Annual reports show county’s cities are falling short on affordable housing production even as they surpass targets for market-rate development

Recent reports on housing production for 2015-2018 show that the cities in Santa Clara County continue to fall far short of affordable housing goals, while on track to meet or exceed their targets for market-rate housing affordable to households with income above 120% of the area median.

Over the past few weeks, cities throughout California have been discussing their annual progress towards their Regional Housing Needs Assessment (RHNA) obligations, which must be reported to the state Department of Housing and Community Development (HCD) every April 1^st. The RHNA is a state-mandated process to determine the housing units each jurisdiction must accommodate in its housing element in response to the regions’ anticipated job and population growth.  The RHNA obligations for the Bay Area cover an eight year period (2015-2023) and were last set by the Association of Bay Area Governments (ABAG) in 2014.

The RHNA targets break down job and population growth by income ranges to guide the amount of housing needed at different income levels over the eight-year cycle.  In this way, meeting an overall RHNA goal, but failing to produce housing that is affordable to Moderate (Mod), Low Income (LI), and Very Low Income (VLI) households further exacerbates an already severe affordable housing shortage in communities throughout the county.  Unfortunately, Santa Clara County has been behind on its affordable housing progress since the beginning of the current cycle. (For a recent analysis of 2017 RHNA reports, including scores for each city in the county see here.)

2018 Countywide RHNA Performance: [spacer height=”20px”]

Housing Production is Happening, Just not Affordable Housing

The current progress is disproportionately in the Above Moderate income category. This indicates that development is feasible, and happening in our communities, yet we continue to struggle to pursue opportunities for affordable housing with the same energy and sense of urgency. Only a little over half way through the current cycle, Campbell, Mountain View, Los Altos, Monte Sereno, Los Altos Hills, and Santa Clara have already exceeded their above Moderate income obligations, and Sunnyvale, San Jose, Morgan Hill, Gilroy, and Cupertino are on track to exceed theirs by 2023. These cities are permitting a lot of housing, but are critically behind on their affordable obligations. As a County, we are only 10% of the way towards meeting our Very Low Income housing needs, and 13% of the way to meeting our Low Income targets.

The Housing Element process requires cities to plan for housing that is affordable at all income levels, which means that all of these cities have identified opportunities for affordable development in their communities.  What these progress reports make clear is that, while many cities are building housing, it is not enough to simply designate land for affordable housing. In receiving these progress reports, most cities acknowledge that the limited progress to date is a problem, but struggle to with the discussion about what more can be done. It is critical that cities reassess where they are planning for affordable housing, that they are creating real and feasible opportunities to develop within their cities, and are actively pursuing affordable development.

There are cities that have little or no housing development at all

While some cities are producing significant amounts of market housing, even as they fall short on affordable, some cities have made little progress on housing development in general. The farthest behind include Los Gatos and Saratoga, with Palo Alto and Milpitas struggling to meet even their market rate goals. Cities who are making the most progress towards their overall obligations are actively engaging developers and bringing a local commitment to their efforts.

We are Successful, with South County outpacing other Jurisdictions

There are some successes. A significant uptick in Accessory Dwelling Unit (ADU) production over the last year in many cities such as Sunnyvale, San Jose, Cupertino, and Los Gatos has created new opportunities within the existing fabric of our cities in the short term. San Jose’s Housing Crisis Work plan has been an effective strategy to increase Above Mod housing, and the City has many work plan actions, such as further streamlining for 100% affordable developments, in process that can impact affordable housing obligations,. The Mayor has also expressed interest in investing ten million dollars towards moderate income housing projects during the next budget cycle.

Most notably, Gilroy and Morgan Hill have already met or exceeded their Low Income housing obligations, and continue work on meeting their Very Low Income obligations. Gilroy has benefited from a large affordable housing project, Alexander Station, with over 200 units affordable to LI households. Producing 100% affordable projects remains the most effective strategy to producing affordable housing. Both Gilroy and Morgan Hill also have Measure A funded project in their communities, demonstrating the importance of local funding sources. In addition, Morgan Hill has remained responsive to the affordable needs in the community, continuing to incentivize affordable housing development. Their system reinforces their Inclusionary Housing Ordinance, by allotting more points to projects that build units on-site rather than relying on alternative compliance mechanisms. Both Gilroy and Morgan Hill demonstrate success in a variety of ways: large scale 100% affordable development, using local funds as a catalyst, and incentivizing City programs that bring more affordable units online.

At this stage it is important to ask, how are we acting as active partners? When we see gaps, how are we filling them?

• Proactive commitment to identifying and supporting affordable housing in all of our cities. Progress on affordable housing is going to take commitment and effort on the part of City government.
• Access to local funding sources allows affordable housing developers to better leverage other funding sources. Funding remains the major obstacle towards an increase in affordable units. San Jose has worked hard to enable more affordable development, only to confront limited funding and falling short by over 4200 units of their goal of 10,000 homes by 2022. Mechanisms like Commercial Linkage Fees (CLF) help cities generate funds towards affordable housing development. San Jose is in the process of completing Nexus and Feasibility studies, but other cities including Campbell and Los Altos should also pursue CLFs. The 2016 Countywide Measure A Bond continues to be a critical resource, and similar affordable housing bond measures should be pursued in the future.
• Inclusionary Housing can be strengthened in most cities to encourage development of units on site. With so much market-rate housing in the pipeline, robust Inclusionary Housing Ordinances can bring affordable units online faster without relying on public subsidies. Current ordinances in many cities have fee-out options that do not produce funding reflective of the cost of producing an affordable unit, leading to limited funding capacity from the city perspective and missed opportunities to build affordable housing units on site.
• Serious consideration needs to be made towards reducing barriers that increase the cost of production. Piling on additional requirements on affordable housing projects decreases feasibility for projects that already face significant obstacles. Actions to consider are fee reduction, reducing parking and retail requirements. We must also take advantage of opportunities on public land, and leverage this important asset to reduce costs and produce more affordable housing.
• We must consider how we can build differently. Building is happening in our communities, but remains out of reach to many in our community. We must continue to pursue innovative mechanisms that have the capacity to produce units that are more affordable. Opportunities include, designing smaller units and building housing types that rely on wood frame construction. Progress continues to be made in modular construction, which could produce a large number of units in a short time period.