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One local groups' plans to make housing more affordable on the Central Coast

BY ANNE QUINN

The trouble with any discussion about affordable housing is the word "affordable." As George Moylan, executive director of the Housing Authority of the City of SLO, likes to point out, "to William Randolph Hearst, Hearst Castle was affordable housing." But most SLO residents are in the position of Brian Miller, a San Luis High School teacher.

Miller earns a median income and wants to buy a house for his family. He has been pre-approved for a loan, but his real estate agent told him that if anything comes up in his price range, he had better be prepared to leave his work right away, come to the real estate office, and write a check before someone else snatches it up.

"But I don’t want to do that. I want to be able to decide," Miller said at a recent panel discussion on affordable housing sponsored by the League of Women Voters.

"I deserve a nice, small house here," Miller said. "This is my community. I don’t want to live in Templeton. I want to live in SLO.… I keep buying my lottery tickets and hoping I win. Those of us who live in the community and don't own their own place are just plain scared at this point."

But there may be help on the horizon for Miller and many like him.

A group in SLO County wants to set up an Affordable Housing Trust Fund, similar to those created in Sacramento and St. Louis and Burlington, Vt. Communities that have created or are in the process of creating AHTFs recognize that affordable, decent, and stable housing is a basic human need, one that has become increasingly difficult for cities and counties to meet.

AHTFs pool money from private and public local sources and use it to increase the number of units of affordable housing for low- and moderate-income residents.

Forty percent of the funds in a SLO County AHTF would assist low-income people with special needs; the remaining 60 percent would target people such as Miller–people who earn up to 120 percent of the median income for the county. The median income for a family of four in SLO is $48,000 being, so that the trust fund would offer hope to families making $57,600 a year–wage-earners in the middle class.

Collective endeavor

The AHTF proposal was put together by the SLO Supportive Housing Consortium, a group of 18 organizations, including housing providers and human services agencies that advocate for SLO County residents with special needs. The Supportive Housing Consortium began meeting informally in the early 1990s, when they recognized that multiple agencies were serving a given client. Common to all groups was the pressing need to help their clients find decent housing.

So instead of competing for city housing or Community Development Block Grants (CBDG funds), the groups joined forces in 1995, said Rachel Richardson, director of the AIDS Support Network and chair of the Consortium. Since its formation, the Consortium has bought a nine-unit apartment complex for people with AIDS, purchased and provided transitional housing facility for women in recovery, and raised $473,000 in funding for a tenant-based rental assistance and security deposit program.

But despite having found housing for 377 people, Richardson said that the Consortium realized their efforts "were not enough to keep them ahead" of the escalating housing problem and that there was a need for a broader program.

"With the student population increasing and the price of a median home rising to $285,000 in SLO County, the rental market froze," Richardson said. "In the past, renters would save their money and buy a home, freeing up the rentals. Now it’s become a stagnant situation."

Caroll Pruett, chairman of the board of Mid-State Bank, said that barely 20 percent of the people in the county can afford their own home. "Workers here must have two, three, even four jobs to afford housing," he said.

The 2000 Fair Market Rent Limit, which is determined by the Federal Department of Housing and Urban Development, pegs $750 as the fair market rental for a two-bedroom apartment, including utilities. The average two-bedroom apartment in SLO rents for $950 a month, not including utilities.

This not only places SLO residents in a difficult situation, it is beginning to affect the city’s ability to attract and retain businesses, according to David L. Spaur, CEO of the Economic Vitality Corporation of SLO County.

Spaur admits that when he was first approached about an affordable housing trust fund a year ago he failed to see any connection between the EVC and a housing trust fund. "I responded, ‘If the EVC got involved in housing, people would misunderstand and accuse us of advocating growth. We’re not pro-growth, we’re pro-jobs,’" he recalled.

But Spaur said that he quickly found it hard to locate housing even for the CEOs of companies his agency works to attract here; EVC has had to house them temporarily in vacation rentals as far away as Cayucos. In his research on business retention, Spaur spoke to several human resource managers throughout the county. The availability of housing was an issue that came up frequently.

Pruett points out that the current housing shortage is exacerbated by "restrictive zoning and big changes in the labor force," including growth in the service industry, a traditionally low-paying sector that’s now the fastest-growing in the county. Changes in agriculture–farmers are switching to labor-intensive crops, such as grapes–have attracted an influx of low-paid workers in need of housing, according to Pruett. "As density increases, it forces more and more people to live in the same house," he said. "When the problem escalates it becomes more than an affordable housing problem, it becomes a social problem."

Chris Skiff, president of the Home Builders Association, said that one reason that not many large multi-unit rental complexes are built today is that there are few large tracts of land still available in the city of SLO. "The last large tract of land I am aware of is out on Foothill and it is being used to build a church," he said.

Tax policies favor big boxes

County planner Dana Lilley said that the current California tax structure encourages cities and counties to build not more housing, but rather auto malls and big-box stores. "The state collects sales tax and sends it to the jurisdictions where retail sales outlets are located," he said. Such jurisdictions are more motivated to get auto malls and big box-retailers than they are to build housing, he said.

Since the state is failing to meet the need, advocates suggest forming a stable continuous housing fund of $10 million a year via a SLO County AHTF. That sounds like a lot of money, but anything less would fail to make inroads into the need, housing advocates say.

SLO County AHTF’s revenues would be used for construction of new affordable housing units, rehabilitation of existing buildings into new units of affordable housing, buying land to be used for affordable housing development, converting nonresidential properties to residential use, leveraging private, state, or federal funds for new units of affordable housing, and assisting low-income individuals and families to buy their own homes or obtain rental housing. All of this is possible only if everyone literally buys into the program.

