Closing the Gap: Affordable Housing in the Capital Region | @bayareaeconomy | [email protected] Home prices are rising in the Capital Region, but not close to SF levels 0 50

February 9, 2017

Closing the Gap: Affordable Housing in the Capital Region

www.bayareaeconomy.org | @bayareaeconomy | [email protected]

Affordable Housing in the Capital Region

1. The Affordability Problem in a Megaregional Context

2. What is “Affordable Housing”?

3. Policy Responses in San Francisco

4. Application to the Capital Region

www.bayareaeconomy.org | @bayareaeconomy | [email protected] 3

Population growth since 2000 has been concentrated outside of the Bay Area

Twelve of the 16 fastest growing cities in the megaregion are located in the Sacramento region and NSJV:

• Elk Grove• Yuba City• Rocklin• West Sacramento• Roseville• Folsom


One-quarter of Capital Region population growth came from Bay Area

(40,000)

(35,000)

(30,000)

(25,000)

(20,000)

(15,000)

(10,000)

(5,000)

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5,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Data Source: U.S. Internal Revenue Service, Statistics of Income DivisionAnalysis: University of the Pacific, Bay Area Council Economic Institute

Bay Area Net Migration Patterns, 2004-2014 within the Northern California Megaregion

Sacramento Area Monterey Bay Area Northern San Joaquin Valley


Home price variation across megaregion drives migration inland


Home prices are rising in the Capital Region, but not close to SF levels

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Data Source: Zillow.comAnalysis: Bay Area Council Economic Institute

Capital Region Home Price Index

Sacramento Placer Yolo El Dorado Sutter Yuba San Francisco


What do we mean by affordable housing?

“Below-market-rate Housing” “Housing Affordability”


2010 2015

Los Angeles 59.2% 60.1%

Riverside 62.7% 59.8%

Santa Barbara 56.7% 58.4%

Fresno 57.0% 58.3%

Orange 58.3% 58.0%

San Diego 58.8% 56.7%

Capital Region 58.7% 52.9%

Alameda 53.7% 51.4%

Santa Clara 47.7% 49.2%

San Francisco 46.2% 42.5%

Share of Renters Spending >30% of Income on Rent

Housing affordability and failing to develop supply to meet demand is NOT JUST A COASTAL ISSUE…

Fresno 222 San Diego 155

Kern 195 Los Angeles 146

San Francisco 183 Contra Costa 128

Orange 175 San Joaquin 119

Santa Clara 174 San Bernardino 113

Riverside 173 San Mateo 106

Santa Barbara 170 Alameda 103

Ventura 165 Santa Cruz 85

Capital Region 164 Imperial 84

California 155 Merced 64

Housing Units Added Per 1,000 in Population Growth (2010-2016)


Housing affordability and failing to develop supply to meet demand is a STATEWIDE ISSUE…


Housing affordability and failing to develop supply to meet demand is a STATEWIDE ISSUE…

20% 22% 24% 26% 28% 30%

Los Angeles

San Diego

Riverside-San Bernardino

Santa Ana-Anaheim

Fresno

Oakland

Sacramento

Bakersfield

San Francisco

San Jose

Other States' Major Metros

Data Source: California Legislative Analysts' Office; American Community SurveyAnalysis: Bay Area Council Economic Institute

California's Major Metro Areas are Less Affordable than the Average U.S. MetroMedian Share of Household Income Spent on Housing, 2014


San Francisco policy choices impact the number of households burdened by housing costs at a 30% housing cost-to-income threshold

Top ten policies that increase affordability…

Top ten policies that worsen affordability…


Methodology: A Static Model for Comparing the Impact of Housing Policies over 20 Years

Housing Supply Change

Access to BMR Units

Income Opportunities

+ + =

Change in # of SF households that can live affordably

1. City data used to predict the market-rate housing supply change

2. Elasticity estimates allowed us to estimate average city-wide price changes

3. All beneficiaries of BMR housing assumed to otherwise be housing cost burdened

4. Randomly assigned price change across all households and income change across the number of households impacted


Highlights: Building new housing has the greatest benefit for affordability

1. Completing major projects, reducing approval times, and streamlining building codes have the biggest affordability impacts

2. Alternative unit designs facilitate new unit development and can have income-generating potential

3. Density bonuses work, but best with moderate affordability requirement


Lowlights: Policies intended to improve affordability have negative impacts

1. Benefits of inclusionary zoning outweighed by less market-rate development

2. Impact fees have value in funding needed social services, but their benefits must be weighed against a negative impact on home production

3. Banning homesharing returns some units back to the market, but the loss of host income results in a greater number of households losing affordability


Key Takeaways

1. Policy does matter.

2. Building all types of housing is still the best way to alleviate housing cost burdens.

3. It is not just about increasing supply, the overall impact on affordability is key.• The type of housing supply that a policy creates is critical

• Income effects must be considered

• Some policies intended to increase affordability have the opposite effect


Capital Region Takeaway #1: Identify underutilized land

Sacramento County has 61,000 potential single-family units clustered between Rancho Cordova and Elk Grove

Source: Sacramento County GIS Library; McKinsey Global Institute


Capital Region Takeaway #2: Facilitate alternative housing unit delivery

Accessory Dwelling Units

Modular Construction


Capital Region Takeaway #3: Zone for future demand, simplify building codes, and streamline permitting

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Q & A

Bay Area Council Economic Institute

Documents

Closing the Gap: Affordable Housing in the Capital Region | @bayareaeconomy | [email protected] Home prices are rising in the Capital Region, but not close to SF levels 0 50