On paper, the concept of affordable housing seems fairly simple: A city works with a developer to build units for people who can’t afford to pay rents at the market rate. But in the reality of red tape, scarce resources and high construction costs, affordable housing becomes much more complex.
Still, the only way to solve a housing crisis is one step at a time. The City of Sacramento has adopted or plans to pursue such steps, including waiving fees for affordable housing construction and reducing or eliminating parking requirements for new housing, among other policies. In February 2022, these efforts made Sacramento the first jurisdiction in California to earn a Prohousing Designation, awarded by the California Department of Housing and Community Development. This distinction was created to incentivize cities by giving points for measures designed to supercharge the supply of transit-friendly affordable housing at a time of dire need.
But what exactly does affordable housing even mean?
In general, it refers to housing that costs the tenant no more than 30 percent of their gross income (including utilities). This “30 percent rule” dates back to 1969, when Sen. Edward Brooke, a Black politician from Massachusetts, pushed a law to help people with lower incomes afford shelter. The Brooke Amendment capped public housing rent at 25 percent, which Congress raised to 30 percent in 1981. (In the 40 years since, some economists have blasted the 30 percent rule as “nearly useless,” claiming it does more harm than good.) The idea behind these measures was to protect the poorest of the poor. But across the United States, home prices and rents have soared, and income levels haven’t kept up.
According to U.S. Census Bureau data, 46 percent of American renters spent 30 percent or more of their income on housing in 2020. An unfortunate side effect of this imbalance forces tenants to cut back on essentials — such as food and health care — to pay for housing, a condition dubbed “shelter poverty” by the late Michael Stone, a University of Massachusetts Boston professor and affordable housing advocate.
But the problem of affordability isn’t exclusive to tenants. Traditional construction of affordable housing requires multiple layers of funding from various public and private sources, which can take years to gather for each project, according to Danielle Foster, the City of Sacramento’s housing policy manager. Private debt, she adds, makes it difficult to subsidize rents and provide services because so much of the operating revenue is necessary for debt payments to a bank.
In California, a big blow came 10 years ago, when redevelopment funds got reallocated in the state’s plan to shore up its 2011-2012 budget under Gov. Jerry Brown. Before that, redevelopment agencies required 20 percent of city/county redevelopment agency revenue to go toward affordable housing. Over the past decade, that funding has been lost. Currently, construction continues to lag, Foster says, and compared to regular redevelopment revenues of the past, current sources of funding are competitive and uncertain. In January 2020, the city looked at issuing a $100 million bond for affordable housing, but the COVID-19 pandemic put that plan on hold. In the meantime, Foster says, the city has directed $31 million in budget surpluses to affordable housing in the past two years.
But to find the right answers, the right questions need to be asked. On the production side, how can the city help get affordable houses built faster, cheaper and more creatively? The city wants to explore modular units or panelized homes, using creative models to broaden options. On the financial side, the city wants to look into other avenues for resources, such as short-term gap loans and new financing structures. According to Foster, the city sees workforce housing as a potential path to serve low-to-moderate income households. This route would also provide housing units that accept and align with the Housing Choice Voucher program (formerly known as Section 8) to serve individuals and families with very low to extremely low incomes.
Without question, solving the housing crisis won’t happen overnight. But if Sacramento hopes to build on its new prohousing reputation, the city will need dedicated funding, various partnerships and creative strategies to make affordable housing a concrete reality.
This explainer is a part of the Solving Sacramento journalism collaborative. In 2022, we are focusing on finding solutions to the lack of affordable housing in the Sacramento region. Solving Sacramento is a project of the Local Media Foundation with support from the Solutions Journalism Network. Our partners include California Groundbreakers, Capital Public Radio, Outword, Russian America Media, Sacramento Business Journal, Sacramento News & Review, Sacramento Observer and Univision 19.