Commentary: Funding Might Not Be Available for Affordable Housing – But Davis Still Has to Comply with the State

By David M. Greenwald
Executive Editor

Davis, CA – There is a realistic concern that has been raised about funding affordable housing and the requirements put forward by the state on local communities to develop their fair share of, not just housing, but affordable housing.

One of the points someone raised with respect to community efforts to fund affordable housing is how fund it.  Some have suggested we create some sort of Housing Trust Fund—which I think could be the start of a plan.

But the problem is the cost.  For example, one million dollars sounds like a good start, but is as one person brought up to me, at the end of the day is one million dollars really going to do anything when the cost to build one unit might be $650,000 (and in some cases even more)?

There may be some ways to create local funding streams but I still think the best way is to have the state reinstate the increment tax—but I would not hold my breath on this.

This is the problem I see with the argument put forward by Matt Williams earlier this week.

He rightly noted that the housing obligations likely to conferred to the city of Davis are in essence “an unfunded mandate.”

He argues that the Vanguard “is not recognizing or discussing” the “unfunded mandate issue” in the “sledge hammer” solutions that the Vanguard is putting forth.

I would first clarify that the Vanguard is not actually putting forward solutions at all—instead it is making predictions about what is likely to transpire, given where the state and the local community are headed.

Matt Williams is also right to point out that the mandates handed down by the state are unfunded.

This is part of the problem that happened when Governor Brown ended “redevelopment” and cut off local government from a stream of money that could be used for affordable housing—but in fairness, was poorly managed and overseen.

Where I think I might part ways is on how to fix the problem.

The first problem here is that Davis and Davis residents can complain about the state imposing its will on local communities in an effort to solve the statewide housing crisis, but there is not much we can actually do about it.

We have seen several efforts including by our own Assemblymember Cecilia Aguiar-Curry to restore the increment tax for affordable housing—and those efforts have not even landed with a bill on the floor of the legislature.  Clearly the political will is simply not there to restore the funding.

Matt Williams goes on to suggest, “There is a simple solution to this problem.  Establish a state-wide affordable housing tax on all Californians, and then distribute those funds to Developers and Builders and communities that apply for them.”

We kind of did that.  Emphasis on the kind of.  The voters, in 2018, passed Prop 1.  Prop. 1 authorized the state to issue $4 billion in general obligation bonds to support affordable housing including $3 billion that would go to the existing state affordable housing programs.

The problem is obvious—that amount of money is simply not enough.

Can we pass a statewide measure that is sufficient to resolve our affordable housing needs?

I’m skeptical.

The voters recently (in March) narrowly passed another Prop 1.  The idea was to provide housing programs for homelessness.  It passed by the thinnest of margins.

That measure would authorize around $6.38 billion in a behavioral health bond that will fund supportive housing and treatment beds for people experiencing behavioral health crises.

There are some complicating factors here—for example, $4.4 billion of that program was going to fund “6,800 inpatient mental health and substance use disorder treatment beds.”  A lot of people on the left were concerned about the notion that we are going to recreate locked treatment facilities and so even though the programming would support those who were experiencing chronic homelessness or living in encampments—clearly a huge overriding program, only about one quarter of the revenue would be spent on actually building or purchasing housing units.

While some expressed concern that this involuntary treatment is not driven by research but “political positioning, and politicians feeling like they have to do something about the number one issue that’s on everybody’s mind.”  Others simply balked at the price tag—and the price tag to actually solve homelessness or really fund affordable housing is likely to be far more.

Given that the state is facing a huge budget crisis, that we are likely to see severe cutbacks to education programs, I don’t see us expanding spending for affordable housing any time soon.

So, while I agree in general that the state needs to find money to fund affordable housing, there really isn’t that much the city of Davis can do other than comply with the state, and the state has shown they are willing to litigate and force local communities to comply—even far more powerful communities like San Francisco.

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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  1. Matt Williams

    Both the Prop 1’s were bonds rather than incremental additional taxes.  Bonds address available cash, but they don’t increase revenues … and they have to be paid off with interest.  The model for the additional statewide tax would be the Davis Open Space Tax.  Each year it generates a supply of investment money, and then that money is used to cover the expenses of open space acquisition.  Replace “open space acquisition” with “affordable housing funding” and you have the model.

