Conversations with Advocates of Fair Growth
Overview | Conversations with Advocates of Fair Growth | Living on the Fenceline
Brad Wiblin
Brad Wiblin is director of the southern California office at Bridge Housing and is based in San Diego. Bridge Housing is pioneering an effort to introduce affordable housing into large-scale, master-planned, suburban developments. Wiblin works with these large-scale residential developers who required by new, inclusionary zoning rules to provide affordable housing as part of their developments. Bridge Housing helps them meet this requirement. Many of these developers set aside a small piece of their master-planned sites for affordable housing and Bridge builds the multi-family rental units. In one sense, these multi-family units are segregated from the single-family homes in the development. Nut while you can tell the difference between the single family and the multi-family units you cannot tell that the latter are subsidized affordable housing, Wiblin notes. The end result is a mixed-income development even though the multi-family unit is 100 percent subsidized, Wiblin argues. Many developers feel that they are being unfairly burdened with the problem of solving the societal need for affordable housing when they did not create the problem, Wiblin reports. What about the large hotel chains that are building huge hotels that employ hundreds of workers who need affordable housing? Why are the developers hit with the financial burden of creating affordable housing and not the big companies that are hiring large numbers of low-wage workers. These are the people who should be helping to subsidize affordable housing, they argue. The debate about who ends up paying for suburban affordable housing goes beyond just the world of the developers and the large companies that are employing large numbers of low-cost wage earners. One theory is that developers will pass the costs on to the buyers of market-rate units in their developments. Another theory holds that developers will eventually past the costs on to the original land owner and will simply offer less for a piece of land because they know they have to include some subsidized housing in their development that will not generate any profit. Developers also can off-set the cost of including affordable housing in their complexes by applying for "density bonuses." These bonuses permit them to build more market-rate units on a property than would normally be allowed. As a result they can make up what they lose on the affordable housing by selling more market-rate units. While the answer to who pays for affordable housing remains nebulous, it is clear that public policy makers have yet to share the costs out rationally.
Interview
Steve Lerner (SDL): Tell me what makes Bridge Housing unique?
Brad Wiblin (BW): With Bridge Housing the mantra from the beginning was to build high volumes of quality housing that would be available to the workforce. And by doing a lot actually make a dent in the demand for affordable housing. As proud as Community Development Corporations are of the ten-unit rehab project they did in the scheme of things the need for affordable housing is a lot greater. So we positioned ourselves at the production level of this business. That is one of the reasons that we have been a good fit for a lot of large home builders facing inclusionary requirements. They need to build some affordability into their 3,000 home-planned community in some upscale part of north county. They can look at us as an organization and ask themselves: "Who are these crazy guys in the non-profit housing business? Why would anybody do that?" Inevitably they want to know how many units we build and we can say that last year we built 1,200 units from Napa to San Diego and then they think: "OK, I guess these guys are doing something right. That puts us in a league with a moderate-sized homebuilder. They see that we are in the same business but that we have a whole additional layer of complicated financing that goes with our projects. We have to deal with the same NIMBY issues, the same environmental issues and all the things they deal with and then we have additional issues such as: Who is going to live there? How much are they going to earn? How are you going to screen them?
SDL: What do you do for Bridge Housing?
BW: I'm the director of the southern California office. The way we are structured we have project managers who deals with the development from finding the land to turning over the keys to the management company and everything in between. That is an unusual structure for a company our size. We met this morning with developers from the John Lang company, a privately held home builder, that does quality, boutique level work. They are organized in a more traditional way. They have a forward planner and a finance guy and they might have a government relations person and a marketing person and the project works its way through the company from person to person. Each employee has their own area of expertise. To make a decision they all get together and meet and the marketing guy says: wait a minute that will put us into direct competition with them. By contrast, with our company the project manager is at the center of the whole thing and we have to find the land and get it designed and titled and financed and then built before handing it over to our sister company that then manages it. This is a throwback to the time when the company was Don Turner, Rick Holiday and Ben Golvin three guys trying to hustle and do all this stuff. And they have managed to keep that entrepreneurial part of the company intact. So I am engaged in all those activities but on multiple projects and now I am supervising other project managers who are doing that.
SDL: How did you get involved with Bridge Housing?
