“Those who cannot remember the past are condemned to repeat it.” ~ George Santayana
When I was growing up in New York City, where my family owned a small business, my father told me that the scariest words in the English language were, “We're from the government and we're here to help you." A lot of people feel that way about ABAG housing quotas and affordable housing projects in general. But it’s more complicated than that.
Reasonable people might agree that having a variety of housing opportunities for those most in need, without discrimination, is a worthy societal goal. But there’s a difference between “providing housing opportunities” and “building affordable housing.” And affordable housing means different things to different people in different places. It includes homeless shelters, starter homes, rental apartments and townhouses, live/work lofts, SRO (single room occupancy) housing, elderly housing and assisted living, housing for very low and low income (below 30 percent to 50 percent median) and 80 percent median income “affordable” units like the ones we see being built all over Marin (for a family in Mill Valley earning about $90,000 per year).
So where should we focus our efforts and how do we define and prioritize our needs? Some history of how we got here helps.
A Brief History of Affordable Housing
Affordable housing in the U.S. was traditionally left to private markets or corporations that built “company towns” for their workers (e.g. Pullman, Illinois (see photo) and Scotia, California). But the idea that the government should get directly involved (other than operating “poor houses” for the destitute; see photo) didn’t really come into being until the Great Depression.
In 1934, the National Housing Act created the Federal Housing Administration (FHA) to help people protect their homes from foreclosure. The 1937 Housing Act, which coined the phrase “affordable housing,” subsidized the construction of government-owned rental housing for the general public under Section 8 of the Act. After that the federal government quickly became the primary driver of affordable housing construction and finance.
The mid 1940s through the early 1960s was the Golden Age of government housing. The 1949 Housing Act and urban renewal legislation caused a building boom across the country to feed post World War II demand. Projects like Stuyvesant Town / Peter Cooper Village in New York City, built by a “public–private partnership” in 1947, housed almost 100,000 people in one location.
The Winds of Change
The 1960s saw the passage of Fair Housing laws to ensure equal access to housing, an important advancement. But in the aftermath of the Vietnam War the nation turned more conservative. The costs of the war and Johnson’s Great Society had been enormous. One of Richard Nixon’s first actions as president in 1970 was to cut federal housing programs dramatically. The thinking was that we were sinking too deeply into debt and could no longer afford them.
To replace some of the financial shortfall, the Community Development Block Grants program was created in 1974 and modifications were made to Section 8 housing programs to allow low income renters to live in privately owned buildings. Signed by Gerald Ford, these changes eliminated a good number of government-built public housing programs so construction started shifting back to the private sector. These were the first substantive changes since the 1930s. But the real turning point came when Ronald Reagan was elected in 1980. This marked the beginning of the end of HUD’s central role in providing affordable housing and the beginning of the “markets can solve everything” mantra.
The End of Federal Housing Programs
One of Reagan’s stated goals was to get the federal government out of the housing business completely, and so the systematic dismantling of affordable housing support systems began in earnest. In 1983, a Reagan-appointed commission recommended an end to all project-based Section 8 subsidies, except in the case of rehabilitation. They recommended that all subsidies shift to housing vouchers to give private developers incentive to build affordable housing (vouchers are a rental payment coupon that a renter can use to live anywhere). No new government-owned housing projects were approved for construction after Reagan’s election.
Jack Kemp, a self-described “bleeding heart conservative” and arguably one of the most important architects of HUD’s recent history, became Secretary of HUD in 1989. Prior to that, he worked behind the scenes to help the Reagan Administration “privatize” the affordable housing business.
Co-insurance, wherein private banks took over the role of financing projects in exchange for government guarantees of their debt, became widely used. Housing “project revenue bonds” and leverage debt became fashionable methods to finance private development without personal risk. And newly created Low Income Tax Credits attracted investment banking, mutual fund and corporate money to fund projects that had federal Housing Assistance Payments (HAP) Contracts in place to guarantee high rents.
This all worked great for a while until unscrupulous underwriting practices and too much leveraged debt brought on the Savings & Loan Crisis in the 1980s (which we have to thank for coining the phrase “too big to fail”). When it was over, multifamily development was stalled for years and the banking fiasco became another excuse to get rid of government housing programs altogether.
