‘All hands on deck’: Can public-private solutions solve Calif. housing crisis?

Why We Wrote This

California sees a window of opportunity to solve its housing shortage, in the form of a $21 billion surplus, resolve from the new governor, and tech and foundation money. Can a regional approach to problem-solving overcome NIMBYism?

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An affordable family housing complex that opened in 2015 is one of a number of such builds in San Francisco. Gov. Gavin Newsom has pledged to create 3.5 million new housing units by 2025.

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California Gov. Gavin Newsom, who was to give the State of the State speech Tuesday, has called the housing crisis “an existential threat to our state’s future.”

Silicon Valley tech companies and philanthropic groups have launched a $500 million investment fund for affordable housing in the San Francisco Bay Area. The Partnership for the Bay’s Future, bankrolled by Facebook, Genentech, and the San Francisco Foundation, among others, plans to produce 8,000 low-income housing units and preserve another 175,000 over the next decade. The campaign will seek to nudge cities in the region to look past geographic boundaries and collaborate with each other.

“What the partnership can do is get cities to see they’re part of a bigger effort,” says Assemblyman David Chiu, a Democrat from San Francisco. “We need every city and county to contribute.”

The partnership has enlisted religious leaders, community activists, and city and state officials to promote the importance of a regional response to the housing shortage. “Everyone is affected by the lack of low-income housing,” says Fred Blackwell, chief executive officer of the San Francisco Foundation, “and all of us benefit when there’s more of it.”

In his inaugural address last month, California Gov. Gavin Newsom vowed to create “a Marshall Plan” to alleviate the state’s housing shortage. If the analogy sounded fanciful, he soon backed up his rhetoric, inserting $1.75 billion for affordable housing production into his state budget proposal. His actions heartened housing advocates frustrated by what they considered his predecessor’s inertia.

“We have to move past Jerry Brown, whose approach was, ‘The housing problem is too hard, let’s leave it to God,’ ” Matt Schwartz says.

The president of the California Housing Partnership Corporation, a nonprofit based in San Francisco that assists public and private efforts to expand low-income housing, he calls Governor Newsom’s attention to the issue “a welcome change.” Then he adds a sobering caveat about that Marshall Plan idea as Newsom attempts to fulfill a campaign pledge to build 3.5 million new housing units by 2025.

“Whatever initiatives he comes up with, they won’t be enough,” Mr. Schwartz says. His view reflects the reality that, unlike rebuilding post-war Europe, reducing the state’s housing deficit will require private funding. “We need an all-hands-on-deck approach.”

Evidence of that approach gaining momentum has emerged in California and other regions where the housing gap continues to widen. Newsom, who will give his State of the State address Tuesday, saw his cause receive a boost in January with the unveiling of a $500 million investment fund for affordable housing in the San Francisco Bay Area.

The Partnership for the Bay’s Future, bankrolled by tech companies and philanthropic groups, plans to produce 8,000 low-income housing units and preserve another 175,000 over the next decade. The campaign’s launch arrived the week after Microsoft revealed plans to invest $500 million in housing programs in the Seattle area, another region upended by the tech boom.

The list of backers includes Facebook, Genentech, the San Francisco Foundation, and the Chan Zuckerberg Initiative. Another prominent supporter, Kaiser Permanente, has announced a separate venture to form a $100 million loan fund with a national nonprofit, Enterprise Community Partners, that will nurture low-income housing growth in California and elsewhere.

The regional strategy of large corporations to address the Bay Area’s housing inequality bolsters Newsom’s crusade to ease a crisis he has labeled “an existential threat to our state’s future.” California’s affordable housing shortage of 1.5 million units accounts for a fifth of the country’s deficit of 7.2 million units, and 3 million tenants statewide spend more than one-third of their income on rent.

The depth of need exceeds what the state, even with a $21 billion budget surplus, can remedy on its own, explains Maurice Jones, the president of the Local Initiatives Support Corp., a New York-based housing nonprofit involved in the Partnership for the Bay’s Future.

“Housing is too big of an issue for only the government or only the private sector to solve,” he says. “We have to have everybody on board. That’s the only way.”

Broader solutions

The Bay Area comprises nine counties and 101 municipalities in a region with 7.6 million people. Across that many jurisdictions, each preoccupied with its own interests, disparities can remain unresolved until a crisis occurs.

