Sunday Commentary: The Current System IS Broken – Hence the Housing Crisis

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Davis, CA – Yesterday the Vanguard ran an article on the city’s proposed inclusionary rental housing guidelines.  I was already kind of churning these thoughts in my head before I saw some of the comments.

As I noted yesterday: The guidelines set a “per-unit in-lieu fee amount of $608,000.”  Moreover, as city staff notes, “This amount is based on the total cost to build an affordable unit in Davis, using the cost per unit from the most recent all-affordable project built in Davis.”

That amount falls below the $708,000 statewide average cost found by the Terner Center when looking at new construction for affordable units.

“As a fee, the City cannot charge more than the actual costs,” staff notes, adding, “This fee is intended to be adopted now and then updated with the City’s master fee schedule annually, with updates based on the California Construction Cost Increase each July 1. This will ensure the fee stays relevant to market costs and conditions.”

The cost of building housing is absurd and the cost of building just one unit of affordable housing is even worse.  That’s one big reason we have a housing crisis in California—and increasingly nationwide.

One commenter noted: “$600,000 to build an affordable unit? No wonder there is a shortage.”

Another said: “Proof that the current system is broken.

Indeed.  The current system IS broken.  That’s why we have a housing crisis.

It’s also why a lot of the recent proposals locally have looked into things like down payment assistance and repurposing existing housing (or even structures) as affordable housing.

It is too expensive to build new housing from scratch.

Under the existing system, the best we can perhaps do is siphon off 15 percent of new housing as affordable.  Even cranking that number up to 20 percent, as the state has attempted to do in builder’s remedy projects, has proven very difficult.

In my view, trying to solve affordable housing at the project level or even the community level is probably a fool’s errand.  I don’t blame the city for putting forth a proposal here that clearly is not sufficient—they can only do so much.

And even if the city pulls money from Measure Q funds and puts it toward the affordable housing fund, it’s going to be relatively small in the way of impact—which is why things like down payment assistance and repurposing will come into play.

There is more that we can do regionally and at the state level.

One option would be for the Governor to back a new RDA with an increment tax component.  We have seen several efforts to introduce legislation including from our own Assemblymember Cecilia Aguiar-Curry.  None of them have gained any traction.

We also saw a statewide initiative to lower the threshold on bond initiatives for affordable housing and homeless services to 55 percent—that fell short.

The effort I was most interested in was a housing bond that would have put about $20 billion into a general obligation bond measure for the production and preservation of affordable housing in all nine Bay Area counties.  But it was withdrawn before going to the voters.

The decision was met with disappointment from housing advocates.

“We are deeply disappointed that this incredibly important affordable housing bond will not be moving forward,” said Ali Sapirman, Organizer and Policy Associate with the Housing Action Coalition. “The Bay Area suffers from one of the worst housing crises in the country, and has become deeply unaffordable for working and middle class people and families. We also face a severe homelessness crisis, with people in every Bay Area county living on the streets without access to shelter and safety. Regional Measure 4 would have created tens of thousands of affordable housing units, providing safe, stable housing for the Bay Area’s most vulnerable residents.”

Sapirman added, “Even amidst budget shortfalls, affordable housing must be a top priority, or we will see thousands in our community continue to face housing insecurity or be forced to leave the Bay Area entirely. Every Bay Area resident deserves an affordable place to live, and this housing bond would’ve helped make that happen.”

Senator Scott Wiener called the decision to delay the bond “extremely disappointing.”

“The Bay Area’s housing crisis is severe, and we desperately need significant investments to fund new affordable housing,” Senator Wiener said.

“In addition to affordable housing funding, we also need to shore up Bay Area public transportation systems to modernize and integrate them and to avoid devastating service cuts,” the Senator explained.  “We’ve worked for several years toward a 2026 ballot measure to modernize, integrate, and fund public transportation, in addition to funding our roads.”

The Senator warned, “Without action, major Bay Area transit systems, including Muni, BART, and Caltrain, will begin cutting service in 2026. That would be devastating for the Bay Area and would lead to increased traffic congestion, increased carbon emissions, and a huge number of residents unable to get to work, school, or other important destinations. I’ll continue working with stakeholders across the region to bring forward a measure to provide sustainable transportation funding at the ballot in 2026.”

But the effort needs more muscle behind it.  Clearly, the Bay Area regional effort would have created real money, but it needed some big hitter support.

Joe Garofoli of the San Francisco Chronicle noted this week, “Gov. Gavin Newsom and San Francisco Mayor-elect Daniel Lurie both must show voters that they can actually make changes that improve people’s lives — and building housing is at the top of the list.”

“More than 1 in 4 Californians (26%) say they worry every day about the cost of housing, according to a December Public Policy Institute of California survey. Four in 10 people making less than $40,000 annually say they worry about it daily.,” he adds.  “Yet, California has made little progress toward building more housing and is doing so far slower than Newsom promised. “

“The original sin in this state is affordability, and the lack of urgency and delays that hold back housing. We’re turning up the heat on local communities to fix the imbalance of supply and demand,” said Bob Salladay, Newsom’s senior adviser for communications.

One area where Newsom can make a difference, since he is not mayor of 478 cities, is to find the funding to make affordable housing—affordable to build.

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