Funding for affordable housing is essential to address the housing crisis we are seeing in Berkeley and communities across the West Coast and the nation. In October, the State Treasurer’s Office allocated a $1.8 billion bonding authority and $88.2 million in federal tax credits to build affordable housing in California.
Affordable rental housing in California is built by both nonprofit and for-profit developers in partnership with cities, counties and the state. The cost of development and construction is driven up by factors ranging from land prices and environmental review to the rising costs of materials and labor. The point of affordable housing is to keep rent affordable, which constrains the amount of debt that can be supported by rental revenue. Especially with rising living costs, it is challenging to make affordable housing developments economically feasible, so nonprofits rely on city, state and other government sources to fill the gaps in financing affordable housing.
Berkeley voters did their share by approving two key measures in November 2018: Measure O, a $135-million bond measure to create and preserve affordable housing for low-income households, and Measure P, a property transfer tax increase that is expected to generate between $6 million and $8 million annually for housing and services for people experiencing homelessness. In doing so, they helped counteract the skyrocketing living costs in the Bay.
These funding sources are in addition to the city’s Housing Trust Fund that is replenished with “in-lieu” fees from market-rate developers who opt to pay a fee to the city, rather than build affordable housing within their developments.
Meanwhile, California has numerous programs targeted at affordable housing production and preservation, including the Low-Income Housing Tax Credit, which is made up of state tax credits, as well as federal credits allocated by the State Treasurer’s Office — these attract capital to projects by providing tax credits to private-sector companies that make investments in affordable housing; low-cost loan programs through the California Housing Finance Agency; and grant and loan programs through the California Department of Housing and Community Development.
Together, these types of funding sources are among the best tools we have to create the need for housing communities. As the housing and homelessness crisis worsens, however, it’s clear that we need more investment in affordable housing.
Affordable housing projects should have a special focus on alleviating homelessness. With the growing prevalence of homelessness on our city streets, state and local funding programs are increasingly focused on the construction of housing for homeless individuals and families. A proven solution is permanent supportive housing, which pairs deeply affordable housing with intensive health and social services. Permanent supportive housing is complicated to build and operate, in large part because of the complexity of the issues many homeless people face, such as chronic health and mental health challenges, addiction and substance use, post-traumatic stress disorder and the daily trauma of life on the streets and in shelters. Comprehensive, high-quality services help people move from homelessness to housing stability, so it is critical to create and identify sustainable funding sources to pay for these services.
In addition to cost issues, the process of getting new housing approved can be complex, lengthy and expensive. It takes time and money to navigate everything from planning permits and zoning regulations to traffic studies, environmental impact reports and community acceptance. Affordable housing developers compete against market-rate developers for land and labor — a significant challenge in a high-cost real estate market such as the Bay Area.
In response to these barriers, we are seeing the emergence of creative solutions that are changing the way affordable housing is produced. Public landowners, including school districts and cities, are partnering with developers to bring housing and mixed-use developments to their surplus sites. Microapartments and backyard cottages known as “accessory dwelling units,” or ADUs, are becoming more common. In fact, in October, California Gov. Gavin Newsom signed AB 68, a bill that facilitates the development of more ADUs. And developers are exploring new construction techniques such as off-site modular construction, where housing components are built in a factory then transported to a site and assembled like Legos (to date, BRIDGE Housing has developed two such modular projects in San Leandro, Calif.).
One of the most logical ways to address the housing shortage in urban areas is to increase density, particularly at transit-rich sites. Having access to transit is especially critical for low-income communities. BRIDGE Housing and partners master-planned the MacArthur BART development in Oakland, which transformed a sunken parking lot into 880 apartments, 143 of which are affordable, a parking garage and nearly 40,000 square feet of retail and commercial space. Transit-oriented development is clearly part of the solution, and discussions are underway regarding development at North Berkeley, Ashby and other BART sites.
None of this development would happen, though, without strong public- and private-sector partnerships and essential funding from public and private sources. We are grateful for the existing programs and the city’s support that are making local affordable and permanent supportive housing possible, including BRIDGE Housing’s Berkeley Way Project and Berkeley Food and Housing Project’s Hope Center possible, but we know that much more needs to be done.