Friday, July 22, 2011
in San Diego, affordable housing units are about twice as expensive to build as homes that go for market rates, due to a complex mix of political and business agendas that conspire to drive up expenses and cost taxpayers millions.
When you think about subsidized, affordable housing for low-income folks, you don't imagine those digs being awfully luxurious. So you might be surprised to hear that, in San Diego, they are about twice as expensive to build as homes that go for market rates. This is due to a complex mix of political and business agendas that conspire to drive up expenses and cost taxpayers millions. The story is told in an investigative report in VoiceofSanDiego.org.
Will Carless, reporter, Voiceofsandiego.org
Mark Sauer, senior editor, KPBS News
David Garrick, reporter, North County Times
FUDGE: When you think about subsidized affordable housing for low income folks, you don't imagine those digs being awfully luxurious. You might be surprised to hear that in San Diego, they are about twice as expensive to build than homes that go for market rates. This is due to a number of business agendas that continue to rise up incentives. The voice is told in VoiceofSanDiego.org, and the reporter is Will Carless. Tell us how you got onto it.
CARLESS: I got fascinated by affordable housing. I got in it through the back door, I was covering some local developers who got in some hot water, amor land who had two of their employees charged with manslaughter. And I found all this money being spent on affordable housing. I went to the various agencies that build this stuff and said can you give me all the reports and projects that you've built? I put them into a spreadsheet and started doing some really basic calculations. One that kept jumping out at me of the per unit cost of building these things. And when you see numbers like 475,000, 510,000, they jump out at you.
FUDGE: Compare those per unit expenses to a unit that's built by a commercial developer for the commercial market.
CARLESS: It's important to recognize that there are different types of buildings, right? So building a downtown high rise is more expensive than building a three story walk up on grade, which means on a prepared piece of land out in the suburbs. But basically they're building very nice, high level luxury apartments in San Diego, and places like mission valley, for around about $20,250,000.
FUDGE: Half as much as what you found out we're paying for affordable housing. And when I say that, I mean this is taxpayer funded stuff.
CARLESS: That's right. There is a small element of private financing in most of these deals. But most of them are at least 90% funded by you and I.
FUDGE: Well, the question of why leads to lots of complex explanations, yet we have to ask, so what's going on here?
CARLESS: Well, it's a combination of different things that's adding to this. It's basically one of the biggest factors is the requirement to pay workers prevailing wages, in this San Diego amounts to a lot more than what the market requires you to pay. Then you've got the requirement to simply build in areas that private developers don't want to build in. On sites where they don't want to build. In expensive area, sites with environmental problems. And then you've got this requirement to add all these bells and whistles to your projects that all add costs.
FUDGE: Why do you have to add a bunch of bells and whistles to affordable housing?
CARLESS: The main relationship that's cited is that most of these projects get funded through what are called tax credits, which are essentially these taxpayer grants of money. And they're administered out of Sacramento. If you want to get tax credits for your project, you have to go through this elaborate beauty pageant, where you have to parade this project up against this committee in Sacramento and boast about all the wonderful things you're add adding. What seems to have been lost in this process is -- okay, so you're putting this biodegradable carpeting in there, solar panels on the roof, building a wonderful computer room, how much is it going to cost and end up being per unit? It hasn't really been an important question.
FUDGE: So with all of the politicians that are connected with this process, all of the legislatures, all the City Councils, nobody's come out and saying wait a second, this is costing $500,000 a unit to build. Why is that?
CARLESS: Not until the last few days, Tom. Certainly in the last, literally, week and a half the tax credit allocation committee, who are the guys who hand out the tax credits in Sacramento have said we're no longer going to award tax credits to projects which are not cost reasonable. They're thrashing out what the finer points of that are, but they've come up with that determination. Locally it's not something that's on the radar screen.
FUDGE: You were talking about the prevailing wage that government contractors have to pay. If I'm a construction worker working on a government contract as opposed to a private developer, I mean, what is the wage difference we're talking about in.
CARLESS: Significantly more in San Diego. And it's important to note that basically prevailing wages are kind of tied to union wages. Those two terms are almost used sort of as sin noms. So in San Diego, because the construction trade's not heavily dominated by the unions, there's a massive difference between what workers who are being paid revealing wages are being bayed, and workers who are being paid what the market dictates. It's different in downtown San Francisco, for example, where people are already paid very high rates that are union wages.
FUDGE: This may be something that the press has not talked about very much, but it sounds like this whole thing you're explain is no secret to people in the business. In fact, they call it the game?
CARLESS: That's right. And that's really the sort of end game, if you like, of this story, was to get people talking about this, not just the core group of people involved in this industry who are shrugging their shoulders and saying, hey, we know that this is crazy, and we know we gotta do something about it, and just sort of explain to everybody else, this is a really big deal and we should be talking about it.
