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Redevelopment Review

This week saw several packed meetings in City Hall’s Hearing Room 1, including a racially-tinged discussion of the city’s contracting policies, a tussle over the Conley report from Councilmembers wanting their districts to get a slice of the pie, and an overflow crowd watching the Dellums Land Use Task Force give a presentation to the Planning Commission (the audience was there for a different item).

At the Community and Economic Development Committee, the Council was treated to the unpleasant spectacle of sharp disagreements over the city’s proposal to construct affordable housing next to Raimondi Park. The city staff and West Oakland residents supported the family-sized homeownership units aimed at households making around 60% of the Area Median Income. Several One non-profit housing developers strenuously objected, arguing that the city should somehow force the Central Station master developer to transfer a plot of land for free, and that more of the units be aimed at 100% AMI households (making up to $82k/yr), since that’s easier for them to develop.

Chair Jane Brunner told the nonprofits that if they wanted to set-aside land for subsidized housing, that should have happened years ago when the master plan was approved. She then speculated that subsidized housing units should be sprinkled within market-rate developments, “so you couldn’t tell which was which.” While I love her socialist idealism, it’s incredibly inefficient to do that. First, subsidized developers should take advantage of cost-saving measures that may not be available to market-rate developers, like low-quality finishes or less parking, since that helps lower the cost of housing. Second, land costs are a huge factor in housing prices. It makes sense to use lower-value sites for subsidized housing, and to allow more density for subsidized units. Both of these measures lower the relative cost of land as a portion of housing costs. Third, the press has reported a lot recently on how owners of BMR units can face steep condo fees since their incomes don’t match those of their neighbors. Luxury buildings should be able to have luxury amenities, and it doesn’t make sense to place people in those buildings if they can’t afford the upkeep. However, I wouldn’t be surprised if there’s another attempt to socialize the housing market early next year.

Because of the overly-long meeting, a periodic report (PDF) on the progress of the city’s redevelopment areas (it did not include the largest RDA, Central City East) was put off until the Council meeting next week. Overall, while the report provided valuable information on the collection and disposition of revenues, there were not detailed charts on affordable housing production or spending for every redevelopment area. While large amounts of money are being generated for housing subsidies, there’s not a direct explanation of where all of that money is going. However, it’s clear that downtown is doing very well, and almost every redevelopment area is meeting its goals and exceeding its revenue projections. While many say the city having some problems meeting its debt obligations, that was not clear from the charts, which showed all of the areas in the black.

The standout redevelopment areas included the Coliseum RDA (which is lower East Oakland from Fruitvale to San Leandro), which strongly outperformed in affordable housing production, with the vast majority of the units aimed at “Very Low Income” households. On the other hand, the Broadway / MacArthur / San Pablo RDA has not produced any affordable housing in its seven years of existence, despite being the pet agency of supposed affordable-housing champion Jane Brunner. The only planned subsidized housing is in the MacArthur BART transit village, which is taking forever and consuming huge amounts of money. The RDA is also cash-poor, so even though 52% of the Conley Report proposal area is in that RDA, Ms. Brunner is very unhappy about contributing to the Specific Plan for retail development.

Downtown (Central District), of course, had the most projects and programs ongoing. $29.7m was set-aside for affordable housing in the last three fiscal years, 568 affordable units were constructed, and $4m was transferred to schools and other agencies (also, the state stole $5.1m to balance the budget). Even though downtown has experienced recent losses of parking spaces, revenue for the city-owned parking garage in the UCOP fell 13%. Of $66.5m spent on projects, $51.9m went to the Uptown district, primarily to Forest City and the Fox Theater. Though the majority of the Tax Increment Funds (TIF) was spent on debt service, there was more than that amount available from bond funds. More stats on downtown at The DTO.

The Stanford-Adeline RDA is winding down, and Oak Center will expire next year, with no more TIF. Some folks, like the ORPN, want to see a rollback of redevelopment areas. It seems that many of the RDA boundaries are arbitrary, and that perhaps the last remaining inner West Oakland RDA could expire along with its neighbor Oak Center. But it is important to have the ability to capture and set-aside revenues from development for specific purposes, which could include public safety. And it’s not like the problem with the police is a lack of General Fund revenue! Without clear priorities and set-asides, the bureaucracy will just eat it all up. Of the redevelopment funds reported in the last three fiscal years, $29.2m went to personnel.

