Issues: Affordable Housing

Housing trust fund offers solid base for affordable housing

By Hunter Johnson
June 1, 2005
San Diego Daily Transcript

Where will our children live? Our teachers, librarians, police and firemen? Our senior citizens? Economically disadvantaged families? If California housing prices continue rocketing up the way they have been for the past several years, these citizens of our state will find it harder and harder to secure nice places to live, work and play. Some -- perhaps many -- will simply not be able to find any decent housing they can afford.

California is facing an enormous housing affordability crisis that threatens our cherished lifestyle, peace of mind and economic well-being. The California Association of Realtors (CAR) reports that the percentage of households in California able to afford a median-priced home stood at 18 percent, a 3 percent decrease compared to the same period a year ago when the index was at 21 percent. Other reports put the affordability index at 11 percent.

Whether rental or for-sale, the rising cost of housing now greatly outpaces the earning power of many Californians, even professionals with advanced education and good jobs such as teachers and nurses.

Thirty years ago, a family earning 70 percent of the state's median income could afford to buy a home at the prevailing median cost in 1975. Today, the CAR says that to purchase a home at the current median statewide price of $488,600, a family must earn $113,920 a year, which is about 210 percent more than state's median income of $53,540. The affordability crisis reaches renters and would-be homebuyers alike. Today, an employee in a minimum wage job will need to work 126 hours a week just to rent a two-bedroom apartment.

In areas such as Orange County (where the median home price is about $576,000), the affordability situation has already reached the crisis stage. The county has, according to the Wall Street Journal, the dubious honor of having the fourthworst housing market in the United States for affordability.

According to Dr. Walter Hahn, an Orange County real estate economist, county housing prices will continue to increase at about 10 percent a year through this decade and beyond (no bubble is expected). Hahn predicts that by 2015, the median price of an existing single-family detached home in the county could be $1.5 million.

Access to quality housing, and especially homeownership, is a fundamental part of our culture and economy, and yet as evidenced by these figures, the dream of living in a nice home or apartment is slipping out of the reach of more and more people. As homes become increasingly expensive, so do rental units. California needs between 60,000 and 80,000 more housing units a year than are being produced by builders; the state has the fourth lowest homeownership record of any state in the United States.

The housing crisis is not being ignored by Californians. The cost of housing is, according to a survey by the Public Policy Institute of California, one of the biggest issues on the minds of state residents. More residents (55 percent) see the lack of affordable housing as a bigger issue than population growth (35 percent), lack of well-paying jobs (35 percent), or air pollution (30 percent).

But looking ahead, the situation only appears bleaker, and in some places such as Orange County, it's quickly getting much worse. One huge problem is state funding for building affordable housing that comes from Proposition 46, which voters passed in 2002, is running out. By 2007, the $2.1 billion fund will be exhausted and there are no other funding sources in sight.

It's an extremely tough problem for the state and affordable housing advocates to get their arms around, but a movement toward one possible solution is under way. With the leadership of the California Housing Consortium, Housing California and similar groups, there is a proposal afoot to establish an Affordable Housing Trust Fund that would, based on current timing, go before voters in November 2006.

Approval of this proposition would trigger the state legislature to establish a continuing funding source such as statewide real estate transfer fee or transient occupancy tax that would provide substantial money for affordable housing development ... in perpetuity.

Recent estimates indicate that the state needs to generate upward of $3 billion a year for the next 20 years to supply adequate affordable housing for families and individuals. According to current estimates, California's backlog of affordable housing inventory is more than 650,000 units, and the state needs to produce 52,000 units of affordable housing annually to keep pace with growing demand from households with annual incomes of less than $41,000 a year.

That represents a significant amount of new construction, underscoring the fact that affordable housing is also good for the state's business and industry. Development and management of affordable housing is a huge economic generator that serves a range of California's economic interests. The $2.1 billion from Proposition 46 has resulted in creating 276,000 jobs and for every $1 invested, $20 accrued to the state's economy in the form of private investment. Proposition 46 funds will have produced nearly 41,000 new affordable rental housing units and assisted more than 42,000 families with achieving homeownership.

We as a state must address the housing affordability crisis now before it gets totally beyond our ability to solve, which could be only a few years away with the depletion of the Proposition 46 funds. While federal programs have historically contributed to lower-income housing programs, new budget cuts of Section 8 and other federal funding may means these programs will no longer come close to meeting California's current housing needs.

Unfortunately for all of us, the federal housing cuts and the impending depletion of the Proposition 46 coffers means that the money necessary to finance badly needed affordable housing is rapidly drying up. If that happens and we Californians sit by and watch, there may be nowhere else to turn and everyone suffers.

So we must act now before the housing affordability problem gets beyond our reach. Only the prospect of a predictable funding source such as the Affordable Housing Trust Fund, along with government encouragement at every level, will provide the wherewithal for builders and communities to continue their programs to provide a diversity of affordable housing for California's residents.

Johnson is CEO of Long Beach-based LINC Housing, which has developed more than 5,700 affordable housing units providing shelter for 12,000 residents in 37 communities throughout California.

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