A Vision for the Future

Pilot program may be a new model for affordable housing

Images courtesy of Peoples' Self-Housing
This newspaper’s last article on the housing crisis prompted many North County residents to leave comments. Large groups of people are feeling left out of the housing game. Some say this county provides housing for low income residents and housing for wealthy residents, but little for those in the middle bracket. 
The “missing middle” is another name for “workforce,” or for those essential workers in the community who provide services and work for low pay. While they are important to the local economy, they make anywhere from 50 to 120 percent of the Area Median Income (AMI), and are part of the income bracket that is largely underserved by federal and state loan programs. Left out of the buying market altogether, they may be paying more than 50 percent of their income in the area’s high rents. The trends can be witnessed on Craigslist: $2,500 for a three-bedroom. $600,000 to buy a home of the same size. Templeton has become the most expensive in the North County with Atascadero and Paso Robles in a close second and third.
Readers are saying what the middle class used to be is no longer, and the gap between the wealthy and the financially struggling has been widening. Our senior community members are missing the good ‘ol days and a whole socioeconomic class is missing out on finding affordable housing. 
For local employers, one of the largest barriers to attracting and retaining employees is affordable workforce housing. The result: People are moving to San Miguel or inland cities, or even other states like Texas for cheaper rent or to buy a home, as housing prices continue to soar up. In the North County, wait lists for the few new affordable housing projects average about five years and are growing in length. Turnover is rare, which makes vacancies low. 
Peoples’ Self-Housing’s President and CEO John Fowler calls housing in San Luis Obispo County a crisis.
“And it’s not just our county, it’s California and all over the nation,” he said. “It’s heartbreaking. It’s really a supply and demand issue, and certainly on the central Coast and in the state, we’re not supplying enough housing.” 
Fowler compared San Luis Obispo county to San Francisco County, where homes with very little to offer are going for a million dollars simply because no other homes are available. 
But Fowler is not one to sit and wait it out. His organization has recently been building low-income housing in Atascadero, Paso Robles and Templeton. Templeton’s 30-unit multifamily affordable rental project will be completed next year. Another opportunity came up in Atascadero where 11 units were made into sweat equity homes. Two large multi-family low income/affordable projects are in the works in Paso Robles, and one of the affordable senior projects on Spring Street is undergoing rehab. Peoples’ Self-Housing is developing quite a bit of affordable housing in San Miguel, and his organization has diligently put the critical housing dilemma back on the conversation table. 
Paso Robles Mayor Steve Martin would like to see affordable housing on the county agenda. His city funding is determined by the County of San Luis Obispo. 
“We get it,” Martin said. “Nobody’s building houses here. We’ve got to have houses for our workforce. We all want affordable housing. And I certainly want affordable housing. We just have to figure out how we’re going to do this, and still for the cost of doing business for the residents of the city. That’s the reason why, when I made my most recent proposal, which was called out in the letter [editorial page A-4], that I proposed to the county, that they actually set aside a small sliver of the property taxes already generated in Paso Robles. These are not new taxes. These are not new fees. They’re nothing but reprioritization of a small sliver of property taxes collected in the City of Paso Robles to fund Peoples’ Self-Housing, Habitat for Humanity – a private company that wants to develop workforce housing can apply to that fund to help with the fees and other costs associated with building that housing. It’s a reprioritization of property taxes that already exist. But it doesn’t touch development impact fees.”
“It’s a pretty complicated set of circumstances,” Martin said. “What we all have to remember is that while we’re very busily engaged in cutting fees, we still have to provide basic services to our citizens and somehow that dollar has to be generated to cover those costs. The cities don’t get to go to the people that build water treatment plants and install water pipes, etcetera and say, ‘Can you give us all that for free because we’ve decided not to charge any fees?’ It just doesn’t work that way. If we’re going to reduce fees, how do we make sure basic services are still paid for?” 
