BUILDING GREAT PLACES INVESTING IN PEOPLE PROVIDING HOUSING FOR ALL City Council Study Session
September 7, 2023
Kristen Clements
Interim Deputy Director
Kemit Mawakana
Division Manager
Josh Ishimatsu
Interim Division Manager
Emily Hislop
Division Manager
Affordable Housing Programs and Policies:
Production, Preservation
& Protection
Staff Presentation
Panel
• Moderator, Regina Celestin Williams, SV@Home
• Anil Babbar, California Apartment Association
• Stephen Lewis, California Rent Stabilization Network
• Chris Neale, The Core Companies
• Khanh Russo, San Francisco Foundations
• Cindy Wu, Local Initiatives Support Corporation
City Council Discussion/Q&A
Public Comment
29/7/2023
Agenda for today's study session
Who we serve
Residents, housing providers, property
owners, developers, partners with a focus on:
• The needs of Moderate- to
Extremely Low-Income residents
• Unhoused residents
39/7/2023
Our mission
Mission
To strengthen and build equitable communities
through housing and neighborhood investment
• Providing housing for ALL
• Investing in people
• Building great places
49/7/2023
Production
Constructing new, rent-
restricted affordable
housing
Preservation
Keeping housing
affordable and in sound
physical condition
Protection
Preventing displacement
for renters due to unjust
evictions or large rent
spikes
Housing stabilization in San José
Funding
Organizations with expertise
Supportive programs, policies & data
59/7/2023
Jobs added versus housing units added in U.S. metro
areas, 2005-2015
Extremely
Low-Income
Very
Low-Income Low-Income Moderate- Income
$0 - $38,070 $38,071 - $63,450 $63,451 - $101,520 $101,521 - $152,280 0 - 30% AMI 31 - 50% AMI 51 - 80% AMI 81 - 120% AMI
69/7/2023
Area Median Income (AMI) categories
(1-person household)
Typical Target cashier
Salary: $35,000/year
Typical San José
teacher salary:
$74,000/year
Retiree with only
SSI income in 2023:
$43,524/year
Full-time min. wage
salary in San José,
2023: $34,000/year
Salary needed to afford
average 1-BR rent in
San José: $96,680/year
Typical San José
registered nurse
salary: $117,000/year
79/7/2023
Income distribution by housing income categories
Source: 2019 5-year HUD Comprehensive Housing Affordability Strategy (CHAS) Data 57,400
households
43,120 42,640
31,455
150,500
0 20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
Extremely Low-
Income
Very Low-Income Low-Income 81% to 100% Area
Median Income
Over 100% Area
Median Income
Number of Households
44% of all households
89/7/2023
Rents rose while incomes for lower-income households
declined over the last 20 years in real terms
Data source: IPUMS USA | National Equity Atlas
-10% -9%
2%
17% 18%
-15%
-10%
-5%
0%
5%
10%
15%
20%
10th percentile 20th percentile 50th percentile 80th percentile 90th percentile Change in Earned Income for Full-Time Wage and Salary
Workers in San José, 2000-2019
99/7/2023
Why we need protections – rising rents
Average rent for 1-BR and 2-BR
units has increased 48% and 47%,
respectively, in 13 years
Q1 2010
$1,634
Q1 2023
$2,417
Q1 2010
$2,091
Q1 2023
$3,077
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
1st Qtr-
2010
1st Qtr-
2011
1st Qtr-
2012
1st Qtr-
2013
1st Qtr-
2014
1st Qtr-
2015
1st Qtr-
2016
1st Qtr-
2017
1st Qtr-
2018
1st Qtr-
2019
1st Qtr-
2020
1st Qtr-
2021
1st Qtr-
2022
1st Qtr-
2023
Effective Rents ($)
Average Rents in San José (adjusted for inflation),
2010-Present
1 BR 2 BR
109/7/2023
Rent burdens disproportionately weigh on certain
races/ethnicities in San José
1%
2%
1%
2%
2%
1%
1%
24%
22%
23%
20%
18%
29%
36%
23%
21%
32%
21%
23%
27%
18%
51%
56%
44%
57%
58%
43%
45%
A LL RENTER
HO U S EHO LD
S
W HIT E
A LO NE,
NO N- …
BLA CK O R
A F R ICA N-
A M ER ICA N…
A S IA N,
NO N-
HIS P A NIC
A M ER ICA N
IND IA N,
A LA S K A …
HIS P A NIC,
A NY RA CE
O T HER
Not Computed Housing Cost Burdened Severely Housing Cost Burdened Not Housing Cost Burdened Rent Burdened Households by Race and Ethnicity, 2019
119/7/2023
City’s affordable housing portfolio vs. existing need
Source: 2019 5-year CHAS data; City of San José portfolio 0 10,000
20,000
30,000
40,000
50,000
60,000
Extremely Low-Income Very Low-Income Low-Income 81% to 100% Area Median Income
Number of Households
All City households
City supported affordable housing
2,300 units
8,500
6,500
850
57k households
43k
43k
31k
129/7/2023
Production of new
affordable housing
Affordable Housing
Construction of new
rent-restricted housing
Inclusionary Housing
Includes affordable
homes within market-
rate development
Market-rate Housing
Creation of
development policies
for all housing
Kemit Mawakana
Division Manager, Residential Development Division
139/7/2023
Need for a local affordable housing production strategy Market-rate developers build projects
that are feasible
New market-rate development does
produce Inclusionary Housing units/fees.
