Can ‘social housing’ help solve California’s housing crisis?

Over the past half-decade, California lawmakers have signed off on almost a hundred laws seeking to alleviate the state’s deepening housing crisis. Yet developers still aren’t building anywhere near enough affordably priced homes for everyone who needs them.

Now, a state assemblymember from San Jose is pushing a novel proposal he believes could finally jump-start affordable housing development by allowing the state government to get into the homebuilding business.

Alex Lee, a 27-year-old Democrat, has written a bill that would create a state agency to develop “social housing” — publicly owned housing that would be affordable for people with a range of income levels.

While skeptics may dismiss the idea as a progressive pipe dream doomed to repeat the failures of underfunded federal public housing programs, Lee points out that California agencies already hire developers to build housing at universities and other public property across the state.

“Wouldn’t it be cheaper and more effective if we just did development ourselves?” Lee asked in an interview.

With its own development agency, Lee argued, the state could save costs by taking a more unified approach to the process of planning, financing and constructing housing. And by removing any profit motive, he said the agency could focus its mission on building affordable multifamily properties while being less affected by swings in the economy.

Unlike most public housing in the U.S., Lee’s proposed social housing would be available to low-, middle- and even high-income residents, who would pay no more than 30% of their earnings to rent or buy units leased out by the agency. Two in five Californians already spend more than that on housing, classifying them as “cost-burdened,” according to the independent California Budget and Policy Center.

Central to the plan is that the rates paid by higher-income residents offset the cheaper prices charged to lower-income households. That, backers said, should cover the costs of managing and maintaining social housing properties, and eliminate the need for ongoing public subsidies such as housing vouchers.

Another benefit, experts and backers argued, is that such mixed-income housing — unlike subsidized public housing projects that have historically been relegated to poorer neighborhoods — can encourage more community investment, lower crime rates and better access to good schools and jobs.

Lee, the youngest member of the state Legislature who lives with his mom in San Jose when not in Sacramento, first learned about social housing a few years ago by reading a policy paper while riding Amtrak. Having seen many in his community struggle to find homes they could afford, the idea of the state taking a more active role in housing appealed to him — as it has other younger elected officials and voters who increasingly view government as a solution to society’s most pressing issues.

“We should have a whole new public developer dedicated to this purpose,” Lee said.

Social housing has long been popular in Asian and European countries, including Austria, where well over half of Vienna’s 1.8 million residents live in government housing. While many large post-World War II social housing developments in Europe degraded into slums in large part due to underinvestment and poor design, Vienna’s model, which prioritizes housing residents of all incomes and integrating projects into the fabric of the Baroque metropolis, is often credited with making the capital city one of the most affordable and livable on the continent.

Here in California, a local public agency in Sacramento has built three apartment projects on state-owned land with over 280 market-rate and affordable units, which Lee cited as an example to follow.

But even if Lee succeeds in creating his new agency, it would still face the main challenge confronting any developer seeking to build affordable housing, said Dan Dunmoyer, president of the California Building Industry Association: “The question is: Who pays for it?”

In the most expensive parts of the state, such as the Bay Area and Los Angeles, building a single unit of affordable housing can cost as much as $850,000, often double the expense of a similar market-rate unit, Dunmoyer said. He attributed the jarring disparity to state and federal building requirements, construction wage standards and the drawn-out process of applying for a patchwork of increasingly oversubscribed affordable housing grants and financing programs.

To find the money to build social housing, Lee pointed to separate state and regional affordable housing bonds, together potentially worth up to $30 billion, that could come before voters in 2024. The proposed development agency could also be allowed to issue its own bonds and potentially take out loans from the state treasury. As for running the agency, Lee estimated that it would start out costing around $1 million each year, with most of that money going toward a dozen staff members.

Lee’s bill, AB 309, passed out of the state assembly last week and will be sent for approval to the state senate, where an earlier version stalled out in committee last year. A competing bill, SB 555, calls for developing a statewide social housing plan, but is shorter on specifics. It’s authored by Aisha Wahab, a Democrat from Hayward.