Developing affordable housing is more expensive and takes longer to build than market-rate homes. But why?
Here are the major challenges Our Town St. Helena (OTSH) faces as we develop our Pope Street Workforce Housing project (10 units) and the Fountain Street project (approximately 40 units).
Complex Financing
When the average homebuyer goes to purchase their home, they deal with a single lender, and it STILL takes weeks or months to get through the process. The same is true for most private housing construction projects–financing is through a single lender and yet is a time-consuming process.
The typical affordable housing project has as many as EIGHT different funders.
That’s eight separate applications, eight contractual procedures, eight legal recordings, and eight affordability agreements for each entity. Not to mention working with several different decision-making bodies, each with its own legal counsel.
In addition, many funders have a “last-one-in” mentality — they delay commitment until other funding sources are secured. This approach is understandable due to the risk involved, but it makes our job more difficult as we work to line up commitments in a reasonable timeframe.
Assembling the “capital stack” – the funding required for a given project – can take months, if not years, to complete and the process is costly, particularly for the non-profit developer.
Government Bureaucracy
Most affordable housing projects rely on public subsidies. That’s because low-income rents don’t support the costs to break even on a project, let alone provide a small return for the developer.
St. Helena is a designated rural community, which allows us to apply for federal funds through relevant programs of the U.S. Department of Agriculture (USDA) and U.S. Department of Housing & Urban Development (HUD). HUD funds are usually administered by the State of California. With the City of St. Helena as a partner, we can apply for federal Community Development Block Grant funds that are administered and distributed by the State.
For each funding source, we usually have just one opportunity per year, or some times every two years, to apply. And it’s competitive. The need for affordable housing is so much greater than the funds available that it can take several years before a given project is approved. For example…
We are in the process of developing our Pope Street workforce housing project. We originally applied for HOME funding through the State in 2020 and were denied because our project was not yet permitted and the competition was stiff. We reapplied in March 2022 when our project was permitted and shovel-ready, but the timeline for announcing awards was delayed multiple times.
This project was finally approved for HOME funding in April 2023! While this is great news for St. Helena, we can’t forget that it took us over three years to receive funding approval. With this commitment, only now can we request local funds through the City of St. Helena’s and County of Napa’s Affordable Housing Trust funds.
Local Government Bandwidth
Over the last decade, it has been a challenge for our City government to focus on increasing affordable housing supply as it wrestles with financial and staffing challenges, multi-year drought and community water use restrictions, and recovery from several natural disasters. Due to limited resources, the City of St. Helena has been resistant to forming a housing committee, or the development and execution of a tactical housing strategy. The City does not have a sufficient, sustainable revenue stream to support multiple housing projects, nor do long-term infrastructure plans incorporate resources for population growth among working families.
Meanwhile, the City must obtain a State-approved Housing Element that puts in place the zoning and policies necessary to allow for development of 250+ housing units, and over the coming seven years the State will be monitoring progress toward achieving that goal.
Without a City staff position dedicated to housing, it is difficult for the City to be proactive in this important area of community need.
A Community in Transition
Meanwhile, our valley has become a haven for tourism. And our town’s real estate growth has been almost exclusively in the high-end, largely second-home market.
As a result, the value of real estate in St. Helena has skyrocketed. Unfortunately, it’s become much harder for businesses to hire and retain staff because there aren’t enough local options where these employees can afford to live. This includes winery managers, hospital physicians and teachers, as well as workers in grocery stores and vineyards.
These changes in our community seem to have sparked an interest in developing new housing and preserving existing housing for local working families. And this concern shows up in every city survey and poll.
The City’s latest Resident Satisfaction Survey conducted in 2022 showed that for issues facing St. Helena, the cost of housing was ranked third in importance, only after water supply and road repairs/infrastructure. Despite this mounting concern, our experience is many local residents resist the increased density affordable housing requires, particularly if it is in their neighborhood. Finding a vacant property that is large enough and correctly zoned for higher density housing is a major challenge, and we don’t have the luxury of choosing when or where these potential sites become available. And the cost of land is at a premium.
Hard but Still Worth Doing
These factors are not new, nor are they specific to St. Helena.
They are, however, very real and directly affect the time and cost of developing housing that’s affordable for households earning $35,000 to $125,000.
Our Town St. Helena’s mission is to provide housing opportunities for these people who are vital to our community. If you would like to assist us in the development of housing projects, please go to ourtownsthelena.org or contact Jennifer La Liberte, Executive Director, at (707) 812-9839.
