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Michael Lin

Academic Year: 2010-2011

Where Does Affordable Housing Money Come From? Understanding the flow of investment in City Heights

Area of Concentration

  • Housing

Key Terms:

affordable housing, City Heights, City of San Diego Redevelopment Agency

Significance/Broader Impact:

With the economic recession and the over inflation of housing costs, it is becoming increasingly difficult for most people to purchase a home or even rent an apartment within their economic means. To mitigate this problem residents are increasingly turning to affordable housing developments as the answer. The increase in demand has put a strain on the availability of affordable housing units for rent.  When there are increased demands for more units the city is obligated to try aznd meet those demands or else risk losing residents to other cities/communities that are able to meet the needs. The public only hears about the lack of new affordable housing, but doesn’t hear/understand why there is not a constant supply of affordable housing units available. It is important to understand how affordable housing projects are funded since money is one of the major limiting factors. Most development corporations develop affordable housing properties with the help of local/state government subsidies to offset the initial costs of the project. These subsidies in the form of grants, bonds and tax credits are limited and cities must decide which projects are best suited for their community. With the availability of new units they are quickly rented out thus creating more demand. The goal of this study is to provide an understanding of the financial limitations cities and development companies have in development projects.

References

Karl E. Case. “The Central Role of Home Prices in the Current Financial Crisis: How Will the Market Clear?.” Brookings Papers on Economic Activity 2008.2 (2008): 161-193.

Michael Diamond and J. Peter Byrne, “Affordable Housing, Land Tenure, and Urban Policy: The Matrix Revealed.” Fordham Urban Law Journal, Vol. 34, 2007; Georgetown Public Law Research Paper No. 976410; Georgetown Law and Economics Research Paper No. 976410.

Rosen, David. 2004. “Inclusionary Housing and Its Impact on Housing and land Markets. In Inclusionary Housing: The California Experience.” Nico Calavita, Editor; National Affordable Housing Conference, Washington, D.C.

Stephen Raphael and John M. Quigly, “Is Housing Unaffordable? Why isn’t it more affordable?” Journal of Economic Perspectives 18 (2004): 191-214.

Witten, Stephen Douglas. “The Cost of Developing Affordable Housing: At What Price?” Boston College Environmental Affairs Law Review (2003): 509-551.

Links:

http://www.cityheightscdc.org/files/2010-Income-Limit-Hold-Harmless.pdf

http://www.sandiego.gov/redevelopment-agency/pdf/cityhts/chfactsheet.pdf.

http://www.sdhc.net/

Fall SRP Proposal Abstract

With inflation outpacing wage increases along with the economic downturn in recent years, the need and demand for affordable housing units has skyrocketed.  In the last decade development firms have increasingly tried to provide affordable housing units, but the obstacle is how much funding and incentives do they receive for these types of units? This proposal seeks to understand how affordable housing developments receive government funding, and whether the type of units built in comparatively similar sized projects affect the amount of funding received. The study will be focused in the city of San Diego, specifically the area of City Heights where the average income is well below the county average.  Support for the study will come from comparisons of development policy reports, past, current and planned housing sites in the community along with comparisons with other income similar communities in the county. The study will contribute to the literature on how developers structure projects to receive the most government funding and whether the current funding structure is beneficial to City Heights and the county as a whole.

Winter Senior Research Project (SRP) Abstract

With inflation outpacing wage increases along with the economic downturn in recent years, the need and demand for affordable housing units has skyrocketed.  In the last decade development firms have increasingly tried to provide affordable housing units, but the obstacle is how much funding and incentives do they receive for these types of units? This proposal analyzed the affordable housing situation in City Heights by looking at the sources of funding for affordable housing developments, how it has changed in the last decade and what was the effect of the economic recession and failure of the real estate market on the ability to meet the needs of the community. The study focused in the city of San Diego, specifically the area of City Heights where the average income is well below the county average.  The comparison of policy reports, fiscal reports, past, current and planned housing sites showed that the there is not just one entity and funding source for all projects and even with the economic recession the demand for affordable housing is met to a certain extent.

Study's Major Findings and Contributions

The overall indications about affordable housing City Heights is that there is a demand for more units and if they are built they will be occupied.  Currently the redevelopment plan for the community addresses the demand with projects that will increase the number of affordable housing units in the community. These increases in affordable housing projects were planned for previously when the last redevelopment plan was created for the community, but the future of the affordable housing after 2012 is unclear. City Heights has shown that funding comes from various sources and cannot be dependent on one agency or source. City heights showed that the funding for affordable housing has come from the private developers, government grants, subsidies, tax credits, federal funds and revenue generated from existing affordable housing properties. While the most common way the redevelopment agency funds projects now is through allocation of projected funds and investing in their own affordable housing projects, that is not a sustainable business model. The affordable housing market in City Heights and all other cities are operated with the intention of making a profit in the long run and in revitalizing their community. These are noble ambitions but at a certain point the economic pressures will outweigh the good intentions of policy makers. Therefore it is more apparent that the model that City Heights uses to address their affordable housing is a temporary solution.

Evidence

The evidence collected and analyzed will come from archival data collected from the San Diego Housing Commission, Affordable Housing Collaborative Program and from interviews. The data from the San Diego Housing Commission consists of a listing of all the affordable housing properties in the city of San Diego along with the number of beds, units and the type of families/persons that live there. The collaborative program also lists a few affordable housing properties in the City Heights area and lists the probable funding sources and tax credits that each of the particular project asked for from the city. This source only provides data on some of the properties in the study area, so data about the other affordable housing properties must be researched. This research will come from asking the San Diego housing Commission who oversees the affordable housing of interest., If the commission does not have the data available then the information will have to be obtained by going to the actual developer of the property and inquiring about the information. To add to the data obtained from archived data, interviews will be completed. The interviews will focus on developers who focus on affordable housing projects and city officials who play a role in the approval process of the projects. Questions will be geared towards asking what are the most common types of affordable housing projects that receive government subsidies. Is it a necessity for all projects to receive funding, why or why not?

Spatial Dimension

The focus of the study will be on the community of City Heights in the city of San Diego. This area is of importance because of its diverse ethnic background and large population of newly immigrated individuals. With such a large immigrant population and an average yearly income of thirty thousand dollars or less, it provides a good area to study the needs of affordable housing. The community is currently in a large redevelopment phase where the needs of affordable housing are being partly addressed along wwith the revitalization of the area to draw in new residents. By studying this area and drawing from other communities similar to and different from City Heights the hope is to be able to see how they are able to promote these projects and from where do the funds come from.

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