The Knock-Out Punch
In the final coup d’état, the Office of Independent Council launched a massive investigation into “political influence peddling” at HUD in 1988. The investigation was based on the “shocking” revelation that subsidy grant decisions in Washington might be influenced by political favoritism and high paid lobbyists (OMG, there’s “gambling at Rick’s”). This seems quaint today and it had little to do with routing out corruption, but secretaries went to jail while high rollers walked away scot free. And federal affordable housing programs never recovered.
Project-based subsidies (projects with HAP contracts) were greatly reduced. Co-insurance and renovation programs like the Moderate Rehabilitation program were scuttled. And all that was left were Section 8 vouchers and tentative annual allocations of Low Income Tax Credits that almost exclusively went to big nonprofit developers who resold them to major corporations and investment funds. But as bad as all this was, it was only the beginning.
Call 'em NIMBYs
In 1991, HUD issued a report entitled, “Not in My Back Yard – The Advisory Commission on Regulatory Barriers to Affordable Housing.” Authored by Jack Kemp and signed by George Bush, Sr., it came to be known as the “NIMBY REPORT.” The NIMBY Report alleged that local planning and zoning control was an impediment to affordable housing development and had to be challenged (this is the same position that ABAG / MTC / Plan Bay Area and, ironically, left-leaning social reformers like the Marin Community Foundation are advancing today).
But we have to ask ourselves, why would neo-con Republican politicians propose such a liberal Democratic sounding idea? Was it because of genuine concern for the needy? Having personally had a front row seat to watch the goings on at HUD in Washington, D.C., at the time, I can say with confidence that it wasn’t. To bring their ideological motives into relief, we need only swap the terms “affordable housing development” with “developer profits” and it becomes clear what the elimination of impediments was all about.
By the early 1990s, it was obvious that vouchers, Jack Kemp’s pet program, had failed to increase the affordable housing supply as promised (without direct government subsidy contracts, projects no longer “penciled”). And as the market weakness of the early 1990s gave way to a new building boom, developers needed more entitled land - and fast. The NIMBY Report, a pro-markets, pro-private developer profits, and pro-big banking campaign thinly camouflaged as an affordable housing policy, has been the rallying cry of affordable housing advocates ever since (who are apparently oblivious as to its origins).
This pro-development agenda formed the philosophical basis for the kinds of “straw man” arguments we’re dealing with today. Resistance to any affordable housing project in Marin, no matter how ill-conceived, is immediately labeled NIMBY. But perhaps the resistance to affordable housing in Marin is less about NIMBYism than it is about the increasing loss of local control and community choice in how our communities grow and cope financially, and how we maintain our quality of life.
Ownership Will Save Us?
In 1994, the Government Accounting Office continued the assault on federally funded housing programs with a report that damned HUD for its wastefulness (never mind that HUD’s total budget was a mere fraction of the U.S. budgets for defense, farm subsidy, oil subsidy, or other heavily lobbied line items). Subsequently, a bill was introduced in the House of Representatives in 1995 to permanently shut HUD down. It almost passed. Then in 1997, Congress removed the last linchpin of affordable housing law passed in 1937 that required the federal government to replace every affordable unit it tore down or put out of use.
From the mid-1990s onward, the affordable housing business remained a shadow of its former self. The new focus was home ownership, not rentals, probably because in a “more debt / more leverage” financial system driven by the lure of lucrative underwriting fees, the mortgage brokers, banks and investment bankers could “game” that system more profitably than the rental housing business (many multifamily funding loopholes were closed after the S&L crisis).
Then in 2003 Congress passed the “American Dream Down Payment Initiative” and the already inflating housing bubble started to expand more rapidly, and affordability went out the window. We became focused on the wonders of price appreciation as the solutions to all our social equity problems. We know how that turned out.
