Santa Clara County affordable housing stuck in pipeline

Santa Clara County’s affordable housing projects funded by local dollars are stuck in a “logjam” struggling to secure other money needed to start construction.

While the county has built more than 3,000 affordable homes over the past decade with Measure A, a $950 million bond approved by voters in 2016, 600 apartments and homes are stuck in the pipeline. The lack of state funding to pair with local dollars, along with rising costs of insurance and building materials, is pushing back the county’s development timeline. Some projects won’t come online until 2030, according to a March report from the Measure A Independent Citizens’ Oversight Committee.

“The plan was always to leverage the state and federal resources so that we maximize the amount of homes that we have,” SV@Home Executive Director Regina Williams told San José Spotlight. “That unfortunately comes with the reliance on the other resources.”

There are seven development projects looking to secure more funding, according to the county. It’s uncertain when these projects will pencil out. Developers have up to three years to find the financing for permanent supportive housing projects before the county considers reallocating those funds to other projects — further delaying the homes that could be built and increasing costs.

The county is trying to speed up the logjam by working with developers to make applications more competitive for state and federal funding and identifying ways to get more state and federal dollars.

“For projects that are having difficulty securing financing, county staff work with the developer partners to update project designs and financing plans to make the projects more financially feasible to be able to reapply for funds,” Kathryn Kaminski, director of the county Office of Supportive Housing, told San José Spotlight.

Competitive tax credits

The oversight committee’s report shows there is more competition for tax credits, a category of funding that developers apply for to make the projects work. Congress expanded tax credits through H.R.1, the federal spending bill passed last year, but this opened the door to more developers seeking funds, Linda Mandolini, CEO of nonprofit developer Eden Housing, said.

H.R.1 provided an increase to the Low Income Housing Tax Credit program, the primary source of federal funding for affordable housing, and made more bond funding available for additional developments.

“The good news is that we have more available low-income market tax credits,” Mandolini told San José Spotlight. “The downside of that is we now have a lot more projects looking for investors, and we haven’t yet grown the investor pool at the same pace.”

But there’s relief on the horizon, Mandolini said. The federal 21st Century ROAD to Housing Act — the largest federal housing bill in decades that was enacted into law last month — increases how much banks are allowed to invest in tax credits for affordable housing projects. Banks can now invest 20% into projects, up from 15%.

There’s been some movement on the state level to address the lack of financing for affordable housing as well.

The state budget for this fiscal year allocates $500 million for California’s low-income housing tax credits program. The state has also created the California Housing and Homelessness Agency to streamline and fast-track affordable housing funding.

In addition, a $11.25 billion affordable housing bond, put forth by the state Legislature, will go before voters this November.

“The state is acutely aware of the need to get projects over the finish line,” Mandolini said. “They’re doing all this work to reorganize how they allocate their funds. There’s just a huge amount of work going on right now to get stuff done faster.”

Housing voucher uncertainty

The Measure A oversight committee’s report also shows  growing uncertainty with Section 8 housing vouchers. This could make it hard to fund deeply affordable housing for homeless or very low income families in future Measure A projects. Households that have a voucher only need to pay 30% of their income for an apartment and the federal government makes up the rest.

“The success of Measure A projects has a great dependency upon obtaining federal vouchers,” the report said.

So far, Santa Clara County has been able to apply 2,666 housing vouchers toward Measure A developments.

Williams said the county will need to find ways to pivot its strategy of who the homes can be used for due to the limited amount of Section 8 vouchers.

“I would think that there’s still an opportunity to build affordable housing. It just wouldn’t be as deeply affordable,” Williams said. “That’s a challenge because we know there are still people who are unhoused … and those folks need a home.”

Despite these challenges, the report shows the county will eventually exceed its goal to build 4,800 affordable apartments for people in the lowest income bracket. The county has approved 6,793 homes and has built more than 3,300, with nearly 1,750 more homes under construction.

“I think the county’s done a tremendous job of advancing the goals of Measure A — housing thousands of residents,” Ray Bramson, chief operating officer at nonprofit Destination: Home and San José Spotlight columnist, told San José Spotlight. “But what the report, more than anything else, underscores is that we do need additional subsidies and we do need additional resources to make sure all of the housing can get built.”

Contact Joyce Chu at [email protected] or @joyce_speaks on X.