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Sonoma County Housing, Crisis and Hope, Part 1

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Sonoma County Housing, Crisis and Hope, Part 1

By John Lowry

Housing — A Personal Journey

Housing has been a passion for me. As a child, I was aware that the comfort and security I experienced was related to the pleasant home my parents were able to provide. As a young person, I was aware of the distress experienced by others who struggled in poor housing conditions, and I came to see the importance of housing opportunity.

As young adults, my wife Susan and I arrived in Sonoma County over forty years ago. We were among those “back to the landers” who had grown up in the suburbs. We wanted to build our own home, and since I was a carpenter at the time that seemed realistic. We were able to buy some land and afford to buy materials out of our wages. A year later, we were able to move into our “tiny home”, and with later additions we expanded it to a comfortable house.

As a result of my own building experience, I became more interested in housing as a public policy issue. And, fortunately, I was hired as a project manager with Burbank Housing in 1984. My first assignment was to get a mutual self-help (”sweat equity”) project into construction. This involved the homebuyers working together to perform much of the work in building their homes. I started work at Burbank with my tools on, teaching people how to build their homes. It was the most satisfying work experience of my life.

Later my work moved into the office, and I served as Burbank’s executive director 1998-2012. We developed over 3,500 homes, about 800 low-income home ownership opportunities and 2,700 apartments. It was a very satisfying career, and I’m still involved with housing. It’s from this perspective that I’m describing our current housing situation.

How Bad Is It?

The concept most often used to understand the cost to housing is to compare it with “area median income” (AMI). The AMI reflects annual incomes and is graduated for different sizes of households. According to the federal government (HUD), the current AMI for a four-person household in Sonoma County is $75,900. The median for smaller households is less and for larger households, more. 

Commonly used terms describe income levels

Extremely low income Earning less than 30% of AMI

Very low income Between 30% and 50% of AMI

Low income Between 50% and 80% of AMI *

Moderate income Between 80% and 120% of AMI

Above moderate income More than 120% of AMI 

* “Low income” is often used to describe all incomes under 80% of AMI. 

For rental housing, median Sonoma County rents now exceed $1600 per month, which is more than half of the monthly income for very low income households. It is no surprise then that most people earning less than 50% of AMI pay more than half of their income for rent. Rents have never been higher, either in actual amounts or in relation to incomes.

For home ownership, the median house price in Sonoma County has reached $600,000, which is about 8 times AMI. This compares with a ratio of 3.5 times AMI for what is considered a healthy market for home ownership opportunity. It would currently require an income of over 160% of AMI with a 10% down payment to afford a median priced home. 

For both rental and ownership opportunities, the current situation is tragic. It will not improve until we can produce more housing, and that cannot happen, at least for lower income affordable housing, until we can reduce production costs and/or increase financial resources.  

How Did We Get Here?

The awareness of the housing problem is no longer confined to a small number of people struggling to find a place to live and a handful of housing advocates. It’s now widely understood that something has to be done about it, but it remains unclear what that something is.

Actually, there is no one thing that will make housing affordable and address the crisis of homelessness. But the path for improving the housing situation starts with understanding that we got here, in part, through public policy choices, many of them taken in pursuit of worthy objectives, but carrying with them unintended consequences for housing. Other policy choices are the result of strained public budgets resulting in cutbacks on commitments to housing and public infrastructure at all levels of government. 

Restricting the area in which housing can be developed in order to protect our astounding natural environment, viable agriculture, and rural lifestyle has raised the cost of buildable land. The shift in the ratio of responsibility for building local public infrastructure from taxes to impact fees, a result of Prop 13, has added a set of costs that falls most heavily on smaller less expensive homes. The responsibility of new construction to fund the preservation of natural habitat and endangered species has added costs. The responsibility of new construction to address climate change has added another and growing set of costs. Higher design standards for both site development and structures, greater opportunity for public input and the slowness of the approval process have all added more costs when compared to past decades. 

Again, the point here is not that these concerns are unworthy of our attention. But we need to candidly recognize that housing costs have been increased by the pursuit of other public policy objectives, and that some combination of greater public investment and/or lower costs is required to provide the housing we need. 

In fairness though, there have always been large numbers of people who have not been able to afford decent housing. And even if we could eliminate all the costs added by other public policy priorities, providing housing for those with the lowest incomes would require public investment. 

Costs and Resources Don’t Add Up

It’s worth looking at some history drawn from the experience of Burbank Housing to get a picture of the imbalance of costs and available financial resources. In 2000 costs to produce an apartment unit were in the range of $175,000. In 2005 costs per unit approached $250,000, and by 2010 they had risen close to $350,000. Today they seem to be in the range of $400,000, an increase of almost 130%. Over this same period, Sonoma County median incomes increased from $58,100 to $75,900 or just over 30%. 

At the federal level, direct funding to housing development has been reduced. Although, the low income housing tax credit program* still drives most of the affordable rental housing in the country, and federal mortgage guarantees still provide low down payment financing to low and moderate income home buyers. 

* Low Income Housing Tax Credits are investments made by private investors who receive a return in the form of lower tax obligations. Tax Credits are an indirect federal subsidy to low-income affordable housing. They are a limited resource, awarded on a competitive basis.

At the state level, voter approved bond financed programs provided significant assistance to affordable housing during the past decade, but these funds have been used up. Attempts to replace this funding have failed to get the required two thirds support in the Legislature or have been vetoed by the Governor. State funding for some specific types of housing, however, including for veterans, people with mental illnesses and for transit oriented housing, has become available. 

Local government housing funding had been drawn from Redevelopment, fees on other new development and pass through of federal funding. But Redevelopment is gone and federal funding to local governments has been reduced. 

The result of the imbalance of costs and funding is that affordable housing production, which was never adequate to keep up with growing need, has slowed down as the housing crisis has deepened.

Next Month

In the September Gazette, I’ll provide some thoughts on policy directions that could make a difference for the future.