By 2007, it’s estimated that more than 40 percent of new jobs being created annually in California were real estate related (finance, banking, mortgage underwriting, construction, materials, real estate sales, household furnishings, appliances, supporting services, gardeners, house cleaning and everything they sell at Home Depot). With stiff environmental regulations dating back to the 1970s standing in their way and housing demand skyrocketing, real estate development interests continued to worry about land scarcity and lengthy entitlement processes. They needed to “feed the beast.” The California State Legislature came to their rescue (and has been coming to their rescue ever since).
“Affordable housing” green-washed with climate change “concerns” was the perfect argument to defeat opposition and look like heroes doing it. Following the passage of AB32 and fueled by the financial backing of moneyed special interest groups, Senator Darrell Steinberg crafted SB375 (drafted in 2005 and signed into law in September of 2008 just weeks before the crash). SB375 capitalized on the “NIMBY” argument and added climate change as a new reason to usurp local zoning control, even though . With the last obstacles to development swept away it looked like clear sailing into an endless building boom. The 2008 crash changed everything.
The unsustainable levels of public and private debt that fueled the boom have brought on the worst financial crisis in more than 50 years. Cities that over-extended themselves by building more and more housing ended up broke and may never recover (Vallejo, Modesto, Fresno, Las Vegas, Atlanta). The fantasy that building housing without prerequisite job growth is a path to a better economic future has been totally discredited. But never underestimate the power of a bad idea.
Affordable Housing Today
As it stands today, we really have no cohesive or financially sustainable national affordable housing programs. Federal funding assistance for affordable housing of any kind is pathetically low. Federal Low Income Housing Tax Credits only offer about $5 billion in annual assistance (Goldman Sachs will pay out about 3 times that amount this year in executive bonuses). Section 8 vouchers only cover about 2 million households at a time when the latest census indicates that 1 in 4 families live at or below the poverty level. Meanwhile local governments are left to fight for table scraps as the state and federal government take more in taxes and fees and give back less.
Today, we have “in lieu” development where at best we get 1 or 2 so-called affordable units developed for every 8 or 9 market rate homes built (about half are for 80 percent median income, which is not all that affordable). But the negative impacts of these projects on traffic, infrastructure, tax base, schools, the environment and everything else far outweigh the benefits. We occasionally get some projects funded through grants, but these have been only marginally successful (e.g., the apartments) because the reasons for developing them are too skewed away from the reality of market economics and real demand.
We’re told there’s not enough money, that the country can’t afford it. But that’s only true because our spending priorities are completely out of whack (i.e. development of the new F-35 fighter jet is estimated to cost us $1 trillion dollars over the next decade). In addition, the affordable housing development game is now so rigged in favor of large nonprofit developers that creative private capital is pretty much excluded. And going forward, private capital participation will be essential.
What is Our Affordable Housing Problem?
There’s little question that more federal funding would help provide financial incentives to local governments and private development interests trying to address affordable housing challenges. The trickle of funding available now is just not enough. But before we start “throwing money” at the “problem” we need to be sure what we’re trying to accomplish.
Today’s affordable housing challenges are very different from the real market demand for housing that followed the Great Depression and World War II. At that time, there had been no housing built in decades and there was a (baby) boom in population and household formation. Today we have just the opposite. We have a glut of housing across the state but much of it is not located where jobs are. And while traditional jobs are scarce, many newer jobs go begging because of the lack of trained candidates in the labor pool. In addition, California’s population is falling. Marin has experienced stagnant population and jobs growth over the past 20 years. And ironically, the Housing Affordability Index is at a record high. On a tax-adjusted, cash flow basis it’s never been cheaper to own a home. So where’s the affordable housing problem?
Our problem today is only similar to the Depression and its aftermath in that it’s more about economic dysfunction and our failure to create an equitable society where real opportunity exists for all. Our problem is that while corporate profits and CEO paychecks are at historic highs, average wages, in real inflation-adjusted terms, have lagged so far behind the cost of living, and personal savings are so depleted, that even middle class people can’t afford to buy a home (much less low income people). On the other hand, rents are rising because so little rental housing was built in the past two decades. So housing options are squeezed for everyone and those most in need suffer disproportionately.
It’s obvious that unless we address our underlying social equity and economic problems, there will be no end to our “housing” problems. But there are still a lot of things we could be doing at a local level.
What Kinds of Housing Do We Really Need in Marin?
