Recently, a 128 unit downtown San Mateo apartment proposal was approved by the Planning Commission. The project description says it will include 20 "affordable" below-market-rate units, half for very low-income brackets and the other half for moderate-income households. As is usual in these developer descriptions, the inclusion of BMR units is touted as a significant contribution toward the city's meeting their State mandated Regional Housing Needs Assessment for affordable units, but the number of units is minimal in relation to the overall need, and the actual amount of rent for each level of affordability is not spelled out.
This particular project is not unique. There are many similar multifamily apartment projects under construction or in the pipeline for almost every city on the peninsula where BMR units are defined by a State and County formula that in my opinion is deceptive. Let me explain.
"Affordable" housing on the peninsula today is generally defined by cities and developers as a percent of Area Median Income, not in terms of real dollars and cents. So here are the latest "official" "affordability" numbers translated into real dollars.
According to San Mateo County, to qualify for "affordable" housing, the annual income for an "extremely low income" family of four must not exceed $58,000. For "very-low income," $97,900, for "low income" $154,700, and for "moderate" income $223,900 annually.
In what rational world, is $154,700 considered "low income"? In the real world, these numbers make no sense. These numbers are based on an AMI in the county of $185,700 annually for a family of four. This may have made sense once upon a time, but the demographics of Bay Area cities has changed dramatically over the past twenty years. Today, the typical household is more likely to be a single person, a couple with no children, a couple with one child, or a single person with one or two children. A family of four is becoming a rarity. Also, since the basic income figure is based on a median, it means that 50% of home seekers today make well below AMI annually, and it is this 50% below median that needs "affordable" housing the most.
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For example, if a family (whether one person or four) makes $80,000 per year, the rule of thumb is that they should not spend more than 33% of their income on housing including mortgage and insurance. So, 33% of $80,000 is $26,400 per year divided by 12 months = $2,200 maximum per month mortgage payment or rent to be "affordable." Where can one find rent for $2,200 per month on the Peninsula today? Similarly, the true "affordable" rent for a family making $58,000 = $1,595.
Clearly, there is a disconnect between the level of affordability that cities use to subsidize "affordable" housing today and the 33% rule of thumb. The affordability formulas today are similar to what environmentalists call "green washing" when a company claims to be green while continuing to despoil the environment. To claim that $154,700 is "affordable" to low-income home seekers is just a way to minimize the reality that lower-income families face everyday — whether to pay the rent or pay the utility bill, to pay the rent or cutback on food or clothing, to pay the rent or forgo health insurance. In short, our current affordability criteria is "affordability washing" (to coin a term) with little relationship with real world economics.
If the state and cities are really serious about reducing the cost of housing, especially for lower-income families, they need to come up with more creative solutions to the problem than what they are doing now. I'd especially like to see the large high-tech/AI companies allocate some resources to this issue. They have added much to the affluence of the Bay Area, but have also benefited from the support and infrastructure of the communities where they are located.
It's time to give back by suggesting both solutions and realistic financing options. Where are the creative thinkers of today?
David Crabbe is an architect who lives and works in San Carlos.
Thanks for your guest perspective, Mr. Crabbe, but again, you’re not addressing the root cause of “affordable” housing. The fact that “affordable” housing (for any income level) cannot be built affordably and must be subsidized by either government and/or other buyers. We also need to reduce the costs of developing and building housing. How can builders make the numbers work out when builders must adhere to installing mandatory all electric appliances, mandatory electric chargers for folks who don’t own electric cars, low-water or no-water toilets, etc.? Builders aren’t going to throw in those “features” for free and will pass on the cost to homebuyers. I’d recommend a look at the Terner Center for Housing Innovation, UC Berkeley website, where you’ll see a number of research papers. Of note, and written several years ago, are papers on the cost of housing development in seven CA cities and residential impact fees in CA, among many other housing articles. It's safe to assume fees have gone up since then.
Folks can complain about affordable housing until the cows come home (and some have for several years) but government needs to make progress in reducing development costs and reducing or eliminating impact fees. We also need to reduce or eliminate nanny regulations and guidelines. If additional building mandates and fees continue to increase, nothing will change and it’ll only get worse. Keep your guest perspective on hand and submit it for reprint next year, and the next… Rinse and repeat.
I think all of this can be done and still complement Mr. Crabbe's vision. Yes, there are many unnecessary regulations, but erasing those alone will not solve the problem at hand. I think any housing situation where people cannot follow the 33% rule is one ridden with problems... greedy landlords and a bloated regulatory scheme need to be dealt with all the same.
nicholas - "greedy landlords"? A landlord is by definition not a benevolent society. He or she will collect what the market will bear. Actually, in many cases they lose on the rent but hope that equity increases and tax benefits will make up for it. I agree with the bloated regulatory schemes. It appears that the mayor of SF is finally looking into it although it may be too late for some developers that gave up some time ago to build in this area.
