Nishi’s Affordable Proposal Shows the Advantage of a Land Dedication Site
There are a number of advantages to having integrated affordable housing, and that was clearly the stated preference of the Social Services Commission last week when it met to discuss the Nishi affordable housing proposal.
Even prior to that, many on the council have supported the notion of integrated affordable housing rather than a land dedication site.
For example, in October, Mayor Pro Tem Brett Lee stated that his preference is for housing that’s integrated. He said he has problems with separate affordable and market rate developments. “The social research that I’ve seen seems to indicate that… when people are fully integrated it provides better outcomes for all involved. So my strong preference would be unless there’s a reason to not do that, (integration) would be my preference.
“For general affordability, I think the idea that there are affordable units and the market rate integrated on the same parcel would be my preference,” he said.
But there are advantages to going the land dedication route.
In this analysis we look at the two proposals for Nishi. It appears that the Social Services Commission prefers the integrated model over the land dedication model – but as we will show there are some advantages to the land dedication model.
Either way, they are assuming a scenario where there are 1696 market rate beds (which appears somewhat lower than the proposed size of the project) and 204 affordable beds. In this case, that represents 12 percent of the beds.
As described in the affordable housing narrative: “Under this program, the 204 affordable beds would include: 50% or 102 beds with rent appropriate for the extremely low income one person household bracket which today would result in a $404 per month rental rate for each person in a double occupancy bedroom.
“The remaining 102 beds would be priced for the next very low income bracket of approximately $673 per student bed again in a double occupancy bedroom. Accordingly, all beds equal to 12% of the 
market rate beds would be rented at extremely low or very low income brackets.”
As Tim Ruff told the commission last week, the developers here were committing to build and complete the land dedication site (which contrasts to Sterling where they dedicated the land and $2 million, but had no commitment to actually build the affordable housing and in five years it would revert to the city).
At Nishi they plan to finance it, build it, manage it, and turn it over to a non-profit which does not pay taxes, or set up a non-profit. And the plan is to internally subsidize the land dedication project from the market rate units – which means they are not relying on external money from the state or the city to build it.
The major advantage here of course is that half of the affordable units would be “extremely low” and therefore just above $400 a month with the other half at the “very low” level, or about $680 a month, which is what Lincoln40 has with a few at the “low” income level at $800 a month.
Both projects use the same formula based on Yolo County median incomes, and rent in both projects includes utilities – gas, electric, water, internet and cable. The advantage of the land dedication site is that it allows Nishi to target a completely lower bracket.
The alternative, and apparently the preferred alternative for the Social Services Commission, is the fully integrated site.
As the narrative indicates: “This alternative would also provide a 12% ratio of double occupancy beds with these beds each renting at the very low income bracket. This program would incorporate the 204 affordable beds within the greater market rate footprint. Rather than being limited to a specific unit plan, normally a four bedroom platform, some effort could be made to mix in another, such as a two bedroom configuration, permitting a more intimate group setting. This would address differing resident preferences.”
But there are disadvantages to the fully integrated alternative.
First, what disappears is the 102 beds that would go to “extremely low” income students. That means that the rent goes from $400 or so per month to $670 or so a month.
Second, as the narrative indicates: “Because this more integrated alternative would not likely benefit from tax exemptions and possible financing economies the affordability would require greater private subsidies.”
Again the commission favored the integrated model even though there seem to be some huge advantages to going to the land dedication site. Moreover, the commission made it a point to say there would be no credit for going to that lower category.
Frankly, while there are clear reasons why a fully integrated model makes sense at times, particularly, given the social stigma associated with low income housing, in a student housing situation some of those concerns are probably reduced and the advantage of internal funding mechanisms combined with the lower income category would seem to outweigh those disadvantages.
This seems like an issue the council should take up before the Nishi project goes too far down the road.
—David M. Greenwald reporting
Housing affordability can be increased at Nishi 2.0 if the areas that are least suitable for housing – bordering the I-80 – are used for housing-subsidizing commercial properties that would provide over-pressured-filtered air for the commercial tenants and used to reduce vibration (sound) impacts, by both blocking and absorbing sounds.