Posted in california, citycouncil, delafuente, dellums, housing, iz, oakland, planningcommission.

12 Responses

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  1. masb says

    I rarely agree with Brunner but this time I do. I don’t think you can look at neighborhoods as “subsidized, affordable, and market rate.” If you do that you will “ghettoize” some areas of the neighborhood thus driving down all property valuations. If you just allow people to live amongst each other you would be creating a true neighborhood, a “village” so to speak where people relate to each other and xenophobia begins to fade.

  2. dto510 says

    We’re not talking about neighborhoods, we’re talking about buildings. Ms. Brunner thinks that there should be no distinction whatsoever between subsidized and market-rate units, and that they should be mixed into the same building. But this is terribly inappropriate, not only because it would decrease the number of affordable units (since the opportunity cost of building a market-rate unit would be carried by the developer), but also because the residents of the subsidized units would be forced to pay for amenities they do not necessarily need.

  3. V Smoothe says

    “unpleasant spectacle of sharp disagreements over the city’s proposal to construct affordable housing next to Raimondi Park”? “Several non-profit housing developers strenuously objected”?

    Come on. Did you watch the meeting? Nearly every speaker on the item was proud of the agreement they had reached and spoke strongly in favor. One person complained about the land buy-back. I get that you’re trying to make a point about BMR units, and it’s a valid one, but you can’t just invent public testimony because it helps your argument.

  4. dto510 says

    In fact, three people complained that the city should somehow seize the land – a Just Cause rep, and the two non-profit developers from EBHO. The developers seemed pretty pissed, and advocated for more units to be more expensive.

  5. dr says

    You got it backward. The staff proposal discussed at the committee would target households at 100% of area median income; the nonprofit housing developers wanted some of the units affordable as rentals to people at 60% of area median income. The nonprofits also did not propose that the developer sell the land “for free”, just that he should sell it at his cost and not reap a windfall from the City’s rezoning.

  6. dto510 says

    dr, I totally fail to understand what you mean by “at his cost and not reap a windfall from the city’s rezoning.” The property was rezoned and subdivided a few years ago, as part of a master plan for the area. The land is private property, and the city is supposed to make zoning decisions based on the general plan and other city priorities, not in exchange for land or cash. The argument that rezoning carries some sort of implied fee to the city (beyond the increased property taxes the developer and his customers will pay) is at odds with basic ideas of city planning, private property, and public good. Should all rezoning decisions be made like billboards, so developers get to do anything they want based only on whether the Council likes their various handouts to various causes? If so, it’s not clear that nonprofit housing developers would be first in line for bribery.

    The summary presented by the staff said that the ownership units were at 60% AMI, and were for-sale. The non-profit developers wanted the 60% units for-rent (which I agree with), but in exchange, the for-sale units at a higher affordability threshold, ie a higher price. I will double-check the report, but that was my understanding, and it also fits with EBHO’s claim that more expensive units would lower development costs.

  7. V Smoothe says

    No, that didn’t happen. Two EBHO representatives spoke, but only one spoke to the purchase price. I have the public comment on video, and I’ve transcribed the meat of the two comments in question below”

    The first EBHO representative (I can’t understand his name…sounds like Ho Elton?) began by saying “EBHO strongly supports the current staff recommendations as greatly improved from the condition 100 proposal that was submitted earlier this year.” Hardly a “strenuous objection.” He then went on to suggest an alternative proposal.

    “EBHO is proposing that 100 of the units be rental that serve households making 30-60% of the area median income, and that the remaining units be ownership opportunities of 100% AMI. This will cost the city considerably less money, while at the same time providing affordable housing opportunities for Oakland’s low to moderate income residents. Please consider this as you discuss the staff’s recommendations.”

    Personally, I think this is an excellent plan. The second EBHO representative, Alyssa Dennis, complained about the purchase price.