BW: I came here from San Francisco. Ben Golvin hired me at Bridge. Prior to that I graduate degree at Arizona State University in architecture and went on to build for S&L clients in Arizona in the 1980s. I didn't know what was going on. I was 22 and happy to be working 60 hours weeks. It was great training. I gravitated to the residential part of the business and got a lot more interested in what my clients were doing on the financial side of the business. I went back to graduate school to make the leap out of the consulting business into the development business. I got out of the school at Berkeley and Don Turner, the founder of Bridge, the entrepreneurial guy who really lit the fire, would speak pretty regularly at Berkeley and that got my attention.
SDL: Tell me about the early days at Bridge Housing.
BW: Don Turner was a Harvard architecture professor but not well suited to the academic scene. He was more of a doer than a teacher. He came out and was teaching at Berkeley when Governor Jerry Brown tapped to run the State Department of Housing and Community Development (HCD). So he ran HCD under Brown and started a lot of the financing programs that we are still using today. It was at that time that the Low Income Tax Credit was coming into being. Turner left HCD but while he was there he met Alan Stein who ran the state's Business and Transportation Department, of which HCD was part, and Stein became the chair of the Bridge Housing Board. This is our 20th anniversary. It was 20 years ago that an anonymous grant of $600,000 of IBM stock was given to the San Francisco Foundation with a note that said: do something about the affordable housing problem in San Francisco. And this foundation found Alan Stein and he formed the blue ribbon committee to figure out what to do. As Alan tells the story the last thing they wanted to do was write a report. What they really wanted to do was get some things built. And Alan said he knew this guy who is really a doer and he went and hired Don Turner who hired Rick Holliday. And those two guys started the company.
SDL: How can people make the transition from affordable housing and then buy their own home?
BW: Some people in affordable housing can pay a very low rent for five or six years and save some money and buy a house. But they had no idea how to do it. So we decided to do some home-buyer education and that is now a service we are providing in virtually all our properties. We also provide classes on English as a Second Language and a lot of money management topics. We are motivated because we manage about 5,000 units now and within each individual development the longevity of the tenant is incredibly long for a variety of reasons including that there is nowhere else they can afford to go and they have this great rent. But they are just like anyone else: they don't want to live in an apartment their whole life. So invariably they are moving out to buy a house in Tracey or some far-flung community. So we try to help them learn how qualify for a mortgage. The idea is to get them out of affordable so we can bring some new people in. It is a mutually beneficial situation and we like to be able to tout that people that leave our rental housing are out buying a house and are doing their part for the economy. They are buying furniture and doing all the things people aspire to.
SDL: When did Turner die?
BW: Don Turner died about five years ago in Bosnia. He had been telling Alan Stein that the company is in great shape and he was going to try to become the director of the Department of Housing and Urban Development (HUD) in Washington. His buddy was Henry Cisneros. I think that was where Don Turner was headed. Why else was he out schmoozing with members of the Cabinet? The people who died in that crash had unbelievable talents. Among them were some of the best engineers and people in tele-communications in the world. They knew what it would take to rebuild a country like Bosnia. Don was just one piece of the puzzle: the housing side of it. Most people don't know that there was an incredible brain drain took place when that plane went down. I learned later how impressive the group was. So upon Don's death Carole, who was the chief operating officer took over the company. She has been running the company since Don's death and the company has taken off in terms of production and growth.
SDL: You have done 1,200 units in the last year.
BW: Yes, 1,000 to 1,200 units in each of the last few years.
SDL: What percentage of those units are subsidized?
BW: Everything we are doing has some affordable component. We might have been 2-300 market-rate units when we do mixed-income housing. But a lot of it is stand alone affordable housing. A lot of it is 120 unit projects. Southern California is a little bit different than the Bay Area. These are big production builders and their mission in life is to produce and sell houses. Then they bump into a conundrum, like building housing for people who earn $15-20,000 a year, and they say: "How the hell do you do that?" And pretty soon they figure out that there are companies like ours that specialize in this.
SDL: They are required to do this because of inclusionary zoning? Is it the stick more than the carrot that is getting them to do this?