You say, nicholasdobbs, that “there are many unnecessary regulations but erasing those alone will not solve the problem at hand.” I’d say removing unnecessary regulations and reducing or eliminating impact fees will solve most of the problem. As I remarked to Mr. Crabbe, I’d recommend you look at the Terner Center for Housing Innovation, UC Berkeley website for how much the cost of housing development has increased. Developers will not develop if costs don’t pencil out. BTW, what other options are there if governments won’t remove unnecessary regulations or reduce or eliminate impact fees?
As for the 33% rule, here’s a solution. For those looking to buy, they only need to save, beg, or borrow enough for a 50% or whatever down payment is required so they fall within the 33% mortgage payment rule of thumb. Easy peasy. For those looking to rent, they only need to save, beg, or borrow enough so they’ll have extra funds so they’ll fall within the 33% rent payment rule of thumb for say, a year or two. And then as needed, beg or borrow more money, as needed. Easy peasy. BTW, there’s no law forcing anyone to buy a home or live in the area. They’re free to leave, as hundreds of thousands have done. And now, more billionaires.
David - you are making a strong argument for just dumping the entire 'affordable' housing concoction. Social engineering has always led to unintended consequences. We should just leave the market drive the appropriate construction for all income levels. Once the supply is unencumbered by the myriad regulations and needless nanny involvement, demand will find its equilibrium. We need to go back to the American way; build, build, and undo this silly notion of having bureaucrats, with ulterior motives, determine how and where housing should be built.
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(8) comments
Thanks for your guest perspective, Mr. Crabbe, but again, you’re not addressing the root cause of “affordable” housing. The fact that “affordable” housing (for any income level) cannot be built affordably and must be subsidized by either government and/or other buyers. We also need to reduce the costs of developing and building housing. How can builders make the numbers work out when builders must adhere to installing mandatory all electric appliances, mandatory electric chargers for folks who don’t own electric cars, low-water or no-water toilets, etc.? Builders aren’t going to throw in those “features” for free and will pass on the cost to homebuyers. I’d recommend a look at the Terner Center for Housing Innovation, UC Berkeley website, where you’ll see a number of research papers. Of note, and written several years ago, are papers on the cost of housing development in seven CA cities and residential impact fees in CA, among many other housing articles. It's safe to assume fees have gone up since then.
Folks can complain about affordable housing until the cows come home (and some have for several years) but government needs to make progress in reducing development costs and reducing or eliminating impact fees. We also need to reduce or eliminate nanny regulations and guidelines. If additional building mandates and fees continue to increase, nothing will change and it’ll only get worse. Keep your guest perspective on hand and submit it for reprint next year, and the next… Rinse and repeat.
I think all of this can be done and still complement Mr. Crabbe's vision. Yes, there are many unnecessary regulations, but erasing those alone will not solve the problem at hand. I think any housing situation where people cannot follow the 33% rule is one ridden with problems... greedy landlords and a bloated regulatory scheme need to be dealt with all the same.
nicholas - "greedy landlords"? A landlord is by definition not a benevolent society. He or she will collect what the market will bear. Actually, in many cases they lose on the rent but hope that equity increases and tax benefits will make up for it. I agree with the bloated regulatory schemes. It appears that the mayor of SF is finally looking into it although it may be too late for some developers that gave up some time ago to build in this area.
You say, nicholasdobbs, that “there are many unnecessary regulations but erasing those alone will not solve the problem at hand.” I’d say removing unnecessary regulations and reducing or eliminating impact fees will solve most of the problem. As I remarked to Mr. Crabbe, I’d recommend you look at the Terner Center for Housing Innovation, UC Berkeley website for how much the cost of housing development has increased. Developers will not develop if costs don’t pencil out. BTW, what other options are there if governments won’t remove unnecessary regulations or reduce or eliminate impact fees?
As for the 33% rule, here’s a solution. For those looking to buy, they only need to save, beg, or borrow enough for a 50% or whatever down payment is required so they fall within the 33% mortgage payment rule of thumb. Easy peasy. For those looking to rent, they only need to save, beg, or borrow enough so they’ll have extra funds so they’ll fall within the 33% rent payment rule of thumb for say, a year or two. And then as needed, beg or borrow more money, as needed. Easy peasy. BTW, there’s no law forcing anyone to buy a home or live in the area. They’re free to leave, as hundreds of thousands have done. And now, more billionaires.
David - you are making a strong argument for just dumping the entire 'affordable' housing concoction. Social engineering has always led to unintended consequences. We should just leave the market drive the appropriate construction for all income levels. Once the supply is unencumbered by the myriad regulations and needless nanny involvement, demand will find its equilibrium. We need to go back to the American way; build, build, and undo this silly notion of having bureaucrats, with ulterior motives, determine how and where housing should be built.
Ever read Hayek or Friedman? :)
No, should I?
Has Salma Hayek or Peter Friedman written a book on housing affordability? Color me impressed.
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