Affordable Housing? Affordable for Whom?

Affordable Housing? Affordable for whom?
By Steve Martinot

The issue of affordable housing is looming again, because the issue of development, as "required" by Plan Bay Area, is looming. And when certain people talk about development, “affordable housing” is mentioned, most often as a paliative. The city says that we have to have development, high-rise buildings, and new apartments and condos, but its okay because there will be affordable housing units included.

We know that the developers are coming. They will be building all over town, mostly along the major transit corridors, like San Pablo Ave. and Adeline. In some circles, however, when “affordable housing” is mentioned, eyes roll and one hears guffaws in the background.

Yet it is a beautiful concept. Suppose no one had to pay more than 25% (for instance) of their income for rent. For whom would that be a problem?

In reality, 40% of “low income” families pay more than 50% of their income for rent in this city. According to The Bay Citizen, Berkeley has the largest gap between rich and poor in the Bay Area, and 10 percent of households make less than $10,000 a year. That’s a bigger problem than a slogan about affordability can cover.

HUD (the federal Dept. of Housing and Urban Development) actually states that affordable housing can be defined as costing no more than 30% of one’s income. “Families who pay more than 30 percent of their income for housing are considered cost burdened and may have difficulty affording necessities such as food, clothing, transportation and medical care. An estimated 12 million renter and homeowner households now pay more than 50 percent of their annual incomes for housing. A family with one full-time worker earning the minimum wage cannot afford the local fair-market rent for a two-bedroom apartment anywhere in the United States.” [http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/affordablehousing/]

That’s an amazing admission. Housing is internationally recognized as a human right. An item is affordable if, after you buy it, you have enough money left over on which to survive. What does it mean that the cost of housing (whether renting or paying a mortgage) might put one’s survival in jeapardy?

Those who prefer not to think about this issue will point to subsidized housing and “section 8” vouchers. But the lines are long. One can lose everything waiting for one’s turn. That is not what the guffaws are about.

The guffaws are about HUDs dividing line, its threshold for those for whom the notion of affordable is important. That dividing line is called the “Area Median Income” (AMI), and it is different for each region. For HUD, the notion of “affordable housing” refers to those people whose income is less than the median income. For Alameda County, the AMI is just shy of $90,000 a year. "Median" means the middle, so for any region, there are as many people earning less than the AMI as there are people earning more. To earn 80% of the AMI ($72,000) is listed by HUD as “low income,” and thus eligible for affordable housing units in new developments. “Low” income is 50-80% of AMI; below 50% is “very low”. But the deeper one gets into those categories, the more “cost burdened” people become.

The expression, “cost burdened,” is a euphemism for being impoverished. It does not signify poverty; it signifies being pushed into poverty. We’re not speaking here of the impoverished, who cannot survive without rent subsidies. We’re talking about those who are being impoverished. If you are paying 50% of your income for rent, and the landlord raises your rent 10%, you have just taken a 10% wage cut. If you are paying more than 50% of your income for rent, and the rent goes up 10%, your wage cut is more than 10%. Rent and low income mortgage debt are part of an impoverishment machine. It is that descent into impoverishment that "affordable" housing is supposed to stop.

Here’s where the guffaws come in. For the city to require a few “affordable housing” units in a high rent development makes it look as if is is actually doing something about impoverishment.

How is the slogan “affordable housing” used?
Lets look at the Plan (Plan Bay Area), which has brought the issue of housing to the fore. The "Plan" requires the city to have 2959 new apartments built by 2022. They will be built along the major transit corridors, such as San Pable Ave.

Of the 2959 units that the Plan requires of Berkeley, 442 are projected (in the Plan) to be affordable by low income families, and 532 are supposed to be affordable by very low income families. That would amount to 33% of the total.

The city however only plans to require 14 low income units among all these thousands planned, and only 182 “very low” income units. That’s 196 units, which is only 6%. What happened to the rest? They get turned into money.

For one thing, developers are corporations. Their business model (debt and financing structure) requires that they operate at a certain volume of capital expenditure to make the venture pay. They need buildings that will break zoning rules if they are to pay for themselves. Those rules govern height limits, resident density, and space usage (open space). They regulate land usage as a defense of the human dimension of the city, its life-style. I asked a developer planning a seven story building at Blake and Telegraph why he couldn’t make the building 5 stories instead. He said they couldn’t make it pay otherwise. With respect to impinging on the neighborhood, and generating traffic and a parking problems, 5 stories was already excessive.