FUDGE: One of the most meaningful quotes that I read in your story was this guy who was a developer who said that for the prices the taxpayers are paying, we could buy these poor folks a big house in lake side for the same price.
CARLESS: It was a big house out in east lake, I think he said. That's a point raised again and again. There are thousands of foreclose homes on the market in San Diego. The median price has come down, lots of bargains to be napped up, and there's a movement within the industry to say look, there's bargains out there. Wouldn't this be a better use of money instead of building a 450 square foot studio for $500,000?
FUDGE: And Will Carless is a reporter for VoiceofSanDiego.org, he just did a story about the cost of affordable housing in San Diego. Mark shower is also a guest. He's senior editor at KPBS news. David Garrick is a reporter for the North County Times. Let's get the other editors enveloped. How about you mark?
GARRICK: The point you just made is interesting. This is a classic aircraft career to set up affordable housing and this process that's got us here is relatively recent. We have had these distressed properties. And maybe it is time to take a look at the difference there. I wonder, too, though, as I go back, I come from Detroit and Chicago with a Cabrini-Green, one of the more notorious public housing projects in American history. Detroit has its share of those places. . Was this an idea in San Diego or in California to have nicer places more -- stricter guidelines for this affordable housing instead of these unbelievable crime generating eye shores of the past?
CARLESS: Undoubtedly. And one of the few metaphors that I didn't get into my story was this idea of the pendulum just singing back. It's like governments, the federal government particularly have made such a mess of building affordable housing and creating this sort of nasty project that is high in crime and everything else, there's been a kickback to make sure that doesn't happen. Now you have projects that are being build that are often the nicest things on the block. They're beautiful places. And far be it for me to say that people who need to live in affordable housing shouldn't live in beautiful places, but when you take into account the cost and what could be being --
GARRICK: And it is public money. Absolutely.
FUDGE: And Will Carless apologizes for the shortage of metaphors in his story. Let's go to David, what do you think about this?
CARLESS: I can tell you why there hasn't been a backlash in my opinion from the City Councils about the higher per unit cost. Of I covered Poway for a number of years and San Marcos and Escondido, and they all built a lot of it. They spend redevelopment money it, and they're required to spend 20% of their redevelopment money it. So the savings doesn't matter to them. It's the counter positive. If they were to get a cheaper product, they worry about Cabrini-Green in Chicago, right? And a lot of these cities don't want a lot of affordable housing units because their constituents aren't that hip on it. They'd rather a smaller number of nice units as opposed to a larger number of not as nice units?
CARLESS: I can tell you in San Diego, in the city, and I have a post coming up on the site later today, I was talking to Tony Young about this, obviously a big advocate of affordable housing. And I said to him, Tony, it seems like the cot of these things have become an afterthought. And he cut me off and said, it's not even an afterthought. We don't even ask this question, we don't even talk about the per unit cost. And the situation's gotta change.
FUDGE: David was saying, in a way for City Councils, for local government, this is almost free money. That's either money that they get from the state or it's redevelopment money which they have to spend.
CARLESS: It's more than that in that the political end game in this, the end game in this general in this is to have this wonderful project that everybody can pull out the silver shovel for and say, look at this fabulous project we've created that's the most green, economically sustainable, everything else, building. And then there's this sort of hidden thing, which is, like, yeah, it's fantastic. But it cost $500,000 a unit.
SAUER: I think it's easier to persuade opponents of low income housing that it's a good thing when it's shiny and new.
FUDGE: We have Joe on the line from Oceanside. Go ahead.
NEW SPEAKER: I was going to say, any time I think the government -- by definition, we're spending somebody else's money, it's really easy for this kind of thing to happen. I don't think anybody should be surprised that it happens. It happens with governments buying war jets or aircraft careers. Why would it be any different for our housing? But I did want to mention one thing. Another thing that would be really interesting to know, how many section eight vouchers could the government have bought for people, provided bought, instead of building these gigantic projects that quite, frankly, are over price?
FUDGE: Good question. Will, do you have an answer?
CARLESS: It's trick on 'cause we're kind of getting outside the scope of what my story was about. And certainly there's this big public policy balancing act that goes on in terms of -- what do you do about the problem of affordable house something do you buy existing units? Do you pit your money over here or over there? I'm not qualified to answer that broad a scope of question. But on the first point, far be it from me to advocate for the private sector and say go private developers go! But private developers have one reason to cut costs, and that is the more they cut costs, are the more money they make. There isn't the same driving factor in the public sector.
GARRICK: Of course the reason we have public housing to begin with, the market isn't gonna provide it especially in a rich area. And we have workers in jobs that don't pay that much especially in our increasingly service oriented economy. So where are these folks gonna live? Are they gonna commute 50†miles from the inland?
