top of page
  • Writer's pictureD Lane

A year off from blogging... but not from affordable housing and homelessness work. (Yes- I have "answers" !!!)

I've been fully engaged with the usual array of homelessness and affordable housing issues. But I've been very lazy when it comes to writing about them here.

However, May is Affordable Housing Month and it's time to start writing about these issues again!

The first thing to say is: there are 21 events going on locally this month for learning and engagement on housing issues. Here's the list of events. Please attend some!

In honor of affordable housing month, I have also been working on a "frequently asked questions" document addressing some important basic information on affordable housing. People ask me questions all the time about affordable housing issues and concerns. I've put something together that I hope will be useful for curious people who want to understand at least some of the details about affordable housing.

Here goes... as usual, I went a bit long but you can skip around to the questions that interest you.

Answering some key questions about affordable housing…


How is the “affordable” in affordable housing defined?

The Federal government uses this key concept: housing is affordable to a household if the rent or mortgage expense is 30 percent or less of the household’s income.  In some affordable housing programs, the rent is based precisely on this 30 percent benchmark and in others it is a target that uses the typical income levels of households below the median income of their community to keep the rent level at approximately 30 percent of household income.


Is the rent in affordable rental housing really affordable?

Because of the 30 percent target, “low-income housing” is affordable to households that earn 60 to 80 percent of median income. “Very low-income housing” has even lower rent levels that are affordable to households that earn 30 to 60 percent of median income. And “Extremely low-income housing” has the lowest rents—affordable to households with the lowest of incomes.  The low rent levels are deed restricted – typically for 55 years and sometimes longer.


How difficult is it to build affordable housing?

From the initial concept of a project to occupancy typically takes 4 to 7 years (and in some cases longer). Complex projects often stretch out even longer.  Here some of the major time-consuming steps:

  •  Identify funding for site acquisition.

  • Site purchase/acquisition.

  • Acquire funds for initial design work.

  • Work with local government planning department on permitting requirement.

  • Design/site planning work.

  • Site studies on items such as drainage and geology and environmental hazards.

  • Extra work to mitigate problems identified by site studies.

  • Modify design to meet challenges presented by planners and residents.

  • Find more funds to update plans.

  • Submit plans for approval.

  • Public process for project approval.

  • Acquire funds to build and operate the housing project.

  • Qualify for and arrange for a “construction loan”  (a huge cash infusion is needed while building – while no revenue is coming in from residents)

  • Affordable housing projects typically need 4 to 6 different funding sources: grants from various gov't agencies, tax credit allocations, housing choice vouchers, private funding. Each one of these requires a separate application process and months of waiting.

  • Architect and engineer create building plan documents.

  • Submit for review by city building officials and make modifications.

  • Find additional funding to adapt to new building requirements from city officials

  • Engage services of a building contractor.

  • Two-year typical construction time… with weather, labor, and supply chain delays commonly occurring

  • Engage services of a building management team

  • Screen potential tenants.

  • Move-in process


Why is progress on affordable housing so slow?

In addition to the lengthy timeline described above, these can be key factors:

  • Limited available sites

  • Funding uncertainty and limited funds available in relation to need

  • Community concerns/objections related to project proposals

  • Slow and cumbersome regulatory processes


Who qualifies to live in affordable housing?

Most affordable housing has a local preference—meaning the tenant either lives or works locally. All must go through a screening process to verify lower income status. Some housing is built for targeted populations: seniors, farmworkers, special health needs—and the screening process verifies the specific status requirement is met. When federal funds are involved in the project, undocumented immigrants do not qualify.


What is a Housing Choice Voucher (sometimes called a Section 8 Voucher)?  Each County’s Housing Authority is authorized to provide a certain number of rent subsidy vouchers to low-income households in their county.  These vouchers, for those fortunate to qualify for one after a wait of many years on a long waiting list, ensure that the household will only pay 30 percent of their income for rent -- WITH THE HOUSING AUTHORITY COVERING THE DIFFERENCE between the amount the household is paying and the fair market rate rent the landlord is charging. (The funds come from the federal government.)


