Thursday, July 26, 2007

Affordable Housing - Yeah, Right!

Our friends over at the Newport Beach Voices blog have provided a couple interesting entries dealing with the recent edict from the Southern California Association of Governments (SCAG) regarding the need for affordable housing throughout Southern California communities. Here's the link to the relevant entry. Embedded in it is a link to a detailed report which, if you choose, you can visit for some of the details of the numbers.

However, since I've already done that, I'll share some of the interesting numbers for Costa Mesa and Newport Beach with you. In SCAG's report entitled "Final Regional Housing Need Allocation Plan - Planning Period (January 1, 2006 - June 30, 2014), it presents their requirements for additional housing units through their fiscal year ending June 30, 2014. The big news locally, which was covered by an article in the Orange County Register, here, is that the City of Irvine must absorb almost half of Orange County's 82,332 total new housing units mandated over the next seven years. Of that total of 35,322, more than 21,000 must be "affordable" - available to very low, low and moderate income households. Irvine officials have freaked out with these numbers, claiming a lack of land. Kind of makes me smile just a little.

Closer to home, Costa Mesa has been mandated to provide 1682 new housing units, of which 972 must be either very low, low or moderate income units. Newport Beach will be required to provide 1784 new housing units, of which 1076 must be very low, low or moderate income units.

For us Costa Mesans this presents an interesting dilemma. By all accounts, we are upside-down in rental versus owner occupied housing. The last number I heard was 60% rental, 40% owner occupied. Typically, very low income and low income housing units mean rental units. I'm informed by city staff that, as far as the 710 market rate units are concerned, we seem to have that covered and more. The Enclave, which will be built by Irvine Apartment Communities in the bean field near the Performing Arts Center, will account for more than 800 units alone.

However, that doesn't address the folks at the other end of the spectrum - the low and very low income folks for which we will be required to plan for over the next seven years. If the rhetoric we've been hearing for the past few years - spurred on by those folks who identify themselves as "improvers" - is any indication, there seems to be little interest in providing housing for folks at the low end of the economic ladder. Quite the contrary, most of the ambient noise we hear these days seems to be about bulldozing many of the apartment units that very likely provide that kind of housing specifically.

The Costa Mesa planners will have their work cut out for them, as they attempt to meet the mandate and still follow the direction of a council intent in turning Costa Mesa into Newport Beach or, at least, Huntington Beach. There are a few folks in our town who, when they hear the words "affordable housing", apparently instantly see slums in their minds eye. They exercise a lot of influence over the council majority, so it will be very interesting to see what tack they take on this subject.


I thought it was quite ironic that Newport Beach has been earmarked to provide even greater numbers of very low and low income units. I find myself wondering just how they're going to pull that off, since the average home value in that city is at least four times that of Costa Mesa. Maybe they can turn the entire Banning Ranch into an affordable housing enclave.

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Anonymous Anonymous said...


This will be interesting. We just had a golden opportunity to add quite a bit of affordable housing, but our myopic Council majority felt that illusory "market forces" would accomodate those needs. Now that SCAG has mandated many additional affordable units, we'll need to find space for them, which we don't have really have. Maybe a giant complex where the Ice Capades used to be? Who knows. Regardless, it will be interesting to see how the Council majority and all their anonymous supporters spin this.

7/26/2007 04:26:00 PM  
Anonymous Anonymous said...

Geoff - affordable will still be a market driven force. Recent sub-prime events will hinder borrowers from buying anything that they cannot qualify for. You can build what you want as a city and state its need (low income), but borrowers will still need to qualify for the ever-tightening loans banks will offer. Working for a major financial institution, I know first hand that areas more affluent; Newport, CM, HB, etc… will stay in high demand but only for the few who will qualify. Back to affordable housing, unless the city will subsidize the upside-down market value to build the units I don’t foresee a need, hence, you can mandate all you want but without the demand, it’s simply not a concern the city will need to address until the next boom in real estate or excessive drop in rates.

7/26/2007 09:22:00 PM  
Blogger The Pot Stirrer said...

Rob, it will, indeed, be interesting to watch. The high rise developments currently in the works to be built near the 405 will add to the mix...

Andrew, welcome back. I'm glad you decided to return. I suppose you're right - market forces will call the tune. The next few years will be very interesting.

7/27/2007 11:58:00 AM  
Anonymous Anonymous said...

I am not sure how this factors into this discussion, but one issue that has been gnawing at me is that our police, fire, teachers and other public servants are being priced out of the communities they work in. In addition I would think it useful to provide incentives for them to live in our neighborhoods. Both of those issues could be addressed by implementing some city sponsored housing subsidy. Any thoughts on this? Am I the only one who sees this as an issue?

