Sonoma Valley has several deed-restricted affordable housing complexes and also many deed-restricted “inclusionary” units inside otherwise market-rate housing projects. The nature of deed-restricted housing is that the affordability guarantees usually expire after a set number of years, although newer units may be permitted with permanent subsidies. Once a subsidy and/or deed restriction expires, the owner generally has the option to convert the housing to market rate. This upends the lives of residents who are dependent on the affordability of their units and can lead to a sizable loss in the overall affordable housing stock overnight.
Many jurisdictions have come up with strategies to intervene proactively before the market-rate conversion of an important affordable housing complex. This allows them to ensure that existing affordable housing remains affordable housing. Examples of jurisdictions that have pioneered this approach include San Francisco, Santa Cruz, and Chicago.
State law requires owners of housing developments, where a significant portion of the units are subsidized, to notify local government when their developments will convert to the open market, and gives local governments and qualifying nonprofits an option to purchase the property or extend the subsidy period, also called a “right of first refusal.”
The next expiring subsidies for complexes in the City of Sonoma are in 2031 (Firehouse Village, subsidized by LIHTC) and in 2035 (Sonoma Village Apts, subsidized via USDA Sec. 515).
There are also “inclusionary” units within otherwise market-rate housing developments, that developers have been required to make affordable as part of the planning and permitting process. These units represent other opportunities for affordable housing preservation, albeit without a clear tracking mechanism (see Strategy 3a: Adopt a Strong Rental Registry).
Recently in the City of Sonoma, Burbank Housing combined several funding sources, including a contribution by the City, to extend for 55 years the deed restrictions on 18 units of affordable housing. Burbank “will oversee ownership, rehabilitation, and long-term affordability management” of these senior and family homes. They include the cute cottages across the Sonoma Bike Path from Vintage House.
Purchase of these expiring properties or units would likely be at market value, or potentially a charitable sale if fully or partly donated. If a government agency purchases the property, there are no property taxes. Another potential incentive that could reduce the purchase price could be a substantial property tax abatement for the life of the property. The government agency could then partner with a nonprofit to manage the property.
-
The California Statewide Communities Development Authority (CSCDA, cscda.org) Community Improvement Authority (CSCDA CIA), an affiliate joint powers authority, acquires public benefit oriented capital projects through the issuance of tax-exempt governmental purpose bonds. CSCDA operates the largest workforce housing program in California. Through its Workforce Housing Program, government bonds are issued to acquire market-rate apartment buildings. These properties are then converted to income- and rent-restricted units for moderate/middle income households, which are generally households earning 80% to 120% of AMI. Annual rent increases are capped at no more than 4%, which is significantly less than the rent limits under AB1482, the State tenant protection legislation. Additionally, no existing tenants are displaced under the program.
For example, in Newport Beach, CSCDA used bond financing to purchase land (existing multi-unit buildings with affordability deeds that were set to expire) in collaboration with a local nonprofit, the Little Tokyo Service Center Community Development Corporation. CSCDA had a local real estate firm (Waterford Property Company) manage the deal and rehabilitation of the property, now called “Sienna Residences”. Since CSCDA owns the property, there are no property taxes, allowing for additional affordability.
Taking this approach would involve the following steps:
County of Sonoma and the City of Sonoma become Program Participants by completing a JPA.
CSCDA is a statewide issuing authority that derives its powers from city, county, or special district members known as Program Participants. Any city, county or special district is eligible to become a Program Participant by executing the Amended and Restated Joint Exercise of Powers Agreement (the “JPA Agreement”). To become a member of CSCDA, the proposed Program Participant’s governing board must adopt and execute a resolution approving, authorizing, and directing execution of a JPA Agreement and then execute the JPA agreement. (See https://cscda.org/about/).
Identify existing properties with affordability deed restrictions that are expiring.
These properties could be single family homes, multifamily rental units, or inclusionary units. This planning and identification function could be accomplished by a new nonprofit Sonoma Valley Community Development Corporation (see Strategy 1).
Coordinate with CSDCA and an appropriate nonprofit for each property to construct an agreement.
Work with CSCDA and a local affordable housing nonprofit (such as Burbank, Eden, MidPen, SAHA, Habitat for Humanity, Housing Land Trust of the North Bay, etc) to purchase deed-expiring properties (rentals or ownership). CSCDA purchases the land and the nonprofit manages the property. Or, for homeownership properties, CSCDA purchases the land and enters a ground lease agreement such that the only property taxes would be on the purchase of the home and not the land, thus reducing the tax burdens of the nonprofit and the homeowners.