SAUER: I've had people call it work force housing. The people who are working at Wal-Mart or the gas station, especially in upper crest cities.
CARLESS: And of course the point of this story isn't to say should we be building affordable housing or not? It's should we be building more of it that's cheaper or should we be building this small amount which is very expensive?
GARRICK: And I wonder because nobody really owns this. If there were affordable housing czar as there is a head of the park and rec diameter, for example, and you get to this out of whack situation, they have to own it. They have responsibility?
CARLESS: $600†million in the last four years. That's an extraordinary amount of money. If this was something else, people would be talking about it.
GARRICK: And how many units? How many folks are actually getting housing?
CARLESS: There are about 2300 that have been built.
GARRICK: Not a great number.
FUDGE: With that, I think we need to take a little break. When we return, we'll continue this conversation a little bit and wrap it up. I think we want to take one more fella who's on the phone. You're listening to the Roundtable, I'm Tom Fudge, we'll be back in a minute.
I'm Tom Fudge, and you're listening to midday on KPBS. My guest this hour are Will Carless, a reporter for VoiceofSanDiego.org. Mark Sauer, senior editor of KPBS news. And David garret, reporter for the North County times. We're talking about an article that will wrote about the extreme costs of affordable housing in San Diego, government subsidized housing. Let's take a call from Tim in San Diego. You're on the show.
NEW SPEAKER: Hi guys I'm actually one of the project managers that's mentioned in the article. And first of all, I want to compliment Will on the article. It's a complicated topic. And he and I may have some small disagreements. But over all, I think he hit the nail on the head.
CARLESS: Thanks tim.
NEW SPEAKER: First of all, they -- the cost of affordable housing in his article, I believe is over all correct. But there is affordable housing in the county of San Diego, let alone California that does come in at market rate pricing for various reasons. Secondly, and will mentioned this briefly in the article, this housing is privately owned by the developers, whether it's a nonprofit developer or for profit. And we're required to keep it affordable in the State of California for 55†years. That project will not be sold at market rate. It's not going to be condoized. So that needs to be taken into consideration in terms of the over all discussion here. And finally, I agree with the metaphor of the pendulum swinging too far. Cabrini-Green's issue, I used to live in Chicago, I'm familiar with that, raised in Detroit. So I would agree with that. And when we get our projects in at, the local agencies, the housing commission, the CCDC, we are grilled on costs. And that's been going on probably for over ten years in terms of being grilled. The best of my recollection issue though is what will is talking about with tax credits. They've not taken it seriously. So on a state wide bases, there's not a czar of affordable housing. And probably on the city by city bases it depends. But in the assistant district attorney of San Diego, they do grow us on cost. And it can be a grind at times. Over all on a broad basis, Will is correct on that.
CARLESS: Thanks time.
NEW SPEAKER: So thanks to Will for the article.
FUDGE: Thanks very much for calling in.
CARLESS: One point they want to make and I haven't made in my story. But I'll make it now, is that if you look at these projects, they are very complicated, and the funding for them comes from various different slices. The Mercado project is a good example. The housing commission is providing I think $7†million. The tax credits are providing something like 20 midst, and the redevelopment agency is kicking something in too. Each one of those agencies has a discussion about cost. But if you look at the reports, like the housing commission's report, what they say is this is only gonna cost us say a hundred grand a unit. And the redevelopment agency says the same thing. This is only going to cost us $100,000 per unit. None of them make very clear and talk about is when you've added all of those different public slices together and looked at the per unit cost across all of those public agencies, it's $475,000 a unit.
FUDGE: One thing that really struck me in your article, will, was a quotation that came from somebody who was responding to the concerns about paying prevailing wages. And this person said, well, we need to pay prevailing wages because we're trying to house low income people and don't want to create a bunch of low income people by paying low wages. But it caused me to wonder with this affordable housing program, what are we trying to do? Are we trying to house poor people? Put money in the pockets of construction workers? What is the point and what is the mission?
CARLESS: I think the important point on that is that the point and the mission has changed. It's evolved. There's been this commission creep over time. And it's been from let's create housing for working people to let's create housing for working people, let's build green, let's build near transit, schools, let's pay people government man dated wages, and while we're at it, let's build these beautiful projects and let's do this, let's do that. And it's evolved so that now it's no longer just about affordable housing. And the result is that far fewer homes end up getting built.
FUDGE: Are you starting to get some reaction from government and --
CARLESS: Yeah. I've been contacted -- called twice from Sacramento this morning. From the tax credit allocation committee who are the body who are getting a lot of -- I guess a lot of flack. And fair play to them. They have really in the last couple of weeks they've started to grab the bull by the horns and saying this is a big issue. We need to change it. Why they didn't do it ten years ago or at least 3 or 4†years ago, I don't know. But they are starting to change their process now.