It turns out that, according to city code, a developer is required to include “affordable” units only if the building is going to break the rules. In other words, Berkeley’s zoning rules have to be broken for a defense against impoverishment to click into effect.

But corporate landlords don’t want to accept low rent units in a high priced building. It interferes with the marketability of building (as an investment). In LA, in 2009, landlords took this to court, claiming the low rentals of "affordable" units represented a loss of income – a wholly subjective argument since the varying rent levels were present in the original negotiations. The court found for the landlords, and said the city must compensate any loss incurred through its required inclusion of "affordability” (the Palmer case, in LA, 2009).

To get around the legal bind between its rules and the law, the city of Berkeley created a “mitigation fee” which, if paid, would excuse the developer from including affordable units. The fee is a charge on each unit (each apartment) in the building for each affordable unit the developer does not want to include. That makes the inclusion of affordable units voluntary, and gets around the court decision. The money from the fee goes to the city’s Housing Trust Fund (HTF), through which affordable housing projects are supposed to be financed.

The original fee the Berkeley City Council approved was $28,000 per unit. The developers informed the city that the fee was prohibitive, and threatened to cancel their plans. The city lowered it to $20K, an almost 30% discount. Either the city couldn’t find developers willing to build affordable housing without subsidies (to replace those cancelling), or it was hungry for high rent housing (for which it is willing to sacrifice $8000).

There is currently one affordable housing project being built – at 2748 San Pablo. It was originally slated for condos (pre-2008); SAHA (Satellite Affordable Housing Assoc.) took it over.

But the city’s hunger is also for money. On April 28, 2015, a proposal was brought to city council for a city "density bonus" (a fee developers could pay to increase building resident density beyond regulations). Its purpose is to compete with a state “density bonus” that was inducing developers to discard plans for affordable units. This city plan would do that too. By offering a lower (and thus more attractive) fee – still called a "bonus" – it would capture that money for the HTF. Apparently, “affordable housing” is not even affordable for the city of Berkeley.

Let us summarize. In the face of a growing housing crisis, the developers tell the city they will build only if they can build big, and only if the mitigation fee is not too high. And the city acceeds rather than sending them home. (It was actually admitted on the record in city council (4/28/15) that the mitigation fee has not been paid, implying that it is unenforceable). We get a 5% increase in affordable housing instead of the 40% that is needed, and the city plays with financial schemes, turning the crisis into money.

But Berkeley will not even get that. When developers come in, they look at low cost real estate (the natural habitat of lower income people) in which to build. When they build, lower rent housing will be lost, because low income people are less able to defend themselves. This loss of low income housing will offset any that is gained through the new developments. The 6% that will be built in the new buildings will be cancelled out before ground is even broken.

Though Berkeley needs affordable housing, its financing schemes have put it in a double bind. It has to provide high-rent housing in order to accrue the funds to finance affordable housing. And in order to provide that high-rent housing, it has to allow developers to tear down affordable housing. The city gains nothing. And there is inflation. ”The effect of putting in high rent buildings is to raise the general “market rate” for housing.” [Aboubacar Ndiaye; 8 Reasons Why The Rent Is Too Damn High; January 07, 2014]

Appendix for Edward Snowden
Founded in 1990, the “housing trust fund pools funds for affordable housing from a variety of sources, making them available to developers through one single application process. Its funds come from state and federal grants, tax increment funds, and mitigation fees. The HUD "HOME" program provides funds for low income rental assistence. The HTF lends the money for affordable development, with the power to sign contracts providing for rent and income restrictions on the rental units involved.

The city’s description of the fund goes on to say, “One important clause requires the borrower to disclose information on tenants' incomes, rents, asset management, reserves, and financial records to the City for purposes of review and evaluation.[1] This clause provides the immediate legal basis for the City's monitoring activities. Monitoring is also called for by federal regulations”.

And we know what that is about. The form it takes is “controlled substance;” its content is the substance of control.

******

There will be a Community Forum in West Berkeley, sponsered by the Berkeley Neighborhoods Council, on May 19, 2015, to discuss these and other issues. The Forum will take place at Finn Hall, 1819 10th Street, at 6:30 pm. It is open to all.