BW: Yes. There are 120 cities in California that have an inclusionary zoning ordinance in place of various kinds. Clearly it is the stick that is compelling them to build this. And it is fascinating how each company looks at it differently. Suddenly they realize: "I have to put a stop light in or build a new street?" From their perspective it is all just infrastructure costs or an impediment to what they really want to do, which is to produce cul-de-sac developments full of houses, sell them for lots of money, and make money for their company. They fight it and grapple with it and chafe under it but they all end up having to do it. It is just a different attitude. I have identified the "old-school builder" who thinks this is an incredible burden. They think this is a societal problem which is being forced on a very small segment of the community which happens to be the new home production builder. And I don't disagree with their argument that they are perhaps unfairly targeted. The source of the need to provide affordable housing probably isn't to the developer who is building million dollar houses. It is more likely the owner of the new Hyatt Hotel who has 500 employees, none of whom make more than $12 an hour, and all of whom need affordable housing. That is the guy, in my mind, if you want to find the nexus and set policy, he is the one who is creating the low wage jobs and the need for employees. There ought to be something done about that. But it is much more convenient to tap into the production side of the building industry and force them to do it.
SDL: In the end, the people who end up paying for the subsidy for affordable housing are the ones who are buying a new home built by the developer who has to include a certain number of affordable units. Doesn't the builder just pass the costs on to the buyers or renters of the market-rate units?
BW: One argument posed by economists who posit a rational real estate marketplace, says that if the developer buys the land with the full knowledge of the inclusionary requirement, then that developer pays a discounted amount for the land to the seller because he has had to set aside five acres that he is going to have to donate for affordable housing. So the classic argument is that it is the land seller who ultimately takes that hit.
SDL: Why is it discounted?
BW: I think the theory is that if you are selling 100 acres they will put together a packet and go to the biggest developers and say I have a tentative site map which it will be voted on in March. How much can you pay me for these 500 lots? If it is 500 market-rate lots those guys can run their numbers and know exactly how much they can afford to pay for land: maybe $ 100,000 a unit for land. If they have had to carve out five acres that doesn't generate any revenue, then they will offer less. And all developers with the same information would make the same decision. But the reality is that in an overheated market where land is in a limited supply your initial argument wins. The land seller says: I am in control of an incredibly limited resource and I am going to charge whatever I can get and invariably these builders that have a big production machine to feed just hope prices will continue to escalate and people will continue to buy. So, in essence, every homebuyer in that subdivision will pay $5,000 to make some land available for affordable housing. And in the heated debates about inclusionary housing in San Diego, which was just adopted, you heard both arguments. But over time it will end up being the land owner who ends up paying for this.
SDL: It could be both.
BW: It is complicated enough that it probably is some of each. There is a carrot component to most of these. These guys get a density bonus. In San Diego large developers have to build 15-20 percent of their units affordable. To compensate for this they can get a 20-25 percent density bonus. So the bonus not only covers the affordable units they have to build but they get an extra 10 percent of their total count of market-rate housing and that is what is going to off set it. So I don't know how that factors in but assuming they can take full advantage of that extra density, which isn't always the case, then in essence they are being made whole. And then when they come to me and I say, well, let me run some numbers. In a perfect world all of them would be happy if all they have to do is come up with land: five acres out of 100. In many cases it is land and $10,000 a unit but not always
SDL: you said you build 1,200 units a year and 200 are market-rate. And you said that most of the projects you do are 100 percent affordable. Does that mean that a big developer buys a big piece of land, builds most of it as market-rate housing, and then gives you a small piece of the site on which you build 100 percent affordable units?
BW: Right.
SDL: Is the affordable part of the development segregated on the site?