Local traffic reduction? All of Nishi can be virtually carfree if a parking structure is built on top of the 80-Richards interchange as part of modifications planned by the City of Davis, with direct-egress to the highway and Richards (and measures to reduce induction of traffic through Downtown). Commuters to NIshi’s commercial facilities, visitors to Davis Downtown, and students needing long-term storage could all park their vehicles there, and use a solar-electric self-driving fare-free 24/7 shuttle to get between there, Davis Depot (synchronised with the train) and Downtown, and Nishi. All commercial tenants would be required to provide electric-assist bicycles for employees to use while at work, either for getting to Downtown or campus.
The parking structure would be part of what would be a joined project of the City of Davis and Caltrans – the latter is proposing a Bus/HOV lane/bike-ped causeway structure. Added to the Caltrans-bit would be measures that would decrease gas, particle and noise pollution on the I-80 through a combination of measures such as a dedicated bus lane with express bus services with short headways, a robust carpool program, quiet road surfacing material and eventually a structure that would block a significant amount of the sound and smaller amounts of the other pollutants, primarily particles. (Right now the primary focus of Caltrans is on reducing future delays and traffic incidents – crashes.) The reductions in pollution would increase further as more electric vehicles are added to the mix and a couple decades hence when freight trains no longer use this corridor and the passenger rail is electrified.
So the place can be more livable? Yes. If or if not the housing there is student-focused, is it possible to design the place smart and cozy (by the way, saving $35,000 per surface space by not building parking), fully rooftop-solar, with per person space about the same, and equal ability to pay either from owned funding or subsidies? In other words, make not only the development, and not just the buildings, but the actual apartments subsidized so that students and non-student roommates of different means can be mixed up? Yes?
If so, we’d be creating a small-i and small-c innovation center – possibly very unique mobility and social(able)-housing solutions in one location, combined with a serious and corrective approach to the polluting road transportation structure that pierces our fine city.
Or maybe we can all get rid of our cars and use anti-gravity hovercraft and float around town pollution free?
You would not be required to get a hovercraft license! They are not cheap!
If you will want to drive to one of the fine businesses at the commercial part of Nishi, you can do so! Just park at 80-Richards and a few minutes later you’ll arrive at their door.
In my opinion, when a SF project is ti include an affordable housing component, it should be integrated, not a separate site within the project…
For MF rental units, I can see advantages and disadvantages both ways. But, I am leery of ‘segregation’… including, based on income. I lean toward ‘integration’ as to MF units…
But the advantages of land dedication here appear to be rather stark
By “here”, do you mean current MF proposals, or ‘globally’?
Here meaning this specific project, Nishi
Thanks…
Correct. It means the other tenants are paying more to subsidize the affordable housing units. The cost of affordable housing is being borne by those in the community who can least afford it. The current affordable rental housing model is regressive, inefficient, and ineffective.
Are they paying more?
What else would “internally subsidize” mean?
It’s really time for us to face up to the actual cost of demanding affordable housing in developments. If you make 35% of the rental units below market rate, the rest of the market pays for it. If you make 35% of the new houses below market cost, all of the other new home buyers pay more. It’s regressive to the extreme in the case of rental housing.
Rents would be charged at market rates, regardless of developers’ cost. If those costs exceed the expected return, there wouldn’t be a proposal.
I wonder how those recommended air quality studies are going.
Unsubsidized market rates will increase due to the requirement for affordable housing.
Internally subsidize is fairly clear, the question I ask is somewhat different and it’s whether they are actually paying more because of the subsidy or whether the subsidy is being born in other ways.
What other possible ways could there be to internally subsidize the cost of below-market housing?
Per rentcafe.com:
Average apartment rent in Davis: $1682
Average apartment rent in Woodland: $1112
Don: On the issue of the 35 percent, these projects are getting to about 11 or 12 percent affordable housing. As I said last week, I am guessing the 35 percent requirement will be reduced.
“Charity” from the owner… like that will happen… that’s the “else”… tnstafl
Market rates are not determined by developer cost. The rents for comparable units already reflect market rates.
You’ve already quoted some market rates, above. New market rate units will command a price above that, regardless of developers’ costs.
Even if developers had zero costs, they would still charge whatever the market will bear.
The rental market is artificially bifurcated by the affordable mandate. There are units that must be rented at a rate that is determined by the average income in Yolo County. All other units are rented at market rate. The market rent is based on a whole lot of independent decisions by landlords all over the city of Davis. If a development has some units whose rates are artificially constrained, the owners of those developments WILL increase the rents of the free-market units. That will affect the overall market rate, and will especially affect the rate paid by those who rent units that are not price-fixed.
Affordable housing requirements increase the cost of housing for everyone else. That is actually unarguable.
