Sac Bee Editorial: Speed up 1-C funding for affordable housing

Sacramento Bee Editorial: Speeding up grants for housing makes sense

                                                June 25, 2008

Proposition 1C projects are ready, and the state's economy could use the stimulus

California's real housing problem has little to do with the mortgage meltdown. The real problem is the giant gap between incomes and housing costs.

While housing prices rose dramatically between 2000 and 2006, incomes did not. Yet sales volumes were at record levels and first-time buyers were entering the market in record numbers. Aggressive marketing of risky, high-cost, no-documentation mortgage loans allowed people to buy houses at prices way beyond what they could afford. That, in turn, kept prices going up and up.

But as everyone knows only too well, that bubble burst. So we're back to the basic problem: California is not producing housing that residents can afford.

Fortunately, when California voters approved five bonds in November 2006 to update the state's increasingly outdated infrastructure, one of those bonds (Proposition 1C) was targeted at increasing the overall supply and affordability of housing.

The state has scheduled three rounds of funding, for June 2008, June 2009 and June 2010. This year's round of project applications produced more strong applications than there was money to support them. So now the Department of Housing and Community Development is recommending that the amount of money in the first round be increased to allow the state to get a full complement of strong projects under way. Legislators should heed that suggestion.

At this time of economic downturn and high gas prices, increasing the supply of affordable housing in urban infill areas and near transit hubs will provide jobs, transportation options and housing close to jobs.

Assembly Bill 1252 is the vehicle. The Senate passed it 35-0 on Monday. The Assembly should do the same today.

For the 2008 round, legislators originally had allocated $240 million for infill infrastructure grants (for sewer, water, roads and so on). That money ran out after 27 projects, which received amounts based primarily on the number of housing units that will be produced and the affordability level of those units. The railyard project in Sacramento was one of two projects that received the maximum $30 million funding.

The department would like to fund 19 more grants for infill infrastructure and add more money to four already funded projects. The Triangle project in West Sacramento would be a beneficiary of the change. That project was originally awarded $16.7 million and would get $6.3 million more if AB 1252 passes. The Township 9 project in Sacramento would get $19.1 million. Broadway Lofts at 19th and Broadway in Sacramento would get $4.4 million.

For the 2008 round, legislators also had originally allocated $95 million for transit-oriented development grants. That money ran out after 11 projects. Again, The railyard in Sacramento was one of only two projects to win the maximum award of $17 million. The department would like to fund five more transit-oriented development grants and add more money to a project in San Diego.

While it will reduce the funding available in the 2009 and 2010 rounds, speeding up the grants is justified. These strong projects are ready, and the economy needs the stimulus. The Assembly should pass this bill and the governor should sign it into law without delay.

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New York Times June 23, 2008

Home Not-So-Sweet Home

By PAUL KRUGMAN

"Owning a home lies at the heart of the American dream." So declared President Bush in 2002, introducing his "Homeownership Challenge" — a set of policy initiatives that were supposed to sharply increase homeownership, especially for minority groups.

Oops. While homeownership rose as the housing bubble inflated, temporarily giving Mr. Bush something to boast about, it plunged — especially for African-Americans — when the bubble popped. Today, the percentage of American families owning their own homes is no higher than it was six years ago, and it's a good bet that by the time Mr. Bush leaves the White House homeownership will be lower than it was when he moved in.

But here's a question rarely asked, at least in Washington: Why should ever-increasing homeownership be a policy goal? How many people should own homes, anyway?

Listening to politicians, you'd think that every family should own its home — in fact, that you're not a real American unless you're a homeowner. "If you own something," Mr. Bush once declared, "you have a vital stake in the future of our country." Presumably, then, citizens who live in rented housing, and therefore lack that "vital stake," can't be properly patriotic. Bring back property qualifications for voting!

Even Democrats seem to share the sense that Americans who don't own houses are second-class citizens. Early last year, just as the mortgage meltdown was beginning, Austan Goolsbee, a University of Chicago economist who is one of Barack Obama's top advisers, warned against a crackdown on subprime lending. "For be it ever so humble," he wrote, "there really is no place like home, even if it does come with a balloon payment mortgage."

And the belief that you're nothing if you don't own a home is reflected in U.S. policy. Because the I.R.S. lets you deduct mortgage interest from your taxable income but doesn't let you deduct rent, the federal tax system provides an enormous subsidy to owner-occupied housing. On top of that, government-sponsored enterprises — Fannie Mae, Freddie Mac and the Federal Home Loan Banks — provide cheap financing for home buyers; investors who want to provide rental housing are on their own.

In effect, U.S. policy is based on the premise that everyone should be a homeowner. But here's the thing: There are some real disadvantages to homeownership.