Recently the City of Paso Robles made huge progress in housing development by creating the Housing Constraints and Opportunities Committee according to Larry Werner, Land Development Specialist for North Coast Engineering. He said a year and half ago, the city planning commission concluded that there were too many barriers in developing workforce housing in Paso Robles, so the new committee was created to tackle the basic fee structure. Werner has served on the Board of Directors of the Paso Robles Chamber of Commerce for nine years and was Chairman of the City’s Redevelopment Agency Project Area Committee for three years. Mayor Martin considers Werner a key member of the Housing Constraints and Opportunities Committee, whose members include School Board Trustee Chris Bausch, CEO of Habitat for Humanity Julia Ogden, and Planning Commissioner Scott Brennan, among others. 
“We embarked on an effort to take a look at those fees one by one, and one that we really tackled was the water and sewer connection fees.” The fees were significantly reduced, especially for multi-family projects. Instead of charging by the unit, whether that unit be a one-bedroom, studio apartment, or a three-bedroom apartment, the sewer connection fee was the same, and that made it really difficult.” Werner considers apartments as workforce housing too, especially he said, “for our children who need to have accommodation, until they can afford to buy a house.” The logical solution the Housing Constraints and Opportunities Committee, with Public Works Director Dick McKinley expediting the idea process, came up with was to charge by meter size, reducing fees by thousands of dollars.
Werner is hopeful Paso Robles is leading in finding solutions to workforce housing, especially how well McKinley expedited the reduction in wastewater connection fees. He said the brand new City Manager, Tom Frutchey, met with him right as the Housing Constraints Committee was being formed and asked how he could help. Werner had a proposal request sitting somewhere in the City office, gathering dust for more than a year. He wanted the development fee structures for various-sized units to be treated fairly instead of a one-size-fits-all approach. Frutchey wanted to work fast on Werner’s proposal, so he helped Werner write a report, ran it through the Housing Constraints Committee, checked it with the consultant who wrote the development impact fee structure, put it on the very next city council agenda, and then the council approved it. “I nearly fell out of my chair,” said Werner, about the speed of the City of Paso. “The city is working hard and is engaged in promoting workforce housing,” he said. After that an affordable 21-unit one-bedroom and studio apartment building was built on Spring Street, benefitting from the fee reduction. “They literally rented overnight,” said Werner, very aware of how hard it is to find a small apartment in Paso Robles these days. Werner is chair of the Economic Development Committee. He said he when people look at North County to move here, they look at two things: the schools and the price of housing. He knows there needs to be more of a balance. But he’s glad to be a part of a city that seems to be doing something about the affordable housing barriers keeping people from moving to the area. 
“The biggest thing that needs to change are the development fees and we’re in the process of that,” Werner said. “The mayor can’t really pat himself on the back, or Tom Frutchey – McKinley – they can’t pat themselves on the back, but I can,” laughed Werner. “We have an incredibly cooperative and supportive and proactive city staff and council. It’s amazing.” Werner also said the Paso Chamber has been very helpful focusing energy on moving workforce projects along.  
Mayor Martin and John Fowler both said there isn’t one silver bullet, one-size-fits-all solution to the affordable housing problem. And Werner says that without very much available land that is not required to have a specific plan, expediting the process faster than the two years it normally takes is a challenge. Martin believes the funding part of the problem must be broken down into smaller parts. The county receives more than twice as much from Paso homeowner’s property taxes than the city. He would like more than 10 cents of every dollar that is given to the city. “Give us just a tiny little bit of that back,” said Mr. Martin, whose proposal begs that very question. “Specify that it be used to write down the cost of affordable housing. Don’t even send us a check. We don’t want the cash. Just put it aside in the county budget and put together a program so that organizations like Peoples’ Self-Help Housing and Habitat for Humanity and other projects can go to the county and say, ‘We would like to apply for those funds to help pay for costs associated with a specific project.’” 
“Within the city is where we need to produce the affordable housing,” Martin said. 
Workforce Housing
What can make more of an impact? How can North County find solutions for the missing middle or the working poor? 
Fowler has an idea, or a vision more like, that may just take off and become the model to solve North County’s housing crisis.
The idea involves “Perpetual Workforce Housing,” housing developments built without government subsidies, said Fowler, a program for nonprofit or profit developers, deed restricted, tied to wages instead of the market, affordable for missing middle community members who make around $75,000 a year or 80 to 100 percent of the area median income. These true workforce houses will appreciate so homeowners can build a nest egg when they move out. These will be nice units, close to transit, and environmentally-friendly.