7/27/2007 06:41:00 PM  
Anonymous Anonymous said...

Bruce – what a great idea! I would love NMUDS to work with the cities it serves to come up with a plan that would help me and my wife (a NMUSD teacher) to subsidize a place in Newport Beach. I think a half-million would do it. That way I can join the majority in CM, rent out my home, have a nicer pad in NB with the same payment and rake in an extra grand a month from my CM home. My kids could then use the better half of the NMUSD and I would not have to pay a grand a month in private tuition. I could be a yuppie. I know driving around in a new BMW 3-serise, subsidies by NB would make DVS green with envy. Sweet deal, please start a petition.

7/30/2007 07:34:00 PM  
Blogger The Pot Stirrer said...


I waited to respond to your question to see if any other readers might provide this information. Former (and maybe future?) councilman Gary Monahan sent me an email to remind us of the First Time Homebuyer's Program, which is administered through the Redevelopment Agency. While not specifically directed at any group, there are funds budgeted and available if a person meets the qualifications. Details can be found at this link: The timing of your question is fortuitous, because the program funds become available tomorrow, August 1st. I checked with the city staff and was advised that, at one time, there had been a similar program available specifically to public safety staff members, but it was terminated due to lack of participation.

7/31/2007 09:11:00 AM  
Anonymous Anonymous said...

Andrew, thank you for reminding me that there are those of you out there looking for every angle to rake advantage of any benefit. I will have to make a note that anyone participating in the program should meet certain financial requirements.

Geoff, good point, I forgot about that program. I hope more will take advantage of it.

7/31/2007 09:52:00 AM  
Anonymous Anonymous said...


Unfortunately, your opinions on this subject seem to echo the council majority. With all due respect, the ignorance on this subject is astounding to me. I was equally ignorant about it until I participated in Tustin's program a while back.

Please explain how "market driven force" will assist a teacher, police officer, or firefighter making a set, government mandated salary of much less than $100,000/yr. afford a home in a community where the least expensive housing unit is a $300,000, 800 sq. ft. condominium. Lets not forget the HOA dues, etc.

According to Cal/HFA, someone making $60k/yr can afford a $200,000 home. Even with a massive crash in the market, CM homes will not get back down to $200k again anytime soon. I know for a fact that most starting teachers and police officers make far less than $60k/yr.

When I refer to ignorance on this issue, it is not meant as an insult. There seems to be some perception that "affordable housing" is a give-away to freeloading welfare recipients who won't better their own lives. Not so.

It typically is a subsidized home in a new development. Through Tustin's program, I learned that the restrictions made it unattractive and very difficult to buy. A home with a market rate of $660k was offered to me at $302k. Sounds like a windfall, right? Wrong. You or your spouse cannot have owned any other property in order to qualify. You have to turn over every aspect of your finances (including retirement accounts) to determine if you qualify, you MUST live in the home for the entire time you own it, you CANNOT resell it for 45 years without going through the City, which means no appreciation as they put it back into the afforadable housing pool. Further, you can never refinance the house or get a second mortgage, and you don't get a break on HOA dues or taxes. Plus, due to state redevelopment law, you cannot spend more than 35%of your income on housing. So, that means that because of $890/mo in HOA fees, etc., and a maximum annual income of $65k to qualify (for moderate single folks) people had to come up with $150k in gift funds from family members (no friends, no loans - documented, verified gifts from family). That is hardly a freeloaders paradise.

I ended up passing on the home because I didn't want to essentially lease a home with a $150k down payment. I no longer income qualify for affordable housing either.

That is the reality of affordable housing. It is subsidized, but with MANY restrictions. You can't rent out your house and get an affordable housing subsidy. It is designed to let people who work in communities live in those communities and not have to be at the mercy of a landlord. This is state policy, designed to promote homeownership and cut down on commuting. Yet when the subject came up during the approval process for the new condo towers, the council spouted off about market forces. Talk about blissful ignorance! The market is about profit! If a developer can sell a townhome or house for $500k - FAR out of reach of any public safety employee or teacher, why would they sell it for less? They won't. That is why these laws are in place.

William Lyon and Lennar didn't set aside 15% of their development for low to moderate income folks out of the goodness of their hearts, Tustin mandated it. Don't think they are suffering either - they reap tax benefits and other concessions in exchange. Too bad our city council is too idealogically weak in this regard. The developers of those condo towers got virtually everything they wanted and gave up virtually nothing. New schools? Traffic improvements? Affordable housing? NADA. What a shame.

