Efforts to Build Affordable Housing Battle Funding Issues, Public Opinion

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By Breeana Greenberg

More than 200 California cities have made “insufficient progress” to meet their low-income housing needs, the state’s housing department determined, using 2021 data. The South Orange County cities of Dana Point, San Clemente and San Juan Capistrano were among those 225 jurisdictions.

A review of the latest annual progress reports that each city submitted to the California Department of Housing and Community Development (HCD) also show that over the past eight years, they’ve issued permits to far fewer affordable housing projects compared to those constructing affluent homes.

As cities across California work to update their Housing Elements and demonstrate adequate residential capacity over the next eight-year period, city officials and developers point to a need for more subsidies and funding for workforce housing projects.

Advocacy groups for affordable housing also note that another obstacle in developing more housing for low-income families is public opinion, and are calling for a paradigm shift to address common misconceptions and fears that come along with such projects.

PLANNING FOR FUTURE HOUSING

In recent months, California cities have been adopting their Housing Element updates, as required every eight years, to plan for their communities’ housing needs based on four income categories: low, very-low, moderate and above-moderate.

Since 1969, the state of California has required that all cities and counties update their Housing Elements—the blueprint within a General Plan that local governments use to address housing affordability and residential growth.

Through the updates—which were due for many Southern California towns by mid-October—cities must show that they can accommodate projected housing demands over the eight-year period; however, they are not required to ever build any of those units.

Megan Kirkeby, HCD deputy director of Housing Policy Development, explained that HCD is in the process of giving municipalities clear feedback and guidelines to bring their Housing Elements into compliance, now that most of the jurisdictions within the Southern California Association of Governments (SCAG) region have submitted their adopted updates.

 “The bar is higher this cycle, and every single Housing Element that gets compliance is going to have a much better chance of producing housing than compliant Housing Elements of the past,” Kirkeby said.

Dana Point, San Clemente and San Juan Capistrano are still awaiting final HCD certification after adopting their updates in late 2021 and early 2022.

IDENTIFYING HOUSING NEEDS

To plan and zone for the future housing, counties and cities are allotted a number of units that are broken down by the income categories. The allocations, which come from HCD, are referred to as the Regional Housing Needs Assessment (RHNA).

Based on the RHNA, SCAG was assigned 1.34 million new homes to plan for among its 197 jurisdictions for the latest Housing Element—now in its sixth cycle. Orange County was to take on more than 183,861 of those homes.

The state assigns the total number of units for the region, and SCAG adopts a methodology to determine the number for each city.

​​For the sixth cycle of the Housing Element covering 2021-2029, Dana Point was allocated 530 units, San Clemente was allotted 982 units, and San Juan Capistrano was allotted 1,054 new housing units.

Of the 530 units Dana Point was allocated, 231 units, or 43%, must be designated very-low and low-income housing, 101 must be moderate-income housing, and 198 must be above-moderate-income housing.

San Clemente must designate 446 units, or 45%, toward very-low and low-income housing, 188 units toward moderate-income housing, and 348 for above-moderate-income housing.

Of the 1,054 units San Juan Capistrano must designate, 443 of them, or 42%, are to be very-low and low-income housing, 183 must be moderate-income housing, and 428 must be above-moderate-income housing.

PROGRESS TOWARD AFFORDABLE HOUSING

Along with the Housing Element Update process, cities must also submit annual progress reports displaying the number of permits issued to very-low-, low-, moderate-, and above-moderate-income housing projects.

Each of the three South OC cities’ latest reports shows that during the fifth Housing Element cycle, permit approvals for projects developing affordable housing and moderate-income housing were far below their respective RHNA allocations.

For Dana Point’s fifth cycle, from 2013-2021, it was allotted 327 units. With a total of 546 permits issued during that cycle, permits for 30 low- and very-low-income housing units were issued—99 units away from its RHNA allotment.

The disparity between the number of permits issued and the number of RHNA-allotted units wasn’t nearly as steep for moderate-income housing in Dana Point. According to Dana Point’s progress report, building permits to develop 30 moderate-income housing units were issued—31 units fewer than the allotment.

SCAG allotted the City of San Juan Capistrano 638 units during the previous cycle. Building permits were issued for 81 low- and very-low-income units, remaining 170 units away from its RHNA allotment. San Juan also issued 37 permits for moderate-income housing, remaining 83 units away from its RHNA allotment.

In San Clemente, the city was allotted 581 units for the fifth cycle. Over that period, building permits to develop 100 low- and very-low-income housing units were issued, remaining 129 units away from its RHNA allotment, and 39 permits for moderate-income housing, remaining 69 units away from the RHNA allotment.

As for the development of wealthy homes, all three cities far exceeded their RHNA allocations for above-moderate-incoming housing, issuing hundreds more building permits than what had been required to plan for in the last housing cycle.

