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S10 E6: Transcript - It’s The Supply Stupid

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Catherine: From Capital Public Radio, this is The View From Here podcast.


Catherine Stifter I’m Catherine Stifter. And this is Place and Privilege. The Sacramento region is facing an affordable housing crisis. And experts will tell you that it won’t get better until more homes are built. They say it’s all about supply.

Todd Leon It’s a total supply issue in my mind. We have to figure out a way to build more units. It’s a crisis we are going to have to build our way out of somehow.

Bernadette Austin We don’t have enough affordable housing, we don’t have enough missing middle housing, we don’t have enough housing stock just in general.  

Jim Lofgren The solution is to build baby, build.

Catherine Stifter A growing population and dwindling housing supply is driving up demand and driving up costs. It’s affecting renters and people hoping to buy homes. Fewer than half of City of Sacramento households own a home. And that’s the lowest homeownership rate in decades.

Housing advocates say Sacramento County would have to build more than 62,000 affordable rental homes to meet the needs of its lowest-income earners.

In Episode 6, It’s The Supply Stupid, reporter Amy Quinton untangles the complex web of policies and market conditions that’s led to the short supply.

Todd Leon So we are emerging from the elevator lobby and to the second floor, the outdoor sculpture garden…

Amy Quinton Todd Leon with the Capital Area Development Authority is giving me a tour of one of Sacramento’s newest affordable housing complexes. The midtown building is called the WAL, an acronym for the Warehouse Artists’ Lofts.

86 of the 116 units here are set aside for artists making 60 percent of the area’s median income or less.

The response to its opening in 2014 is a perfect example of the demand for an affordable place to live.

Todd Leon When the doors opened for applications we had 250 people in line waiting. And that was just to get their application in. During the week we had 1200 people on the waiting list.”

Amy Quinton Now, the wait to get one of these apartments is four years. What’s more alarming…how long it took to get this project built.

Todd Leon So this particular project site actually started in 1997.

Amy Quinton You heard right, 1997. It took 17 years. Think that’s unusual for an affordable housing project? Think again.

Amy Quinton Bernadette Austin with the UC Davis Center for Regional Change helped develop the La Valentina affordable housing complex on 12th Street in Sacramento.

Bernadette Austin The project actually took over 20 years to develop. It took over a decade to put together, to assemble parcels big enough to develop something on and then a lot of work needed to happen.

Amy Quinton Building affordable homes are the most time consuming, the riskiest and the most difficult.

Amy Quinton To understand why, let’s first look at the just the difficulties in building market rate homes.

Amy Quinton They’re supposed to be easier to build and come with higher profits. But Austin says it’s not as easy as you might think.

Bernadette Austin It’s not as simple as showing up at City Hall and saying, ‘Can I build a house?’ There’s a significant number of agencies that you need to coordinate with, pay fees with, get approvals from. So people who do not work in this industry may not realize that water agencies, sewer agencies, school districts, fire departments, all look at a proposal to build a group of homes.

Amy Quinton The state and federal government might also get involved. Environmental regulations could slow down the process.

Amy Quinton Michael Strech with the North State Building Industry Council says approvals are the first road block builders hit. He says it could take up to 10 years.  

Michael Strech And then of course after you have the benefit of going through that process, often times our builders are faced with some community opposition because they may not want a particular project to be built next to them.

Amy Quinton Even if you get a project approved, the next step is getting it financed. Stricter federal rules after the foreclosure crisis make that tough.

Amy Quinton But the major slowdown -particularly in Sacramento - is the high cost and limited supply of labor.  

Amy Quinton During the recession, construction workers left the industry. It’s been slow to recover, says Nikky Mohanna with Mohanna Development Company.

Nikky Mohanna We are facing a labor shortage when it comes to a lot of these trades and I think California is witnessing that. In Sacramento itself, we’re seeing that a lot of our laborers going to the Bay Area to build projects because they can pay more.

Amy Quinton Bay Area developers can pay workers more because they can garner a bigger return on their investment through higher rents and prices.

Amy Quinton But in Sacramento, incomes have remained relatively flat, making it difficult for developers to produce housing that a lot of people can afford.

Sotoris Kolokotronis I have not seen anything like this in my 30 years.

Amy Quinton Sotoris Kolokotronis is with SKK Development. He’s built master-planned communities as well as mixed use and affordable housing.

Sotoris Kolokotronis We used to build a home, a basic home, you know 1500, 2000, 2500 square feet home in 80 working days, today god knows how long it would take, 110? I mean that’s a big difference.

Amy Quinton Delays and higher costs mean developers are more likely to build higher priced homes or luxury apartments. Greg Sandlund, a senior planner with the City of Sacramento, says that’s exactly what’s happening, particularly in the coveted midtown area.

Greg Sandlund The apartment market from my understanding is picking up because rents have gone up so high. There’s more proposals. There’s more development. Just four or five years ago, we were hearing that the multifamily market was the weakest, now it’s the strongest.

Amy Quinton Is that because rents are going up and people can make money off of it?

Greg Sandlund Yes. The asking rents have gone up and people are paying those.

Amy Quinton But that doesn’t help low income earners. Sandlund says building affordable housing is more difficult, especially now.

Greg Sandlund The biggest issue with affordable housing is that our subsidies, federal, state, local, have been reduced by more than 50 percent in the past 10 years with the loss of redevelopment.

Amy Quinton The state’s elimination of redevelopment agencies in 2011 was a big hit. That along with cuts in state and federal funding have reduced investment in affordable housing in Sacramento County by $44 million a year since 2008.

