Low-Cost Housing: Precious Commodity : City Must Not Allow Decrease in the Limited Supply of Units for the Poor
In the city of San Diego, where 80,000 families need help paying the rent but just 18,000 have received some form of assistance during the past 10 years, low-income housing should be viewed much like water--as a precious, endangered commodity.
The city’s pricey rents compound the urgency of an emerging nationwide housing crisis that could begin this fall. In September, a congressionally imposed moratorium is scheduled to expire, allowing developers of federally subsidized housing projects to pre-pay their mortgages. Once that’s done, they will be able to raise rents to market rates, in many cases to levels that the current low-income tenants cannot afford. The very real possibility of eviction looms for some.
Locally, the owner of a 200-unit complex has advised the San Diego Housing Commission that she intends to pre-pay her federal loan. Another, the principal owner of 800 more apartments in two complexes in Rancho Penasquitos and Clairemont, intended to do the same thing, until the Housing Commission came up with this novel proposal: it would form a nonprofit corporation and buy the projects from him for $38.5 million.
That sounds like a huge sum--Mayor Maureen O’Connor and Councilman Bruce Henderson already have balked at the idea--until one examines the alternatives. Then it becomes abundantly clear that the idea is a sound one. The City Council should embrace it.
Housing officials estimate that rents in the two complexes could rise from a current average of $315 monthly to as much as $750 when restrictions are taken off. About 85% of the tenants would be unable to afford those increases.
Government must help. But how? Congress is considering legislation to stave off the impending crisis, but it and the Housing Commission want to ensure that tenants never face this situation again. The commission could subsidize market rents, but purchase of the units would guarantee that they are reserved for the poor forever.
At about $47,000 per apartment, purchase is an expensive proposition. But, largely because of land prices, it costs more than $100,000 per unit to build housing for the poor in middle-class neighborhoods like North City West. Acquisition of existing housing costs between $75,000 and $95,000 a unit. The city is committed by policy to building affordable housing outside the poor neighborhoods where it has traditionally been placed.
Another argument in favor of purchasing is that, when the useful life of the apartments ends, the commission also will own a valuable asset--the increasingly expensive land on which the units stand.
Financing for the purchase would come from a combination of bonds and the sale of tax credits. Money for rehabilitation would be borrowed from the state at 3% over 30 years.
If the whole idea seems daunting, try thinking about low-income housing the way the drought is teaching us to think about water: If we don’t conserve today, there won’t be enough to go around tomorrow.