Dana Point issued permits for 349 units more than its above-moderate-income housing allotment, San Juan Capistrano issued permits for 332 units more than its allotment in the same category, and San Clemente issued permits for 328 units more than its allotment.

Based on the cities’ progress reports as of last June, HCD found that the three cities “made insufficient progress” toward their very-low and low-income RHNA numbers. As a result, they are subject to a streamlined ministerial approval process under Senate Bill 35 for proposed projects with at least 50% of the units reserved for affordable housing.

Brenda Wisneski, Dana Point’s director of Community Development, stated that the city has met with affordable housing developers and “stand ready to process and facilitate any affordable housing development that comes forward in the City.”

The City of San Juan Capistrano noted the disparity between permits for workforce housing and affluent homes in 2018. San Juan City Manager Ben Siegel explained that as a result, the city reached out to affordable housing developers about potentially constructing low-income housing on the city-owned property known as the Groves site.

C&C Development is constructing 75 affordable units at the Groves, located at 30333 Camino Capistrano, with the city contributing $4.8 million of affordable housing funds in addition to the land.

San Juan has also approved a contract with Jamboree Housing Corporation to construct 50 permanent supportive housing units on the current City Hall site and an agreement with Landsea Homes for the construction of 14 units for moderate-income households.

Construction on the Jamboree Housing project is expected to begin next year, and construction at the Landsea project has just begun. These two projects will count toward the city’s sixth cycle of the Housing Element. 

“These projects illustrate the City’s commitment to incentivizing, funding and facilitating the production of needed affordable units by working in partnership with the private development community,” Siegel wrote in an email.

Jennifer Savage, assistant to the city manager in San Clemente, explained that the city made positive progress with housing programs during the fifth cycle and exceeded the state average for issuing permits for total households, as well as for low- and very-low-income levels during that time.

“Notable activities include establishing incentives for lot consolidation, updating our density bonus regulations, enhancing the effectiveness of the Affordable Housing Overlay, updating our accessory dwelling unit regulations, and the continuation of funding organizations, social service grants, and fair housing education,” Savage said in an email.

LACK OF FUNDING

The biggest issue facing affordable housing development is a lack of subsidies, among other things, said Eric Nelson, president of the Building Industry Association of Southern California’s Orange County Chapter.

“The gap between market rate housing and affordable housing has gotten extremely large between what people can afford and what the market would require in order for a project to go forward,” Nelson said. “So, what ends up happening is that as housing becomes more expensive, to close that gap becomes much more difficult, and the need for more subsidies becomes even more important to the discussion.”

Many housing advocacy groups argue that an inclusionary housing ordinance, in which developers either set aside a percentage of new units for affordable housing or remit an in-lieu fee to the city, is a critical component to affordable housing development. Cities may put those in-lieu fees toward the production of affordable housing.

Nelson contended that a redevelopment program like the State of California had until 2012 would work better than in-lieu fees. He explained that the redevelopment agency program helped to fund and subsidize workforce housing through a tax on the increased value generated in a redeveloped area of the city.

He added that in-lieu fees in some cases burden developers and dissuade development. He explained that the costs developers incur on a project end up coming out of their revenue and ultimately increase the cost of housing.

In-lieu fees, Nelson explained, leverage market rate housing in order to build more affordable housing, whereas the redevelopment program leveraged the redevelopment of an entire area of the city, generating additional tax revenue to subsidize housing.

“If the whole solution (for affordable housing) is leveraged off the back of market rate housing, you automatically increase the cost of housing for everybody, except for those who are lucky enough to get a few of those subsidized units, because you can’t build enough market rate housing to subsidize the amount of affordable housing that we need today,” Nelson said.

Elizabeth Hansburg, the regional director for YIMBY Action, explained that there’s a need for all forms of housing. Looking at the fifth cycle housing numbers, some may say that cities have overproduced on above-moderate-income housing, Hansburg noted.

However, she pointed out that the sixth cycle RHNA numbers continued to grow even for above-moderate-income housing.

For Dana Point’s sixth cycle of the Housing Element, 198 units, or 37% of its 530 RHNA allotment, were designated for above-moderate housing. Out of the 1,054 units San Juan was allocated, 40%, or 428 units, were designated for above-moderate.

And similarly, in San Clemente, 35%, or 348 out of the 982 units, were allocated toward above-moderate-income housing.

Hansburg added that by creating a clear Housing Element with viable housing sites, cities can help streamline housing projects. She explained that developers spend lots of time and money investing in a project that may not get approved. All of the hearings and presentations required to get a project approved end up increasing the cost of housing, Hansburg said.

