What do you do when hundreds of millions of dollars in funding for affordable housing falls to zero with just a few months’ notice? That was the situation cities faced in California when, in a chaotic few months in 2012, the Governor and the courts eliminated redevelopment agencies. Not only did this wipe out the largest source of funding to build low and moderate income housing, but it also decimated cities’ ability to monitor and preserve long-term affordable homeownership units. In cities across the state, staff members were laid off and housing departments were closed.
Former Cornerstone Partnership director Rick Jacobus and I sensed a huge problem. Having worked closely with cities for years, Cornerstone understood that even in the best of times they often struggled to find resources to provide good stewardship. How could they possibly do it with no resources? Rick and I started making calls. We researched the size of the problem and tried to figure out who was working on the issue. Tens of thousands of units had been produced over decades, and surely someone was thinking about what would happen to them. Call after call yielded nothing. Slowly, we realized that with all the turmoil, the affordable homeownership piece was not on anyone’s radar. It was just us.
Meanwhile, life went on for homeowners. They called to get approval to refinance their loans or sell their property, but in at least several cities, no one answered the phone. Literally, boxes of files sat forgotten in dark closets in shuttered offices. What’s worse, in many cities, when homeowners fell behind on their mortgages and their properties went into foreclosure, there was no money or personnel to deal with the problem. Consequently, in one third of the cities that we surveyed, properties that should have stayed affordable for decades reverted to market rate housing. After talking with stakeholders, we came to believe that the best policy option would be for interested cities to ‘donate’ their Below Market Rate (BMR) portfolios to state-designated nonprofit housing organizations. By donate, we meant the nonprofit would take over the responsibility associated with enforcing deed restrictions. Communities that felt that they could successfully oversee their BMR portfolios could continue to directly administer them. Not only would this help cities that were struggling to manage their units, it would start to build a professional industry of affordable homeownership nonprofits. Because of the economy of scale, these nonprofits would be able to better steward the units at lower cost.
Working first with the Senate Transportation and Housing Committee and then the Assembly Committee on Housing and Community Development, we helped craft AB 1793. The bill, sponsored by the Assembly Member Chau, directed the state housing finance agency to select qualified nonprofits to be able to receive homeownership portfolios from interested cities. At the State’s request, I testified on Cornerstone’s behalf at two hearings about the bill. At these hearings, and all subsequent ones, the bill passed unanimously. Ultimately, Assembly Member Chau decided that more information was needed about the state of affordable homes in California before making any changes to the status quo. The bill was amended to simply require cities to collect and report information about their affordable homeownership programs.
Among other things, the law requires cities to list on their website and report to the state annually:
- The number of affordable homeownership units in the city’s portfolio;
- If any of those units lost their affordability during the past year; and
- If the cities are contracting with a third party for the management of these units.
Having this data is a great victory. It will allow nonprofit organizations to know which cities are struggling and offer assistance. It will also give us information about the size of the affordable homeownership industry. While not the goal we originally pursued, it’s a step in the right direction. Perhaps most heartening is that through this process we have built a strong coalition of nonprofits poised to act quickly and cooperatively as we continue to look for ways to preserve long-term affordability throughout the state.