Quotas and mandates have clouded our thinking. Instead of counting units we should be asking what types of housing we really need. In many Marin communities, demographic trends show that we have an underserved need for many types of affordable housing that we hear little about in the media. These include:
- Housing for the elderly and assisted living facilities.
- Housing for people with disabilities and special medical needs.
- Homeless shelters and abused women's safe houses.
- Live/work opportunities like lofts and cooperative housing.
- Co-housing, where residents design and/or operate their own hybrid housing solutions (the ultimate in local control).
- Apartment building preservation, reconfiguration and substantial rehabilitation.
- Building conversions from commercial to mixed use residential.
- Sweat equity opportunities where residents can buy unfinished space to finish out themselves.
- Very small starter rental and condo units for singles and young couples (as small as 650 sq. ft. two story).
- Smaller single family housing for the “active elderly” (partially retired and very active but not wanting any maintenance obligations).
The list is long. So let’s ask ourselves, how many of these kinds of projects are we actually getting built using our present process? The answer is none.
The Law of Unintended Consequences
Ironically, the more laws we pass to try to force zoning changes to enable high density residential development, the more creative, mixed use / adaptive use local solutions are “crowded out” of the market. With our planning tools (Housing Elements, zoning bonuses, site designation lists, fast track processing, etc.) radically skewed to support over-sized, high density in-lieu schemes, affordable housing development has become a game where those are the only projects that get considered, whether or not they make financial sense, community sense, common sense or there’s any real market demand for them. Creative capital investors have no incentive to even try to fill our real housing needs (listed above) and even if we could get these kinds of projects built, most wouldn’t be counted as against our ABAG quotas.
Yet Sacramento’s social engineers and ABAG planners and some of our elected representatives seem oblivious to these kinds of unintended consequences. Residents are increasingly being bullied into capitulation about quotas and requirements because they’re told “it’s the law.” But as anyone who has actually read the prevailing mishmash of governing laws can attest, the implementation of “the law” in this case is anything but clear cut and is open to a variety of interpretations. And there are certainly enough gray areas to mount good arguments for local solutions. But the problem is that everywhere we look we only seem to be hearing one interpretation of the law: the one that most benefits special interests.
It’s fairly obvious that Marin has many more opportunities for infill, mixed-use renovation projects with affordable units included than we do for “high density near public transportation.” So why aren’t we doing everything we can to help that happen instead of continuing to promote unneeded market rate, in-lieu development?
It’s The Law?
As debates about local planning, Housing Elements, and affordable housing heat up, it is increasingly important that the public be given the full story about what is or is not “the law.” But this isn’t always the case.
In Mill Valley, for example, the community has been told for years, by our Planning Department, that we are required to adopt provisions that provide for 30 units per acre zoning: our default density for affordable housing development because we’re designated an “urban” area by HCD (Housing and Community Development). This clearly favors large-scaled development. This was their justification for recommending approval of Planned Development (PD), high density projects on Miller Avenue. These recommendations also came with a variety of floor area ratio (FAR) bonuses, and building setback, height and parking variances because 10 percent of their units were affordable.
This single issue about site density has been the basis of endless battles and hundreds of hours of time at public meetings. It has created enormous community ill will and it’s even driven some well-intended affordable housing developers with more modest schemes, to give up and walk away. But it turns out that it’s not even true.
According to the HCD Housing Policy Development regulations on minimum densities for the Housing Element and the appurtenant regulations, Mill Valley’s default density is just 20 units per acre not 30. The regulations state that: "Jurisdictions (cities/counties) located within a Metropolitan Statistical Area (MSA) with a population of more than 2 million as listed below (Alameda, Contra Costa, Los Angeles, Marin, Orange, Riverside, San Bernardino, San Diego, San Francisco, and San Mateo - are “urban”) unless a city / county has a population of less than 25,000” in which case it would be exempt from that requirement and be governed by the law’s minimums, which is noted as 20 units per acre.
I suspect the community is dealing with this kind of thing in other cities in Marin and at the county level.
