Affordable Housing Wobbles as Redevelopment Agencies Close

New America Media | 5/1/2012, 2:58 p.m.

Affordable housing advocates across California are scrambling for alternative sources of funding following the closure of the state's redevelopment agencies last February.

A state law upheld by the California Supreme Court mandated the dismantling, which aims to redirect billions in property tax earnings held by the redevelopment agencies (RDAs) back to local governments to help close a huge gap in the state's general fund.

The demise of California's 425 RDAs "comes at a very bad time," says Rachel Iskow, executive director of the Sacramento Yolo Mutual Housing Association.

Money coming from the federal housing program has been substantially reduced. The $2.9 billion generated by the state's Proposition 1C bonds -- enacted by California voters in 2006 for various types of housing -- are almost gone, and a sluggish development market has reduced money for local low-cost housing trust funds to a trickle.

"The end of redevelopment agencies significantly shrinks the total supply of financing for affordable housing," Iskow explains.

She adds that her private nonprofit has built more than 900 homes in the Sacramento-Yolo area. It serves an ethnically diverse community of mostly "workers earning an average of $20,000 a year for a family of four people."

It must now put a hold on the construction of 100 apartment units on six acres and the renovation of a decrepit 150-unit housing complex, all meant for low-wage workers. It also stands to lose well-trained professional housing managers and neighborhood advocacy organizers, says Holly Wunder Stiles, the group's housing development director.

Ready Source of Housing Funds

Redevelopment agencies served as the second largest source of funding for affordable housing in the state for 65 years. Local RDAs zoned out rundown or blighted areas, held down property values within them, and borrowed funds for infrastructure improvements -- roads, services, open spaces -- to attract private developers.

Once the property values in the redeveloped area rose, RDAs kept the incremental increase in property tax earnings for their exclusive use. This amounted to 12 percent of all property taxes collected in California, currently around $5 billion a year. By law, 20 percent of RDAs' share of the new tax revenues went back to the county or city for affordable housing.

After the passage of Proposition 13 in 1978, which slashed property tax revenues, cities relied on RDA funds to build affordable housing and rehabilitate blighted areas. From 1998 to 2001 RDA money helped build 16,714 units, more than 75 percent of which were for low-income households, according to a Cal State Fullerton, Dept of Economics study.

Gov. Brown's Push

Governor Jerry Brown pushed for the RDAs' dismantling, in hopes of freeing up billions in property tax revenues held by the RDAs to ease the $26-billion crunch in the state budget by at least $1.7 billion. His push gained traction because RDAs became vulnerable to criticism over the years.

Some of that criticism was directed at RDAs' diversion of as much as $5 billion a year in statewide property tax funds from local governments, depriving schools, law enforcement and other services of much-needed money. They also have been accused of serving as subsidies for private developers.