, the appreciation was capped to 5 percent annually, and the unit had a “right of first refusal” to allow the city to purchase the unit upon resale.
As it turns out, only one project, Grande, ended up including the middle-income requirement. Grande was approved in 2008 and had six middle-income units. Even had the measure continued, it would have been limited to projects with 25 or more units. And only those with ownership affordable units rather than rental units.
Most ownership projects now in Davis are small infill projects that are below 25 units and go the in-lieu fee route.
Cannery is a larger project, but with dedicated land and construction of affordable apartments.
The city in recent years, while not precluding ownership deed-restricted affordable housing, has clearly moved away from that model.
In addition, the middle-income requirement did not actually expand the amount of affordable units, it simply required that a certain percentage of them have to be set aside for middle-income residents. The city has since focused on low and very low-income residents, and in some projects an even more restrictive category of “extremely low.”
Using the 2009 figures from the staff report, an individual at 120 percent of median would have to earn at most $60,000 but that number goes to $90,000 at 180 percent and for a family of four as high as $130,000.
The housing costs ranged between $300,000 and $500,000 with the average for 140 percent being between $318 and $355 thousand.
By 2018, that floor would about $73,000.
Finally, while I agree with the need for housing for people who can afford the $300 to $400 thousand range, the deed restrictive appreciation capped model probably is not the best model to help those in the middle-income range. That’s a big reason the city has moved away from ownership affordable models to rental housing affordable models.
The bottom line here is that this program was a very small item in the big picture. It only applied to ownership deed-restricted housing, of which the city has clearly moved away from. The project would have focused on people making at least $73,000 in today’s world and up to 180 percent of median income – which would be people making upwards of $100,000 today and perhaps as much as $150,000 for a family of four.
I spoke with some of those who opposed the ordinance at the time and their feeling was if they are going to have to pay the price for affordable housing, they would rather it be for those truly in need.
As they put it, “Selling someone a $350,000 home and calling it affordable housing is a money loser for the builder but more importantly we are helping people that are not desperate.”
Suspending this ordinance neither ended nor reduced the amount of housing that was set aside as affordable. Rather it shifted that affordability to the categories of extremely low, very low and low income.
As we have seen in recent years, even providing for 35 percent of the units at an affordable rate is problematic. The city, following the lead of the state, has reduced the requirements to about 15 percent.
There is a continuing debate here as to whether that is good enough. Given the loss of redevelopment money, funding for affordable projects has become more and more scarce and the city has had to be creative to find ways to increase the amount of affordable housing.
This has also become a statewide emphasis as well, with the state legislature finding additional ways to fund local affordable housing. There seems to be a reasonable chance that the state will reintroduce the tax increment funding for affordable housing, which could once again shift the game.
That is not to say that having some sort of middle-income requirement would be a bad idea. My preference, however, would be to provide it for the 80 to 120 percent range and for rental rather than ownership housing.
—David M. Greenwald reporting