When San Diego got the go-ahead two years ago to withdraw from the
federal government's long-standing public housing program, it came with
the proviso that the city create a relatively modest 350 new housing
units for low-income households.
The feds would be happy to learn that the city's housing agency
intends to nearly triple that, thanks to a battered economy that has
greatly depressed housing values.
Next month, the San Diego Housing Commission will bring to the City
Council a plan to borrow up to $102.6 million against more than 1,200
of its former public housing rentals to produce 1,035 additional
subsidized units throughout the city over the next five years.
The commission's housing stock has an estimated value of more than $140 million.
In some cases, the agency will be able to acquire distressed rental
projects, purchase vacant land or partner with developers to construct
new housing affordable to lower-income households at a time when
financing for such projects is scarce.
The commission has accumulated a list of more than 40 properties,
including undeveloped land, complexes in need of renovation and
partially completed projects in financial distress.
“What we're trying to do is take what the marketplace offers us,
and with values down and owners looking to sell, it's a good time for
San Diego to acquire and hold housing for affordable use going into the
future,” said Rick Gentry, the commission's chief executive.
“What we're achieving here is housing that will remain affordable for the next 55 years.”
The proposal, which would be phased in over three to five years, is
regarded as a considerable improvement over an initial plan to limit
production to 350 affordable units.
It is also welcome news to affordable housing developers, many of
whom have seen their projects stalled for months because of frozen
voter-approved bond funding from the state and a scarcity of corporate
investors.
Affordable housing developer Hunter L. Johnson of Long Beach-based
LINC Housing Corp. says his planned multimillion-dollar rehab of a
nearly 30-year-old complex in the Lincoln Park neighborhood would not
have been possible without the commission's financial assistance, which
includes purchase of the site for $6.4 million.
Johnson said the 112-unit Arbor Village complex is run-down, and in
some cases the two- and three-bedroom units were overcrowded. Once the
$22.5 million project is completed next year, monthly rents will range
from as low as $447 for a one-bedroom apartment to $594 to $1,159 for a
three-bedroom unit.
“The project would continue to deteriorate if it didn't stay in the
hands of someone who would do a complete rehab,” said Johnson,
president of LINC. “Some housing and redevelopment agencies sit on
their hands and say, ‘We don't know what to do.’ Others are being very
creative in using the resources they have to provide affordable
housing, and the commission is in that latter group.”
When the city exited the decades-long public housing program, it
was permitted to retain ownership of its 1,371 units, scattered
throughout the city from Carmel Valley to San Ysidro. It also was given
vouchers by the federal government to subsidize tenants' rents at those
properties or elsewhere in the county if they choose to move.
The commission, however, remains responsible for the cost of operating those complexes.
The federal Department of Housing and Urban Development was
satisfied with that arrangement as long as San Diego agreed to leverage
its debt-free properties to create more affordable housing.
Under the financing plan already endorsed by the commission board,
newly created housing in which the commission would have an ownership
stake would be affordable to households earning no more than 80 percent
of the median income, or $66,100 a year for a four-person family.
Housing advocates had argued in the past that affordable rents at
that level are really the equivalent of market-rate rents and that
much-lower-income households are those most in need of assistance.
In fact, the city's public housing has historically housed the
neediest families and individuals. Currently, the average income of
households still living in the commission's housing units is $17,750.
By comparison, new residents moving into vacated apartments can earn up
to 80 percent of the median income.
The advocates have since come to support the commission plan, now
that the agency has agreed to keep rents as low as is financially
feasible while still being able to repay its debt. And in cases where
it partners with affordable housing developers, the rents will probably
be lower still because those projects rely on other financing sources
that require deep affordability for lower-income families.
“To get much below 60 percent of median income, you need an
operating subsidy,” Gentry explained. “We don't have that for this
program. What we committed to do is buy the cost down as low as we
could, but we didn't want to give absolute assurances we didn't know we
could meet.”
In its report to the commission board, the staff said the
underwriting for the proposed loans assumes rental income of $950 to
$1,000 a month for a two-bedroom unit, which is significantly lower
than the $1,478 monthly rent that would be affordable to a household
earning 80 percent of the median income.
“We will still raise the concern that they need to keep the rents
as low as they can, and we will repeat that mantra,” said Tom Scott of
the San Diego Housing Federation, a coalition of affordable housing
advocates and developers. “But at the same time, the commission needs
to have sufficient operating money to do their job right.”
The plan relies on Fannie Mae and FHA loans, though the financing
has yet to be finalized. One major factor working in the commission's
favor is a federal stimulus program known as Build America Bonds, which
will provide the agency with a 35 percent interest rebate on the debt
it takes out for about half the units it plans to create.
That rebated money in turn could be used to reinvest in additional
affordable housing, Gentry said. Once the more than 1,000 units it
plans to produce are fully occupied, the agency estimates it will have
a net cash flow of roughly $100,000 per month.
“My hat's off to them to put together a really clear and decisive
plan to make this happen,” said Ken Sauder of Wakeland Housing, which
is hoping to eventually take advantage of commission funding for a
49-unit low-income complex for larger families it is planning in
southeastern San Diego.
“This plan will provide opportunities for organizations like
Wakeland to secure financing for projects that we're potentially
working on or for creating some of the new units they want to bring on
line.”
For Roberto Torres and his wife, Janet Ibarra, the completed rehab of LINC Housing's Arbor Village cannot come soon enough.
The couple pay $1,125 a month for a two-bedroom apartment at Arbor
Village, leaving them with very little money to clothe and feed their
two young children.
Torres, who earns roughly $26,000 a year doing janitorial work at a
hotel, said his family would probably have to double up with a family
somewhere else if it weren't for the affordable rents planned for Arbor
Village.
“It is difficult to buy clothes for my children, who are growing,”
Torres said. “We'll be very happy because we'll be able to buy more
food and the things my children need, and my wife will be able to go
back to school to learn English and nursing.”
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