SAN DIEGO, CA - Hundreds of planned affordable-housing units for San Diego County's neediest households have little chance of getting built this year as once-reliable financing from corporate investors continues to shrivel. Affordable housing developers, many of them local nonprofits with years of experience, worry that without a federal infusion of dollars to make up for the loss of investor financing, low-income families in need of affordable shelter will find it increasingly difficult to pay their rent.
"I'm very worried," said Ken Sauder, head of Wakeland Housing and Development Corp., a San Diego nonprofit that had planned to spend $19 million this year to transform 93 apartment units in east San Diego into permanently affordable housing for low-income families. "One of the main things affordable housing does for people is that it provides people with disposable incomes so they can spend more on their family needs, like food and clothing. It will only make life more difficult for those folks without this housing."
The threatened loss of such housing is another example of the fallout from a sputtering economy. Locally, 26 proposed low-income rental projects accounting for more than 2,000 units have stalled. Statewide, the count is 32,000 units. At issue are investor-funded federal tax credits, long the backbone of affordable-housing financing. Typically, developers of low-income projects cobble together multiple sources of funding, but the tax credits make up a major part of the equation.
Over the past decade, about 11,000 affordable units have been produced in the county, nearly all of them reliant on tax-credit financing. The credits, which in California are parceled out to developers on a competitive basis, encourage private investment in low-income housing projects while providing investors with credits against their federal tax liability. Armed with their allocation of low-income-housing tax credits, developers must find investors willing to purchase them. The trouble is, now that most companies have few if any profits to shelter, the once-valuable credits are going begging, leaving affordable-housing developers in the lurch.
Projects from Poway to Coronado are ready to start construction, but without their key source of funding, they remain in limbo. So do the hundreds of families on waiting lists for subsidized housing that caters to households earning as little as $24,000 a year for a family of four.
There are 26 projects in the county that have nearly $350 million in financing lined up. But to move forward, $150 million more is needed, a gap that normally would be filled through tax-credit equity, according to the San Diego Housing Federation, a coalition of affordable developers and housing advocates. "I was on the phone the other day with a representative of a well-known tax-credit investment group, and he told me, 'You've got a great little project in Coronado we'd like to fund, but we don't have any tax-credit investors that are willing to put any investments into affordable housing right now because they have no profits to shelter,' " said Matt Jumper, president of San Diego Interfaith Housing Foundation, which has two projects on hold totaling nearly 100 units.
"I've called a half-dozen of these kinds of well-known groups, and they're all telling me the same thing." Making matters worse, the biggest buyers of the credits, mortgage giants Fannie Mae and Freddie Mac, started pulling out in 2007, leaving a huge void.
Evan Becker of Red Capital Markets, a syndicator of low-income-housing tax credits, acknowledges the difficulty in finding companies interested in investing. Typical investors have included banks and insurance companies, Becker said. "I'm extremely concerned about this," said Becker, a former housing and redevelopment director for Carlsbad. "This program has generated a whole industry of good developers, but if we don't have the tax-credit equity to drive this, we basically don't have a program."
Irma Guerra, her husband and two sons now live in a subsidized rental complex in Poway after waiting months for an affordable unit. Were it not for the $945-a-month two-bedroom apartment, they still would be sharing a cramped, two-bedroom rental with three other people. They endured crowded conditions for eight years. "I love this apartment where I live now," said Guerra, 33, whose husband earns $22,000 a year as a carpenter. "It's good because there's more space. If we didn't have this apartment, we'd have to live with other people."
Although the rents at Guerra's 52-unit complex are now affordable, the developer, Community HousingWorks, halted plans late last year to undertake a multimillion-dollar renovation when a tax-credit investor was forced to pull out, said Anne Wilson, housing and redevelopment director for the nonprofit. A telling example of the crucial role tax credits play in getting affordable housing built is Ten Fifty B, a 229-unit high-rise under construction in downtown San Diego that will provide sharply reduced rents for very-low-income households. Roughly 40 percent, or $34.5 million, of the project's $86 million cost was financed through low-income tax credits.
Monthly rents are expected to be as low as $430 for a one-bedroom apartment and $491 for a three-bedroom. For low-income service workers in the tourism industry who are largely shut out of downtown's pricey housing market, the rents would be easily affordable. "With all the attention there has been on the single-family home industry and foreclosures, no one is really paying attention to the fact that our population is still growing, and there's really little affordable multifamily housing in California," said James Silverwood, president of the Affirmed Housing Group, the developer of Ten Fifty B. "This year and next, you'll see very little multifamily housing built."
Jose Martinez, the sole breadwinner for a family of five, is hoping a subsidized apartment opens up soon because he cannot afford much more than the $975 a month he is paying for a two-bedroom, one-bath apartment in south San Diego. "I really need something that is low-income because right now, I'm the only one working, so it's hard for me to pay really high rent plus bills," said Martinez, who has three young children and earns about $32,000 a year as a copier technician. "If we go out, it's to the park or some place that doesn't involve money."
Statewide, the estimated 32,000 affordable units that could be under construction this year could yield jobs for 37,000 Californians, said Matt Schwartz, president of the California Housing Partnership Corp. The slide in tax-credit investment has been rapid, decreasing from $9 billion nationwide in 2007 to $4.5 billion by last year.
Adding to developers' angst is the nearly depleted supply of housing-bond money approved by California voters in 2006. The pot of money for multifamily housing should be exhausted sometime this year. Housing advocates are lobbying Congress to include in the economic stimulus package $5 billion in gap financing for developments that cannot find investors for their tax credits. "If there is no major federal intervention to assist the low-income housing tax-credit market, it could be years before there's a return to normalcy," Schwartz said.
Source: SignOnSanDiego.com