What Will it Take to Fill the Affordable Housing Gap?
Last year, Bay Area Rapid Transit (BART) and Silicon Valley Transportation Authority (VTA) adopted ambitious targets to prioritize the construction of affordable housing on their land – 35% of all housing built on their land would be affordable and at least 20% on each site. Both agencies are developing implementation plans to determine how and when to work with developers, cities, and local communities on these transit-oriented joint development projects. To support their efforts, GCC supported some research to better understand the following three questions:
- What is the funding gap at the regional scale required to meet the demand for very low and low income housing in the region? In this report, the focus of analysis is VLI and LI housing, given that housing for this level of affordability relies more heavily on funding sources and programs provided through federal, state, and local agencies. Because there are very few public funding sources targeted to moderate income housing; land use policies, incentives, and other market-based strategies play a major role in enabling the construction of moderate income units.
- What are the local funding gaps and policy changes needed to ensure BART and VTA can meet their targets? As discussed above, BART and VTA’s affordable housing goals are ambitious, and will require close coordination with local governments to enable housing development in station areas, in addition to accessing funding.
- What are strategies do we need at the federal, state, regional, and local level to promote the production of new affordable housing units in the Bay Area overall, and near transit in particular? An important avenue to increase the pace of construction of new affordable housing is through zoning and land use regulation for market-rate developers to provide lower income housing. Some examples of local land use policies to promote affordable housing production include incentive zoning and inclusionary zoning, which can be useful for encouraging the market to deliver housing units, especially for moderate income households.
Through their analysis, Strategic Economics and Novin Development Corp. identified the following key findings:
- The Bay Area has a regional funding gap of $1.45 billion annually for VLI and LI housing. The Bay Area must raise $1.45 billion in addition to existing major subsidies for affordable housing. It would cost approximately $4.28 billion per year to build the region’s very low and low income housing needs, as defined by the regional housing needs allocation (RHNA). Existing federal, state, and local funding sources for affordable housing units in the Bay Area total $2.84 billion annually. Once these subsidies are accounted for, the remaining gap is $1.45 billion annually.
- Within the region, there is a great deal of variability in terms of the amount of funding needed to build affordable housing in each county. The cost of building a unit ranges from $455,000 in contra Costa County to $650,000 in San Francisco. RHNA also sets different affordable housing targets for each county. Therefore, Santa Clara County for example, which has development costs of approximately $500,000 per unit and the highest RHNA goals in the region (3,213 VLI and LI units per year over an eight-year period to meet 2014-2022 RHNA goals), would require $1.4 billion in funding annually, not accounting for existing resources.
- The availability of local funding is critical for achieving regional affordable housing goals. Overall, it is estimated that local Bay Area jurisdictions, including cities and counties, have funds of approximately $1.6 billion each year for affordable housing. However, the amount of funding available in each city or county varies significantly. For example, San Francisco has local housing impact fees and a citywide bond measure that generate revenues for affordable housing. On the other hand, most cities in Contra Costa County do not have local impact fees for affordable housing in place, and the county has not approved bond measures for housing. It is more challenging to develop affordable housing projects in jurisdictions that lack a local funding source to match federal and state subsidies.
For those working deeply in the affordable housing world, these findings are not surprising, but we hope that this data and information provides a solid grounding for efforts to implement the BART and VTA policies, and to create synergistic strategies to address the region’s affordability crisis while building on our history of planning for great communities.
Check out the full report to learn more, and continue to follow this space for more analysis and implications of this report.
(Note: Report updated August 2017 to include estimates of how changes to federal tax credits could increase gap.)