The average home price in California topped $400,000 in June. This news stimulated the now-familiar headlines about how even beat-up tract homes from the ’60s have become unaffordable for middle-class families. It’s getting to the point that a six-figure income does not guarantee homeownership.
But what does this do for the more traditional “affordable” housing that we in California have supposedly been fighting about for the last several decades – housing not for the middle class but for low-wage workers and for the poor? Has this topic slipped off the radar screen altogether amid concerns about housing for teachers and paramedics? And when concern for poor people does emerge, will the astronomical price of housing make the cities and neighborhoods more amenable to lower-cost housing – or less?
These thoughts surfaced recently when two affluent cities in South Orange County, struggled with the question of how to consider two different “affordable” housing projects.
Back in January, the Steadfast Cos. gave up on an apartment proposal for a 23-acre hilltop site on Jeronimo Road in Mission Viejo after intense neighborhood opposition. The proposal called for 168 units, or about 7 units per gross acre – about the density of a typical single-family subdivision. Nevertheless, the project was designed to accommodate low- and moderate-income residents, and neighbors objected. According to the Los Angeles Times, everyone appearing before the Planning Commission opposed the project and claimed it “would bring overcrowded apartments, graffiti, gangs, drugs, and even drive-by shootings.” The perplexed developer, who had brought forth the low/mod project in response to direction from the city’s staff, went back to the drawing board.
In June, the affordable housing dilemma surfaced in San Juan Capistrano when the City Council voted in closed session not to sell a 2.7-acre parcel of land to a nonprofit housing developer. Once again, neighborhood concern was the driver. As one council member said, “The neighbors were concerned about the density and the property values. I felt the complex was too expensive, too massive, and wasn’t right for the neighborhood.”
In each of the two projects, some units would have been set aside for families categorized as “very low income,” which in the case of Orange County means a household income of about $37,000 per year, while others would have been set aside for “low income” families – those up to about $57,000.
In each case, the city was driven by pressure to comply with the low- and moderate-income housing allocation target that resulted from the regional housing needs assessment process – the dreaded “housing element” requirement overseen by the state Department of Housing and Community Development.
One of the ironies of the recent real estate boom is that it seems to have rendered the income categories somewhat obsolete. The housing element system requires jurisdictions to plan for the amount of housing required in three specialized income categories – very low income (up to 50% of median income), low income (50% to 80% of median income), and moderate income (80% to 120% of median income). The assumption is that people making more than 120% of median income can take care of themselves in the housing market.
The recent debate over workforce housing has left the first two categories behind. Builders focusing on workforce housing usually say they are targeting households at 80-200% of median income – which today amounts to somewhere between $50,000 and $100,000 in most parts of California. (See CP&DR Insight, July 2004.) At current interest rates, these incomes can leverage home prices of $200,000 to $400,000 – prices that were well within range just a year or two ago, but are quickly vanishing today. More significantly, the recent price run-up has increased the gap between market and subsidized housing, especially in affluent areas. Maybe a family’s “low-income” pay can leverage a $200,000 house (or rent of $1,000 to $1,500 a month). But such neighbors don’t look very attractive when the average home price in your tract is $800,000 and rising by $10,000 or more a month..
Ironically, the problem is not that everybody wants to build high-end housing instead of affordable housing. There are plenty of developers – both nonprofit and for-profit – who are trying to make “affordable” housing deals work. There are also lots of different pots of money around – low-income housing tax credits, redevelopment housing setaside, Proposition 46 funds – that can be tossed into the mix. (San Diego, for example, is considering increasing the bed tax and/or levying a car rental tax to provide funds.) And there are lots of cities and counties promoting low-income housing, either because they think it is the right thing to do or because they feel the heat from HCD.
The problem, as the two South Orange County examples suggest, is the sites. A given site may look good – until the public meetings start. Cities often try to avert this problem by identifying sites that seem segregated from higher-end residential neighborhoods. In the Mission Viejo case, the 23-acre parcel was located on a hill 40 feet above street level. It was adjacent to commercial property and did not abut any residential parcel. Residents responded by circulating a flier reading “Stop the Nightmare Before It Starts,” which contained a rendering of a public housing project.
So who’s being left out in the cold? Actually, it is not all low-wage or low-income people. Some folks who qualify for affordable housing are more acceptable than others – senior citizens especially. In fact, some reports suggest that because cities often use senior projects to meet their affordable requirement, there’s a glut of senior housing.
In Santa Clara County, developers seeking to avoid political opposition have focused on senior housing and housing for moderate-income residents (80-120% of median income). The result? “It’s cutthroat,” says one San Jose developer, who has proposed a moratorium on low-income senior housing.
This glut may not last long, and it might not become widespread. After all, everyone is predicting a boom in the elderly population in California. But it does suggest that some low-income groups benefit while others do not. And that may have peculiar consequences as well.
The gap in affordable housing appears mostly to affect families with low-wage workers – farmworkers, retail clerks, and others seeking to make ends meet on one or two minimum-wage jobs. But for these groups, there is another way around the housing problem – if they’re willing to overcrowd their way into the American dream. Anecdotal evidence suggests that extended immigrant families are bootstrapping their way to ownership even in this housing market by doubling and tripling up – not only in the housing unit itself, but on the mortgage. By combining their salaries, three, four, or five low-wage earners can escalate beyond the moderate-income category and buy a nice house.
It will be interesting to see how affluent neighbors react to that kind of upward mobility, because there is an inherent conflict. On the one hand, the neighbors are undoubtedly thrilled to see owner-occupied single-family homes nearby. On the other hand, they’re probably not too happy to see these very same houses overcrowded by low-wage workers. Many cities have overcrowding ordinances, so the neighbors might call the local code enforcement department. But that would mean kicking people out of houses that they own. If that starts happening, the battle over the Jeronimo Road hill will pale by comparison.