First of all, there's the financial risk. Although it's rarely put this way, borrowing to buy a home is like buying stocks on margin: if the market value of the house falls, the buyer can easily lose his or her entire stake.

This isn't a hypothetical worry. From 2005 through 2007 alone — that is, at the peak of the housing bubble — more than 22 million Americans bought either new or existing houses. Now that the bubble has burst, many of those homebuyers have lost heavily on their investment. At this point there are probably around 10 million households with negative home equity — that is, with mortgages that exceed the value of their houses.

Owning a home also ties workers down. Even in the best of times, the costs and hassle of selling one home and buying another — one estimate put the average cost of a house move at more than $60,000 — tend to make workers reluctant to go where the jobs are.

And these are not the best of times. Right now, economic distress is concentrated in the states with the biggest housing busts: Florida and California have experienced much steeper rises in unemployment than the nation as a whole. Yet homeowners in these states are constrained from seeking opportunities elsewhere, because it's very hard to sell their houses.

Finally, there's the cost of commuting. Buying a home usually though not always means buying a single-family house in the suburbs, often a long way out, where land is cheap. In an age of $4 gas and concerns about climate change, that's an increasingly problematic choice.

There are, of course, advantages to homeownership — and yes, my wife and I do own our home. But homeownership isn't for everyone. In fact, given the way U.S. policy favors owning over renting, you can make a good case that America already has too many homeowners.

O.K., I know how some people will respond: anyone who questions the ideal of homeownership must want the population "confined to Soviet-style concrete-block high-rises" (as a Bloomberg columnist recently put it). Um, no. All I'm suggesting is that we drop the obsession with ownership, and try to level the playing field that, at the moment, is hugely tilted against renting.

And while we're at it, let's try to open our minds to the possibility that those who choose to rent rather than buy can still share in the American dream — and still have a stake in the nation's future.

NY Times Op Ed: Home Not-So-Sweet Home

The holy grail of home ownership drives a whole range of public policies... transportation, land use, and taxes to name a few. Krugman points out that there are some serious downsides to this.   -- David Grabill

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June 23, 2008

Home Not-So-Sweet Home

By PAUL KRUGMAN

"Owning a home lies at the heart of the American dream." So declared President Bush in 2002, introducing his "Homeownership Challenge" — a set of policy initiatives that were supposed to sharply increase homeownership, especially for minority groups.

Oops. While homeownership rose as the housing bubble inflated, temporarily giving Mr. Bush something to boast about, it plunged — especially for African-Americans — when the bubble popped. Today, the percentage of American families owning their own homes is no higher than it was six years ago, and it's a good bet that by the time Mr. Bush leaves the White House homeownership will be lower than it was when he moved in.

But here's a question rarely asked, at least in Washington: Why should ever-increasing homeownership be a policy goal? How many people should own homes, anyway?

Listening to politicians, you'd think that every family should own its home — in fact, that you're not a real American unless you're a homeowner. "If you own something," Mr. Bush once declared, "you have a vital stake in the future of our country." Presumably, then, citizens who live in rented housing, and therefore lack that "vital stake," can't be properly patriotic. Bring back property qualifications for voting!

Even Democrats seem to share the sense that Americans who don't own houses are second-class citizens. Early last year, just as the mortgage meltdown was beginning, Austan Goolsbee, a University of Chicago economist who is one of Barack Obama's top advisers, warned against a crackdown on subprime lending. "For be it ever so humble," he wrote, "there really is no place like home, even if it does come with a balloon payment mortgage."

And the belief that you're nothing if you don't own a home is reflected in U.S. policy. Because the I.R.S. lets you deduct mortgage interest from your taxable income but doesn't let you deduct rent, the federal tax system provides an enormous subsidy to owner-occupied housing. On top of that, government-sponsored enterprises — Fannie Mae, Freddie Mac and the Federal Home Loan Banks — provide cheap financing for home buyers; investors who want to provide rental housing are on their own.

In effect, U.S. policy is based on the premise that everyone should be a homeowner. But here's the thing: There are some real disadvantages to homeownership.

First of all, there's the financial risk. Although it's rarely put this way, borrowing to buy a home is like buying stocks on margin: if the market value of the house falls, the buyer can easily lose his or her entire stake.

This isn't a hypothetical worry. From 2005 through 2007 alone — that is, at the peak of the housing bubble — more than 22 million Americans bought either new or existing houses. Now that the bubble has burst, many of those homebuyers have lost heavily on their investment. At this point there are probably around 10 million households with negative home equity — that is, with mortgages that exceed the value of their houses.

Owning a home also ties workers down. Even in the best of times, the costs and hassle of selling one home and buying another — one estimate put the average cost of a house move at more than $60,000 — tend to make workers reluctant to go where the jobs are.