BW: The affordable piece is usually integrated into the master plan. It is a different land use in that it is a multi-family housing instead of single-family or retail. So it is identifiable but from an architectural standpoint the market-rate and the affordable units are related. In other words, you can tell it is multi-family but you can't tell it is affordable. That is the way it ends up if we have done our job properly. We just visited a project today that is being framed and the contractor said that they have four or five people a day stopping in to see if the affordable units are for sale. They are in a primarily single-family suburban, master-planned community. Here is a multifamily building going up and a lot of people think it is condos and they think: wow, I'd love to live out here and I can't pay $600,000 for a house, maybe the condos are $250,000. So they show up and call us and we tell them if they are subsidized housing and if they make between $15,000 and $40,000 they may qualify and we will put their name on the list. But the units are not for sale. These are rental units. Maybe 100 out of the 1,200 units we do a year are for sale. We are building townhouses or condos; we don't build any single family houses. The rest are all rental units. But in terms of defining mixed-income, I think of the 306 units we built in Milpedes where half is market-rate apartments and the other half are affordable apartments. And nobody knows which is which. That is the classic mixed-income model that got its start with the taxes and bond program. It used to be that you could get a tax exempt interest rate on your debt if you built 20 percent of you apartment building as affordable. A lot of developers thought that was a great deal and a lot guys did it a lot of REITs that are out there today. In Avalon Bay, Mike Myers started doing these 80/20 deals. The reason he did it was that he didn't have to give a discount on the 20 percent of the units because it was in this high income area of Santa Clara County and 80 percent of the median was a market-rate rent. So it was a flawed public policy because we were subsidizing guys to do market-rate housing. They have since made the competition for that tax exempt debt much more rigorous. Now you have to do 40 percent of your project at 60 percent AMI or something like that. So from a tax payer perspective it is a better use of that resource. Let the market-rate guys find their own financing: there is no reason we should be subsidizing them. Imagine that a community votes on a master plan that may have 300 single family houses at a range of sales prices and lot sizes from small lots to estate lots. The plan has a small retail center and there is a multifamily piece that happens to be our affordable housing project. So if residents look at the range of incomes across this master-planned community there are people earning $15,000 a year and there are people earning whatever it takes to qualify to buy a million dollar house. The whole range is there. In California this is sometimes called a "sustainable community" or a "mixed income community" where housing is being provided at all levels. It is not just a bunch of rich people behind a gate. That has filtered not only into the language but into the way credits and bonds are allocated. There is a public push to do this and projects are rewarded that integrate these housing types.
SDL: If a developer does not want to provide land for affordable housing on site, can they pay an in lieu of fee?
BW: In different communities you have that option. You can just write a check and we are working in communities that do that. They will do their own rigorous analysis of whether or not it is cheaper to give three or four acres away or write this big check. Normally those fees are sized so that it is painful for that builder to write the check. Oceanside here an in lieu of program where the community thought they wrote it in a way that it would be painful not to build affordable housing but over three or four years not a single affordable unit got built. The city housing agency had $15 million in its account [for affordable housing] but they didn't have the expertise to build it. None of the builders were going to build it: they were writing checks. And the counsel with some housing advocates looked at this and asked what the hell was going on. They are angry that no affordable housing production has occurred so they quadrupled the in lieu of fee. In Irvine they have soft inclusionary housing ordinances they call housing goals. We have been there long enough that when they have a progressive majority in power then it is an inclusionary ordinance and then Irvine has to build affordable housing and they call us. Then there was this stretch with the populist Republican majority who don't want affordable housing. They say: "those might be affordable housing goals but you don't have to build them." My experience is that in a variety of these cities they all have these ordinances and they are all enforced differently. They have different reasons about why they are even doing it.
SDL: Then there is the state law.
BW: Yes, redevelopment law is forcing cities that have redevelopment areas, to use 20 percent of their redevelopment money toward the production of affordable housing. And then there is the Housing Element by itself and that was pushed by Don Turner. One of HCD's main functions was to require every city to produce a Housing Element plan every five years. And in they have to not only identify potential affordable housing sites but they have to report on the amount of production that has occurred in the past five year cycle.
SDL: And that is based on "meeting the needs."
BW: Yes, they have a "fair share" assessment. Usually it is regional like Association of Bay Area Governments (ABAG) in the Bay Area. It does a regional housing needs assessment. Down here we have SDAG and they look at the county as a whole and look at everything from land availability to suitability for affordable housing. If a community has lots of available land they will end up with a bigger share of the affordable housing production because they can absorb it. And if you are little Del Mar, that wouldn't build affordable housing if it had to, the good news is that Del Mar doesn't have any land anyway so its portion might be only 20 units. But they still won't meet even that minimal requirement. By contrast, the city next door, that may not be that dissimilar in size, might have to produce 800 units [because the have available land]. So there is lots of wrangling as these agencies produce these 'fair share' numbers. You can imagine the push and pull that goes on.
SDL: What happens to the city that just refuses to go along with building its fair share of affordable housing?