Yet, it does not provide deep affordability
RHNA Goals & Housing Element establish
affordable housing targets
This Photo by Unknown Author is licensed under CC BY-NC 149/7/2023
Need for a local affordable housing production strategy • Main funding sources leave a finance gap
Traditional bank loan (debt) + tax credit equity + state subsidy ▪ Bank loans: covers on average 10-20% of capital stack ▪ Tax Credits: incentivize developers/investors, constitute 40-50% of capital funding ▪ State subsidies: covers on average 10-15% of capital stack Recent San José projects required 6-8 total funding sources Role of cities:
Financing the gap with local or county funds
159/7/2023
Capital stack for typical properties in three states,
2019
Source: Terner Center April 2021 Report: The Complexity of Financing Low-Income Housing Tax Credit Housing in the United States Gap
169/7/2023
Many parties involved in transactions
Housing
Production
team
Risk
Management
Loan
Administration
Inclusionary
Transportation/
Public Works
Planning /
Environmental
Building
Public
Works/ OEA
City’s
External
Partners
Developers
County of
Santa Clara
Lenders
HCD
Investors
Title Co.
City Attorney
179/7/2023
Affordable development approval process
City NOFA Awards
Announcement
Top scoring projects identified to
seek City Council approval
City Planning Entitlements
Permits issued by City Planning
team (includes SB 35 & AB 2162
Streamlined Ministerial Processes)
City Council Meeting
Awarded NOFA projects obtain
Council approval for City funding
CDLAC / TCAC
Application Submission
Tax-exempt bonds & tax credits
PROCESS
1 3
2 4
189/7/2023
Affordable development approval process (cont.)
CDLAC / TCAC Awards
Allocation awards announced
Performance Period/
Closing of Financing
Awarded projects must close on
financing within 180 days of
receiving CDLAC award
Construction Period
Construction starts within 30
days of finance closing. Generally,
1.5 to 2 years for construction
…CONTINUED
5 7
6 Lease-Up and Certificate of
Occupancy
Property managers need 3-6 months
to lease-up property after the
Certificate of Occupancy is issued
8 199/7/2023
Example of sources: Tamien Station Apartments
Source Construction
Amount
Permanent
Amount Entity Type Funding Type
Citibank Tax-Exempt Loan $66,100,000 $10,200,000 Private Loan Private Equity Investment $8,254,425 $46,775,073 Private Equity HCD (state) – Aff. Housing &
Sustainable Communities $0 $16,000,000 Public Loan
HCD (state) – Infill
Infrastructure Grant program $3,000,000 $3,000,000 Public Grant City of San José $17,250,000 $17,250,000 Public Loan County of Santa Clara $25,000,000 $25,000,000 Public Loan Total $119,604,425 $118,225,073
209/7/2023
Funding Sources for the City of San José
Funding sources to fill financing gap
• Measure E
• Low-Moderate Income Housing Asset Fund
• Inclusionary Housing Ordinance (In-lieu fees)
• Commercial Linkage Fees
• Affordable Housing Impact Fee
City issues Notices of Funding Availability for new construction annually
For every $1 of City money put into a development, other sources put in $5.50
Local challenge
Exhaustion of Santa Clara County Measure A funds
Economic Conditions
Rising interest rates, supply chain disruption →
increased cost of ALL development
State/Federal
Bottleneck for federal housing tax credits
219/7/2023
Challenges and solutions for affordable production
Image Source:
Enterprise Community
Partners
SOLUTIONS
Regional and state bond
measures
Federal bill to increase tax
credits and bond
allocation
229/7/2023 229/7/2023
Preservation of
existing housing
Support acquisition/
rehabilitation ecosystem
Ensure housing is
in good condition
Keeping housing
affordable
Josh Ishimatsu
Interim Division Manager, Policy Division
9/7/2023
In five years, Santa Clara County lost about half of its unsubsidized affordable homes
Source: Enterprise Community Partners, “Preserving Affordability, Preventing Displacement” SANTA
CLARA
COUNTY
23 San José loses affordability on rent stabilized homes as tenants turn over (via vacancy decontrol)
9/7/2023 24
259/7/2023
Why create an acquisition/rehabilitation practice?