And these are not the best of times. Right now, economic distress is concentrated in the states with the biggest housing busts: Florida and California have experienced much steeper rises in unemployment than the nation as a whole. Yet homeowners in these states are constrained from seeking opportunities elsewhere, because it's very hard to sell their houses.

Finally, there's the cost of commuting. Buying a home usually though not always means buying a single-family house in the suburbs, often a long way out, where land is cheap. In an age of $4 gas and concerns about climate change, that's an increasingly problematic choice.

There are, of course, advantages to homeownership — and yes, my wife and I do own our home. But homeownership isn't for everyone. In fact, given the way U.S. policy favors owning over renting, you can make a good case that America already has too many homeowners.

O.K., I know how some people will respond: anyone who questions the ideal of homeownership must want the population "confined to Soviet-style concrete-block high-rises" (as a Bloomberg columnist recently put it). Um, no. All I'm suggesting is that we drop the obsession with ownership, and try to level the playing field that, at the moment, is hugely tilted against renting.

And while we're at it, let's try to open our minds to the possibility that those who choose to rent rather than buy can still share in the American dream — and still have a stake in the nation's future.

Op Ed - 40th Anniversary of the Fair Housing Act

IS LOCAL HOUSING REALLY "FAIR"?

SANTA ROSA PRESS DEMOCRAT, April 26, 2008

This month marks the 40th anniversary of the Fair Housing Act, which prohibits discrimination in the sale and rental of housing. President Lyndon B. Johnson signed the bill April 11, 1968, one week after the murder of Martin Luther King, and said "fair housing for all -- all human beings who live in this country -- is now a part of the American way of life."

The bill outlawed the common, open practice of denying housing and home loans based on race, and was later amended to ban discrimination based on religion, national origin, gender, age, disability and family status. So 40 years after the law was signed, do people in Sonoma County have equal housing opportunities? Overt discrimination is rare. Realtors and landlords are generally careful not to indicate discriminatory preferences. They face serious penalties if they violate the law.

But how does it happen that students in a few public schools in Santa Rosa are overwhelmingly Caucasian, while other schools are overwhelmingly non-white? Clearly a school's students reflect the characteristics of the neighborhoods the school serves, but how did those neighborhoods get to be mostly white or mostly non-white? The answer may be in the zoning code. One area -- Fountaingrove -- is dominated almost exclusively by large-lot expensive housing. Other areas of the city are zoned for high-density apartments. De facto segregation wasn't necessarily the goal of city officials who approved the zoning, but it's the result.

Another factor contributing to the racial disparity is the city's "inclusionary zoning ordinance," which actually operates to exclude affordable housing from new developments. Most cities in the county require developers to include some affordable housing in their projects, helping integrate neighborhoods. Developers in Santa Rosa are allowed pay an "in lieu fee" instead. The money is used to build affordable housing, but usually in neighborhoods which have lots of affordable housing.

Santa Rosa is not alone. Healdsburg is considering a proposal to build a 130-room luxury hotel and 70 elegant houses on 250 acres known as "Saggio Hills." The hotel will employ about 250 low-wage workers, and more will be employed as gardeners and maids in the fancy homes. The developer has offered to donate some land to the city which could be used for affordable housing at some future date, but the proposal does not include affordable housing for any of these workers. Nor is there housing affordable to them elsewhere in Healdsburg. So they'll have to commute from Santa Rosa or Ukiah.

The developer says the project will feature "green design." But color-wise, its residents will be mostly white. And any benefit from solar panels will be dwarfed by the huge environmental impact of hundreds of workers commuting on Highway 101.

A member of the Sonoma City Council recently objected to efforts to provide affordable housing which would serve farmworkers and other low-income, mostly non-white families. He derided it as "subsidized housing" and equated it to housing common in Eastern Europe. Nevermind that he and other wealthy homeowners get a huge housing subsidy -- in the form of mortgage interest tax deductions.

All of our city councils favor economic development. They want an abundance of workers, but they aren't ready to accept these workers -- who tend to be non-white -- as neighbors. Cities that welcome exclusive developments like Saggio Hills often have to be pushed to approve affordable housing developments which will be occupied mostly by non-white families.

But there are signs of hope. Petaluma has been more successful than most cities in encouraging diversity in its housing development. Affordable housing is integrated into single-family housing areas; schools have a good socio-economic balance. Can they do better? Of course. Can all of our cities do better, in order to make the promise of "equal housing opportunity" a reality for all persons regardless of race, national origin, disability, age, family status, religion and income source? Yes, and let's hope it doesn't take another 40 years.

David Grabill, Attorney with the Sonoma County Housing Advocacy Group
(www.hagster.org)