Though a less common use of this kind of voucher, a portion of these vouchers can be allocated to new affordable apartment projects. This means that the subsidy voucher stays with the apartment rather than with the household and continues to maintain that 30 percent rent level.


What is the relationship between affordable housing and market-rate housing?

There are two key relationships to consider here. One is “inclusionary housing.” (see below for more details.)  Inclusionary housing is a certain percentage of apartments/units that are set aside for lower income residents. In other words, these inclusionary units must be rented at an affordable rate (as described above).  Though there is quite a range throughout California (each city sets its own rate), the inclusionary rates in California are most commonly in the 10 to 20 percent range. (Some jurisdictions do not have inclusionary requirements at all.)  Many jurisdictions allow some kinds of exceptions to the percentage of inclusionary apartments, but the exceptions still require concrete steps by the housing developer to create affordable housing units.


The other relationship goes to the large question of whether or not increasing the supply of rental housing of all types puts downward pressure on rents. It appears that most economists believe that this does help with housing affordability; however, many social scientists and critics believe otherwise.  For deeper perspectives on this, here is a good link. And a video link here.


Also worth noting: Market rate apartments are the primary source of housing for low-income households with a housing choice voucher. Many private landlords (though perhaps not enough) accept voucher-holders because they know the rent is guaranteed by the Housing Authority.


Why is rental housing in Santa Cruz so expensive?

Of course, a whole book could be written exploring this question.  Some of the key ideas that are discussed are: 1) we haven’t built enough housing for the population growth we’ve had; 2) higher income people from the Silicon Valley have bid up the price of housing; 3) the University hasn’t built enough housing for its students and the housing UCSC has high rents; 4) there are so many impediments to building housing in this area that it is very expensive to build here; 5) because of our desirable setting/environment land costs are very high; 6) Santa Cruz has been zoned mostly for single family home ownership types of housing so there is a shortage of apartments.  Of course, all of these make some contribution to the problem but there is real disagreement about which are more significant.


A bit more detail on number 1: our County’s population grew  by about 80,000 in the past 40 years but we only allowed housing for about 60,000 people to be built.  Similarly, in the City of Santa Cruz, the population grew by about 22,500 but we only allowed housing for about 15,000 people to be built.  These gaps clearly left us with a big housing shortage.


What are the best locations for affordable housing?

A few factors useful to look at are:

  • Convenience of non-car transportation.  If a household can get by without a car, living is more affordable.  Also, less parking built into housing means lower building costs.

  • Proximity to employment centers.  Again, less driving and less parking needed.

  • Places where higher density, taller buildings can be best accommodated.  Higher density and more height mean savings in terms of land costs. (more apartments without more land)  Since community resistance can be an impediment to getting housing built, building can happen faster (and therefore more cheaply) in more urbanized locations away from neighborhood resistance.

  • An area close to a variety of amenities like grocery stores, medical clinics, entertainment, public schools and civic centers


What are the state requirements related to creating affordable housing?

There’s a fairly complex statewide and regional process in California that requires each city and county to designate a specific substantial number of sites for the construction of housing for various income levels.  (This is generally referred to as the Regional Housing Needs Allocation—RHNA—which is often pronounced “ree-nuh”) Once the number is set, the city or county must demonstrate to state regulators that allocated the number of sites have been designated AND that the city or county will shape a local regulatory process for housing that facilitates getting housing built on those sites.  If the state finds that the City or County is not meeting state requirements, state laws that further reduce local control of housing development will kick in.


What are some key state laws related to affordable housing?

The “Builders Remedy” allows many housing projects to move forward without local approval – if the local government is not in compliance with certain state rules.

AB 2097 allows some housing developments to move ahead without on-site parking when the project is near a public transit system.

SB 35 provides for speedier approval for housing projects in cities that have fallen behind in meeting their housing targets

There are two relatively new laws that remove barriers to building housing on land of faith-based organizations and on underutilized land currently zoned for commercial uses.

Density bonus law allows builders of housing projects to exceed local height and density limits – when the project meets certain standards of inclusion of low-income apartments (see more on this below)


Who is responsible for dealing with the affordable housing challenge?

