Khamis: The missing middle—JPA housing

What if I told you San Jose has the opportunity to preserve and create workforce housing using no new taxes or taxpayer dollars? No, it’s not too good to be true—it’s a relatively new concept that California established to allow for joint powers authorities (JPAs) to raise money from private investors to help finance low and moderate-income housing.

So far there are two organizations in the state working to buy and build desperately needed workforce housing—California Community Housing Agency (CalCHA) and California Statewide Communities Development Authority (CSCDA). They have been buying and managing class A rental units with no expenses to the municipalities where the developments are located. Once purchased the units are deed restricted to an affordable rental level for new tenants who earn 80 to 120% of the area median income (AMI). This is a gradual process that does not displace the current residents.

These organizations need permission to operate in each city they work in and San Jose has the opportunity to work with both. Once it does, it allows private investment to flow into San Jose to preserve and develop housing for the “Missing Middle”—workforce housing—and creates a win for taxpayers, a win for workers and a win for the city. The city is poised to vote on this item on Tuesday, May 11.

By all measures, San Jose is falling short in the production of affordable workforce housing. While the pace of construction on extremely-low, very-low, and low-income housing has picked up slightly with an influx of taxpayer dollars and development fees, like Santa Clara County’s Measure A Affordable Housing Bond, San Jose Measure E Real Property Transfer Tax, Residential Impact Fee, Inclusive Housing In-Lieu Fee and the Commercial Impact Fee.

Meanwhile, market-rate units continue to outpace moderate and low-income production, housing for the “missing middle” has been forgotten. The city’s own Housing Element Annual Report from 2019 showed zero units of deed-restricted moderate-income housing completed or in the pipeline for the 2015–2023-time horizon. We have an opportunity to begin to quickly change this—with zero taxpayer dollars and zero financial risk to the city by having San Jose become an additional member of the joint powers authorities mentioned above that allow for private investment into subsidized housing.

CalCHA and CSCDA issue tax-exempt revenue bonds that they use to purchase market-rate developments that they then convert to deed-restricted, affordable housing. After the bonds are paid off (typically over 15-30 years) the property reverts to the city or a designated agent of the city. San Jose then has a housing asset and the deed restrictions continue to keep the units affordable.

Another benefit is that no one is displaced as the property shifts from market-rate to workforce housing. These organizations are already operating in many cities all over California, including Glendale, Hayward, Livermore and Mountain View. Furthermore, because the city will not control or manage the JPA, there is zero liability for taxpayers and there is no recourse to the city if any particular investment fails.

CalCHA and CSDA benefits include:

•       Preventing displacement
•       Expanding housing affordability
•       Requiring no new taxes or fees
•       Available to us immediately
•       No property management responsibilities for the life of the bonds
•       City gains assets once bonds are paid off
•       Excess proceeds go back to the city for housing the unhoused or other priorities

Membership in these organizations is a win-win-win. It’s a win for our workforce, who will gain access to affordable housing units, a win for taxpayers who won’t be burdened with yet another tax or fee and a win for the city who can focus our limited housing dollars on helping the most vulnerable, along with increasing affordable housing Regional Housing Needs Allocation (RHNA) goal units. The program also enhances the whole housing ecosystem, since the property owners who sell to CalCHA and CSCDA-funded projects will have freed up their funds to re-invest and create new housing supply.

Unfortunately, because this is a relatively new concept, San Jose staff is not recommending going forward because of the unknowns and the loss of property tax revenues because these units would be exempt like all the other low-income projects in the city. What can be done is to allow a pilot program allowing a limited number of projects to go through so we do not take on more risk than the city is willing to take.

Please join me, other cities, the Santa Clara County Association of Realtors, Silicon Valley Leadership Group, Eden Housing, SV@Home, The Bay Area Council, Stronger Foundations, LLC, the California Apartment Association and others in supporting this win-win-win idea. You can attend the next San Jose City Council meeting on May 11 after 1:30 p.m. or send letters to your elected representatives asking them to support workforce housing.

Johnny Khamis is a former San Jose councilmember campaigning for Santa Clara County Supervisor District 1.