    Adam Gold from Just Cause Oakland began his comments by saying that Just Cause had originally wanted the developer to pay for the subsidized housing, but then went on to endorse the proposal. He made no complaints about the purchase price.

    “I think the proposal in front of you is something that increases the number of affordable units and makes the city’s expenses a little bit less. But the crucial thing to Just Cause and our members who fought on this is that we have to make sure that there’s significant amount of affordable housing that gets built at Wood Street because it’s such a major project. And so anything that will save money to the City in terms of the final cost of what they’re subsidizing to this project so that other affordable housing can be built and will make sure there is more affordable units at Wood Street is something that we’re gonna want to support and look at. And I think just one thing that’s not in the staff report that we want to suggest is that there is some community process and input on the RFP itself. Cause I think there are things that could be worked in there such as preferences for more affordability within that parcel that gets purchased, maybe a mixed of rental and home ownership, things that could be incentivized to get that development even better for West Oakland residents.”

  8. dto510 says

    Okay, that’s not a bad idea. It does unscore that 100% AMI units aren’t far from market-rate, so cost less subsidy at the expense of affordability. And the EBHO proposal to split the project in two (with one as deeply-subsidized apartments) is directly contradictory to Ms. Brunner’s suggestion that units of different income levels be combined in a single building. I misunderstood the staff, who said that the units as proposed would be a range from 60 – 100%, which probably means that most will be sold to 100% AMI families.

    I will correct some of the statements in my blog above. I should have included Rick Holliday’s tale of removing tons of trash, including a meth lab, and his pioneering vision to increase West Oakland’s housing stock by 10% while restoring an important historic building. I agree with Just Cause that we should maximize subsidized units (like, with density bonuses and little parking), but not at the expense of market-rate units, which pretty much fit the affordability thresholds anyway.

  9. V Smoothe says

    I think you understood the staff correctly.(?) The BMR ownership units would, under the current proposal, be available at a range of affordability, that range being 60%-100% AMI. EBHO’s suggestion was to change this, splitting the affordable units so that part would be BMR ownership, and those would all go to 100% AMI, while the remainder would be rental, targeted to 30-60% AMI. So under that plan, we would be providing less subsidy for ownership units, and could use the money instead for rental housing that would serve needier populations.

  10. dto510 says

    Yeah, but what’s the point of the 100% AMI units? They’re available to people making $82k/yr, who are eligible for homeownership assistance from the city to boot. The market-rate condos at Central Station seem very cheap. Why shouldn’t the city spend every last penny on the low-income rentals, even if it means fewer subsidized units overall?

  11. dr says

    Take a look at page 7 of the staff report: “Because of the high development costs of ownership housing, the lack of other subsidies for ownership programs, and the high market prices of new market rate ownership housing at Wood Street, even if additional financing from other sources is available, it would be very difficult to target households below 80% of AMI. Thus ownership units developed with Agency assistance and those bought with down payment assistance loans described in this report will be targeted to households up to 100% of AMI.” It’s actually cheaper for nonprofits to do rental even at incomes down to 50-60% AMI because they have access to more funding sources like low income housing tax credits.

  12. dto510 says

    One problem with that report is that the market-rate housing at Wood Street is not, in fact, as expensive as the phrase “high market prices” implies, with many condos under $300k, well within the official affordability thresholds. Also, the city provides downpayment and other assistance to first-time homeowners.

    I understand that tax credits are a good source of development financing, as they are sold off and thus converted to cash. Do rental units for lower incomes receive more tax credits? I am very suspicious of non-profit developers’ claims to target low-income folks, since they gravitate toward 100% AMI condos just like the private sector, but do it with public subsidy. Recently, EBALDC received units, as part of a city settlement, that were subsidized rentals. EBALDC is going to “sell” them as BMR condos, removing them from the rental market and targeted a higher-income group than the folks there before. The neighbors in the building objected to the below-market “ownership” units, saying they would compete with their own units when they were resold, and asked that the units be preserved as low-income rentals. The only explanation the Council could give was that it was cheaper to set them up as BMR condos, and they didn’t care that they weren’t rentals or for low-income families.