For example, op-ed pieces in the Marin IJ regularly admonish us about our need to comply with every rule and RHNA allocation that ABAG / HCD hands us or risk onerous penalties, law suits and loss of funding. Yet as Carla Condon, councilmember from Corte Madera, explained in great detail at a recent Marin Communities Coalition for Local Control meeting, this just isn’t true. No city can be denied funding for which they are otherwise eligible just because they are in a disagreement with ABAG or HCD about how to interpret their legal obligations. A city is only obligated to create a Housing Element and get it certified within a specified period of time. And the kinds of “urban development” grants that are supposedly at risk have never be available to small cities in Marin anyway.
Similarly, I’ve read that housing renovation is not eligible to be counted toward our housing allocation quota. But again, this turns out not to be the case. Projects that qualify as “substantial rehabilitation” can qualify against ABAG housing mandates (Gov. Code 65583(c)(1)). This kind of misinformation can discourage private capital from investing in something we actually need and can do.
Bottom line: I think the information being given to the public is grossly inadequate. In fact, getting to the truth is a full-time undertaking. they have no intention of answering our questions. Planning “workshops” and “community input” sessions for Plan Bay Area are so tightly orchestrated that meaningful dialog is completely eliminated. And even at the local level, I’ve seen our hard working Planning Commissioners ask staff for clarifications about the myriad of inter-related affordable housing regulations only to get explanations that are so simplistic, so “inside the box” that they only support the top-down point of view.
All this considered, I wonder sometimes if the fox isn’t guarding the hen house, or if governing has gotten so complicated that our planning officials are just in way over their heads. Either way, who is looking out for the community’s interests? In the meantime the only ones who’ve benefited from these one-sided interpretations of the law are ABAG and developers promoting new construction projects that are mostly market rate (i.e. highly profitable) housing.
I want to make it clear that I have nothing against profits, and there are some very good nonprofit organizations that have been building and managing affordable housing projects in Marin for decades. Many of these address real demand, like housing for the elderly and Section 8 tenants. I hope they’re making a profit so they can continue to do what they do. But the widely embraced “market rate + in-lieu units” approach promoted by the ABAG quota system (which is primarily profit driven) has more downside than upside for the community and it’s not going to get us where we need to go.
As it stands, by dutifully following mandates from above we’re giving away the store and getting next to nothing in return.
A Cycle of Failure
Our affordable housing challenges go much further than just getting housing built. In fact, that’s the easy part. In , as an example of a failed affordable housing concept. And there’s no question that segregating the poor in isolated housing developments remains a really bad idea. But Pruitt Igoe failed for many other reasons, the most important of which was the lack of ongoing funding for maintenance, management, replacement of fixtures, appliances and equipment, and proper security.
It’s easy to put up a trophy project (which Pruitt Igoe was in its day) funded by high profile, one-time grants and zoning concessions. It’s easy to have a big party where self-congratulating politicians and housing advocates show up for photo ops of shovels being put into the ground. But it’s a whole other thing to keep that enterprise going for the long term. It’s a whole other thing to maintain the buildings year after year, and to work with families and individuals who live on the edge, day to day.
The truth is that Priutt Igoe was abandoned by its creators and left to fend for itself as the fickle winds of politics shifted to other vote-grabbing issues, long before it was abandoned by its tenants.
We’re seeing this same story unfold in Marin. A big fuss is made about the grants that help affordable projects like the Fireside in Mill Valley get built. But where will the revenues come from to keep projects like this operating and well maintained in 10 years? While housing advocates cheer on every new project proposed, regardless of its merits, the steady deterioration of our existing affordable housing stock continues to be a chronic problem. And many existing Section 8 projects around the county continue to have disproportionately higher crime rates and other ongoing management and maintenance issues that give affordable housing its bad reputation. These projects continue to need more operating funds. But where is the effort to address that need and why aren’t we addressing that first?
Going forward, who will bear the social and economic burdens of the future projects driven by SB375 and the One Bay Area plan? And just how financially “sustainable” will the Sustainable Communities Strategy really be?