Ron:
It’s actually determined by both. You are ignoring the fact that there is variability in the costs from complex to complex.
After checking it appears that the subsidy will increase the cost for rent. One of the problems, as explained to me, when public subsidies are utilized , students typically don’t qualify for the affordable units they are subsidizing. So at Sterling for example, there is an external subsidy, but the people living in the affordable units won’t be students.
David: Just to clarify, you’re suggesting that developers will “give renters a break” (and will offer rent below market-rate levels), if they’re not required to include Affordable housing.
Forgive me, if I have trouble believing that.
You’re also suggesting that renters “consider” developers’ costs, when comparing the rents at different complexes.
I have trouble believing that, as well.
And finally, you might also be suggesting that renters don’t at least consider less-expensive, comparable units in surrounding locations.
I can tell you for a fact that they do, and then the cost of commuting becomes a significant factor.
If you read my most recent post, I’m not suggesting that at all.
Nope. They might hope to increase the rents, but the market will determine whether or not they can. Renters will choose to live elsewhere (including possibly out-of-town), if a complex is significantly over-priced.
In general, developers/owners will try to extract the highest rent possible, while still keeping their vacancies low. (Regardless of the developers’ costs.)
If costs exceed expected rents, then the proposal would not be pursued.
Ron:
David:
You are wrong, Ron.
As long as you say so, it must be true. (Especially since David “checked” this with someone.) 🙂
Makes sense, as long as you ignore how market-rate rents are established everywhere in the world. (Even for units that were constructed long ago, when costs were much lower.)
Ron: “Makes sense, as long as you ignore how market-rate rents are established everywhere in the world. (Even for units that were constructed long ago, when costs were much lower.)”
Reading what Don Shor wrote and you wrote, it appears you are quite ignorant about rental markets.
Landlords of new and used rental properties can target which ever market segment they want to. They can even over-price their units for a given location by including amenities. The cost of developer-subsidized units will just cause the developer to shift to a higher-cost target market strategy for the remaining units. And in Davis, since all markets lack adequate housing, he will get it. He might need to add some granite and stainless appliances; but these are additional fixed costs that are going to be required to pencil out the long-term cash flow and cap-rate need of the project due to the added costs for the subsidized units.
Don is 100% correct here that the costs will just be passed on in higher rents for the non-subsidized units. It will result in the other units going up-market.
They can try.
Maybe. In any case, it seems like you’re arguing that there’s a demand for higher-priced, amenity-rich student rentals (leased “by-the-bed”, or “by-the-room”), which would then be satisfied. (If that “need” is not met, then what’s your theory at that point?)
Unless developers “opened their books” for public inspection, we’ll never know what costs they can “eat” (without passing them on to renters). Note that I’m not suggesting that they do so, perhaps unless they’re trying to claim/convince someone that their costs must be reduced.
Davis is not a “closed market”. There are nearby communities which “compete” with Davis rentals.
Which is why we have no vacancy and students live in substandard conditions.
David: Your comment has no relationship to the conversation, above.
Also, the city has now implemented a program to address substandard conditions.
The larger problem (a failure to arrive at a permanent, enforceable agreement between the city and UCD) continues.
My comment is in response to this: “Davis is not a “closed market”. There are nearby communities which “compete” with Davis rentals.”
the actions of renters do not bare that comment out.
David: Seems like Don disagrees with you:
Side note: Commuting costs vary, depending upon whether or not one already has a car, parking costs, and/or other commuting choices available.
Note that I’m not suggesting this as a solution, especially for students. But, it is a reality, and no doubt does help to keep prices in check within Davis.
On-campus housing is the only location which doesn’t require a commute through town to reach campus.
Unless the city arrives at an “agreement” with UCD, this problem will never be permanently solved. (And, non-student renters who don’t live in Affordable housing will continue to be pushed out of Davis.)
As a side note, I suspect that those with cars are exactly the types of students that would consider housing outside of Davis. (Especially if there’s a charge to park cars at an apartment complex.)
“whether they are actually paying more because of the subsidy or whether the subsidy is being born in other ways.”
What other ways come to mind for you ?
That would be “charity” from property owners, or “charity” from taxpayers taxing themselves (or via the State or Fed governments) to provide the $… or a combination of the three…
Some phrase “charity” as “social justice”… at the end of the day, they are extremely alike… individuals do ‘charity’, folk like to compel others to do ‘social justice’… other than that, still, same/same…