Santa Rosa Affordable Housing

From Northbay Biz (September, 2008)
By Sarah Campbell

Santa Rosa’s efforts to create ample affordable housing aren’t without their limits, but they’re getting noticed throughout the Bay Area.

Is “affordable housing” an oxymoron? In Santa Rosa, the puzzle of how to answer “no” to this question has always been difficult. And although prices have dropped 26.47 percent over the last year, median home prices still hover around $375,000—a hefty amount for many families in Sonoma County, the majority of whom earned between $50,000 and $74,999 in 2006. With an annual income of $61,500 for a family of four currently considered low income in Santa Rosa, this means a significant percentage of the community—teachers, nurses, firefighters, bank tellers, students trying to start a career or raise a family, and the people who harvest our grapes, carry our mail and serve us coffee—are working in a place they can’t afford to call home.

The situation isn’t going unnoticed. As the fifth-largest city in the Bay Area, Santa Rosa has recently gained attention as one of the region’s largest producers of affordable housing, ranking third only behind San Francisco and San Jose, according to the Association of Bay Area Governments (ABAG).

“ABAG’s low income housing goals for cities in the Bay Area are quite ambitious,” says Bill Arnone, a lawyer with Santa Rosa-based Merrill, Arnone and Jones, who’s also a member and past chairman of the Santa Rosa Housing Authority. “Few cities meet them. We’re one of the few that does.” Between 1999 and 2006, the city subsidized the production of 1,787 low-income housing units in Santa Rosa, which was 138 percent of the 970-unit goal projected for them by ABAG. “We’re proactive in letting developers know what our affordable housing budget is each year—how much money we can give them—and let them come to us,” says Arnone. And over the last nine years, this method has been working. Within the last fiscal year (2007/08) alone, 320 units were completed, up from 279 in 2006/07 and just 31 in 2005/06. The city celebrated the dedication of its 4,000th affordable housing unit in January 2007 and ended its 2007/08 fiscal year in June with 1,200 units in various stages of production; 389 units should be completed by the close of the 2008/09 fiscal year, which began July 1.

But the city’s efforts don’t just stop with development. “There are different needs, beyond affordable housing,” says Arnone. “It’s not enough to get units in the ground, people also need rental assistance. The Section 8 voucher program assists people with rent subsidies for units they normally couldn’t afford.” The Section 8 voucher rental assistance program, which serves 1,800 families annually and puts $1 million a month back into the local real estate economy, is just part of what Arnone calls the “Santa Rosa Housing Continuum,” which, on top of addressing affordable housing needs, provides transitional and special needs housing, and addresses homelessness for “people who don’t have housing at all, much less affordable housing.”

David Gouin, executive director of Santa Rosa’s Department of Economic Development and Housing, also feels that, while Santa Rosa’s third-place ranking is something to be proud of, the numbers don’t reflect the whole picture. “ABAG doesn’t formally recognize other programs that assist low income households, such as the city’s Housing Accessibility Modification program that provides funding for wheelchair ramps, grab bars, and the like. The city also isn’t recognized for its investment in the acquisition and rehabilitation of existing units, or for special needs facilities.”

Gouin also cites the two city-owned and operated homeless shelters, Brookwood and Samuel Jones Hall, as well as a recent project the city worked on with Community Development Corporation of Santa Rosa in collaboration with Vietnam Veterans of California to acquire an existing-but-vacant residential care facility on West Hearn Avenue that will be used as a 12-bed transitional housing facility for homeless veterans. Gouin says homeownership options, like Santa Rosa’s homebuyer’s assistance program are also overlooked.
Plain and simple

David Grabill, who’s the lawyer for the Sonoma County Housing Advocacy Group, also thinks a critical part of the affordable housing reality in Santa Rosa is being overlooked, but for completely different reasons. “Per capita, Santa Rosa’s efforts haven’t been so good,” Grabill says. “They’ve done a reasonably good job of encouraging affordable housing, as have most cities in Sonoma County, but I can’t say they’re the best, because so many factors come into play.” Grabill points to Santa Rosa’s lack of affordable housing for the very low-income (those making less than $38,900 a year, or just 50 percent of the median income). While Santa Rosa is exceeding its ABAG goal in terms of low-income units produced, like many other cities in the Bay Area, it’s far behind in production of very low-income housing, issuing just 1,539 permits between 1999 and 2007—only 47 percent of its regional need (an additional 295 very low-income units are in various stages of production, though, bringing the city up to 65 percent). “It’s certainly more challenging to provide very low-income housing,” agrees Gouin. “It requires more subsidies to make the rent affordable. It’s as plain and simple as that.”

