Battle for Affordable Housing
The Mayor recently submitted his proposal for affordable housing to the City Council. Some elements of the proposals are good, such as increasing the percentage of redevelopment increment funds allocated to affordable housing. This fund is generated when the property taxes rise in a redevelopment zone. Currently, 25% of these funds are dedicated to affordable housing. The Mayor’s proposal increases the allocation to 35%.
A less appealing feature of the Mayor’s proposal is an inclusionary zoning policy for all new developments containing 20 or more units. Inclusionary Zoning (“IZ”) is a policy where the city requires a residential property developer to set aside a percentage of units for affordable housing at a reduced rate. In essence, the developer is required to set aside and pay for units for low-income housing.
While IZ has worked in other cities, it does not appear to be feasible or practical as proposed in Oakland. Mainly because the threshold is far too low and will cause small developments to become unaffordable.
Many small developments are geared towards moderated renters and first-time homebuyers. Requiring a 15% set aside in a 20-unit development will almost certainly result in a severe economic hardship for the new residents and developer.
For example, the proposed policy would require that 3 units in a 20 unit development be subsidized. If the costs of those 3 units are a moderate $300,000, then the other 17 units would absorb the cost difference of almost $1 million. With an additional $50,000 tacked on to the remaining 17 units, the inflated price would make those units unaffordable to moderate buyers, creating additional housing problems.
IZ generally works well in large developments of over 100 units where the costs can be spread out over a larger number of units, thereby lessening the impact. While it may be effective for much larger units, IZ will not generate very much affordable housing stock in Oakland.
The City only has a few large development tracks. Requiring IZ in these tracks does not help the current housing market. These developments will take 10-15 years before they are completed. The Oakland residents most likely to benefit from this program are now in the second grade. The program does not address the needs of current residents in the City facing an affordable housing crisis.
The Mayor‘s proposal also recommends an “in lieu fee” which allows a developer to pay into a fund instead of setting aside low-income units. It’s a good start, but must go further. If we want effective affordable housing funding, the cost needs to be spread over a much larger group. For example, the city should consider a parcel tax on all properties and create a dedicated affordable housing fund, and consider issuing a bond to raise capital to invest in building affordable housing.
The City’s focus on IZ only applies to new development tracks, which does virtually nothing to help current neighborhoods. The primary focus of affordable housing should be to build units in existing neighborhoods so that we repopulate and place badly needed housing stock and services in existing neighborhoods.
By funding a dedicated housing source, we can build a diverse affordable housing. As our population ages, seniors will need affordable housing, in addition to families and younger people. The city must create the flexibility to fund diverse housing to meet the needs of all our citizens, and not just focus on token placement in new developments that will only benefit a few in the distant future.
By creating a dedicated housing fund and tapping resources throughout the community, we also create opportunities for small businesses to participate. This way, affordable housing does not become the exclusive franchise of large developers, who tend to focus on big housing projects.
The housing fund could focus on infill housing, creating opportunities for small developers and contractors to build infill projects in existing neighborhoods. It also allows for more jobs and housing to repopulate our existing neighborhood, and badly needed services where people currently live.
Lastly, our housing policy should be more focused on assisting persons to own property. For many Americans, homeownership is the largest investment they will make in their lives. The city can create an entryway for homeownership. Again, this will stabilize neighborhoods, repopulate them and improve the quality of life.
The Mayor’s proposal also included a provision regarding condominium conversions of rental property. While I agree we need strong regulation and limits the conversions, there should also be clear exceptions for tenant occupied ownership conversions. The City should encourage and facilitate tenant’s ability to buy their units from landlords. Again, the focus is on homeownership and allowing persons to transition from renters to owners.
The condo conversion ordinance should contain safeguards so that elderly are not forced out of their rental units and can maintain their rental units. Smaller conversions and tenant purchases should be relieved of the replacement housing requirement. Again, the City can charge a fee for each unit converted, and those funds placed in the affordable housing fund for construction of new housing in existing neighborhoods.
Current thinking about funding affordable housing in the City will not bring about the change need. New ideas have to be explored, and existing thinking expanded. Long term success will depend on the creation of a viable housing fund. The City needs to have a clear focus. The direction of affordable housing should be to rebuild existing neighborhoods, provide housing for current residents’ needs, stabilize and improve existing neighborhoods with infill housing, encourage the transition from renter to homeowner, increase rental units, and create opportunities to build diverse housing options to meet the needs of seniors, families, youth, and low-income individuals.
With new ideas and responsive policy, we can create better solutions for our housing needs.
Clinton Killian is an attorney in downtown Oakland, an Oakland resident, a former Oakland Planning Commissioner and a candidate for Oakland City Council. He can be reached at: (510) 625-8823 or email: clintonkillian@yahoo.com. Website: www.clintonkillian.com