As for the First Time Homebuyer's Program, we are fortunate to have such a great program. Unfortunately, only 1.5 loans are available tomorrow. The funds are very limited. Essentially, CM will provide a silent second mortgage of up to $240k to income-qualifying residents of CM. The restrictions are very strict, no property ownership, resale restrictions, etc. It is still a great program, but there just aren't enough funds. The same 35% income for housing costs restriction applies as well. I have applied for this program in the past, and know it in-depth, so let me know if you have any questions.

Affordable housing isn't a give-away, it is a necessary tool to promote home-ownership for those that couldn't otherwise buy in the communities where they work. There are VERY limited amounts of units available, and it is very, very tough to qualify.

The comments about the condo tower developers having to charge more to others to provide affordable housing were red herrings - the developers get tax breaks and other considerations. Plus, you wouldn't be getting deadbetas in the towers, as even affordable housing buyers would be subject to the same restrictive HOA dues.

7/31/2007 12:42:00 PM  
Anonymous Anonymous said...

Bingo Bruce – that is my point. Thai is why a program like that is unacceptable. What needs to happen to keep public servants living in the city they work in is for that entity to focus on the correct benefit package, salary, housing stipend, flexibility, etc… The cities don’t have this influence with NMUSD, why should they be responsible for providing a separate benefit above and beyond what was negotiated for the masses to a few people who would choose to live here anyway?

7/31/2007 12:49:00 PM  
Anonymous Anonymous said...


That is a great point! NMUSD should refocus their funding priorities AWAY from bloated administration and useless feel-good programs and start actually paying their teachers what they deserve, along with good benefits such as housing incentives.

I have a very good friend who is a high school teacher in Santa Barbara. There, the county and schools got together and created a pool of funds to subsidize housing for income-qualified teachers. They had a huge problem with teachers commuting from Ventura, Santa Maria, etc. so they helped solve it. NMUSD WOULD need help from the city, though. This isn't local money, by the way - the state provides much of the housing money.

Just because an area is affluent does not mean that public sector employess should be forced to commute for hours each day. Even the wealthiest cities with the most expensive housing need cops, firemen, teachers, etc.

I do think there will be demand, as this is a very desirable place to live, and many, many "middle class" folks are forced to rent due to high prices. By middle class, I mean those making $50k - $100k/yr. Even making $100k/yr, you could only afford a $375k ome, of which there are currently only a few very small, rough condos in CM.

7/31/2007 03:27:00 PM  
Anonymous Anonymous said...

So Rob are you saying affordable housing is not affordable. I am unclear as to how the city, unless it wants to back the mortgages at x% on the dollar will change the fact that where we live the market has set the ownership of a home at a high bar. Even with a solid program in place it will take an arm and your first born to get into a property around here. Good for some and bad for others but that’s life. Not sure, what you’re trying to tell me, I respect what you write, you seem to be knowledgeable about this subject and many others, but maybe I just am ignorant on this subject.

7/31/2007 05:03:00 PM  
Anonymous Anonymous said...


I think that the Tustin program was poorly designed from the perspective of a single moderate income buyer. The only homes allocated for single moderate income buyers were very large ones - no smaller, less expensive condos.

I had extensive discussions with Tustin officials about the fact that I income qualified, have good credit (you are dead-on there - you cannot qualify for affordable housing if you have bad credit, as the loans are provided by regular financial institutions), and was no. 4 in the lottery, yet could not get a house without some mystical long-lost relative gifting me $150,000.

Essentially, the builders structured it that way, which is legal but kind of underhanded. The builders were responsible for the allocations, and "assumed" that moderate income buyers were 4 person households, resulting in only large, more expensive homes allocated for moderate buyers. They didn't want TRULY affordable housing folks to live in the midst of their planned community. So, they clevery structured the program so that the high mandatory HOA fees, taxes, and insurance kept people out who didn't have families with deep pockets. The result? The "affordable housing" went to young people with low incomes (students, people new to the workforce, etc.) who had family money. Perfectly legal and very clever.

So, to actually answer your question (sorry), my main point was that it is a very difficult and stringent process, not the free home giveaway that some make it out to be.

If Costa Mesa doesn't sue SCAG, which Irvine just did, we will be forced to cough up some affordable housing units. From looking at the Homebuyer Assistance Program rules, available here:

it is obvious that Costa Mesa's redevelopment staff will structure a fair and strict program that will weed out opportunists or deadbeats and actually make a dent in the stated goal of many city officials - turning the ownership/renter ratio upside down in Costa Mesa. Bever and Mansoor talk a big game about promoting home ownership, but I know well that someone making $60-100k/yr. has an almost insurmountable task in buying a home here.

I live and work here in Costa Mesa, and have for close to 15 years. I have rented all that time, and hopefully I will be able to buy a house at some point. I work in the private sector, so my income has great upward potential. I don't want the city to give me anything. But a teacher or cop or firefighter with an ironclad cap on their income (unless they marry someone with money) should have an opprtunity to live in their community. The restrictions in place guarantee that such a program won't be a taxpayer-subsidized home giveaway.


