Developers: Affordable Housing Fees Not The Answer

The affordable housing crisis is on just about everyone’s minds these days and developers are no different. Developers hashed out some solutions at Bisnow’s recent Silicon Valley State of the Market event.

A panel including St. Anton Communities division president Ardie Zahedani, Lincoln Property VP Patrick Gilligan, The Sobrato Organization CEO John Sobrato and KT Urban Properties principal Mark Tersini agreed affordable housing fees were not helping the situation. The cost just gets passed down to the renter or homeowner.

Mark suggested using those fees instead to provide loans or rental vouchers to teachers, fire and police tied in with a 10-year commitment, especially since there is such a high turnover for these professions in higher priced communities.

“I think we can really get that money to go a lot farther than you would as a tax on those who are building the project who would then pass on that cost to the renter or homebuyer,” said Mark.

John said housing stock is not affordable because “we aren’t building enough of it.”

Affordable housing fees actually produce very little affordable housing, he said. What ultimately happens is, when a young engineer who could afford a market-rate or higher priced home can’t find that home, they seek out the next-best option, ultimately pushing out the lowest income families who no longer have an affordable option. This creates a situation where you have more homeless people, John said.

John said the upcoming $950M housing measure, which would raise property taxes to create housing for homeless and build more affordable housing, will help. The community also needs to move beyond the NIMBY environment and build more housing along the transit corridor, he said.

Ardie, above with panel moderator Bijal Patel of counsel for Lubin Olson and Lincoln Property's Patrick, who said in Campbell he had to set aside seven townhomes for $130k that would normally sell for $1.4M at market rate. The lower-priced homes are available through a lottery with priority to those who work for or live in the city, which really won't help with the housing problem, he said.

He said he’s had success in Fremont creating more affordable housing near BART, and he’s been able to do so with sensible partnerships, including working closely with the city and creative financing.

“You need land, you need flexible policies, you need a subsidy, and the only way to do that is get it in early in the master plans,” Ardie said.

He said he is seeing similar success in Emeryville, Menlo Park and additional locations in Fremont. Of the 7,500 units his company has built, 3,500 are market-rate and the rest are affordable housing, he said.