Sustainable San Rafael – Housing Choices in Marin Housing Economics - David Kunhardt

1. Sustainable San Rafael – Housing Choices in Marin
San Rafael, CA
September 17, 2014
Affordable Housing Economics
David Kunhardt

2. The Housing Continuum
0 60%
Home Ownership
*2014 Median Income for a family of four is $97,100, per County Housing Element Update.
Served by LIHTC Program
Supportive Housing Solutions
Rental Housing
Extremely Low
$0 to $33k
Very Low
$33k to
$55k
Low $55k-$89 Moderate Income
$89k to $126k
Percent of Area Median Income*
30% 50% 80% 100% 120%

3. Federal Tax Support for Housing (Billions)
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
LIHTC Capital Gains
Deferral
Property Tax
Deduction
Mortgage Int.
Deduction
$8
$20
$28
$85

4. Federal Tax Support for Housing (Billions)
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
LIHTC Capital Gains
Deferral
Property Tax
Deduction
Mortgage Int.
Deduction
$8
$20
$28
$85
Homeowners / Renters
Subsidies = 17- to – 1

5. National vs. Marin Home Ownership Ratio
65.5%
34.5% Owner
Renter
National Homeowner Ratio = 2/3rds
75%
25%
Marin Homeowner Ratio = 3/4ths

6. National vs. Marin Home Ownership Ratio
65.5%
34.5% Owner
Renter
National Homeowner Ratio = 2/3rds
75%
25%
Marin Homeowner Ratio = 3/4ths
Therefore, Marin uses a disproportionately high level of
tax subsidies -- for homeowners on the high end

7.  Public Housing Authorized 1937
 Great Society programs in 60’s & 70’s provided boost to private-
sector housing production via loans and loan guarantees.
 Circa 1972, “syndication” launched to raise private equity
 1974: CDBG, and Section 8 in Project-Based & Tenant Vouchers
 About 1.6 million families receive tenant-based assistance
 And about 2 million units of private housing produced…so far
Short History of Affordable Housing

8.  In 1986, Tax Reform Act passed:
 Removed incentives to invest in real estate
 Initiated Low Income Housing Tax Credit (LIHTC)
 Codified syndication to raise private equity for housing
 1987 to 2013, +/- 2.4 million of LIHTC housing units
 Housing for people with jobs in our high-service economy:
 Retail, Food Service, Car Service, Health-Care, Day-Care
New Evolution in Affordable Housing

9. Relative Quantities of Affordable Housing
0
0.5
1
1.5
2
2.5
Public
Housing
Sec 202 &
811
HUD $
Private
Tenant-
Based Sec
8
Sec 42
LIHTC
Federally Subsidized Units (Millions)

10. Shift in Housing Leadership Focus
 WAS
 Federal Agenda-Setting: HUD
 Public Agency Action
 HUD compliance
 Federal Funds Availability
 Emphasis on cheaper
 One size fits all
 BECAME
 State Agenda-Setting (QAP)
 Private Action, supported
 Private compliance, reviewed
 Lender & Investor Initiatives
 Emphasis on Market Quality
 Celebrate Diversity

11. Credits Mean More Equity, Less Debt
Debt,
75%
Equity,
25%
Other
0%
Traditional Finance
Debt
25%
Equity
65%
Other
10%
Section 42 - "9%" LIHTC
Affordability With Lower Leverage: Incentive is Equity, not Debt:

12. Affordable – Rotary Valley Senior Village

13.  LIHTC relies on recorded Regulatory Agreement and Section 42
 Regulatory Agreement sets forth:
 Term of affordability
 Depth of affordability (maximum household income)
 Maximum rents
 Other service commitments
 Penalties for noncompliance
 Unresolved noncompliance
 ...Means credit recapture
Warner Creek Senior Homes,
Novato:
What Makes Housing Affordable?

14. How Long are Property Restrictions?
 Tax credits claimed over 10 years, but compliance period is >15 years
 Extended use period runs from years 16 through 30 – in CA, 55 years
Creekside in Hamilton Field

15. Key Ratios for LIHTC
 Spend more, get more Credits (up to cost limits) = Quality
 Credits approx. 85% of project hard cost (over 10 yrs)
 Equity paid for Credits can be 100% = Efficient
 And Debt is less
 More Credits when more low income households served
 Rents @30% of Low- and Very-Low Income (30% to 50% of AMI)
 Rents at least 10% under market (Investor standard)
 Expensive land major drag on feasibility density.

16. Affordable Apts. at Drakes Way, Larkspur
Affordable properties more handsome than Luxury

17. Equal to Superior Amenities

18. Affordable Community Benefits
Non-profit
managers work:
Education programs
Scholarships
Special needs
Family support
Homeownership
Computer Center at San Clemente Place

19. The Housing Continuum & Transportation
0 60%
Home Ownership
Served by LIHTC Program
Supportive Housing Solutions
Rental Housing
Extremely Low
$0 to $33k
Very Low
$33k to
$55k
Low $55k-$89 Moderate Income
$89k to $126k
Percent of Area Median Income
30% 50% 80% 100% 120%
Own fewer cars; drive less Own more cars; drive more
Best located near town & transit Can be disbursed—with cost

20. Action Steps – What Can I Do?
 Pass City & County Housing Element Updates
 Affirm support for projects that have been in local plans:
 Marinwood Plaza
 Fairfax Housing Element Properties
 Whistlestop in San Rafael
 Seminary in Strawberry
 Affordable homes complete the community, economically
 Support Habitat for Humanity and First-Time-Buyer
Homeownership programs

21. Time for Panel Interaction, then Q&A
Edgewater Place - Larkspur