Funding Shortages For CA Housing

SAN MATEO, CA - Developers of low-income residential projects that have already secured state funding are enjoying lower construction costs because of the weak building market. But as California's budget problems worsen, some worry the state's contributions to such projects will suffer just as funds dry up from two voter-approved bond measures.

Those people are pushing for a permanent state fund that would finance housing for low- and middle-income Californians. The need is particularly acute in the Bay Area because of extraordinarily high housing costs, they say.

Construction has already begun on the Peninsula Station project, a four-story apartment building with 68 units of subsidized housing at the former Goodyear Tires site on El Camino Real in San Mateo, said Yoomie Ahn, a project manager at the Mid-Peninsula Housing Coalition, which is building the complex. Earlier this year, San Mateo County and the city of San Mateo guaranteed backup funding if the state doesn't come through with $3.9 million it pledged to the $34 million project.

Ahn said Friday she is still in talks with the state about when the funds would arrive. "Obviously, nobody wishes for a bad economic climate," Ahn said. But there are some advantages, including lower construction costs, she said. "The difficulty is for nonprofits that depend on fundraising because when the economy is not doing well, then fundraising becomes challenging," Ahn said. "We're not dependent on fundraising and so our projects can move forward if we can get the financing."

Subsidized housing developments usually rely on a combination of state, municipal and county money, as well as tax credits. Lydia Tan, interim president and CEO of BRIDGE Housing in San Francisco, said her organization has a number of subsidized housing developments under construction in the Bay Area, including a building with 56 units for low-income seniors on Fabian Way in Palo Alto.

State funding will likely come through for those projects, but a number of others remain in limbo, she said. "There are a lot of projects that are ready to go that could really put people to work, that could get dollars out into the local economy, that really aren't going forward right now" because of uncertainty about the state's commitment, Tan said.

And with funds from two voter-approved bond measures for affordable housing set to run out in 2010, developers such as Ahn and Tan are pushing for a permanent state fund to support below-market-rate projects. That's something that the California Department of Housing and Community Development is also working on.

Director Lynn Jacobs and other members of the department have held 11 meetings throughout the state since January 2008 to discuss setting up such a fund, said Panorea Avdis, the agency's director of external affairs. A list of the top ideas for funding sources is available on the department's Web site.

Avdis said the department is working with state Senate President Pro Tem Darrell Steinberg, D-Sacramento, on possible legislation, though that process has stalled somewhat because of the budget impasse.

"We need affordable housing, and even now with people thinking that there's a glut and supply of housing, there really isn't," Avdis said. "With the permanent source, we want to do a few different sources just so there's stability with the funds coming in."

A number of states have established such funds, including Oregon, which created the Oregon Housing Fund in 1991. In addition, various cities, including Palo Alto and San Francisco, have commercial linkage fees that require developers of non-residential projects to put money into affordable housing accounts, according to information compiled by the state.

"We really need a permanent source," Tan said. "For the next year or two there will still be a decent amount of construction happening, but if we can't solve the permanent source issue, there will be a drop-off" in subsidized housing.