If AHTF’s goals are to be achieved, monies will have to come from both private and public sources. Potential revenue sources outlined in the AHTF proposal would affect all SLO County residents–just as the affordable housing crisis does. The proposal suggests a menu of revenue-generating choices such as changes in the use of existing city and county general fund revenues; increases in transient occupancy (hotel/motel) taxes, real estate transfer taxes, and sales or utility taxes; and redirection of the affordable housing portion of redevelopment tax receipts.

At a breakfast recently hosted by the Consortium, Grover Beach Mayor Rich Neufeld asked why the AHTF doesn't use redevelopment funds, which are created by diverting a portion of county property tax revenues to clean up blight in cities.

The process is relatively painless for residents, said Neufeld, since property taxes do not go up but are simply divided up differently between the county and the city. When a redevelopment agency is established, property tax revenues are frozen in what is called a "base year." Cities and counties continue to receive property tax revenues at the level they did in the base year, but any incremental tax revenues–for example, from increases in property tax revenues that are generated when a property is sold or new developments are built–go to the Redevelopment Agency. The agency then uses that money for improvements within the redevelopment area, such as widening sidewalks and planting trees, or as incentives to attract new businesses.

State law requires that 20 percent of such incremental tax revenues be used to build affordable housing. Cities within SLO County that have redevelopment agencies are Pismo Beach, Grover Beach, Arroyo Grande, Paso Robles, and Atascadero.

These cities are allowed to accumulate incremental tax revenues for four years, and may keep four years’ worth in an affordable housing fund as a minimum balance. However, tax revenues in excess of that minimum–such as the applicable revenues collected in the fifth year–must be spent within the next two years. For example, if Arroyo Grande collected $500,000 in four years and $100,000 in the fifth year, the city would have to spend $100,000 within two years, according to city planner Lynda Snodgrass. If it could use that revenue to further its goals, this could be good news to the AHTF,

Since revenues coming in to redevelopment agencies depend on properties within the agency being sold, any windfall depends on property values’ increasing. Traditionally, in the first few years of an RDA there is not a whole lot of money to play with.

Paso Robles: case in point

Paso Robles has one of the oldest redevelopment agencies in the county. It was established in November of 1987. The city currently has $719,000 in the affordable housing portion of its RDA budget, and financial planners project that it will have an additional $203,000 this year, according to city housing project manager Ed Gallagher.

In the past, funds in the Paso Robles RDA affordable housing fund were spent on low-interest loans of $49,000 to help seven low-income homeowners improve curbs and gutters. An additional $120,000 was given to People’s Self-Help Housing to pay the building fees on Los Robles Terrace, a 40-unit senior housing project. A $10,000 zero-interest loan was given to a low-income homeowner whose home was damaged in a flood, and $35,000 was given to Habitat for Humanity towards the construction of three houses in Paso Robles.

This year, $735,000 from Paso’s affordable housing fund has already been designated for People’s Self-Help Housing for Creekside Gardens, an affordable housing project. Another $300,000 will be loaned (at 3 percent per year simple interest for 35 years) to People’s Self-Help Housing for another project.

Arroyo Grande has $33,000 in its Redevelopment Agency affordable housing fund, according to city planner Snodgrass.

Atascadero, which formed its redevelopment agency in 1998, has just received its first increment of $118,000, and has not yet separated out its affordable housing funds, according to city manager Wade McKinney.

A role for nonprofits

But government can’t provide all the funds. Financing affordable housing takes a lot of creativity.

Right now, in addition to the big players in the affordable housing arena, organizations such as People’s Self-Help Housing and the SLO Supportive Housing Consortium, small nonprofits are attacking the SLO County housing shortage from all angles.

Habitat for Humanity has built three houses in Paso Robles and owns lots in Los Osos and Cambria, according to director Ken Pyburn. Habitat organizations have a "sweat equity" program whereby individuals and families slated to own a home under construction are required to put in time building it along with volunteers–a minimum of 500 hours of work. The organization’s belief is that as future home owners work alongside the volunteers, they are not only building houses, but a stronger sense of community.

Hal Rosen thinks building affordable housing is fun. "It’s a hell of a challenge," he said. His group, a nonprofit called Affordable Homes, just completed its first large project in Oceano, where 15 homes that would normally sell for about $230,000 each were sold to families whose incomes were below 80 percent of the County median income, or $38,400. "The cost to the buyer was the first mortgage, which was $130,000, and the balance was paid for through various grants," Rosen said.

Rosen enjoyed seeing the new homeowners move into their extraordinary homes, which were designed by architect Mark Rawson. (Rawson designed, and Bob Cantrelli built, SLO’s Downtown Center.)

"I have no problem with people making money, as long as it’s a reasonable return on an investment. But in this case our ‘profit’ is being able to house people decently and creating stable citizens," added Rosen, who is now retired from a career in real estate.

The Affordable Housing Trust Fund hopes to use this type of creativity and more.

The next step, AHTF advocates say, is to form an oversight committee of one representative from each participating jurisdiction (city or county), two representatives from the SLO Supportive Housing consortium, a disabled person, a low-income person, a representative from the construction or home-building industry, a representative from business or agriculture, and a representative from the fields of banking or economic development. The makeup of the committee reflects the advocates’ holistic approach to creation of the SLO County AHTF fund.

Since they’re working on a community-wide problem, AHTF’s advocates hope that SLO is ready to try a community-wide solution. Æ

Reporter Anne Quinn can be reached via e-mail with comments or questions at [email protected].