Proposition 1C - Housing and Emergency Shelter Bonds

Voter Guide
November 1, 2006
This measure appeared on the November 2006 California state ballot.

 

What it does

This measure seeks voter approval of a $2.85 billion general-obligation bond to finance housing production ($1.5 billion), and infill and transit-oriented infrastructure ($1.35 billion).

The $1.5 billion housing-production programs include the following:

  • Low-interest loans for development of affordable rental housing $345 million); units for the disabled ($195 million); units for emancipated foster youth ($50 million).
  • Downpayment assistance for low- and moderate-income buyers ($125 million); grants and loans to public agencies and non-profits for local homeownership programs and developments ($290 million); second loans for downpayment and closing costs for first-time, moderate-income homeowners ($200 million); grants to organizations to support self-help construction ($10 million).
  • Rental and ownership housing for farmworkers ($135 million).
  • Other programs including emergency shelters ($50 million); demonstration of cost-saving approaches to creating or preserving affordable housing ($100 million).

The $1.35 billion in infill and transit-oriented infrastructure programs include the following:

  • Incentive grants for infill housing development and related parks, water, sewer, transportation improvements, traffic mitigation and brownfield cleanup ($850 million).
  • Loans for development of transit-oriented housing ($300 million).
  • Grants for housing-related parks in nearby urban, suburban and rural areas ($200 million).

These are general-obligation bonds to be serviced out of the General Fund and require only a simple majority to be approved.

Why it is on the ballot

In 2002 the State of California adopted a $2.1 billion general-obligation bond measure (Prop. 46) to support affordable housing. It has funded a variety of different programs similar to those proposed to be funded through Proposition 1C. San Francisco been very successful in competing for these funds and has received approximately $89 million?which has leveraged, on average, three dollars of other funds (private, local, federal) for every one dollar of Prop. 46 funds, resulting in 2,234 units of low- and very low-income multifamily housing.12 As of March 2006, the City of San Francisco ranked second among the cities in California in funds received from Prop. 46 and in total number of housing units produced.13 At the current rate of utilization, all funds in Prop. 46 will be exhausted in 2007 and the Multifamily Housing Program will be out of funds by the end of 2006. Supporters of affordable housing are working on the development of a more permanent source of state funding. This bond measure is intended to provide funds to sustain the current momentum of affordable housing production until that source can be created.

Pros

Those who support Proposition 1C claim:

  • San Francisco has an affordable housing crisis that cannot be addressed without significant public investments to bring down housing costs for low and moderate income households
  • Funding from the federal government has declined substantially over the past few years, making the City even more dependant on assistance from the State as well as local sources.
  • The bond funding will assist the City in continuing a number of its very successful affordable housing programs, including construction of affordable rental housing for families, seniors and homeless and repayable downpayment assistance for first time moderate income households
  • The City potentially has much to benefit from the in-fill and transit oriented infrastructure program. Financial support for infrastructure could help to facilitate the development of such reuse projects as Treasure Island and Hunters Point Shipyard, among others.

Cons

Those who oppose Proposition 1C claim:

  • The State should focus on ways to lower the cost of housing rather than helping people buy overpriced housing through downpayment assistance.
  • There are a number of items within the bond that are ill-defined, including the Affordable Housing Innovation Fund and the infill and transit-oriented infrastructure programs. It is unclear from the legislative language precisely how these funds would be used.
  • The focus on homeownership is a direct assistance to people of higher incomes. This is because those who can attain homeownership are wealthier on average than renters. Further, the total value of the subsidy is greater for homeownership projects than rental ones.

SPUR's analysis

The cost of housing is increasing throughout the State at a much faster rate than incomes. In some markets, only tiny percentages can afford the median priced home. Additionally, over 360,000 Californians are homeless. A 2005 report from PolicyLink notes that housing costs are the single largest expense for most Californians and that in order to address the state's backlog need for affordable housing, 651,000 units of affordable housing would need to be produced.14 In a 2005 study by the National Low-Income Housing Coalition, the San Francisco metropolitan region ranks as the least affordable housing market in the country.15 The unaffordability of the City is due to both supply constraints and the city's ability to meet only a fraction of the need for housing at rent or purchase levels that moderate, low and very-low-incomes can afford.

San Francisco has been very effective in utilizing a variety of sources of funding to reduce the cost of housing. Given this experience the City is likely to be able to compete very successfully for a significant portion of the bond funds to continue its support for new and rehabilitated multifamily housing projects, broaden and enlarge its first-time home buyer program and assist in the provision of infrastructure to support new housing areas. The Mayor's Office of Housing estimates that the City is likely to be successful in obtaining some $80 to $120 million from the 1C bond issue if it is approved. The following are some of the components of the bond and how San Francisco might benefit:

  • Rental Housing: This component of Prop. 1C will enable the City to continue the very successful low and very low-income rental housing programs supported by the Mayor's Office of Housing and the Redevelopment Agency.
  • Homeownership Housing: Prop. 46 included $384 million to support its low and moderate homeownership goals. Additionally, the City's 1996 affordable housing bond did provide $15 million for down payment assistance for first-time homebuyers with below-median income. Under the City's homeownership program, when the home is sold, the money is repaid to the City, together with a portion of the appreciation. The funds are then re-lent to another buyer. To date there have been 330 loans made without any defaults.
  • Infill and Transit-oriented Infrastructure supporting Housing: This represents a new state approach to facilitating housing production. The state, through the infill and transit oriented infrastructure program component will be embracing "smart growth" measures in a significant way, focusing on transit accessible housing and support for in-fill housing. Many of the City's larger efforts to create more housing at all income levels in areas that are not currently in housing, (such as Treasure Island and Hunter's Point Naval Shipyard) necessitate the provision of new or expanded infrastructure. These efforts can be substantially assisted with funds from this component of the proposed bond.

This measure will enable the City to continue many of its successful housing programs While there is much more to do, this bond is a practical amount for the state to invest in housing statewide and past experience has shown the City has been very successful in obtaining more than its fair share. This bond is a practical amount to invest toward the critically important goal of increasing San Francisco's ? and the state's ? supply of affordable housing. Critics claim that we should not be subsidizing homeownership assistance because homeownership is already heavily subsidized through the federal and state mortgage deductions on mortgage interest and property tax, and these deductions disproportionately benefit families who live in expensive homes. However, the home-ownership programs contemplated in Prop. 1C are in the form of loans for moderate-income households. Further, as these loans are repaid, new funds become available which continue to benefit lower income households, the city's workforce, and enable them to receive the benefits of homeownership in the City. Prop. 1C is not the full solution to our affordable housing crisis, but it is a necessary step.

SPUR recommends a "Yes" vote on Proposition 1C.



12July 2006, Non-Profit Housing Association of Northern California
13Non-Profit Housing Association of Northern California
14"Expanding Opportunity: New Resources to Meet California's Housing Needs" a PolicyLink Report for Housing California. Executive Summary. Winter, 2005. http://www.housingca.org/PDFs/2347_PL_EXEC.pdf.
15"Out of Reach, 2005" http://www.nlihc.org/oor2005/.