    Last night at the Interfaith Housing Justice Davis forum, across all the speakers there was a lot of data provided and passion expressed about housing affordablility … as well as the upwards of 850 persons in Yolo County who are homeless. I’ll have to look at the video to confirm this, but the first speaker Rev. Connie Simon never mentioned market rate housing, then Roberto Jimenez never mentioned market rate housing, Dana Bailey never mentioned market rate housing (or even housing affordability given her very appropriate and thorough focus on homelessness), Bill Pride never mentioned market rate housing, Judy Eniss never mentioned market rate housing, and Robb Davis never mentioned market rate housing.  It wasn’t until Georgina Valencia spoke about her first-time buyers program that market rate housing was even mentioned. (Note: Georgina also provided data that showed UCD workforce and DJUSD starting teacher start at between $46,000 to $47,000 per year).

    That leaves me with an unanswered question … If all of the speakers before you were laser focused on housing affordability (both capital “A” affordable and small “a” affordable), then why are the developers not “showing empathy for their neighbors” (a beautiful, resonant invocation by Robb Davis) and coming forward with proposals for housing that are affordable for the workforce in Davis making those $46,000 to $47,000 salaries?  Wouldn’t adding those members of our local workforce to the roll of Davis residents actually produce progress toward achieving more equity and diversity than we have now?”

      1. Matt Williams

        Robb’s ““show empathy to your neighbors” invocation had nothing to do with charities.  I heard it as an across the board statement … a societal moral imperative.

        With that said Don, are you saying that developers can not make money/profit from building affordably priced homes that your Redwood Barn Nursery employees could afford?

    1. David Greenwald

      Matt: “then Roberto Jimenez never mentioned market rate housing, ”

      Roberto said, “I’m not opposed to market rate housing at all. It’s absolutely necessary. It’s a part of the equation…”

      1. Matt Williams

        As I said David, “I’ll have to look at the video to confirm this.”  So I stand corrected.  Thank you for making that correction.

        With that said, Roberto made that comment as an aside … and never gave any indication why he feels that market rate housing is “absolutely necessary” or “part of the equation.”  That is particularly germane in a community like Davis where such a large proportion of the housing units are market rate with an average purchase price of close to, or over, $1 million or a monthly rent that is considerably higher than the statewide average rent.  I would love to ask Roberto why he thinks Davis needs more unaffordable housing.



  2. Keith Y Echols

    So I’ve said this for the umpteenth time:  DEVELOPERS MAKE MILLIONS IN PROFITS; SO WHY CAN’T CITIES DEVELOP A MIX OF MARKET RATE HOUSING TO FUND AND DEVELOP AFFORDABLE HOUSING?   In a way, the city is already doing this with the Celeste market rate apartments being used to fund the cities’ affordable housing fund.   But otherwise all I hear is begging the state, feds and tax payers for money to fund affordable housing.   The drawback that was stated for the Celeste is that while it’s a source of revenue for the affordable housing fund; it doesn’t directly provide affordable housing.  If the city develops housing then it can directly add to the city’s housing stock; both market rate and affordable housing.

    New units can be built by the city with the intention of making 51% or more of the units workforce and affordable housing.  To pay for development and construction the city would initially have the units be market rate housing to pay off the lenders.  There would have be a binding schedule for units to be converted into workforce and affordable housing.  The next thing to do would be to get the state to count future affordable (scheduled and bound) housing towards current RHNA requirements. The remaining market rate units (developed units not scheduled for BMR conversion) would go on to subsidize the below market rate (BMR) units and possibly provide capital for new development.  A city developer would look at funding/capital as a for profit developer.  Instead wishing/hoping/praying for someone to give you money; the city developer would seek development OPPORTUNITIES.  Developers enter into option agreements, joint venture agreements that are land, debt and equity based.  But as long as your financial partners make money; they’ll help fund development….especially since one of the major investment/financial risks for new development is the city itself with it’s local politics and laws.  But if it’s the city itself that is the developer; a lot of the investment risk is alleviated.

    Direct city development provides two other benefits.

    1.  It allows the city to directly control and influence the types of homes/communities that are developed vs. trying to convince a builder to do it for you.

    2.  It allows the city to address specific workforce housing needs for it’s own workers.  So publicly developed housing owned and controlled by the city could provide workforce housing to entry level police officers, fire fighters and other city workers.  A joint or separate venture could be made with DJUSD for providing teachers with workforce housing options.  Mixing workforce housing with affordable housing could alleviate a lot of the apprehension by many community neighborhoods about having affordable housing close by.  The faces of the affordable housing project will be community members like police, fire…teachers etc…PLUS you have all the people that live in the market rate units too.  This makes neighborhoods more accepting of the very low affordable housing units mixed in with the market rate and workforce housing.

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