How Cities Could Help and Hurt Affordable Housing Development

Following the pandemic, local governments and the State of California have the opportunity to support the construction of affordable housing, but with financial pressure from the public health crisis, those same governments could also impede it.

“Coming out of the pandemic to stimulate the economy, construction is probably the quickest, easiest clear cut way to start creating energy within our economy and also to solve our housing crisis to start construction new units,” Edward Campbell, a partner in Nixon Peabody’s affordable housing and real estate practice group, tells GlobeSt.com. “However, I don’t think that local governments or even the State will make a huge push to start removing regulatory barriers to development.”

Financial barriers are a major reason that governments could avoid removing regulatory hurdles. “The impact fees is one of the cleanest ways for local governments and the state to generate revenue right now. Prior to the pandemic, there was a big push against these local impact fees,” says Campbell. “That has dried up recently. There has been the move to amend and change and Prop 13 to allow commercial properties to adjust property taxes more frequently. There has also bee a grassroots effort to reform that segment of the state tax code. Given the strains that we are seeing, raising taxes on people is going to be a hard push by legislators.”

Most experts agree that the pathway to affordable housing development is through public-private partnership. “I think creating more affordable housing has to be a joint effort and truly a public-private partnership,” says Campbell. “The private sector, particularly in the real estate market, there is a wealth of detailed knowledge on the operation of housing and financing structures that can play a role. That aspect will create efficiencies in the system that are important as well.”

While public-private partnerships are essential to the construction of affordable housing, Campbell says that there is a lack of political will to achieve it. “The big impediment to getting more affordable housing is lack of political leadership and a lack of public will,” he says. “In the affordable housing industry, there is the industry’s opinion of affordable housing and the public’s definition of affordable housing, which is that it is expensive for me to pay my rent. There are two separate conversations being had that are being mixed into one.”

Housing advocacy groups are working with local governments, but the niches within affordable housing are not lining up. “A lot of smaller housing associations have done a lot of advocacy, but I do think that there is a bit of a disconnect between the affordable housing industry and the market rate industry in terms of development and removing the hurdles to development,” adds Campbell. “They should be pushing as one whole multifamily industry.”