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UC Berkeley researchers recommend changes to boost state's affordable housing
27 March 2001

By Kathleen Maclay, Media Relations

Berkeley - The preservation and expansion of California's desperately-needed affordable housing supply will require substantial, stable and consolidated funding, enforcement of existing laws requiring affordable housing, and giving nonprofit developers with proven track records an edge when issuing funds.

These are the recommendations of a group of researchers from the University of California, Berkeley, in a report funded and recently released by the California Policy Research Center.

The researchers explored the affordable housing scene throughout California, where poor renters living in overcrowded housing far outweigh the national median and Los Angeles and Orange counties are the hardest hit. They also said only three states have lower home ownership than California, where the homeownership rate stands at 55.6 percent, and that the expensive housing market is making it harder for businesses to draw new workers.

The report challenged prevailing economic theory that private builders and landlords essentially provide for everyone from the rich to the poor with a supply chain constantly scaled by an increasingly affluent population. In exceedingly tight housing markets such as California's, the researchers said, there is a point where rents do not cover costs and where few can afford to do business.

Enter the nonprofit housing developers, who in California, the report said, account for about 6,000 new units each year and the rehabilitation of another approximately 3,000 units. The numbers aren't high in terms of the estimated 60,000 such units that should be built every year for the next two decades to meet the need, but few others are entering the field, researchers said.

Nonprofit housing developers, in fact, are the preferable developers for this market because of their sensitivity to community needs, the report said.

"California's nonprofit housing developers are an important state asset," said the research group headed by Karen Christensen, an assistant professor of city and regional planning at UC Berkeley. "Their productivity in the face of scarce, sporadic federal and state funding illustrates their dogged adaptability and resourcefulness. Yet, the survival of these organizations is continually threatened."

UC Berkeley's researchers surveyed the 211 nonprofit housing developers working in California between 1997-98. Some 147 developers participated in the survey, and researchers also conducted in-depth, related interviews.

California's nonprofit housing organizations must compete for a complex assortment of "scarce and sporadic" funds that range from redevelopment money to federal block grants, housing trusts, iffy tax credits or traditionally meager state funds, the report said. Nonprofits commonly use 10 to 12 funding sources per project, and it is not uncommon for projects to collapse because of the complex and varying requirements and timetables, researchers said.

"The good thing is that the state has recognized it needs to do something, but the procedures continue to be very complex," Christensen said. She suggested streamlining the system so there is a single application rather than several, and a single monitoring report on the progress of each nonprofit housing project.

While California has committed some additional funding for affordable housing in recent years, those monies remain at risk without a dedicated funding source, Christensen said.

To increase the supply of affordable housing, researchers said, the state should avoid a policy followed by most funding sources that requires nonprofit developers to get matching funds.

Researchers also said the state should limit low-income housing funding to nonprofit developers with good performance histories. Some local governments already follow this practice, they said.

"Although this proposal appears to close entry and stifle competition, new organizations could work as subcontractors of seasoned nonprofits," researchers said. "Indeed, some of today's successful nonprofits began by doing joint ventures with more experienced nonprofits and are now helping smaller, newer organizations."

The California Policy Research Center is a UC research and public service program established in 1977. It applies expertise within the UC system to the analysis, development and implementation of state policy and federal policy issues of statewide importance.



A report brief is available from the center.