Tom Butt
 
  E-Mail Forum – 2015  
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  Recession Level Rents in an Exploding Economy?
April 22, 2015
 
 

Remember the recession? How could you forget? Richmond suffered more than most cities. Unemployment skyrocketed to over 17%. Home values tanked, and thousands of mortgages were underwater. Residents were abandoning foreclosed homes by the hundreds while squatter moved in and blighted the neighborhoods. Rental rates, both commercial and residential hit ten-year lows.   

People packed City Council meetings demanding that the City provide jobs. The City Council pursued a controversial plan to rescue underwater mortgagees through eminent domain. Those were desperate times, and no one was happy about any of it.

Except for one thing – those really low rents.

Now Richmond unemployment has dropped to 5.8%, beating both California and U.S. rates, and Zillo says home values have risen 100% since 2102 and 21.8% in just the past year with another 8.1% forecast for the next 12 months.

The Bay Area economy is on fire, and Richmond is finally seeing some of the benefits. People like having jobs, and those who own homes like the appreciation in value and emergence from underwater mortgages.

But many people want rental rates to stay at recession levels while the rest of the economy booms, and they want the City of Richmond to make sure that happens through rent control.

I acknowledge that money for rent is a challenge for many people in Richmond – perhaps even most people, as it is around the Bay Area. San Francisco and Oakland are rated by Forbes as the top two worst rental markets in the U.S. , and both have had rent control for decades. But a challenge is better than being unemployed, underwater or foreclosed on, and with a rising economy, rents are going to rise unless the housing stock increases.

Rent control advocates believe you can regulate your way out of a demand-supply imbalance to keep rents low, but that is nothing but wishful thinking or voodoo economics. or both. You have to build your way out.

The Richmond Progressive Alliance supports rent control, but they do not support the level of construction needed to increase the Richmond housing stock, particularly low income housing. Earlier this year, they opposed the market rate Shea Homes project that will deliver $1.4 million in inclusionary housing in-lieu fees to build affordable housing. On April 21, they opposed a 155-unit all affordable housing project because it was “too dense.”

The Richmond General Plan 2030 was aggressively pro-growth and also aggressively green and sustainable. Much of this was achieved through increased density. Statistics provided in the EIR for the General Plan 2030 indicated that development opportunities providing higher density focused in areas that already have infrastructure and access to services and public transit will easily accommodate the ABAG projection of a 41,050 population increase and job growth of 22,488 between 2005 and 2030. Furthermore, the new General Plan provides capacity for even greater population growth of 50,000 and job growth of 109,165.

But as projects meeting these density goals come forward, they are routinely opposed. You can’t have it all both ways: guaranteed low rents and no new housing or only low density projects.

There are also many other ways to help out low income residents, such as helping them register for CalFresh (California version of SNAP – formerly known as food stamps). There are over 5,000 people in Richmond who qualify for over $5 million in free food purchasing assistance. ACCE and other rent control advocates could help out a lot more people more quickly by registering CalFresh recipients instead of packing City Council meetings to feed their obsession with rent control, a program that has failed everywhere it has been tried.

Tom Butt

Richmond approves affordable housing complex that may not get built
By Karina Ioffee
kioffee@bayareanewsgroup.com
Posted:   04/21/2015 11:09:22 PM PDT | Updated:   79 min. ago
RICHMOND -- After more than a year of discussions, Richmond has approved a controversial plan for a 155-unit affordable housing apartment complex on Central Avenue at the El Cerrito border, but the developer said the project now has so many concessions, it would no longer would make economic sense to build.
The 6-story apartment building would be located at 5620 Central Ave., in the Richmond Annex, one of the fastest gentrifying neighborhoods in Richmond, according to a recent analysis by the Haas Institute for a Fair and Inclusive Society.

Most of the speakers at Tuesday's meeting said they supported affordable housing, but attacked the project, saying it would add to congestion on an already busy street, create a parking nightmare and even "block out" their sunlight.

"The sheer increase in population density will change the character of the neighborhood," said Rebecca Goodberg, who lives nearby.

Others said traffic through the area was already terrible, with lights that are not timed along Central Avenue and plans to close the Interstate 80 onramp during peak hours, part of a Caltrans project to thin out congestion in the area.

Ultimately, the project was approved, but with three modifications, including more parking and more open space around the building and the nearby creek. That prompted the developer, Alexis Gevorgian, president of AMG & Associates, to say that it is unlikely the apartment complex would break ground because it now have fewer units.

"This is an affordable housing project and there are no public funds that can be used. When the costs go up too high, the project is off," Gevorgian said.

"What happened last night was typical NIMBYism, even in light of Bay Area's housing crisis," he said. "On the one hand, people are talking about landlords not raising rents, yet they don't want to increase housing. The more housing you have, the more likely rents will go down."
Gevorgian said he is considering resubmitting the project to the Planning Commission, but couldn't say how the new proposal would be different from the original.
The proposed development is aimed at entry-level professionals, skilled trades people and service providers, earning $50,000 to $65,000, city staff said.
Richmond Planning Director Richard Mitchell said the location was selected specifically because it is within walking distance to the Pacific East Mall, Costco and a Trader Joe's store and only eight blocks from El Cerrito Plaza BART. He disagreed with opponents that an Environmental Impact Report was needed, calling the area a former industrial site that is "consistent with uses already in the area, which is housing, housing and more housing."
In 2012, Richmond adopted a General Plan that focused on adding density in various parts of the city, especially those located near existing commercial corridors, as a way of growing sustainably. But residents have been critical of many of the proposed residential and commercial projects, often citing traffic, noise and density in their opposition.
On Tuesday, Mayor Tom Butt struck back against the critics, saying increasing urban density would help preserve other areas.
"By building up density in areas that can handle it, we're not building in cow pastures," Butt said, adding that increased density boosts jobs, stores and other amenities, while reducing traffic.
"We've had two housing projects come before the council in recent months and people have criticized them," Butt said. "At some point, we have to move ahead with our general plan, which has been adopted, or amend it to a plan that's aimed at a smaller city."
But Councilwoman Gayle McLaughlin said the city shouldn't blindly accept what private developers impose.
"If this developer can't make enough money at or around 100 units to proceed, we should help the landowner find another developer," she said. "The purpose of our General Plan is to create the city we want, not to passively accept what private developers want to do."
Contact Karina Ioffee at 510-262-2726 or kioffee@bayareanewsgroup.com. Follow her at Twitter.com/kioffee.


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