Economy

California’s Innovative Plan To Crack The Code For Affordable Housing

CREDIT: AP Photo/Paul Sakuma

There are millions more low-income Californians than there are places they can afford to live, and the problem could only get worse in the coming years.

But if Assembly Speaker Toni Atkins (D) gets her way this year, the left coast will take one significant step toward reestablishing the link between hard work and a roof over one’s head. Atkins wants to create an enduring, independent source of affordable housing money in the state by charging a $75 fee on some real estate document filings.

The fees — a rounding error compared to the amounts of money involved in most property sales and development projects — would go to the California Housing Trust Fund, a dedicated body for facilitating affordable housing development projects. Such trust funds are a common and effective way for both states and local governments to not only supplement the limited federal resources available for affordable housing work, according to Mary Brooks, a senior adviser to the Center for Community Change’s Housing Trust Fund Project. They also help keep such development work grounded in local communities.

The hundreds of state and local housing trust funds and associated community oversight bodies around the country are “an expression that we do need to make that kind of commitment and not just rely on the federal government,” Brooks said. “Cities and counties and states need to pitch in as well.”

Atkins’ proposal is adapted from a similar bill that has stalled twice in recent years, falling two votes short of passage last time around. Realtors opposed the idea in the past as an addition to the cost of closing deals, but Atkins’ new version might find a way around those objections. Only the first three documents tied to a given deal would face the fee, according to the Sacramento Business Journal’s report on the proposal.

There is healthy precedent for the idea beyond California’s previous attempts. “Document recording fees are the second most popular revenues source that states use” for financing affordable housing trust funds, Brooks told ThinkProgress. The group’s site lists 47 states that maintain a housing trust fund, and nine of them fund it using fees on real estate documents of the sort that Atkins is proposing.

Linking the fund to a dedicated and steady stream of money would go a long way. “That ongoing source of public revenue enables the state not only to be smart and strategic about how it uses those resources,” Brooks said, “but also enables the nonprofit and for-profit affordable housing communities to be able to use those funds in productive ways.” Document fees in Ohio furnish about $50 million a year to support “a variety of programs from addressing homelessness to the production and preservation of affordable housing.” Illinois uses the fees to finance a state-level rental subsidy program modeled on the federal Section 8 voucher system, which leaves other tax revenue from real estate deals available for helping to build more such housing.

Affordable housing protesters in San Francisco

Affordable housing protesters in San Francisco

CREDIT: Brooke Anderson/Flickr

And California desperately needs the boost Atkins’ proposes. In Los Angeles County alone, the affordable housing shortfall is about a half-million units. In the spring of 2014, there were 490,000 more low-income families than there were housing units they could afford to live in, according to the Southern California Association of Non-Profit Housing (SCANPH), and executive director Alan Greenlee expects that number to rise when the group’s new study is finished later this spring. “It’s not getting any better,” Greenlee told ThinkProgress.

The statewide shortfall is closer to a million units, according to similar research by the California Housing Partnership Corporation, and there is not a single county or legislative district in California that has enough affordable housing for extremely low-income families who earn less than a third of the median earnings in their area.

The documents fee would inject hundreds of millions of dollars into the state’s long-dormant Housing Trust Fund with the specific purpose of increasing the stock of affordable units and slowing the rate at which currently affordable units get overhauled into high-income living space. But the state and federal tax codes would remain stuffed with incentives that favor wealthier homeowners and encourage unaffordable development.

Still, additional resources like the kind that Atkins’ plan would generate are critical to maintaining the network of programs that attempt to serve affordable housing needs — “a step in the right direction,” Eric Tars of the National Law Center on Homelessness and Poverty. The revenue wouldn’t address the underfunding of federal rent vouchers that help match existing housing units with tenants who need subsidies, but it would be a boon to the construction side of the affordable housing policy landscape.

“With all of these programs, the level of resources is below the level of need,” Center on Budget and Policy Priorities Senior Policy Analyst Will Fischer said, noting that just one family out of every four who are eligible ever receive federal housing vouchers. “There’s long been a shortfall in rental assistance, and waiting lists, because it’s never been funded as an entitlement like assistance for other basic needs.” Unlike food stamps and other safety net programs tied to things defined as essentials, federal housing programs “are funded in limited quantity through the appropriations process.” Political winds and budget pressures end up robbing even the most effective affordable housing programs of the money they need to meet demand for their services.

The lack funding for affordable housing dates much further back than the Obama-era fixation on federal deficits, to the Reagan presidency. Federal spending on low- and moderate-income housing through Housing and Urban Development (HUD) peaked in 1978. By 1996, HUD was spending 75 percent less each year on those programs, after adjusting for inflation. In that time, a 300,000-unit surplus of affordable housing nationwide turned into a multi-million-family shortfall. The Great Recession exacerbated the problem — the gap hit 5.5 million housing units in 2009 — but the broad shape of the failure to connect people to places they could afford was already locked into place long before the downturn.

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If Atkins’ plan goes through, it would finally fix a 20-year-old unforced error. California appears on the Center for Community Change’s Housing Trust Fund Project list of 47 states that has a Housing Trust Fund because it established one in the mid-80s, but it’s a sort of honorary degree. Tax revenues from the fossil fuel industry were supposed to keep the fund funded, but it never got off the ground. “There was some money put in in year one, but never since,” Housing California executive director Shamus Roller told ThinkProgress. “For practical purposes, there is really no housing trust fund in California.”

Affordable housing has always relied on a mixture of federal money and state-level programs, and California recently gutted the primary generator of state money for building the kinds of projects that would bring federal rent voucher money for residents and tax incentives for builders. For years, California government agencies used property tax revenue to finance targeted redevelopment projects around the state. The redevelopment agencies were required to spend 20 percent of the money they raised from the bond markets to build affordable housing.

But Gov. Jerry Brown (D) eliminated the redevelopment agencies a few years ago because the system required the state treasury to reimburse the local school districts for the property tax revenue the schools lost when their area was designated as a redevelopment zone. The move saved California nearly $2 billion a year by putting an end to the schools payments. But it also wiped out a billion dollars in annual affordable housing money, “a huge blow” according to Roller. “In 2007, there was $1.2 or $1.3 billion per year flowing into affordable development. That essentially all went away by 2012.” By comparison, he said, “we spend about $7.7 billion subsidizing mostly higher income people” through tax breaks for developers and homeowners.