“In theory, it is possible to have a very clear Housing Element and a very clear zoning code such that a developer could come and identify a site based on what’s in the Housing Element site list, look at what the zoning code says and have a project designed to suit that site and never have to get it entitled,” Hansburg said. “They would automatically be allowed to move forward because their project would comply with what the city says it wants. And that happens in zero places.”

Developers and affordable housing activists also point to cost and feasibility of land as a hurdle for affordable housing projects.

Kathy Esfahani, chair of the San Clemente Affordable Housing Coalition, said she believes that cities should dedicate surplus city-owned land for workforce housing.

“The big hurdle, of course, is land costs,” Esfahani said. “If (cities) donated surplus city land, then that would remove a huge hurdle.”

TACKLING PUBLIC OPINION

The second biggest issue facing affordable housing is public opinion, Nelson explained.

“What generally happens in any housing project is you’re going to have your opposition and your supporters,” Nelson said. “The majority of the time, the support for housing is overshadowed by the opponents who don’t believe that an affordable housing project is appropriate for their city, but more importantly, their neighborhood.”

Opponents to affordable housing projects often fear that low-income or affordable housing will increase crime in their city.

During a San Clemente Planning Commission meeting in April 2021, commissioners, including Chairperson Jim Ruehlin, argued against such claims, stating that it’s unfair to equate low-income housing to higher crime rates.

“It was kind of a built-in assumption among many of those (public) comments that low-income housing equals crime, and that simply isn’t the case,” Ruehlin said. “And I think that’s a little bit unfair to attach that to people who move in there automatically.”

In 2015, the Stanford Business School published a report by Rebecca Diamond and Timothy McQuade, who had studied the socioeconomic effects of low-income housing on surrounding communities in both low-income and high-income areas. 

What they found was that while low-income housing developments built within high-income areas with a low minority population did lead to a decline in property values by about 2.5% within a 0.1-mile radius, crime did not go up.

And in low-income areas, affordable housing actually boosted local property values by about 6.5%—also within 0.1 miles of the site. It also decreased segregation and caused violent and property crimes to decline.

 “People have a belief about affordable housing, that it’s going to do damage to their housing in their neighborhood,” Nelson said. “So, it’s very complex, to say the least.”

Another common fear is that affordable housing will decrease the resale values of neighboring homes. Nelson explained that there is little to no evidence that affordable housing lowers the resale values of nearby market rate housing.

“Based on my personal experience building affordable housing adjacent to brand new market rate housing, I have not seen this fear materialize,” Nelson wrote in an email. “In addition, and in our community, there are several relatively new affordable housing units and projects. None of them have led to a reduction in home prices or diminution of value.”

Instead, Nelson continued, the opposite likely occurred “as a function of redeveloping an old run-down apartment building that was having a negative impact on surrounding homes.”

Nelson further explained that it is often difficult to distinguish affordable housing units from market rate housing.

“The projects are largely occupied by hard-working individuals and families who contribute to our community every day, just like the market rate developments,” Nelson wrote. 

Mildred Perez is the senior project manager at the Kennedy Commission, a nonprofit organization that advocates for the production of affordable housing in Orange County.

She explained that an important aspect of planning for affordable housing is public outreach—where cities can engage with local advocates, homeowners, residents and the community to get involved in the Housing Element.

“There’s a lot of advocates out there who understand what’s going on,” Perez said. “They’re able to point out that a site isn’t feasible, they know that history, they know exactly how the surroundings are.”

By engaging community members, Perez said that the Housing Element will better reflect the needs of the community.

Hansburg explained that YIMBY Action, which stands for Yes in My Backyard, aims to change people’s attitudes toward housing and “make room” for housing.

“The question is, can we find leaders who are willing to transition us from an Orange County that conceives of itself as pastoral, bucolic, rolling acres, to the actual urban patchwork of communities that make up a very dense region with a lot of job opportunity, a lot of innovation, and a place where a lot of folks want to be because we’ve got good weather and we’ve got good quality of life?” Hansburg said.

“Those people are not going to stop coming,” she continued. “The people who have means will come, and when we don’t have enough housing, they will displace the ones who don’t.”

Kirkeby explained that in order to have a thriving California, cities need to make space to house those who work in the community and be able to accommodate the growing population.

“Change is hard, but change is inevitable,” Kirkeby said. “I think we’re in a stage where this change is going to be hard for a lot of jurisdictions, but I’ll say that a lot of times when we see the change happen, it’s not as scary as people thought.”

Shawn Raymundo contributed to this report.

Breeana Greenberg is the city reporter for the Dana Point Times. She graduated from Chapman University with a bachelor of arts degree in English. Before joining Picket Fence Media, she worked as a freelance reporter with the Laguna Beach Independent. Breeana can be reached by email at bgreenberg@picketfencemedia.com