Increases
number
of
restricted
affordable
homes
Enables
tenants to
stay in
their
homes
and
neighbor-
hoods
Is cost-
effective
and
relatively
fast
Fixes
condition
problems
and can
help
energy
efficiency
Supports
community
ownership
models
(community
land trusts)
269/7/2023
How does acquisition/rehabilitation work?
Building owner
ready to sell property
Acquisition loan from
nonprofit lender
Rehab/permanent
loans from public
agency(ies) +
permanent lender
(CDFI or bank)
Buyer
Newly deed-
restricted
affordable
property
Very limited funding available for acquisition/rehabilitation projects
Acquisition/rehabilitation projects are less likely to receive tax credit allocations
• So local/regional/state financing are larger share of capital stack Few organizations are both highly interested in and qualified to undertake acquisition/rehabilitation projects
Many renters at risk of displacement live in smaller buildings under 50 units – harder to finance and feasibly operate 9/7/2023
Challenges for acq/rehab practice in San José
27 9/7/2023
What we’re doing in San José
28 Partner with local public agencies
Report on preservation program development
Issue funding availability & award grants for capacity building Issue funding availability & award grants for acquisition/rehabilitation Quantify preservation needs
299/7/2023
Protections for
tenants
Fund Safety Net
Programs
Limit Rent SpikesSafe & Stable housing
Emily Hislop
Division Manager, Rent Stabilization Program
Prevent large spikes in rents that can displace renters Prevent unnecessary evictions
Require relocation assistance for no-fault evictions
Guarantee basic habitability and safety standards
Support safety-net programs
• Example: Countywide Homelessness Prevention System
309/7/2023
Types of protection policies
319/7/2023
Why we need protections – high rent burdens
San José
renter
households
48% of renter households are rent burdened
paying over 30% of their income on housing
22% of renter households are severely rent burdened,
paying over 50% of their income on housing
329/7/2023
Challenges for protecting more renters
0 100
200
300
400
500
600
FY 18-
19 Q1
Q2 Q3 Q4 FY 19-
20 Q1
Q2 Q3 Q4 FY 20-
21 Q1
Q2 Q3 Q4 FY 21-
22 Q1
Q2 Q3 Q4 FY 22-
23 Q1
Q2 Q3 Q4
Eviction Lawsuits Submitted to Housing Department for TPO Units All causes Nonpayment
COVID-19 Eviction Protections
Apartment Rent Ordinance (1979, rev. 2017)
Mobilehome Rent Ordinance (1985)
Tenant Protection Ordinance (2017)
Ellis Act Ordinance (2017)
Homelessness Prevention System (2019)
Eviction prevention programs (2020)
339/7/2023
What we are doing in San José
38,000 households rent stabilized
10,000 mobilehome spaces rent stabilized
86,000+ households with local just cause protections
3,500+ households stabilized by the Homelessness Prevention System
13.5K+ households stabilized by COVID-19 rent relief funds; $161M paid to housing providers
200+ evictions diverted during COVID-19 recovery; $3.3M paid to housing providers
349/7/2023
Impact
BUILDING GREAT PLACES INVESTING IN PEOPLE PROVIDING HOUSING FOR ALL City Council Study Session
September 7, 2023
Kristen Clements
Interim Deputy Director
Kemit Mawakana
Division Manager
Josh Ishimatsu
Interim Division Manager
Emily Hislop
Division Manager
Affordable Housing Programs and Policies:
Production, Preservation
& Protection