James Weller, a local housing advocate, thinks he has an answer to our community’s most vexing issue, the fact that most of us cannot afford to pay the exorbitant cost of housing. The state has mandated Santa Cruz County build more, Weller writes, but developers won’t build unless they can make a profit by charging high rents. “But what if we had a public subsidization fund so we could pay developers some fraction of their marginal cost per unit” so that more units could be low-rent dwellings, he asks.”Maybe we could pay them enough to make a profit on the deal.”
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We are all adversely affected by the housing crisis, some more than others.
It’s been two generations since a median-income household could afford to buy a home on the strength of earnings alone, without a big bundle of accumulated wealth.
Why do sellers always seek higher prices? Because they can.
Our institutions of commerce have structured the transactional game we call “the market” to serve the pecuniary interests of the players, who are continually expected to show up with far more money than most of us can muster, unless we’re already owners, or we inherit some wealth.
Most of us in Santa Cruz County cannot well afford to pay going prices for housing without severe sacrifices. And the crisis of homelessness is directly correlated.
We simply do not have enough housing to meet our people’s needs. So we build more dwellings, everywhere possible, including upward. But the real crux of the problem is affordability, not mere supply.
What then, for most of us? We rent.
Many of us pay out most of our incomes to owners who always expect more. By the grace of HUD, the U.S. Department of Housing and Urban Development, a fortunate few of us enjoy subsidized affordable rents, while landlords get paid in full by Uncle Sam.
Thus, most new dwellings must be apartments for rent. In multistory, high-density, urban-infill settings. Affordable rent is the key to housing security.
The private sector can only produce affordable rental housing by including just a few dwellings for below-cost rent in projects yielding mostly high-rent housing. That’s because profit is required at every level of development.
In the public sector, we can deliver 100% affordable housing because owners’ profit is absent and the public bears the cost. But nowhere near enough public funding is at hand. We used to do this with structural public redevelopment district funding, but that’s history.
To begin to meet the need, we permit “market rate” apartments, about seven of them for every income-restricted affordable one, pursuant to our local “inclusionary” ordinance that calls for one in five to be let at lower rents; but state law allows “density bonus” increases in the total number of units, without more income-restricted housing being required in the bonus.
If we required the same portion of “bonus” units to be income-restricted as we do the “base” numbers, private-sector developers would not profit sufficiently and would therefore not build at all. In their frame of reference, profit is paramount.
But what if we had a public subsidization fund so we could pay developers some fraction of their marginal cost per unit, in exchange for another “inclusionary” one in five of the bonus units, to be permanently low-rent dwellings? Maybe we could pay them enough to make a profit on the deal.
Any which way, public subsidies are necessary if we want to build more affordable housing than the private sector can accomplish. Costs are high. Taking everything into account, the average unsubsidized apartment can cost $500,000 or more to build.
The public sector can do better.
A 50-unit public housing project might cost $20 million or less, but public funding is scarce. Instead, maybe a per-unit public subsidy program could yield 50 more affordable apartments out of the next 250 private-sector density bonus units for $12 million or so.
More bang for the buck.
An important community-based effort will soon be under way in the City of Santa Cruz to organize an affordable housing bond measure that could be passed by a 50%-plus 1 majority vote on the March 2024 ballot, raising necessary public funds to create more affordable housing for modest-income and low-income residents, and supportive housing for very disadvantaged residents transitioning off the streets and out of the woods.
A per-unit subsidy program to augment our 20% inclusionary standard could be an effective way of utilizing new bond funding to create as much affordable housing as possible in our economically challenging environment.
James Weller is a founding leader in the Central Coast COPA organization (Communities Organized for Relational Power in Action) and a member of Peace United Church of Christ in Santa Cruz. COPA’s Housing Action Team has studied the proposed draft City of Santa Cruz Housing Element and has made key recommendations, supporting in concept a housing bond initiative, and including a per-unit inclusionary housing subsidy program, among other policies.