APB Archives

HOUSING TRUST FUND (Dec 03, 03)

HOUSING TRUST FUND, DEPENDING ON THE CONTRIBUTIONS OF OTHERS, HA

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By KEVIN CHRISTENSEN, The Daily Transcript November 26, 2003
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As a result of a series of debilitating funding cuts, San Diego's Housing Trust Fund has become virtually powerless to perform its basic function of supplying housing for the city's low-income population. The Housing Trust Fund, founded in 1992, was supposed to receive $15 million annually from five sources.
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Snce its inception, however, the fund has received more than $6.5 million annually only twice: its first year and again in 1998. For the other nine years, the fund has been allocated more than $5 million just five times. Exploding regional housing prices continue to make building affordable unit production increasingly difficult without help from municipalities, said Tom Scott, executive director of the San Diego Housing Federation. "The cost of building and operating an apartment building these days are such that you cannot do it without subsidy," Scott said.
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Affordable housing providers build units that cost less and offer fewer special amenities to specifically serve the lower income market. To build a 60- to 80-unit apartment complex today cost anywhere between $9 million and $12.8 million in the current market. The buildings are paid for through the acquisition of a variety of low interest loans and grants that are paid off using the rents collected from tenants, Scott said. Because rents are lowered to serve lower income needs, that payment in not enough to repay the full amount of the loans, Scott said.
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"With the current rental rates for affordable housing, there is a 60 to 70 percent financing gap in paying back loans," Scott said. A portion of the
construction loans are paid off using state and federal funding sources including tax exempt bonds, low income housing tax credits and grants. The remaining portion of the construction costs must be paid using government funding, Scott said.
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For-profit builders have also stopped production of affordable units because low rent cannot balance the building costs, said Jack McGrory, current chairman of Price Legacy Corp. and former San Diego city manager. "Most investors won't look at one of these deals," he said.
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To date, the Housing Trust Fund has assisted with the development, rehab, or purchase of more than 6,200 units and the support of an annual average of 452 transitional beds. This is not fulfilling the city's need according to a June 2003 report issued by the Affordable Housing Task Force. The report states that 38 percent of the city households earn less than 80 percent of the average median income and qualify for affordable housing. Between 1998 and 2002 an average of 6,313 units were built annually, only 985 units or approximately 16 percent of the units built were affordably priced - leaving a high demand, according to the report.
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According to the city's municipal code, the Housing Trust Fund should receive money from five separate sources including commercial development linkage fees, revenues from the transient occupancy tax, in-lieu fees from new home production, revenue received from the city's shared equity programs, and any additional appropriations from the city. Only three of those sources have ever been tapped and the fund is currently working off just two, said Betsy Morris, CEO of the San Diego Housing Commission, which oversees the Housing Trust Fund.
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Meanwhile, California's other major metropolitan areas are making steps in their procurement of funding for affordable housing. The city of Los Angeles started its trust fund in 2000 and after just three years has boosted its revenue to more than $55 million annually, said Ralph Esparza, assistant general manager for the Los Angeles Housing Department. "The reason that we've been able to get the increase is creative financing," he said. Funding sources include the city's general fund, various bond refunding proceeds, an increase in tax increment financing, Community Block Development grants, and money from a department of energy and water program, Esparza said.
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In its first year, the San Diego Housing Trust Fund collected more than $7.3 million, a promising start but still less than half its proposed annual allotment. However, when the recession hit the city, those funds were redirected, McGrory said. "The money was originally given to the Housing Trust Fund, but by the beginning of 1993, the San Diego economy cratered and anything that could go into the general fund to help maintain basic city services was redirec-ted," McGrory said. The trust fund was left struggling, bringing in an average of $3.9 million from 1993 to 1996.
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The funding was then cut again in 1997 when the City Council reduced the rate of housing impact fees going into the trust fund by 50 percent, cutting annual budget to $1.9 million. When asked why the funding hasn't been restored, McGrory said, "The fact was that new programs were created and funds that were diverted on those. But when the times got better, the council spent the money on other things and didn't see the affordable housing as something that deserved the funds."
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The council is trying to find some new sources of money, but the trust fund is competing with other services including libraries, parks and infrastructure, said Bobbie Christensen, San Diego Housing Commission spokeswoman. "This is a horrible time for municipal government trying to fund new things," she said.
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This shortage of funds has left the housing commission unable to build any substantial projects, Christensen said. The commission largely uses the trust fund monies to leverage equal funding grants from the state and local levels, but these are competitive grants that other cities apply for and San Diego is not always the winner, Christensen said. The inconsistency has stripped the commission's ability to invest in larger projects, Morris said.
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"Because of the fund's lack of size and lack of predictably it has less of an impact that is was supposed to have and it plays more of a supplemental role," Morris said. For example, last year the commission had about $3 million in trust fund money invested in program activities. Only $465,000 went in to supplementing the creation of new rental developments, Morris said. "We did a little bit of supplemental funding for supplement housing and transitional housing and the little left went to home buyer and rehabilitation project," Morris said.
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Affordable housing providers warn that if funding measures are not identified, the fund will continue as an impotent institution. "To have some sort of sustainable standards of units, you've got to have multimillion dollars set aside for this, if they are serious about it," said Matthew Jumper, president of the San Diego InterFaith Housing Foundation. "If in fact, there is no political will, it is going to limp along like it is right now." Christensen notes that one of the fund's two sources of revenue, the industrial development and commercial linkage fee, is producing very little now because of the slow economy. "We have been hampered recently by the reduced amount of construction because the linkage fee is also dependent on what is being built," she said. "We haven't had a lot of office and retail construction."
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One of the funding sources, the in-lieu fees paid on new homes as part of the city's inclusionary housing policy, is paid solely by the construction industry, said Matt Adams, director of governmental affairs for the San Diego Building Industry Association. "The building industry has therefore been the primary financier of the Housing Trust Fund - that's not how it was designed," Adams said.
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Jumper warns of the danger of placing the burden of paying for funds on one segment of the business world. "To fully dump the problem squarely on their shoulders only, we are making an enemy when we should be creating an ally with the building industry," he said. "It should include all kinds of sources of revenue, it has to be spread out because it hits all segments of the society in San Diego." The affordable housing report called for increasing the percentage of the commercial linkage fee that the Housing Trust Fund receives to its original level of $7 million per year.
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