As a former affordable housing developer and owner of large Section 8 housing projects, I can say unequivocally that these types of projects are much more management and capital intensive than any other type of real estate. And when we look at the other types of affordable housing Marin communities really need or the demographic we should really be concentrating on (low and very low income residents), I don’t see the sources of adequate future revenues to ensure success. But no one seems to be thinking about that right now. Affordable housing is just discussed academically, as if the world were really that simple. Right now, it’s just “build baby build.”
But wouldn’t it make more sense to work together locally and regionally to pressure the federal government to offer better financing terms to qualified buyers (i.e. 40-year amortized mortgages) so more families could buy homes? Wouldn’t it make more sense to fight for more types of financial assistance to low-income renters and landlords so renters could afford a better place to live and private property owners had more financial wherewithal to renovate and build rental housing than to waste precious time and money trying to re-engineer human behavior and warehouse people in high density “workforce” housing next to highways?
Making Better Decisions
One thing I’m sure of is that we’re not going to solve today’s planning and affordable housing challenges by continuing to rehash old ideas. More “business as usual” will just add to our long term problems. Equally, we’re not going to move forward by going backwards, dismantling decades of environmental protections in the name of “streamlining" and “jobs” and “growth.”
"Environmental" laws that pretend to be one thing but are driven by something else are leading to a chain reaction of bad ideas. For example, the scope of the new “Preferred Land Use and Transportation Scenario” just published by the TAM Executive Committee includes examining “CEQA streamlining opportunities for development projects as defined by SB375.” Am I the only one whose head spins from the irony of all this? Yes, there may be instances of abuses of environmental protection laws, but name one area of the law where that’s not true. It’s no justification for removing protections or not having a thorough public process.
Things today tend to get reduced to pointless "for" or "against" arguments. But when it comes to affordable housing, we need to be asking more substantive questions about exactly how, where, what kind, why, when, by what means, to whose benefit and what are the unexplored alternatives. We need to move the conversation from the general to the specific. And the only way to do that is locally. This is the fundamental purpose of public policy.
Well-crafted local public policy has to lead our vision of the future, not consultant’s opinions, not academic studies, not housing quotas, not a developer’s bottom line, not special interest groups, and not a billionaire philanthropist’s pet project. That’s letting the tail wag the dog and only leads to knee-jerk decisions and more wasting of public assets, not lasting solutions.
The kind of process we’re witnessing that substitutes orchestrated group workshops and consultant’s studies for thinking is a recipe for disaster. I don’t question for a minute the heartfelt concern and passion of affordable housing advocates for wanting to correct our world’s social inequities. But I do question their understanding of economics and their acumen about the political horse-trading that’s going on in Sacramento, at our expense.
But make no mistake about it, the planning challenges we’re facing today are unlike anything we’ve dealt with in the past. The world is faster and more interdependent. Our problems are more complex and our errors will be more costly. Our environmental challenges are more precarious than ever before and many affordable housing development sites that have traditionally been considered (e.g. sites at or below sea level) are no longer really viable. We’ve learned so much about environmental sustainability and human health in the past 20 years, and the outcry from the scientific community is so loud and clear, that we can no longer simplistically equate “building” with “progress,” or make decisions just for the sake of short-term economic growth. And we can no longer justify putting low income or elderly residents in harm’s way and call it a solution.
We find ourselves in uncharted waters. The undeniable trend at the state level is the systematic dismantling of local control. Regional Housing Needs Assessments, which began decades ago as a fairly benign way of estimating growth in California to assist cities in planning for it, have become a heavy handed, well-funded, quota-driven system that attempts to wrest control of local planning by forcing zoning changes to accommodate high density, multi-family development (as a condition for certification of a Housing Element).
I believe this entire system needs to be questioned to its core.
I remain convinced that the best affordable housing solutions will come from the local level, guided by local policy, informed by local conditions, needs and markets. There may be commonalities among the affordable housing solutions devised by different Bay Area communities and if so, that’s great. But there certainly aren’t any solutions that can be applied in all cases, because Marin, thank goodness, is just too nuanced for that to work.
As we look ahead toward more equitable housing solutions, in the sage words of Steve Jobs, I believe we need to “think different.”
NEXT WEEK: PART IV – Public Policy, Community Voice & Social Equity
Other articles of interest:
Restoring the Balance (Jan 1)