And, in plain and simple terms, when it comes to affordable housing in Santa Rosa, efforts are dependent on political will, the availability of funding, land suitably zoned for multi-family residential, certainty in the entitlement process and developers wih expertise to combine a variety of specialized financing. “The Santa Rosa Housing Trust acts like a lender,” says Gouin. “It’s a sum of money gathered from a variety of sources—pooled from federal, state and local levels—to be put toward affordable housing development.”

According to Arnone, in addition to federal money from the U.S. Department of Housing and Urban Development (HUD), which averages roughly $5 million a year, the Santa Rosa Housing Authority also reroutes 20 percent of revenue raised from redevelopment project areas (roughly $2 to $3 million annually) to the Housing Trust Fund for affordable housing. Both Arnone and Gouin reference the Southwest Redevelopment Project Area, which stretches 2,000 acres south of Highway 12 and west of 101, and the Gateways Project Area, approximately 1,100 acres surrounding downtown and Railroad Square. They say they’re good examples of current redevelopment projects that, on top of redeveloping neglected infrastructure, roads and sewer systems, have the potential to generate new revenue for the city and give a boost to funding for future affordable housing developments.

When asked what’s made Santa Rosa’s affordable housing efforts so successful, both Arnone and Gouin agree the inclusionary ordinance and in-lieu fee structure of Santa Rosa’s housing policies have helped maintain the incentives and funding for would-be developers to produce affordable housing units. The premise is simple: Santa Rosa’s inclusionary ordinance requires developers of 15 acres or more to provide 15 to 20 percent of housing units for lower income households. For less than 15 acres, developers can choose to pay an in-lieu fee, which goes into the Housing Trust Fund. As of June 2007, the fee (which varies based on project density and size) starts at $0.97 per square foot and was responsible for raising roughly $1 million during the 2007/08 fiscal year. Critic Grabill admits Santa Rosa’s inclusionary ordinance is unique in Sonoma County, but also feels the 15-acre threshold needs to be much lower, because, “developers usually split proposed projects up into smaller parcels to avoid including affordable units. The city granted exemptions to the requirement when approving those that couldn’t be easily split, such as Oakmont. At this time, there are almost no undeveloped 15-acre parcels in Santa Rosa.”

Gouin admits the in-lieu fee may not be playing the same strong role it once did. “The first year of the housing downturn, we saw a lot of opportunities to secure and develop affordable housing,” he says. “In 2007, 30 percent of all building permits issued for residential development were for affordable housing. However, building has stopped, and in-lieu fees have gone down. If it can’t be paid, it can’t be loaned. And if the development of market rate units goes down, our ability ot make loans to developers of affordable housing is impacted.”

In 2007/08, the Housing Authority’s budget was $22.5 million. This fiscal year, which started July 1, it will jump 37 percent, to $30.9 million—but only because of a short-term $11.5 million bond against projected tax increment revenue from the Southwest Redevelopment Project Area. The most recent city of Santa Rosa 2008/09 fiscal year budget report states, “This revenue source will be allocated to homeless shelter operations, homeless service contracts and federally mandated fair housing services,” which isn’t good news for padding the available funds in the Santa Rosa Housing Trust.

Over the course of the next year, Gouin says the Department of Economic Development and Housing plans to “sustain the units already in preconstruction and, ideally, be in a position to assist new development…if we have the capacity.” But with a budget 30 percent smaller than the previous year, Gouin admits the “focus is to keep the projects already underway going. We’ll be entertaining less new development proposals [this fiscal year].”
Changing times, same needs

John Lowry, executive director of Burbank Housing, a leading nonprofit developer of affordable housing in Sonoma County, is acutely aware of what rising costs and smaller budgets may mean for future affordable housing projects. “We have a business plan to develop 300 units a year, and we reached that goal. But now we’ve had a little bit of a cutback,” says Lowry, pointing to Colgan Meadows, an 84-unit affordable apartment development on Dutton Meadow, which will be completed this fall. “There’s a constraint for rentals, because costs are up and we need more subsidizeed financing, but there’s greater competition for [this resource].”

This burden of costs isn’t just affecting the affordable housing sector. According to Lowry, over the last 30 years, as more costs have been shifted to developers (both of affordable housing and market rate developments), costs have increased dramatically. It’s a trend that’s ultimately reflected in the price of housing. These spiraling costs include land, which is influenced by availability, construction (public fees, environmental mitigation), design, permit processing and finance. Higher development and construction costs mean higher housing prices, which only complicates the affordable housing situation. At the same time, Santa Rosa’s affordable housing budget is reduced because of decreased development.

