The first council meeting in January has one major item and that is an affordable housing workshop. It appears to be the first of two parts after the council receives information and provides feedback. However, like most staff reports, it seems to fail to raise a number of important issues.
Of interesting note, while the staff report seems to provide a history of affordable housing, it does not supply any information or even acknowledge the affordable housing scandals of the early part of this decade, where the affordable housing program was abused in part by city staff.
Research into Wildhorse Ranch has put some numbers on that scandal. There were 52 ownership affordable units in Wildhorse. Six of those homes were sold before the two year limit with about one million dollars in illegal gain received by households. City Staff failed to catch any of these homes being sold before they were allowed to. Seven homes were sold within days after the two year requirement ended. 25% of the affordable homes were gone within two years and their owners cashed out on a huge windfall. Right now 32 of the homes have been sold and are no longer affordable. One of them was purchased by a Planning Department employee.
Four of the homes were the subject of a council inquiry back in August of 2002 initiated by then Councilmember Mike Harrington.
This is from the Davis Enterprise, August 7, 2002:
The issues arose when Harrington presented at the July 24 council meeting Enterprise advertisements for four Wildhorse homes built two years ago as affordable houses and being sold at market value. He was concerned about the ability of affordable home owners being able to profit from sales after just two years of occupancy.
Cochran said today that the four homes originally sold for $140,000 to $143,000. They were listed in the July 12 Enterprise advertisements at prices ranging from $299,000 to $325,000.
Katherine Hess, planning and redevelopment administrator, reported to the council at its Aug. 1 meeting that the two-year occupancy requirement was the only restriction on the homes, so the owners were not violating any city policies. Cochran said today, though, that one of the home owners is moving out before the two-year mark, but that it is a legitimate exemption issued by the city.
Councilmember Harrington had raised concerns about the City’s affordable housing program:
“From my perspective, given what I’ve seen from my review of the city’s affordable housing program over the last two and half years. We might as well not have one for the purchase of affordable homes because what’s happening is tremendous city subsidy has been put into helping a few people buy homes which they later make a killing off of.”
None of this of course is cited in the city staff’s report. There are further allegations that a number of city staffers actually benefited from affordable housing in South Davis near Willowbank. I was unable to find documentation of that in the archives of the Enterprise. There is no mention of this by the city staff even though these situations prompted the current equity restrictions on households. Previously, the plan had been to allow people to build equity over time–but that time was apparently just two years and the program was abused.
They mention in the timeline 1990 as:
“Adoption of the affordable housing inclusionary requirements within an Affordable Housing Ordinance. (no equity restrictions on affordable ownership units, some rehabilitation projects, mostly new construction).”
Then in 2005:
“Adopted an update to Affordable Housing Ordinance with the goals of clarifying requirements and their fulfillment, limiting equity growth in affordable ownership units, specifying buyer/tenant selection guidelines, inserting asset caps, and restricting use of in-lieu fee payments.”
Another issue that is not addressed is the number of available affordable housing units by income category. The vast majority of the available affordable units go to people who we would not normally think of as low income, people making nearly $60,000 per year. We addressed this issue back in November.
The city staff report defines affordable housing:
What does Affordable Housing mean? The term “affordable housing” is used to describe for-sale or rental housing whose total costs are determined to be affordable to households of extremely low, very low, low or moderate income households. According to the federal government, housing is considered “affordable” if it costs no more than 30% of a household’s monthly income for rent and utilities. (Note: Davis’ current ordinance allows up to 35% of a household’s monthly income to be counted for payment towards monthly mortgage payments and Homeowner’s Association or other special fees, not including utilities.) For example, under the federal definition, a household with a gross annual income of $60,000 a year should pay no more than $1,500 monthly for their mortgage or rent and utilities. Since tailoring rents and mortgages to individual tenants and buyers would be practically impossible, income categories have been established for use when housing projects are planned and developed in order to accommodate target income groups and ensure appropriate financing and budgeting during a project’s predevelopment stages. Programs, like Section 8 Tenant-Based Rental Assistance and first-time homebuyer loans, can tailor payments specifically towards the income of the household being served. This is why affordable housing unit developments often have tenants and owners who utilize affordable housing programs like rental assistance and first-time homebuyer loans.
Affordable units and affordable programs can work together or separately to serve needs of income-qualifying households. This means that an affordable housing unit can be built to serve a household at 50% of Area Median Income, but a Section 8 Tenant-based Rental Assistance Program Voucher can subsidize lowering the rent of the 50%/very low income two bedroom units to serve a household who is really at 42% of Area Median Income.
The report even defines the income categories for extremely low, very low, low, median, and moderate income. What it does not do is what we did in November, actually lay out how many units of each are available in the city. Extremely low is $21,000 (30% of median) while very low is $36,000 (50% of median).