BW: Supposedly there are teeth in that law so that state funds can actually be withheld but I don't think that has ever happened. Nevertheless, that is the stick. One stick has been used and that is if you don't have a Housing Element that has been certified as part of the General Plan then all the other land use decisions that cities needs to make are actually in jeopardy. You can't rezone to build a baseball field if you don't have a Housing Element certified because that could then come under a legal challenge because you don't have a valid plan that is in place. San Diego, for example, wants to do this big public stuff and give money to football owners. They are motivated to get the Housing Element certified. If they don't get it certified they may end up in legal limbo when it comes to the 200 land use decisions they make every month and they want to be on firm footing when they grant somebody approval.
SDL: I can imagine that it is not that hard to build affordable housing in an economically destitute area. But you do this in more upscale areas. Do you run into a lot of NIMBY opposition?
BW: Part of the niche that Bridge Houding occupies is to build a high quality product that will surprise people. That has become a basic tenant of most affordable housing providers. We have a track record of solid housing from an urban design stand-point and it fits in whether it is Irvine or San Francisco. In either place it sort of looks like it belongs. When you are trying to sell $750,000 homes the last thing you want is to have a building next door that makes the guy who is about to buy say: what is that thing over there? And you answer: well, that is affordable housing. Sign this disclosure. And they all have disclosures that the buyers have to sign. It says that I acknowledge that three blocks away in parcel 26 is some restricted housing. I don't know if by law they have to disclose it but people have been sued by not disclosing it. So when they see a solid company with a good portfolio of well-built and designed affordable housing, then it is a lot easier to get the necessary approvals. We go to the sales people and give them all our brochures with all our requirements and they can see that we have our act together. When I talk to marketing people they say they do lose sales not a lot -- but a few people just flat out say: "I am going to go somewhere else." But we also have a lot of neighbors who, for obvious reasons, we have gotten to know who don't have any problem once they understand what we build. This is not Section 8 housing. These people [who live in our affordable housing] get up in the morning and go to work. They just are young and are only making $25,000 a year or they are old and living on a fixed income.
SDL: That suggests that your projects are appropriate for the higher-income group of people in the lower-income category. In other words, you can rent your places to low-income people who have jobs.
BW: That's true. That is exactly right. It tends to be 50 percent of the Area Median Income. In certain circles that would be viewed as a rather high-income group. Homeless providers or Legal Aid workers' clients make $10,000 a year. But we are unapologetic about not being a homeless provider. We don't do that.
SDL: So none of this is Section 8?
BW: We take some. Most of them show up as potential residents and they have to apply just like everyone else. They will use the value of their Section 8 certificate as part of their income. So maybe they only make $10,000 a year but the voucher is worth $10,000 and if we have an income category for $20,000 families and their credit is good and they meet all this other requirements, then they are in. So we do have people in our buildings with Section 8 vouchers. But the old project-based Section 8s, where you build a whole building filled with Section 8 residents, I think they still do them but it is very rare. We haven't done one.
SDL: What is your screening like for this?
BW: When I am trying to convince a homebuilder that they should partner with us we like to talk about how rigorous our screening is. But it is all set down: it is not arbitrary. Our residents can have no unresolved credit issue over $500, no bankruptcy in so many years, and we do third party income verification. So if someone comes in and says they make $25,000, we correspond with their company to provide us with evidence of how much they earn. That is required by our investors and because we have to answer to the IRS. The worse thing we could do is rent to an unqualified, over-income tenant. The tax credits can go away and there are penalties. So we have to know exactly how much they are making. And people's lives are complicated in terms of income. There are people who stand on the street by the hardware store looking for work and make $10 to $12 an hour. And there is a methodology for those people to tell you how much they make. They may or may not have a tax return but that informal labor market is so big that the IRS established a procedure to allow us to estimate that. And then there is the more traditional husband and wife who both work at Home Depot and they are each making $11.50 an hour. These incomes are easier to calculate with two incomes and two verifications compared with people who work a job and a half and their salaries vary wildly. Our screening also checks to see if a prospective tenant has been kicked out of other places or has been a belligerent tenant and what his payment record is.
SDL: Do you do a check of their criminal record?
BW: There is no criminal background check that I am aware of. But any lie on the application can lead to an eviction so there is a certain honesty factor. The other question we get is whether or not we check citizen status. And the reason they ask is that they don't want illegal aliens living in housing that their city helped fund. The answer is that we request a social security number but if you are a somewhat acclimated illegal alien you probably have a social security number. We are not required to go and check and see if the social security number was obtained falsely. If you want a car parked on the property we need a driver's license and proof of insurance. So there is a certain winnowing that occurs. Do illegals live in our buildings? I have no doubt that they do. If you are a high-functioning drug addict or alcoholic and you pay your bills on time then we will never know and generally never care. But if that part of your life is spilling over into functions that are important to us then it will show up in some way.