Lowry readily agrees there’s no easy fix (nor one that will please everyone) to this problem, but adds that continuing to raise fees in hopes of generating more income isn’t a viable policy at this time. “Right now, most of the proposed housing developments are no longer feasible, so [developers] are waiting around for the market to shift—but the fees are still going up. Developers have always protested fee increases, but now that building has stopped, a serious conversation on this issue is needed.”

Grabill agrees that, even with current budget constraints, this shouldn’t be a closed issue. “We need the same amount of affordable housing that we needed before the housing prices took a tumble. The need is continuing regardless of the city’s budget problems, regardless of the housing downturn. It’s a fact of life. We need to keep building, tapping into creative funding and encouraging private developers to voluntarily build affordable housing.”

In stark contrast to Lowry, however, Grabill suggests the city consider adding another fee, often called a commercial-linkage fee, to provide additional funding for affordable housing and offset the impact of the new, large-scale commercial developments (like Wal-Mart) on the city’s limited affordable housing supply. A commercial-linkage fee, also called a jobs-housing linkage fee, would require larger commercial developers to pay a fee, determined by the size of a proposed building, that would be used toward developing affordable housing along with its commercial development. The idea is, if a commercial development draws workers to Santa Rosa, it should support the city in providing those workers with a place to live. Although commercial-linkage fee proposals have been met with opposition in Sonoma County in the past, it can be argued that it’s one way to ensure employers take responsibility for their role in alleviating (or aggravating) the city’s affordable housing problem.
Employer education

Educating employers about the importance of employees living close to work is what the nonprofit Northbay Family Homes (NFH) does best. Located in Novato, NFH works throughout the Bay Area, including Marin and Sonoma counties, providing innovative loan programs, access to grants and onsite workshops to facilitate workforce home ownership whenever possible. “Education needs to happen,” says Carrie Pierson, vice president and director of real estate and finance for NFH. “We go to employers directly and educate them and their workforce about buying housing closer to the workplace.”

A nonprofit that specializes in facilitating the home buying process for both low-income and existing housing stock, Pierson adds, “We’re a Nonprofit Buyers Broker. Builders enlist our help to sell homes to the workforce. We don’t do the construction, but we help facilitate the development outreach and purchase process with an emphasis on education and reaching undeserved markets.”

Northbay Family Homes and Stewart Title Company are spearheading the Employers Empowering Homeownership (EEH) initiative, which was launched in 2007 by the Northbay Leadership Council. This innovative program, born in Marin and Sonoma counties, is set to launch statewide through Stewart’s Community Forward efforts.

NFH was a partner in the development of the mixed-income Meadow Park community at the former Hamilton airfield, and Pierson says she’s seen an increase in employers interested in providing close-to-work home ownership for employees. As a result, the amount of homeownership Northbay Family Homes has been able to facilitate is growing. And although she can’t reveal its location or name (just yet), Pierson says NFH has a Sonoma County development project on the horizon that will include both below market rate and market rate homes.
Model efforts

Both Arnone and Gouin emphasize that, for its size, Santa Rosa is doing a commendable job. “Santa Rosa has one-third of the county’s population,” says Gouin, “yet the city develops more than half of the affordable housing in Sonoma County.”

“We’re doing such a good job, our program models are being replicated by other communities,” he continues, citing Berkeley and Walnut Creek among the Bay Area cities that have been in contact with him regarding their own affordable housing models. Arnone is optimistic that the Southwest Redevelopment Project Area and the currently stalled Gateways Project Area (due to a pending lawsuit), will reinvigorate affordable housing development efforts in Santa Rosa.

Lowry concedes that, despite his other concerns, “The city of Santa Rosa has provided staffing, support and a huge amount of effort, and I think it deserves a lot of credit for that.” And while Grabill says “optimistic” is too strong of a word. “City councils in the county seem to recognize the importance of affordable housing to their communities, and we’re seeing a broader range of housing types in the approval porcess. That’s encouraging, but we’re still a long way from our goal: decent, attractive, affordable housing for all in sustainable, livable neighborhoods in all cities in Sonoma County.”

“It’s time we think of housing not as a problem,” wrote Lowry in an editorial to the Press Democrat last year, “but as a critical component of a healthy community.” Gouin, Arnone and, certainly, Grabill would be unlikely to quibble with him.

“There are reasons a city should pay attention to whether people can afford to live there,” says Arnone. “If teachers and policemen can’t afford to live there, the city will suffer. It’s in a city’s best interest economically, but also socially.”

The question of where Santa Rosa has been and what it’s accomplished in regard to affordable housing is much easier to answer than where the city is headed. But one thing is certain: The debates over rental units or square footage have great consequence, and the importance that city officials, advocate groups and residents place on the availability of affordable housing will have a direct correlation to the future of the city socially, culturally and economically.