Todd Leon with the Capital Area Development Authority says now it takes longer to get financing and it’s riskier.  

Todd Leon Even with low income housing tax credits which is kind of the bread and butter of affordable housing projects there’s always a need for gap funding from some source, local, your city, your county...

Amy Quinton Developers in Sacramento pay fees dedicated to affordable housing, but it’s not nearly enough to fill that gap. And city planners say raising those fees would make it even more difficult to build.

Amy Quinton What’s being left out of the supply conversation is making housing available for median income earners, who increasingly can’t afford market rate but don’t qualify for subsidies.

Nikky Mohanna with Mohanna Development Company says there is a reason middle income housing isn’t talked about much.

Nikky Mohanna One of the arguments we’ve heard is that if you produce more luxury housing that the demand will be released from the existing housing units and those who can afford more will move into those other you know luxury housing products.

Amy Quinton Theoretically that makes less expensive housing available. But Mohanna doesn’t buy that argument. She says the need for more homes is too great. So she’s building housing at 19th and J in Midtown Sacramento specifically for that “missing middle” population. And she’s targeting a millennial workforce that’s being priced out of the market.

Nikky Mohanna So the rents at 19 J are starting out at less than $1000. And that was the goal originally in designing it was how do we get rents below $1000 in a brand new building. And we did that by designing them smaller.

Amy Quinton Really small. Three to 400 square feet. Even with apartments that small, she barely made it work.

Nikky Mohanna It’s been a tough battle for sure to get this project where it needs to be to just break even. But when you’re committed to building something because you believe in it, then it becomes a little easier to overcome those obstacles. But I can imagine why we’re not seeing the housing production when people are looking at it just from a profit side and it doesn’t pencil. Of course they’re not going to do it. There’s a lot of easier ways to make money.

Amy Quinton Microunits may be an innovative idea for middle income singles, they aren’t the solution for middle income families. A median income household in Sacramento makes a little more than $62,000 a year. They would have a tough time affording a market-rate home, especially a new one.

Amy Quinton Bernadette Austin, with the UC Davis Center for Regional Change, says even existing older homes that might be cheaper are tough to find.

Bernadette Austin One of the big issues with existing housing stock is that following the downturn of the economy, investors came up and bought a lot of the types of homes that are perfect for first time homebuyers. They may be just outside the central city, they’re often much more modest size maybe 1000 to 2000 square feet. These are properties that people can’t buy. They can only rent. And so that really impedes first time homeowners from being able to get to these properties.

Amy Quinton Over the last 17 years, the median income in Sacramento County has also decreased 11 percent. Austin says a Sacramento family makes proportionally less now than just a generation ago. Back then a family could afford a home, even on a single salary.

Bernadette Austin One or two working people with Sacramento’s kind of median income could afford maybe the equivalent of a you know 2000 square foot home in a highly desirable neighborhood. Now that same household is probably renting a two bedroom apartment that is significantly smaller and maybe in one of, a less desirable neighborhood or one that requires a very long commute to their employment.

Amy Quinton There are signs of improvement. The region’s wages are slowly increasing. And the city of Sacramento has doubled its housing production in the last year. But the complexities of Sacramento’s affordable housing crisis make one thing clear, building more homes won’t come easily or quickly.

Catherine Stifter So we heard a lot of about the reasons for the lack of  housing supply in the Sacramento region, but what about the solutions, Amy?

Amy Quinton Well, one solution that certainly affordable housing advocates want to see is a permanent source of funding, whether that’s through a bond or some other source. And that’s something that state lawmakers have proposed as they’re working on as they’ve made housing a top priority. But the city of Sacramento is also looking at this issue as well.

Catherine Stifter Are there steps Sacramento has already taken that are helping get homes built faster?

Amy Quinton City planners as well as developers will tell you anything that can make the approval process more predictable and less risky will get homes built. So Sacramento already updated its zoning code to streamline permitting – it’s a process called ‘by-right.’

Amy Quinton And just this spring Sacramento passed a fee deferral ordinance. City planner Greg Sandlund says it allows developers to defer impact fees – instead of paying them upfront – paying them after homes are constructed.

Greg Sandlund It saves them money in interest but more important from what I’ve heard especially from the single-family developers they can do larger batches of homes. As opposed to five, they can do maybe 10 or 15 because they don’t have to front load all that capital to pay those fees.”

Amy Quinton The city is also looking at participating in the Statewide Community Infrastructure Program. And this allows developers to pay for fees and infrastructure through a statewide bond – Sandlund describes it as kind of like taking out a mortgage to pay those costs as a way to stimulate development.

Amy Quinton But despite all these steps, there is not a lot the city or county can do when it comes to market conditions – and the lack of labor is a major road block right now.

Catherine Stifter Well thanks for bringing us this chapter of Sacramento's affordable housing story, Amy Quinton.




Next on Episode 7. After Homelessness


Jessica Hodges It was hard, you know choosing to sleep in a car especially with your children because poverty turns into crime. You can get your kids taken. I’ve learned that it can happen at any point to any of us. We're all a couple of paychecks away from it.


Catherine Stifter You've been listening to The View From Here podcast.

Place and Privilege. Episode 6, It’s The Supply Stupid.


Produced by Amy Quinton and Sally Schilling.


Music By Privileges.


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This is The View From Here.

From Capital Public Radio.


I'm Catherine Stifter.

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