We all have a role as members of a community… in supporting efforts to meet our housing needs and paying taxes that help fund affordable housing. 

The federal government’s role is mainly in the area of funding. It also has a role in enforcing anti-discrimination laws to remove some impediments to building lower income housing.

The state’s role is particularly large. It has a regulatory role (both state housing laws and building codes). And it has a significant funding role.

Local governments can both facilitate and hinder housing development.  They can either loosen regulations and zoning or not. They can also contribute public land and public funds to facilitate specific projects.

Community members also have a responsibility by recognizing the human need, by calling out the injustices of caused by housing shortages, by saying YES to housing, and by supporting policies and elected officials that make a difference.


Why has the state come to take such a strong (some say “heavy-handed”) approach on housing?

The simple answer is that almost the entire state was failing to meet the housing needs of its residents—both housing affordability and availability were widely recognized as a problem.  The state’s housing troubles were seen as 1) leading to a high level of homelessness, 2) a transportation problem (especially in terms of long commutes for workers who couldn’t find housing near their jobs), 3) a workforce problem (employers in some areas could not find enough workers because of the housing shortage in those employers’ communities), and  4) the housing shortage was driving up the cost of housing for everyone and causing much displacement.


What about water?

Because we have experienced droughts and water restrictions several times in recent decades, water supply questions remain an important issue for our community.  That said, there is significant evidence that additional residential growth will not lead to new strain on our limited water supply. This article explains in detail..

The key points in this article are 1) overall water use has decreased in our community even as housing units have been added; 2) new building standards and approaches are saving lots of water; 3) drought is our real problem (rather than growth)… whether we add housing or not, the impact of a drought on the local community will be very similar. It’s also important to note that the city is making incremental gains in increasing our local water supply and its reliability.


Funding sources for development of affordable housing?

Affordable housing for lower income households relies primarily on public funds or public tax subsidies.  At the federal level, Low Income Housing Tax Credits are the number one funding source (Complicated system where private for-profit enterprises give money to low-income housing projects in exchange for substantial federal income tax credits. The other key federal source is Housing Choice Vouchers (also known as Section 8 vouchers). As mentioned above, they can also be a source of financial support for construction by guaranteeing a rent revenue stream for the builder.

The State of California has several grant programs for a variety of affordable housing types. These grants are highly sought after and very competitive.

Local governments often have affordable housing funds—sometimes from voter-approved funding streams and sometimes from local fees collected specifically for housing. 


How does inclusionary housing work?

As noted above, inclusionary housing is a set percentage of affordable housing that market-rate developers (builders of apartments that can command higher rents) are required to include in their projects.  The basic idea is that, since the developer is making a profit on the market rate apartments, she/he can afford to include a modest number of apartments that don’t make any profit (actually lose money) and still make a decent overall profit on the entire project.  The tricky part in this: there is a point when too many money-losing low-income apartments make the overall project not at all profitable. When that percentage gets too high, housing projects don’t pencil out so they are not built at all. This is why the “inclusionary” percentage is fought about in local politics: there is sharp disagreement between people on the question of what level is feasible for apartment builders.


To make this even more complicated, the state has “density bonus” rules that encourage developers to make their inclusionary apartments have extra low rent for the lowest income households. If the developer includes these extra low-income apartments, they are allowed to add extra market rate apartments to cover the cost of losing some additional money on the extra low-income apartments. This process changes the actual inclusionary percentage.


What the heck is “penciling” or “penciling out”? 

This is a term in the building industry referring to the financing of a project. If the cost and income calculations of a project (calculations formerly done with a pencil!) show that it will lose money or make so little money that it’s not worth the trouble, the project is said not to “pencil out.”  If a for-profit entity finds that project is too close to the no-profit mark, it will simply abandon the idea and not build. It’s also important to remember that banks finance housing construction—and if the bank says it doesn’t pencil out, there will be not financing from the bank.


 Feel free to get in touch if you see a needed correction or are looking for deeper information. (And thank you to Diana, Rafa, Sibley, Tim, and Linda for their input on this.)

59 views0 comments

Recent Posts

See All


bottom of page