SDL: Once a person is in and they turn out to be a problem client what happens?
BW: We have an annual income recertification process. We want people to grow their income. But there are some problems if they get to 140 percent of median and we start to lose the property tax exemption and some other things. We will try to persuade them through home buyer education or whatever that maybe it is time to take the next step and buy a home. But we are not allowed to actually push someone out or evict someone for being over the income limit. If, however, someone said I make this much and it is clear that they lied to us initially and there is a percentage where that occurs then that is grounds for eviction right there. We had a Chinese family in a San Francisco rental property with two parents and a couple of kids and both kids went through high school, through college, and medical school. The kids were still living at home and they are making six figures. They were so ensconced in that community that they were professional tenants in a sense. We went and sat down with them and said: "Come on, this is getting ridiculous, let someone else have a shot at this resource." And they did move. But they knew we couldn't evict them and they held out for several months. Our management folks are astute at dealing with those issues. When there are problem situations there are sit-downs that happen immediately. I know a property in San Marcos in which the three teenage boys of a single mother accosted a neighbor and took the kids scooter. I got a call from the city so we get the mom and bring her in and say: "Either this situation straightens out or you guys have got to leave." And she does her best to rein them in. Things quiet down for awhile and then she loses track and ends up having to leave. We are sensitive to trying to give people a chance but when it jeopardizes the larger relationship with this city, when we are working on a second deal and we are borrowing money, when everyone is praising what a good job we did on the first project then these kids have to go. It was more of a public relations debacle than a huge operational problem. On another project we just leased up all these young families and we got a call from the city. It related to an incident report from the Sheriff's department about all these calls from this new property. So we jumped on it to try to get a handle on it, looked at the incident reports, and found out that it came from four apartments in a 168 unit property. Each had their own unique challenges and they were creating all this activity for the Sheriff's Department. So we got them in and got it squared away. We told them: if you want to stay here then you are here but you have to get it together otherwise you are out. Our leases are pretty tight and if we want to we can interpret them pretty aggressively. Some of this was domestic abuse with multiple calls. It is one of the most frequent calls nationally and one of the most volatile. It is the one where the most people die in the line of duty. With our projects there is a level of good behavior that we are expected to uphold. We have built a number of buildings near the traditional public housing and the difference between their tenant populations and ours is that most of theirs don't work while virtually all the people in our buildings work. When we do have a population of very low income folks our management company, which is really astute at managing lower-middle income folks, even they acknowledge how radically different their challenges are with people at these lower incomes. These tenants are on the property all the time and that in itself means more wear and tear on the property. It sounds almost like a stereotype and something pejorative but there is the woman who runs our management company, who couldn't be more liberal in her perspective and who knows the hard truth, and she says she will have to have more money to manage properties with a higher density of low income tenants. She needs more staff on site and it just adds a whole new layer to the operation. So we do affordable housing for very low income families but it has a ripple effect through the whole budget. Instead of the need for just the homebuyer classes or English as a Second Language classes there are all these other needs like parenting lasses or home budgeting classes or any number of life skills. We were required to hire some residents from a local housing project and train them to work on the construction of a large mixed-income, mixed-use project. And you didn't start by teaching them how to work safely with a hammer. You started with life skills. The main life skill was that you get up every day and go to work. If you have a sore back you still had to go to work. Do you have a headache? Go to work anyway. That is the most basic life skill. There are some people who are second or third generation in public housing who don't have those skills. We did get a bunch of people who went through this training program and then they graduated to apprenticeship in a trade and have gone on to great success. But what we saw was that a bunch of people who are good users of the public housing system got trained, went to work, hurt their back, and went on disability. Maybe they were legitimate claims, I'm not saying they weren't but our insurance and costs went up. And there were an inordinate number of them who went on disability and it suggested to the casual observer that these people were experts at working the system for benefits. They had a housing benefit and now by God they had a disability benefit and workers comp. So when we get saddled with some of those things there are some unintended consequences. There were some residents that graduated from the program and improved their lives; but there were others who became a drag on the rest of the system, which is unfortunate. There are all these fears about the people who live in affordable housing but what we really need is neighbors who will trust us that we our residents will not degrade their property values or their schools. What they need to see is that people who live in our affordable housing complexes are really just people who want to live in the community and be a good neighbor.
