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SACRAMENTO — The state gatekeeper to tens of millions of dollars in federal affordable housing subsidies promised Wednesday to study the soaring costs of those developments and make reforms if needed.
That group, the California Tax Credit Allocation Committee, called a special meeting here as the last in a series of hearings it has been holding across the state. By the end of the session, it had pledged to conduct an in-depth examination of development costs to establish why affordable housing projects so often cost wildly more than private, market-rate developments.
Affordable housing is designed to provide homes for tens of thousands of working families who can’t afford to pay high rents. But with tens of millions of tax dollars set aside each year to build it, affordable housing in California has also evolved into a delivery mechanism for social goals that have little to do with that central mission — and even less to do with containing costs.
As a recent voiceofsandiego.org investigation found, the result is that far fewer affordable apartments get built than could be.
Wednesday’s meeting was a strong sign that the state has taken note of the rising costs.
The commission plans to update a study completed in 1993 that comprehensively compared the cost of building affordable housing to market-rate developments.
“In light of these figures and the comments that we’ve taken in our various public forums, it is still not clear to us yet what path to take going forward to get our arms around cost containment and begin to address it,” the committee’s executive director, Bill Pavão, said in announcing the new study.
The committee, headed by State Treasurer Bill Lockyer, is tasked with choosing which of dozens of projects around the state receive federal low-income tax credits.
The process by which those multimillion-dollar grants are awarded has come under criticism in recent years, with some developers decrying the lengthy, complicated process of winning tax credits as a beauty pageant that forces them to meet policy objectives that have little to do with the core mission of housing working people.
As the process of winning tax credits has become more convoluted and competitive in recent years, the costs of the projects the committee funds have been growing. Statewide, the cost of building each affordable housing apartment in the publicly funded projects has increased 60 percent since 2005. That’s led the committee to regularly reassess its model for awarding grants.
At the meeting Wednesday, developers and affordable housing advocates lined up to discuss the relative merits of those policy goals and to explain to the committee the complicated factors driving up the cost of building affordable housing.
Several speakers pointed to the committee’s complicated points system, which rewards developers for building on expensive, tough-to-develop plots of land. The requirement to incorporate green building elements like solar panels can also increase costs, the committee was told. So can the requirement to build large, family-sized apartments that most market-rate developers won’t consider building.
But speaker after speaker also cautioned the committee not to ignore the benefits all those public policy goals bring to communities.
Building affordable housing isn’t just about building cheap homes for people to live in, the committee was told.
The industry also aims to redevelop blighted neighborhoods by building attractive new buildings in them, and doing so has ancillary benefits like pushing up local property values and even driving down crime rates, said Laura Archuleta, president of Jamboree Housing Corp., a nonprofit developer based in Irvine, one of seven speakers invited to make presentations to the committee.
Archuleta said one of her company’s projects in the city of Fontana actually led to a significant drop in calls to local police. In addition to making the city safer, the project will actually save the Police Department money in the long-run, she said.
“I would encourage you to evaluate the success of the California tax credit program by the total impact it has on the residents living in and around the developments it helps to create, not just on the cost per unit,” Archuleta said.
But several affordable housing developers and officials at the meeting acknowledged that there is room for improvement in the tax credit allocation system in California.
Andy Agle, director of housing and economic development for the city of Santa Monica, said his city limits developer fees on all projects to $16,000 per unit, for example. The average developer fee on projects statewide is more like $25,000 to $35,000, estimated Pavão.
Some speakers cautioned that without reform, affordable housing funding could become a target.
Pat Sabelhaus, a board member of the California Council for Affordable Housing, an advocacy group, said tightening up the tax credit system is especially important given the current economic and political climate. With so much attention focused on reducing the federal deficit, all taxpayer-funded programs will likely be given close attention by conservative hawks in Washington in the coming months, Sabelhaus said.
“I think all of us should be concerned about costs and what we can do to build a cost-efficiency program into the system so that the public and the taxpayers and Congress will view this as a program that they should continue to support,” Sabelhaus said.
Joe DeAnda, Lockyer’s spokesman, said the committee hopes to have feedback from its study of costs within six months.
Will Carless is an investigative reporter at voiceofsandiego.org. You can reach him at email@example.com or 619.550.5670.
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