Three years ago, a municipal water shortage in East Palo Alto, Calif., led city officials to impose a moratorium on new construction that halted an affordable housing complex and other projects. The problem dated to a 1984 regional water plan that resulted in the Silicon Valley enclave, whose residents are predominantly low-income and people of color, receiving less water than more affluent cities, including some with smaller populations.

The ban lasted more than a year before East Palo Alto obtained water transfers from two nearby cities with help from the Chan Zuckerberg Initiative. The philanthropic fund — formed in 2015 by Mark Zuckerberg, Facebook’s co-founder, and his wife, Dr. Priscilla Chan — provided $2 million to cover a portion of the transfer fees.

The Bay Area partnership will seek to foster that kind of collaboration for affordable housing by nudging cities to look past geographic boundaries.

Rich Pedroncelli/AP
California Gov. Gavin Newsom presents his first state budget during a news conference Thursday, Jan. 10, 2019, in Sacramento, Calif.

“The solutions can’t just work within city or county borders,” says Amie Fishman, executive director of the Non-Profit Housing Association of Northern California. “People live, work, and drive across those borders, so we have to develop broader solutions that individual local governments don’t necessarily think about.”

The soaring housing costs and rental prices wrought by the Bay Area’s tech boom has induced a belated awakening within the industry about its responsibility. A few entrepreneurs have made attempts to atone.

The Chan Zuckerberg Initiative was the largest donor behind a pair of statewide ballot measures passed by voters last fall that will funnel a combined $6 billion into affordable housing and homeless services. Marc Benioff, the founder of Salesforce, contributed $7 million to a ballot initiative in San Francisco County that will raise an estimated $300 million for similar programs there by taxing big businesses.

A regional study last year found that, between 2010 and 2015, the Bay Area gained 617,000 jobs and added a meager 56,000 homes. The partnership will offer low-interest loans and lines of credit to developers and nonprofit groups to create, acquire, and maintain affordable housing. The infusion of financing could remove a stubborn obstacle to construction.

“One of the biggest political issues that cities face with low-income housing is [controversies over] using public money,” says the Rev. Paul Bains, co-founder of Project WeHope, a homeless shelter in East Palo Alto. “Private funding can help them get around that.”

The Bay Area campaign has enlisted religious leaders, community activists, and city and state officials to promote the importance of a regional response to the housing shortage. Their support may serve to blunt the pervasive NIMBYism that represents perhaps the strongest deterrent to new housing and persuade residents who lament the rising homeless population even as they oppose affordable housing.

“These things are connected. It’s not someone else’s problem,” says Fred Blackwell, chief executive officer of the San Francisco Foundation. “Everyone is affected by the lack of low-income housing, and all of us benefit when there’s more of it.”

Sharing the burden

A state law passed in 1967 requires California’s cities and counties to set targets every eight years for building affordable and market-rate housing in proportion to population growth. But the state has seldom enforced the guidelines, and a report in December showed more than 96 percent of California’s 539 jurisdictions lagging in production.

Newsom signaled an end to the leniency last month when he threatened to withhold state transportation funds from local governments that failed to build enough housing.

Two weeks later, the state sued Huntington Beach, accusing officials there of blocking low-income housing development. (The city has countered with two lawsuits against the state that assert the primacy of local control over housing matters.)

California has built fewer than 80,000 housing units a year since 2007, which is 100,000 short of the annual supply needed to meet demand through 2025. The sluggish output arises from complex building regulations, restrictive zoning ordinances, escalating construction costs, and local opposition to high-density housing.

The state’s suit against Huntington Beach illuminates Newsom’s intent to prod cities to share the housing burden. A spirit of cooperation has taken root in the Bay Area beyond the partnership. A coalition of housing advocates, business leaders, and labor interests has crafted a 10-point plan to tame the region’s housing crisis.

The policy proposals range from tenant protections to a streamlined process to approve certain housing projects. The group sent its plan to the Legislature a few weeks ago, and lawmakers will weigh whether to adopt the recommendations.

For Assemblyman David Chiu, a Democrat from San Francisco, the coalition’s work and that of the Bay Area partnership offer examples of the regional sensibility on housing that Newsom supports.

The chairman of the housing and community development committee, Assemblyman Chiu describes public-private alliances as “absolutely critical” to brightening the state’s housing future. He suggests the newly created investment fund will help the governor cultivate that sense of collective responsibility among cities, businesses, and residents — without litigation.

“What the partnership can do is get cities to see they’re part of a bigger effort,” he says. “We need every city and county to contribute.”

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