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Sonoma County Housing, Crisis and Hope, Part 2

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Sonoma County Housing, Crisis and Hope, Part 2

By John Lowry

Housing — A Search for Solutions 

In Part 1 of this article, published in the August Gazette, I made the case that the desperate condition of housing affordability stems from a variety of public policy decisions.  Part 2 identifies some local options for housing success.

 Since local government alone will not be able to provide for all of the needed affordable housing, there can be a complacent despair about doing anything.  But local government can make substantive changes in housing, and it can do so by reexamining and revising its own policies. 

This list of recommendations is not a complete summary of all possible policy options.  But, hopefully, these comments can help expand the conversation about what local government can do to improve opportunities for housing.

Policy Initiatives:

Inclusionary Housing Most Sonoma County governments have some form of inclusionary policy that requires market rate developers to provide affordable housing on site or pay an “in lieu fee”.  On-site inclusionary housing is usually in the form of low and moderate income homeownership.  In lieu fee payments are more often used to leverage tax credits and often result in very low income rental and supportive housing.  Another approach is for a developer to donate land on which a nonprofit, such as Burbank Housing or Habitat for Humanity, builds affordable housing.  If inclusionary requirements are to be increased, greater incentives to developers should be considered.

Impact Fees Impact fees are the most regressive revenue source in our history, since all units pay the same, or almost the same, fees regardless of size or value.  Maximum fees are determined by nexus studies, but fees can be reduced or waved if done consistently for a public purpose.  It would be possible to charge fees based on floor area for affordable housing built at higher densities, reducing the costs to the housing and maintaining the same fee income to local government as if single-family homes had been built on the site.  These fee savings can be structured as local funding for tax credit allocation purposes.  

Mitigation Local governments could establish, and help finance, a Habitat Conservation Plan to provide mitigation of endangered species habitat related to all development, including affordable & market rate housing, commercial development, public facilities and agriculture.  This process would provide for more reliable, more effective and less expensive mitigation and restoration. 

Public Land Recent changes in state law have made it easier to transfer surplus public land to affordable housing at a below market price.  And land can also be transferred to affordable housing use with its value secured by a deferred payment mortgage.  This approach would provide the highest value of local support for tax credit purposes and give local government greater long-term control of the use and management of the housing, as well as the possibility of repayment from cash flow in the future.

Density Bonus This policy, already widely adopted by local governments, allows for more homes to be developed than zoning would allow in return for some portion of affordable housing.  California also has a density bonus requirement, which applies to all local jurisdictions.  Local governments can allow density bonuses that exceed the state required minimum and target density bonus opportunities to the proximity of transportation, services and amenities.

Overlay Zoning This policy has been used by Sonoma County to promote the development of affordable housing.  Under this program, selected parcels that are zoned for commercial or industrial use are “overlaid” with a housing designation that would allow their use for affordable housing without a rezone or general plan amendment. But landowners may still pursue development under their current zoning.  Most of the cities have some areas that would be appropriate for housing overlay designation. 

Junior Accessory Units This program allows for the creation of small apartments within existing homes.  It would increase the supply of housing without adding any new building area or significantly changing the appearance of existing homes.  They should be approved with only plan check and building inspection fees.  No other impact fees or requirements should apply since these units are simply putting existing bedrooms back into use.

Planning for Density All Sonoma County jurisdictions have accepted a “city centered” growth plan, which defines developable areas as being within the urban boundaries of the cities and more or less the currently serviced areas of the unincorporated county.  At the same time, local governments are seeking new economic development, which means more jobs.   The only way to reconcile these objectives will be to plan for higher density housing and commerce.  As general plan updates are made and specific plans created, higher density development will have to be anticipated to house the people who will work in the future Sonoma County economy.

Cost Awareness All levels of government have been adding cost to housing through the regulatory process, and it’s time to recognize that housing should not be made to pay for more.  Public agencies must be willing to look for funding for their priorities someplace other than housing.  They could pledge that they will not add costs unless they are willing to reduce costs somewhere else.  This may be particularly important for homeownership where subsidies are more limited than for rental housing.  Government must be aware of the cost implications of its actions and act upon that understanding.   

Financial Strategies:

Strategic Investments The largest single source of funding for affordable rental housing is the federal Low Income Housing Tax Credit Program.  It can provide up to 65% of the entire development costs.  However, significant local funding is needed to successfully obtain an allocation of tax credits.  Local funding strategy should be structured to maximize the likelihood of success in the tax credit competition.

Housing Bonds Cities and counties may wish to have a large amount of funding available atone time to be able to initiate larger scale affordable housing development.  To do so, local government can raise money through a bond sale.  Bonds can be repaid by property taxes, but require a two thirds popular vote.  Voters in San Francisco have approved a housing bond, and bond measures will appear on the ballots in Alameda and Santa Clara Counties this year.  If successful, these jurisdictions will have reliable access to tax credits while others will be at a disadvantage. 

Voter Approved Tax Measures Sonoma County local governments could consider the options available to create new permanent sources of revenue for affordable housing.  Any tax measures that are specifically for housing would require two-thirds support from the voters.  This is a high bar, but other specific purpose taxes have been successful in Sonoma County.  Revenue measures that could be considered include sales tax, parcel tax, transient occupancy tax and real property transfer tax. 

Redevelopment  Local government’s biggest asset for housing support was Redevelopment, andits loss is a significant blow to the ability of local government to initiate new housing. However, accurate information and candid conversation have been lacking in telling the Redevelopment story.  It’s widely assumed that the State took the money.  But, actually, it redistributed the money back to the “taxing entities”, which include counties and cities.  Local governments could commit this returned funding to affordable housing, since this is funding that would not have been available to for general fund purposes if Redevelopment had not been dissolved.  This has been done by Alameda County.

Jobs Linkage Fees Many local governments charge a fee to new commercial development based on the rationale that more housing is needed as jobs are created.  Some Sonoma County jurisdictions have adopted this type of policy.  The others should consider it, though they may need to balance this policy with their economic development objectives. 

HOME and CDBG HOME Investment Partnerships (HOME) and Community Development Block Grant (CDBG) are federal sources that have been reduced, but continue to be available.  Sonoma County could make low income affordable housing development the clear priority for their use.

State Programs Local governments could prioritize projects that can make use of state programs.  One promising program is the Affordable Housing and Sustainable Communities (AHSC), which has funding derived from the purchase of carbon credits, and is available to transit oriented development.  Another program is the “No Place Like Home” initiative that will provide $2 billion to supportive housing for people with mental illnesses.  There is also the Veterans Housing and Homeless Prevention Program (VHHPP) that provides funding to housing for homeless and disabled veterans.

Investment in Housing

We should see funding for affordable housing as an investment.  If we spend money on services or rental assistance, as important as they may be, when the money is spent, it’s gone.  Money spent on producing housing, like for other infrastructure, creates an asset.  If maintained, it could last a century or more, and could result in significantly lower service and assistance needs.  It would greatly improve the lives of lower income people, and foster a community-wide sense of wellbeing and prosperity.  It provides us with new opportunities and hope for the future.