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Solimar Research

Affordable Housing Caught in Redevelopment Crossfire

When redevelopment was first introduced in California, it included no provisions for affordable housing and instead focused solely on fighting blight. Introduced in 1976, the affordable housing set-aside � amounting to 20% of an agency's annual tax increment � was intended to mollify critics who contended that redevelopment amounting to nothing more than a boondoggle for developers. With the governor's successful dissolution of redevelopment, affordable housing now counts among the most lamented collateral damage. 

For decades, cities in California had relied on redevelopment agency funding to contribute to their respective Low and Moderate Income Housing Funds; statewide, redevelopment generated roughly $2 billion annually for these funds. Redevelopment agencies across the state had gotten mixed reviews for their production of affordable housing, with some accused to stockpiling funds rather than actually promoting development. But many cities did produced promised housing, and they are now being forced to adapt to the new reality. 

Long-planned projects will appear for the next several years. The dissolution legislation allows redevelopment successor agencies to continue to fund "enforceable obligations," as long as contracts were signed before June 1, 2011. But the outlook for affordable housing after that looks more uncertain. 

Some lawmakers in Sacramento are trying to replace TIF funds with another statewide funding source, rather than force localities to fend entirely for themselves. 

An initial attempt to stanch the loss of housing funds through redevelopment was Senate Bill 1220, which attempted to raise $700 million a year for affordable housing through a real estate document recording fee. That measure failed to get two-thirds necessary for passage in the state senate, losing by two votes. 

Dianne Spaulding, executive director of the president of the Nonprofit Housing Association of Northern California, remains optimistic, in light of the close vote. "1220 was the beginning," she said. "It raised a lot of awareness." 

On a number of controversial issues, she noted, "you have to start, and it takes years before you get there." 

Some cities are waiting to see what the state government does to make up for the loss of millions of dollars in redevelopment funding for affordable housing. But others, such as San Francisco, are moving ahead. Two measures are on the city's November ballot to increase funding for affordable housing there. Other cities are looking at local real estate transfer fees, Spaulding said.   

Affordable housing, of course, is not financed solely by redevelopment money. 

Federal money and inclusionary zoning also helped to add more affordable housing. 

But cities were required to spend 20% of all redevelopment money on it. And redevelopment money helped non-profit developers acquire land and keep construction costs down. 

Some cities adjusted early to the new reality. The City of San Jose, said Housing Director Leslye Corsiglia, struggled with state takeaways of redevelopment money in the two years before redevelopment ended, and laid off 25%of its housing staff. In its heyday, the city was producing 500 to 1,000 units of affordable housing per year, she said.  

But as a large city with almost 1 million residents, San Jose still has few programs robust enough to continue its output of affordable housing units.  The city gets $3 million a year in federal home investment partnership funding, and also gets money from inclusionary programs and developer programs that help, Corsiglia said. San Jose also has a large loan portfolio of $800 million that allows it to loan money to developers and first time homebuyers. As those funds are repaid, new loans can be made. 

Similar loan programs exist in smaller cities such as Emeryville in Alameda County, which has 10,000 residents. Emeryville's program has 317 outstanding loans worth $13.4 million, and its work continues, according to Helen Bean, Director of Economic Development and Housing.  

Bean said the city is also looking at a linkage fee on new commercial and residential construction that would fund affordable housing. That kind of fee will provide some of the money lost after the end of redevelopment, but not all of it. 

Non-profit affordable housing developers are among those wondering what's next.  The lost funding will not come from private sources, according to Linda Mandolini, president of Eden Housing, a non-profit housing developer in Hayward.  Mandolini said that her organization used to receive between $2 million and $10 million per project from local redevelopment agencies, and wonders where that money will come from. 

"You can't replace millions of dollars a year in $5 increments," Mandolini said.

Eden Housing, which serves the entire Bay Area, has 7,000 people on its waiting list for affordable units, she said. Two affordable developments that Eden recently opened in Fremont and Dublin in Alameda County had ten applicants for every available unit. 

Housing proponents are still trying to make sense of the demise of redevelopment after 60 years.

"Part of the challenge right now is the demise of redevelopment agencies is incredibly complicated," Mandolini said. "It's just too soon to be innovative."

Terry Henderson, a city councilwoman in La Quinta in Riverside County, said cities don't know where they stand. Henderson said a recent letter from the state Department of Finance stating that it has the discretion to change its mind on locally approved projects has local officials confused. 

It's now "more complex (and) more confusing for cities to work on low-income housing," she said. "We remain in a state of limbo." 

Her own city is in the midst of rehabilitating an 85-unit housing complex, but the end of redevelopment has complicated how parts of that project will proceed, she said. 

San Francisco's ballot measures provide one glimpse of what the future may hold in other California cities. The measures would set up a housing trust fund, financing it with a variety of taxes and fees. The measures would provide between $20 million and $50 million a year for housing programs for 30 years. Part of the funding comes from property tax revenue that would have gone to the city's redevelopment agency in the past. 

San Francisco voters last approved a bond measure for affordable housing in 1996, and state voters last approved bonds for affordable housing through Proposition 1C in 2006, Spaulding said.  Spaulding said San Francisco's ballot measures have no formal opposition, and are supported by the business community. She said 

Corsiglia of San Jose said her staff will discuss options for funding San Jose's affordable housing in the fall when the city council reviews its housing investment fund, a process it undertakes every five years. She said "provocative" ideas will be presented to the council. 

Like many public officials, Corsiglia said her city should be okay for the next two years.  What happens after that is the unknown. "It's a real concern," Corsiglia said. 

Mandolini pointed to one affordable housing project in her area that had ended due to the collapse of redevelopment. Another in Livermore is on hold.  Others have been reduced in scope, like an 800-unit mixed income complex at the South Hayward BART station planned by Eden. That project is now slated to have 375 units, she said.  

Government officials acknowledged that redevelopment had its excesses, but point to affordable housing development as one its successes. 

"It's a dark time for the state of California," said Bean, of Emeryville. Redevelopment, she said, "was the only affordable housing and economic development program the state had. There's nothing to replace it."

Contacts:

Linda Mandolini, President, Eden Housing (510)582-1460

Dianne Spaulding, Non Profit Housing Association of Northern California (415)989-8160

Leslye Corsiglia, Director of Housing, City of San Jose (408)535-3851

Terry Henderson, city councilwoman, La Quinta (760)777-7030

Helen Bean, Director, Economic Development and Housing Department, Emeryville, (510)596-4350