The very first of this pilot program – 40 units of perpetual workforce housing – will be located on Broad Street in San Luis Obispo. The development is destined to break ground on January first of 2018. Peoples’ Self-Housing will be rolling it out to employers before the end of the year. Fowler has heard employers complain how hard it is to hire employees and retain them in this area, so now, he said, they will have the opportunity to provide affordable units just down the street from work.
“It requires them to give us some equity to do that and when those employees leave, they can come back to the pool and the employer can give them to the next employee.”
“Everybody on the Central Coast is going to know about this project if it’s successful as I want it to be,” he said. “The chamber and the [Economic Vitality Corporation] — everyone’s loving this. Who doesn’t love this idea? Now it’s about proving it in the marketplace economically. We’re a nonprofit but we can’t give it away. We have to make it work economically for us, otherwise we cease to exist...It’s a lot of moving parts. But I felt if we solved this – if we showed it could be done – gave the model away – everybody else can do this...You can do it in San Luis Obispo. You can do it in North County. You can do it in Santa Barbara. You can do it anywhere.” 
The program is not to be confused with workforce by design, Fowler said. “All that is, is building a smaller home and it gets priced in the 400s and then it’s gone. The market moves it up and it’s no longer workforce, and it’s usually a smaller unit. Perpetual workforce housing would be deed restricted so that units will appreciate based on wage increases, not based on market supply and demand. 
“We’re trying to say, ‘Listen, You can go and acquire a piece of property, build it, deliver it under market, deed restrict it and keep it affordable so that the equity that we would normally get from a public subsidy will come from an employer. And the employer will provide the equity that will help us build it. So they’re a partner… For-profit developers can do this if they’re willing to do it for less money — school districts, hospitals.”  
How did this unusual idea blossom? Fowler points to his right temple and smiles. If and when his idea finds success, he plans to give it away to North County, California, and whoever else wants to try it. 
“I chose to do this the hardest we could possibly do it,” he said. “Market rate. No subsidies. All workforce housing. I could have done some market rate units within it, and that would have subsided the cost, but I thought, No, I’m going to do 100 percent workforce housing so somebody couldn’t take this model and say, ‘well of course John was able to do it because he got subsidies from the city or John could do it because of funds from the school district, or John could do it because he put half of them at market rate, unaffordable to most people…’ I’m going to say we did the absolute hardest model...In other words, you can do this much easier than we did, so there’s no excuse.”
“It’s been a head scratcher for us finding out how to get the cost down. We have to make sure lenders get this. How does it turnover? When somebody leaves, how do we make sure the contribution to the employer isn’t too large? How will we make sure the value and growth for the employee is going to make it worth it? How can we make it a nice enough place so people will say, ‘I live here. It’s kind of cool?”
So many variables went into the mix, but one thing was for sure. Fowler did not want the workforce design to go back to market rate. “You need long-term,” he said, “which calls for deed restrictions.” Peoples’ Self-Housing is known for working on deed restrictions. For a couple years now they have been working on a way to make their projects build equity. There was obviously a need for it in San Luis Obispo County.
“Well we’re going to give them [workforce homes] appreciation, so they can build equity to move into the market out of the workforce when their family grows or whatever, but it can’t grow faster than wages grow. That’s the point you have to keep it. We said people can buy these homes under market. They’re going to see about three percent growth. Three percent of $400,000 is about $12,000 a year. You can build up a little nest egg and have a down payment when your wages get to a certain point. So we’re going to give enough growth to be able to move into the market, build a nest egg. They’re not going to make a killing, but they can make enough to move into the market. And they are a homeowner. And it’s a nice unit. Close to transit. Helping our environment. We’re really excited about this. I’m really excited about this.” 
Fowler wants to try to lower the fee structures county-wide. He encourages various jurisdictions to be proactive in trying. Lately he’s been encouraged by the hundreds of affordable housing units being built in Paso Robles and San Luis Obispo. He said the City Councils are working well to approve and move certain projects. He sees their progress in reviewing fee structures while also coming up with smart solutions regarding traffic and environmental impacts, as a shift in the old way of thinking about housing. 