7/31/2007 08:19:00 PM  
Anonymous Anonymous said...

Andrew, yes I got your point as you can tell. All your point means to me is that programs have to be properly developed.

Rob, thank you for your insights into the affordability programs that you have reviewed.

I stick by my original statement that at the very minimum we need to support our public sector employees in a way that encourages them to live in the communities they serve. You guys seem pretty smart, come up with a plan that works. Maybe that does mean paying private sector wages and benefits packages. Would public employees give up some other benefits to help offset their housing subsidy? I don't know what would be best, but I still think the community as a whole owes it to our employees to try and solve the problem.

As always, great discussion guys! Thanks.

8/01/2007 08:22:00 AM  
Anonymous Anonymous said...

Affordable or not, with the new abundance of 'For Sale' signs all over Costa Mesa and the collapse of the subprime model, there's going to be an awful lot of high-rise condos available, and I have to wonder if those developers are starting to get nervous that 'market forces' are going to start pushing those prices down to where a two-income family (perhaps a teacher and a cop) just might be able to afford to get in.

8/01/2007 01:14:00 PM  
Anonymous Anonymous said...

Mike, good observation. Is it possible though that this is a momentary blip in the economics of housing? In that case only some may be in a position to capitalize on it. Also, another consequence of the sub prime fallout is the tightening of credit that will make it harder to qualify for a loan even if the cost of housing drops.

8/01/2007 03:46:00 PM  
Anonymous Anonymous said...


I agree completely - we need to help critical public sector employees live in the community. I also agree that tighter lending standards and increasing interest rates are going to be a double whammy that will make it even more difficult for low income buyers to get into the market. As for prices, just check Redfin or Zillow. These condos selling for $400k now were selling for $150k 5-7 years ago. Another example is an $800k eastside home that sold for $290k in 2001. Will the prices ever get that low again? Doubtful. I hope so, but that is purely self-interest talking...


8/02/2007 08:59:00 AM  
Anonymous Anonymous said...

Bruce and Rob - what you are now talking about is what I originally posted. These are market conditions working against lower income people. Rates, credit, assets, income, all of these factors are key to qualifying for a home. Tightening criteria for loans and loan programs will make it even more difficult for people with a good income and credit to qualify (Rob sounds like this is your situation). If a mean home price is 500K, even a 20% assistance program makes that 400K. Still is well out of range for the incomes you are stating.

I don’t know what the solution is, but having the government involved at any level is useless. I don’t believe that they could handle the different scenarios, legalities, market conditions to run an effective program.

The other factor here is demand. Is there really a demand by teachers, cops, and other public employees to live in this city? Most cops I know don’t want to live where they work, firemen seem to love the IE, and teachers, well some I know own very nice homes in NB, other at the entry level (50K) are too busy partying (youngsters) to worry about settling down. Fact is it will take a two-income house at minimum to qualify for a home near the coast and probably equity from another home. And like my wife and I did, that means scrapping by; getting a condo, moving up to a home that was a major fixer-upper. None of it came easy and took time. If that means buying your first home in another city, saving and building equity to move to a nicer beach community that is what people will do and should do. Instant gratification is not always the best route, but it seems that is where our society is sitting, wanting it all now.

Best of luck to you Rob on getting yur first home, it is a real joy, when you are not working on it :)

8/02/2007 10:18:00 AM  
Anonymous Anonymous said...

Andrew, I understand what you are saying and I too wonder if there is any real demand from the people I originally identified. I am thinking of it more as a benefit to our community to have people that we count on here and knowledgeable and invested in the community they serve. I am aware that there are locations in the SF bay area that have not been able to attract the talent they want because no one can live in the area on the salaries offered and traffic is too horrendous to commute from another more affordable location. We are heading that way with the IE. Government has proven to be quite inept, I agree. That doesn't mean there isn't a better solution. To me the best solution is to pay wages that allow people to live in the city they work in. If the median price of housing is 500k, then the salary offered to someone that my life may depend on should certainly be enough to buy a house at that price. If they choose to live elsewhere, they are of less value to me and their salary should reflect that. Maybe it is just that simple. A salary adjustment or bonus for living in the city.

8/02/2007 03:13:00 PM  
Blogger The Pot Stirrer said...

Thanks to each of you for this debate. This problem is not an easy one to solve, but if folks like you continue to engage issues like this and address them with the city leaders solutions may be found afterall. You each made excellent points. I'm happy to provide a forum for these kinds of exchanges of ideas.

8/06/2007 05:49:00 PM  

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