Rising construction costs and a big drop in public funding is forcing an organization that builds inexpensive homes for low-income buyers in the Bay Area to sell them for higher prices than many of those people can afford.
The group, Habitat for Humanity, says it can't raise money fast enough to cover the gap between what very low-income residents can pay and the actual costs of providing homes, even with the help of legions of volunteers.
That scenario is playing itself out right now in Fremont, Calif., where Habitat for Humanity is selling 19 of 30 planned condos to families whose income is 40% to 115% higher than that of the buyers originally targeted.
Janice Jensen, president and CEO of Habitat for Humanity East Bay/Silicon Valley, said costs for everything from raw materials such as wood and drywall, to labor and real estate have soared over the past five years. Materials alone jumped almost 5 percent from December 2016 to December 2017, the fastest rate in six years, according to the Associated Builders and Contractors, Inc.
"If you look broadly at affordable housing, it's never been more expensive than it is right now to build," Jensen said.
When first envisioned, half of the condos in Habitat's Central Commons project were supposed to be sold to very low-income families and half to low-income families. But Habitat had to raise the price of the homes twice in the past couple of years to cover the additional $3.54 million the project was costing, effectively excluding very low-income families from a shot at the homes. Those families earn up to half of the median income for the area, or $58,100 for a family of four.
So far, 11 condos are nearly complete and have been sold to low-income families earning a maximum of 80% of the area median income, which amounts to roughly $89,600 annually for a family of four. Those two-, three- and four-bedroom units sold for between $169,100 and $200,500, according to Habitat.
Eligio Rivera-Cuevas, of Sunnyvale, his wife Liliana and their sons Sebastian, 6, and Diego, 9, are among the 11 families expecting to move into one of those condos by early this year.
"It meant a lot of things, but the most important is just the stability of my family, and a safe place for my kids," Rivera-Cuevas said of having a home to call their own.
The project was conceived in 2013 and helped along by $530,000 in community development block grants from the city and a little more than $1 million in affordable housing fees from a land purchase development fund.
Because the condos must now go for more than initially intended, the Fremont City Council on Dec. 4 authorized Habitat to sell the remaining 19 to moderate-income families earning 120% of the median, or a maximum of $125,300 for four people.
Jensen estimated those homes will be sold for between $419,500 and $462,600, still a significant amount less than their appraised value of $700,000 to $830,000 and affordable to some people who otherwise wouldn't have a hope of owning a home in the region.
Jensen said although Habitat had to deviate from its original plan for Central Commons, moderate-level income housing is badly needed in Fremont as well.
"There's no philosophic change, this is all dollars and cents," she said. "We want to serve more families, not less, and the deeper the subsidy per family we have to invest, the less actual families overall we are able to serve."
Dan Schoenholz, Fremont's community development director, said because the city hasn't seen any of the nearly 1,000 moderate-income housing units needed to meet demand get built, approval of the price increase at Central Commons will help.
"It's true that isn't what we originally planned, but it's an area where we need additional housing, and we have an opportunity to get 19 units without any additional public investment, so the council decided to do that," he said. He also noted that since the council approved the first version of the Habitat project in 2014, almost 1,000 low- and very-low income housing units have begun construction or are in the design phase.
Rivera-Cuevas said his family has been living in a small, two-bedroom unit in an aging apartment complex in Sunnyvale where the rent has constantly climbed. They've had to move several times while searching for a home over the past six years.
If not for the Habitat project, they might have left the area to find cheaper housing elsewhere while he would continue to work in South San Francisco as a postal clerk and supervisor.
Although happy with his new home, Rivera-Cuevas said he's concerned about other families priced out of the low-cost housing market.
"It makes me feel sad, because everybody who is living in the Bay Area should be getting affordable housing," he said. "Those people are living in the same conditions like me. Hopefully we can create more spaces for affordable housing. It would be great," he said.
Jensen blamed high construction costs, "outrageous" land prices and a shortage of government subsidies for causing Habitat projects throughout the state to sell at higher prices than preferred, not only in urban areas but also in typically less expensive regions such as the Central Valley.
In the Bay Area from 2000 to 2016, the value of land jumped 129% in Oakland, 109% in San Francisco and 114% in San Jose, according to data from the Lincoln Institute of Land Policy.
Like Habitat for Humanity, other developers of affordable housing also are finding the margins between housing costs and prices getting squeezed.
"I think we're just coming out of the roughest patch" in history for producing affordable housing in California, said Michael Lane, policy director for the Non-Profit Housing Association of Northern California. He noted that because no major bonds were passed between 2011 and 2017, public funds to help pay for affordable housing dried up.
The problem was compounded when the Legislature decided in 2011 to eliminate local redevelopment agencies, which provided more than $1 billion annually to help cities cobble together land and create affordable housing projects
"It's like a perfect storm," Lane said.
But some help is on the way.
November's election passage of state Propositions 1 and 2 will result in billions of dollars for affordable housing subsidy supply, he said.
And county bonds passed in 2016 to fund affordable housing, including Alameda's $580 million Measure A1 and Santa Clara County's $950 million Measure A, are starting to flow into communities.
Rivera-Cuevas said his goal ever since he came to the Bay Area more than 15 years ago from Mexico City was to buy a home where he could raise a family.
"Because they're going to have their own place, and they're going to have stability to grow up and attend schools, and prepare for college," he said of his sons.
"It's going to be a great future for them."