“There’s a huge step in Paso Robles right now with the fee structure. They’re really trying to get at that. I think [Mayor] Steve Martin is after that. We want to applaud them. We want to cheer them.” 
“There’s no doubt about it,” said Mayor Steve Martin. “It costs about $60,000 in fees. Actually lower. We’ve already lowered the fees in Paso. It costs closer to $50,000 in fees to build a house in Paso Robles right now. And we’ve dropped fees because we spent two years reviewing the fee structure, and tweaking it and streamlining it and doing everything we can to lower fees, while at the same time protecting that dollar we have to spend on water and other services. But you get to a certain point where bills still have to be paid. And all the money comes from the citizens. It all comes from taxes and service fees. It doesn’t appear magically out of thin air. So if it costs a dollar in development fees and we’re going to say we want to subsidize housing by giving that dollar to (fill in the blank)... to Acme businesses who want to buy houses. Which is a laudable goal. What still remains is who pays for the dollar we just shifted? That’s the question we’re always faced with. The system has to be paid for, the water has to be paid for, the roads have to be paid for. You can only spend each dollar one time. So that’s the difficulty that we face.” Martin listened to the workforce housing pilot idea and it reminded him of the times he has talked with companies who want to develop housing for their own work force. “But they aren’t necessarily coming in and saying, ‘and want you to drop all fees.”
Fowler goes to every meeting in the county on housing. Early this month People’s Self-Housing weighed in on the County Board of Supervisors meeting to discuss the latest study evaluating the fee schedule as it related to the local housing market. These problems are still being dealt with. He sees the City of Paso Robles and the City of San Luis Obispo as leaders in the housing solution, as in meetings he sees collaboration to shorten time frames and reduce fees in development at the meetings. The County Board of Supervisors, he said, noting that the conservative versus liberal dynamics of the Board deters larger solutions, and ideological disagreements prevent collaboration on figuring out the housing crisis. He remarked that he would like to see more consensus on where the money is spent. 
As cities and counties struggle to move forward on an extremely complex problem, Fowler worries about new ordinances the state is forcing on jurisdictions to comply with broad-based developmental ideas like the AUD (Average Unit-size Density) ordinance, a plan that allowed developers to build more dense, presumably “affordable by design” workforce housing. The Santa Barbara Independent reported one of the city’s completed 89 unit AUD developments did not have actual affordability requirements, and a 646-square-foot one-bedroom apartment was starting at $2,900 per month in rent. 
“What we see is the state is starting to mandate and force cities and counties to do more housing,” he said, mentioning the Governor’s hurry to build and fast track projects may bypass certain environmental protections. “We really encourage jurisdictions to get after it. Figure out how you can fix this before someone tells you how to do it the wrong way,” he said. “Let’s get our own solutions and figure out how to solve it or they’ll give us this cookie cutter thing that doesn’t really work.” 
Fowler’s experience with Peoples’ Self-Housing and also as a member of the City Planning Commission allows him to see what the community needs. In response, his organization is working on more affordable units with lower square footage. 
“I think there are some trends we’re seeing, particularly [with] millennials. We’re seeing they don’t need the 1,500-square-foot, 6,000-square-foot lot. They’re saying, ‘I can get by on less.’ Maybe they’re saying, ‘I don’t even drive anymore. I don’t have a car. I don’t mind living in an apartment complex that I can own, or a condo.’ They’re delaying with their buying. So we see the marketplace moving. Tiny homes. Right? We need all kinds of things. Not everyone wants a 2,000 or 3,000 square-foot palace in Paso Robles. So I think housing is changing.” 
“It’s always hard for a private developer because the larger it is, the bigger the price, the more it costs, and the more you make, so it has always been driven by bigger, bigger, better. But maybe they see a trend in the market where maybe some people don’t want bigger and better and they do care about their carbon footprint, and they do care about traffic and noise, and water, and so we’re seeing more bicycle paths and we’re seeing smaller homes,” he said. 
Do you have a personal housing experience in North County that you would like to submit for our housing series on our reader’s housing challenges? We’d like to hear from you. You can reach Reporter Beth Giuffre at [email protected] to share your thoughts.
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