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Affordable Housing Wobbles as Redevelopment Agencies Close

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

Critics also charged that the criteria designating an area for redevelopment were loosely defined, while by 2009 RDAs had incurred huge debts -- $29 billion in outstanding bonds. Oakland's RDA alone owes $160 million.

And while the Cal State Fullerton, Dept of Economics 2002 study noted RDAs' contribution to the state's housing stock, it also found that they had very small low-to- moderate housing funds, insufficient to have a dramatic impact on affordable housing overall.

Feeling the Pinch

With RDAs gone, large cities -- Los Angeles, San Diego, Oakland, San Francisco and sprawling suburban centers in Southern California and the Central Valley -- that benefited the most from redevelopment money are suddenly feeling the pinch.

Thousand Oaks may lose up to $20 million in cash and $10 million in assets. Oakland used most of its $39 million in RDA funds to support citywide staff salaries ($3.7 million for police; $3.2 million for city attorneys staff; half the salaries of city council members). The demise of its RDA will cut 160 jobs in 11 departments.

San Francisco may be able to stand the hit, reports the San Francisco Planning and Research Association (SPUR). As a successor agency to its RDA, the city government transferred redevelopment funds and assets to the Mayor's office of housing and City Administrator's office; so affordable housing and existing redevelopment projects stand to be protected.

As both a city and county San Francisco does not have to send its redevelopment money to a separate county government where funds will be divided up among cities -- unlike Oakland or San Jose, which are just part of larger counties.

"Redevelopment here in Hercules was under water even when it was around," explains Hercules city manager Steve Duran, "but dismantling it sure doesn't help."

For Hercules, a middle-class community east of San Francisco with a diverse population, the end of redevelopment means "no money for affordable housing subsidies and no capital funds for potential infrastructure projects," says Duran.

On top of this drought, a private financial guarantor is suing Hercules because its RDA defaulted on a $2.4 million bond, and the city is accused of diverting RDA funds to its operations. If it loses the suit, it could go bankrupt.

Banking on New Legislation

Housing advocates are now pinning their hopes on state legislation for a new source of funds, a statewide housing trust fund, which will be a permanent source of funding for affordable housing.

State Senate President pro tem Darrel Steinberg (D-Sacramento) and Mark DeSaulnier (D-Concord) introduced Senate Bill 1220, which will charge a $75-fee per document recording of non-sale real estate transactions -- maps, easements, liens, title changes and notices of default.

Funds collected will go to the dedicated state housing trust fund. Thirty-nine states have such trust funds, but California has none. Supporters estimate that the fee collection could raise "$300 million in years with low activity and $722 million in high-activity years."

The trust fund will support the construction of affordable housing, the renovation of distressed housing stock, and foreclosure prevention and homebuyer assistance programs.

The California Association of Realtors dropped its opposition to the bill once it was made clear that the purchase and transfer of residential and commercial property will be exempt from the fee.

"All of the state's affordable housing advocates are focused on building support for this bill right now," says Iskow.