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Redirecting housing spending

This week’s blog series, timed to coincide with Oakland beginning to discuss its new Housing Element of the General Plan, is about “affordable” housing. There are different kinds of affordable housing. There are BMR condos for median-income people, developed or managed by non-profits to whom the condo must be resold at a fixed price. Low-income housing is rarely ownership. This includes city- or non-profit-built “projects” that rent to people at a subsidized rate, and Section 8, a voucher that pays the difference between an “affordable” rent and the market-rate rent, often used in privately-owned buildings. The city receives a wide variety of funds, and must meet many mandates.

Aside from Section 8, most of Oakland’s federal housing monies go to replacing or renovating public housing projects built decades ago. The operation of these buildings is managed by the Oakland Housing Authority, which receives funding from the city, county, state and federal governments. The OHA also administers Section 8 vouchers. A portion of city redevelopment (property) and transfer taxes are set aside for housing. State grants are usually for specific projects or function as incentives. The city is asked by the region to build a certain amount of housing for people of different income levels, including below- and above-median incomes. Additionally, the state mandates that 15% of housing units built in redevelopment areas be “affordable.”

While the regional (ABAG) goals for housing production contain targets for different income levels, the state mandates do not. Non-profit developers compete annually for city grants, bundled from a variety of sources, to construct housing. The competition is successful, say supporters like Councilmember Nancy Nadel, because it encourages the non-profits to leverage outside funds. Others disagree, saying that, because the competition is based on housing units per dollar, non-profits hew closely to for-profit development models and build only BMR condos. The Dellums Housing Task Force felt that these were not serving Oakland, and recommended the city’s affordable-housing dollars be redirected to low-income renters. I support that recommendation, because there are too many median-income people for the government to help. At least in Oakland, BMR and market-rate condos are not far very apart in price, so the net public benefit of subsidizing price-controlled condos for median-income households is very low. Additionally, BMR condos can compete with market-rate condos, and that screws up the housing market and is bad for homeowners. Moving away from the non-profit developer model would represent a progressive change in housing priorities.

Oakland’s Section 8 program represents an efficient destination for redirecting affordable housing monies. The voucher works with, not against, the market, and more vouchers could encourage landlords to build more apartments. Section 8 combined with rent control (which we already have) is the ultimate solution to so-called “gentrification” – people can’t be “pushed out” by rising rents if the city directs assistance to renters. Building BMR units in “gentrifying” neighborhoods, however, does nothing to guarantee that those already there will be able to stay, and usually the BMR units are far more expensive than existing housing stock. Section 8 can subsidize a wide variety of housing types, while BMR condos are generally the mid-rise, insular blocks that neighborhood activists and newspaper columnists love to hate, since that’s today’s most efficient construction type.

One of the benefits of working with the market, by spending affordable housing dollars on Section 8, is that it may encourage landlords to invest more in their buildings and perhaps even to build new apartments. Many landlords are small businesses, and could build apartments on the small scale that fits well in Oakland’s neighborhoods. But even more important than building new, small, cheap apartments, is renovating people’s current homes. A majority of Oaklanders live in housing built before the end of WWII. Many live in homes built more than a century ago. Lead, bad wiring, asbestos, energy inefficiency, and serious structural problems are just a few of the hardships faced by people living in substandard housing. To complement Section 8’s focus on small-scale and existing apartments, additional funds should be directed toward rehabilitation programs for individuals and landlords, and to return blighted or abandoned properties to the housing market. While it doesn’t produce as many units, renovating existing housing is less expensive than flashy new BMR buildings. This also closely follows Just Cause’s emergency housing recommendations.

Redirecting the city’s discretionary housing spending away from the non-profit competition and toward existing Section 8 and rehabilitation programs is straight-forward and has a clear progressive message. It would shift the city’s focus from median-income households to low-income households. However, Oakland does have state and regional mandates to produce median-income housing, and due to inflexible federal formulas, much market-rate housing does not count as median-income (even though it is). It is unclear whether rehab or Section 8 vouchers count. However, new housing affordable to people making up to 110% of AMI does count, and the “affordable” rent for such a household is $1728/mo for a one-bedroom apartment. That is well above market rate. The city should explore ways to encourage private rental housing to be built at this rate. If we can make “affordable housing” profitable, we can exceed our regional goals while provide much-needed rental housing. If the city wants to be serious about helping the truly needy, spending money on big, new BMR buildings should end, and the revitalization of our existing buildings should begin.

Today, V Smoothe writes about encouraging targeted redevelopment with master EIRs.

Posted in housing, oakland.

5 Responses

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  1. Ryan says

    OK, I guessI’m Mr. Nitpicky tonight! This is an interesting take but I wonder about the sentence “While it doesn’t produce as many units, renovating existing housing is less expensive than flashy new BMR buildings.”

    If it’s less expensive, wouldn’t it produce _more_ units than BMR? Are you saying there’s not enough housing stock to renovate, so you hit a supply ceiling before you hit a budgetary ceiling?

  2. dto510 says

    I mean that there is not enough abandoned housing stock to renovate. There are tons of units to renovate, but many are already occupied. The residents of those units would experience an increase in the quality of their habitation, but technically there would not be an increase in the housing stock.

    I have no problem with being nitpicky! It’s good to be challenged; that’s the whole point of blogging. Otherwise, I wouldn’t have comments (like BeyondChron or Aimee Allison’s campaign “blog”).

  3. Ryan says

    OK makes sense.

Continuing the Discussion

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