How many units serve people who make less than $36,000? 51 units in Davis. There will be an additional 25 units when New Harmony comes on line. New Harmony has 7 units for people at 30% of median and another 18 units for people at 35% of median.
That leaves the only other option in Davis for people making less than $36,000 to be Section 8 Vouchers, of which there are apparently 245 recipients who reside in the city of Davis.
The real question that I think the council needs to address is what do they mean by affordable, who do they plan to serve, and is Davis to be a city of only people who make over $57,000?
The other thing the council really needs to examine are what are the affordable housing needs of Davis. How many people work in Davis, cannot afford to live in Davis, and how do we square that issue with issues like the growth cap and voter inclinations against new peripheral developments.
—David M. Greenwald reporting
I learned of the “Affordable Housing Workshop” yesterday. As the person who has whistle blown on most of these “for sale affordable” housing scandals I am glad you have brought it up.
I doubt that the staff report will cover the various ways in which the system has been gamed.
But the “gaming” involved about 150 homes.
What I found interesting is your excerpts from the Davis Enterprise and the quotes from city staff.
The records of who got the 52 homes in Wildhorse do show that one staff member did receive one of the homes. How did that happen, was the process appropriate, what is the conflict of interest policy of the city relative to that specific transaction?
From the Enterprise.
:Katherine Hess, planning and redevelopment administrator, reported to the council at its Aug. 1 meeting that the two-year occupancy requirement was the only restriction on the homes, so the owners were not violating any city policies. Cochran said today, though, that one of the home owners is moving out before the two-year mark, but that it is a legitimate exemption issued by the city.”
What in retrospect is so interesting is that by August 7 2002 (when the article was published), five of the six homes had already been sold prior to the two year requirement and a sixth was in escrow to be sold before the two year requirement. It looks like City staff checked the title records but if they had why did they not report the illegal sale of six of the homes. The sellers gained $954,500 in unauthorized value against city policy and the grant deed. Why was no action taken by city staff against this breach of city policy?
In recounting the problems with the 52 “for sale affordable” the staff did a report to Council. This would have been a good time for the city staff to have reported the circumstances under which a city employee had received one of the homes. Regretfully, the issue of conflict of interest or apparent conflict of interest was not raised.
However, the comments by city staff, do lead one astray. Sale of the six homes sold did violate city policy!
I provided part of the information that Michael Harrington and the Enterprise made public and thank them for exposing the Wildhorse scandal.
6 of the homes were sold prior to the two year requirement set in the grant deed.
The six owners appeared to have therefore gained almost one million dollars in windfall illegally as this was not allowed under the grant deed (see below for grant deed wording for the Wildhorse homes).
Did all six homes escape detection?
If so, how did they escape detection?
Who should have detected and stopped this illegal transaction and windfall?
Which staff members were involved in the Wildhorse “for sale affordable” home program?
Given the Deed Restriction what action could the city have taken to stop the windfall?
Was any action taken against any of the households for their wrongful sale of the home and the windfall they gained?
These are questions I hope the City Council will get answers to.
The thread in the 150 homes that have not met requirements is that city staff has not always spotted the illegal transactions, or have ignored the illegal transactions or have not taken action when the transactions were discovered to be illegal.
The city staff do not and have not take action when state law, the Davis Sterling Act, cooperative law, or the bylaws of the borrower organization and nonprofit law have been broken. We will never have a system that works if city staff will not enforce the law. City staff do not enforce the law and the Council needs to have an independent study of the various illegalities and transgressions that have been exposed.
The Vanguard wrote,
“How many units serve people who make less than $36,000? 51 units in Davis.”
Neighborhood Partners is the entity that did most of those 51 units which are mainly at Eleanor Roosevelt Circle and Cesar Chavez Plaza. Other organizations could have done them but chose not to. City staff fought hard to stop ERC and CCP which is a shame given how great they turned out to be for the people that live there.
NP’s four year struggle to get project based Section approved for ERC meant that we lowered the average rent on 12 apartments from $537 down to $267 a month. Can you imagine what a blessing that rent level is a senior on fixed income. And to think staff made us go through a hearing process to get Council approval. What’s to approve?
We agree with the Vanguard that housing for this income category is hard to find in Davis. On the other hand, many people fit this category and of them many are seniors or people on disability and have no options to increase their fixed income.
David Thompson,
Why would poor people in general not be better off if, instead of our giving money to middle-men like Neighborhood Partners to build and manage housing projects, we didn’t just hand them the money?
How much do your projects benefit poor people in Davis who don’t live in your housing projects but pay the taxes which subsidize them?