ORANGE COUNTY VOICES : Nonprofit Groups May Ease Dearth of Affordable Homes : Housing: Organizations dedicated to building high-quality, low-cost units are emerging as a second-tier real estate market.
Like a disease with no cure, finding solutions to Orange County’s and California’s affordable-housing mess has baffled policy-makers for at least a decade.
The consequences of the breakdown are grim. The homeownership rate in the state has fallen below 50%, more than 700,000 Californians live in overcrowded conditions, and 1 million residents pay 40% or more of their income on rent.
The problem has a simple explanation: Personal incomes can’t keep up with the cost of housing. Solutions are more elusive.
In 1989, California residential real estate values increased by nearly $75 billion. But incomes only grew an estimated $12 billion. Include $1 billion in state, federal and local housing aid, and $62 billion was added to the state housing deficit last year alone.
Fat with equity, homeowners benefit from this trend, but finding solutions for people who are stuck renting is one of the state’s most pressing challenges. This gap is dramatic in Orange County, where the median home price is $250,000.
Historically, remedies to the housing malaise involve taking one of two tacks: increasing the supply of housing, or forcing developers to offer affordability.
At real estate industry conferences, “supply, supply, supply” is proffered as the panacea for high housing costs. The build-your-way-out-of-the-problem approach holds that increasing supply to meet demand will stop the price spiral and wipe out the affordability gap.
Another scenario mandates that private property owners and developers come to the rescue. The theory says that since real estate interests benefit from property inflation, it’s fair to require developers to include a certain percentage of affordable homes in every new project. Rent control also fits into this strategy.
However, neither of these two approaches--leave it to the free market or redistribute the wealth--have done much to solve the state’s housing ills.
In the meantime, a third approach is taking shape that may hold out hope for long-term solutions to the current muddle.
With government aid and corporate philanthropic contributions, nonprofit groups are popping up all over the country with a mission to produce high-quality, low-cost housing. A second-tier real estate market is emerging that specializes in affordable homes and apartments.
Nationwide, there are now between 1,500 and 2,000 community-based housing development groups. Organized as tax-exempt, public-purpose groups with special access to government funds, they have built nearly 125,000 housing units.
These grass-roots organizations have become the darlings of state and federal lawmakers. Every major housing bill approved in the last several years has targeted money for nonprofit housing groups. In the coming years, they will have exclusive access to more than $1 billion in state and private funds that are earmarked for housing in California.
“It’s a very political, palpable way to privatize the job of building and managing low-cost government housing,” says Michael Yaki, an aide to Rep. Nancy Pelosi (D-San Francisco). “By letting community-based groups do it, you eliminate layers of bureaucracy, and they tend to humanize the design of the units and give the residents more control over their homes.”
One of the most successful residential developers is a nonprofit corporation. Bridge Housing Inc. of San Francisco has no stockholders, no earnings and no profit, but its developments suffer few vacancies, frequently win design awards and are affordable to entry-level home buyers and low-income renters.
Credited with building 3,000 units in the last seven years, Bridge ranks as the 37th largest builder in Northern California. The organization is expanding its operation to Southern California with projects planned in Irvine.
By vowing to use government funds exclusively for the production of low-cost housing, nonprofit groups also promise long-term affordability. They own and maintain the units that they produce, guaranteeing that they remain affordable.
In the past, government aid programs were used to give incentives to private developers for building low-cost housing. But requirements on affordability often lasted no longer than 10 to 15 years. Nonprofit groups, on the other hand, often guarantee permanent affordability.
These new organizations don’t replace the private market. Home builders will continue to build to the middle and upper income groups, and private firms will often join in ventures with nonprofit groups for the part of the market that is too often ignored.