SDL: Are they already in their community or should they be in the community?
BW: A large number of our tenants lived for ten years in the community where we build. So they are already there. For the most part they tend to live relatively close. We sometimes put a flyer about our project in with the paycheck of local workers and the employers love to see their workers live near their jobs. It meets the goals of cities to have this jobs/housing balance because it reduces traffic. So that is an ancillary benefit. Even those who don't live there before we build the project may work there.
SDL: Do you often encounter an "us vs. them" schism on the master-planned site between those in affordable housing and those in the market-rate units?
BW: I think there is a little of that. People are sort of insular. One thing we are doing on a couple of sites is that these homeowner associations may not have an actual place to meet because the developer didn't build them a clubhouse. So we invite them to come and meet in our building. We invariable do things that the homeowner Association's most active people would like us to do such as change our lighting or build a new trash holder. They look at it and say: "Wow, they demolished three trash enclosures and built it somewhere else." That is what I did for a community. At the end of the day you say it was worth it because I am going to gain a few really staunch allies. It sounds very strategic and it is but it is also just good business practice. We also offered up this community room and partly it was because we wanted people to come see that this was a really nice apartment building and get them into the building. I thought it was going to be one meeting but it turned out to be a monthly event. They now have a one-to-one relationship with our manager. If there is a problem they know exactly what to do. So it has built a little bit of interaction that otherwise would not have happened. That is a project up in Carmel Valley in one of these typical inclusionary deals. It is a fascinating dance that goes on. The people that bought properties right next to us got a little discount, not necessarily because they are next to affordable housing, but because they are next to the multi-family, the commercial spaces, and the busy street. And the people who buy near the park on the quiet end paid a premium. Our builders have all this stratification even in the same housing development. The first thing they did after buying their house at a discount was to come to me and say how great it would be if I moved the trash enclosure and try to improve their situation by another increment. Part of what they wanted I couldn't do but the rest was easy enough so we just did it.
SDL: Do you see Bridge moving to more mixed-income projects where the units are dispersed within the complex?
BW: We started that but the financing programs pushed us to 100 percent affordable multi-family units. There are these complicated scoring competitions. It doesn't preclude a mixed-income approach but it does make it harder. We continue to do it in places where there is a good market. Like any other developer, we don't want to build something where the rents won't pay us what it cost us to build. So in a lot of places in the Bay Area we will come up with a piece of land that is bigger than what we need and we don't want to build 300 units of affordable housing but 150 would be a great fit. And the city likes it and it is the best policy. So in a perfect world there would be more incentives within the financing program to do the mixed income. It is complicated but the tax benefit that our partners buy isn't just a tax credit, they also buy losses and depreciation. So if you have a $10 million building that is depreciated over 27.5 years and it is just a straight line depreciation, we as a non-profit don't have a need for any of that. So we sell that right to the depreciation. They get this benefit: a tax credit where they write off their income and then they get the depreciation so they have a paper loss as well. In a mixed-income project half of the project that is market-rate doesn't generate any tax credits but it still generates depreciation. So now you have a tax credit buyer who would have normally paid 80 to 90 cents on the dollar for a tax credit but in a mixed-income deal because that guy is getting less tax credit and more depreciation he might pay 60 cents on the dollar. Usually they end up getting a requisite percentage of the cash flow and in a mixed-income there is a lot more cash because the market-rate units generate a lot more cash.
SDL: What would fix this?
BW: There would be a tax law or under our Section 42 of the tax code there might be a subsection for a different treatment so that maybe you would be able to split those even though it is all one owner and one building. Maybe you could split it but the way it is now you can't. The building is either all owned by the partnership or it is not. There is no way the partnership can own the affordable half if it is really mixed-income and blended. The second issue is that just to get the financing the programs are designed to have incentives for 100 percent affordable housing. You are trying to compete on these various criteria and if there is a market component it waters down As the taxpayer you should feel pretty good that this is the most effective housing program ever. And partly that is because it is privately run. And the market does dictate efficiencies. But it also could use a little tweaking here and there to clean it up.