New Bill Addresses the California Affordable Housing Crisis

3 min read

With housing market yet to sort itself out, both renters and would-be homeowners face hurdles finding affordable housing.

Rendering credit: Kuchman Architects PC

By Jeffrey Steele, Contributing Writer

Los Angeles—With government funding reaching new nadirs and the housing market yet to sort itself out, both renters and would-be homeowners face hurdles finding affordable housing. The problem is likely even worse in California than it is nationally.

The recent introduction of California bills such as the HOMeS Act (Senate Bill 1220) may provide a start toward addressing the issue. Bill 1220 would generate an estimated $700 million yearly through a document recording fee on real estate transactions. According to Senate President pro tem and bill sponsor Darrell Steinberg (D-Sacramento), that would be a permanent ongoing source of funding dedicated specifically to affordable housing development and construction job creation.

If enacted, the Housing Opportunity and Market Stabilization Act would support the development, acquisition, rehabilitation and preservation of affordable homes for California state residents on fixed incomes, and dealing with modest budgets.

The Sacramento|Yolo Housing Association, a 24-year-old organization that develops and operates well-designed housing for modest-income households, will be watching the bill’s progress closely.

“The vacancy rate in one of the areas in which we work, the city of Davis in Yolo County, is 2.5 percent,” association CEO Rachel Iskow tells MHN. “You can imagine being a low-income household and competing for housing in a market like that. Even having a slight blemish on your credit puts you at a huge disadvantage when you’re competing for housing in that kind of market.”

A common myth holds that because a great many homes remain in foreclosure, this translates to affordable housing, Iskow says. “The problem is we still have this really tight credit market, and a lot of foreclosures are held off the market. So people who in another economy with looser credit could buy a home can’t get a home, and that puts more pressure on the rental market,” she adds.
Among the challenges standing in the way of new affordable housing development is a lack of parcels zoned for multifamily housing, Iskow says.

There were not enough such parcels to begin with. Exacerbating that problem is that developers around the Golden State have been able to downzone from multifamily to single-family uses, she adds.

Photo credit: Roy Wilcox

An even more vexing challenge may be that many cannot afford to pay rents that would permit an apartment building owner to operate the property and pay his or her mortgage. “That’s why public subsidies are critical in financing the affordable housing production,” Iskow says. “Senate Bill 1220 is so important in jump starting affordable housing construction, which is a big part of our economy.”

Rob Wiener, executive director for the California Coalition for Rural Housing in Sacramento, reports that “submerged demand” has resulted from a failure to build sufficient affordable housing last decade and before.

“A lot of people who needed rental housing in that period have simply left the rental market,” he says. “They’re homeless, living with parents, doubling and tripling up. Superficially, you look around and see there are so many units sitting empty, and the prices are lower. But there’s a mismatch between what’s available and what people can afford.” Senate Bill 1220 would create a new revenue stream to assist a variety of housing types, and would stimulate both buyers and producers or sellers, Wiener says.

“It would have a great impact on stimulating the housing market and stimulating buying,” he notes. “Most people who buy a home live in rental housing before that. So you need for-sale home interventions for people who are ready, and rental housing interventions for people saving for home purchases.”

Adds Iskow: “We do need and want the real estate profession to support this, and we want to make sure home ownership is covered. Funds should come out of this to help home ownership and make for-sale homes affordable.”

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