Who pays for inclusionary zoning?

One of the many objections to inclusionary zoning is that it unfairly places the burden of providing affordable housing for the entire city on the handful of homeowners buying market-rate units in new developments. In response, inclusionary zoning advocates repeat ad nauseum they are simply asking developers to “pay their fair share,” and that (in defiance of all logic and common sense) developers will not pass the costs of subsidizing the units onto buyers.

Friday’s Chronicle featured a column about the difficulties the arise when inclusionary zoning lottery winners find that they are unable to keep up with rising condo fees.

In many ways, Hernandez’s experience is anomalous. A lifelong renter, she applied for a unit in one of the the Mayor’s Office of Housing lotteries because she knew it was her only avenue for homeownership in San Francisco. But the studio apartment she “won” — $233,000 for 450 square feet — happened to be in a remodeled building with hidden construction issues and an upscale homeowner population who was interested in amenities like 24-hour doormen.

It isn’t anomalous. Every lottery winner of a BMR ownership unit must grapple with paying condo fees.

She also learned that the building’s homeowners association was planning to levy another special assessment. Last year the association assessed the residents with a one-time $4,000 fee to cover various construction problems including leaking skylights which damaged one resident’s furniture. This year, the association had determined that another assessment would be necessary — this time between $7,000 and $12,500.

The column goes on the advocate a State Assembly Bill that would allow BMR unit residents to veto fee increases.

The fact is that there is a certain amount of income needed to own a home. When I hear proposals demanding ownership units being made available to families making in the neighborhood of $20,000/year, I cringe. It is a recipe for foreclosure. Home ownership costs money. Property taxes are one example. Another is the frequently exceedingly burdensome cost of unexpected repairs. For families surviving on limited incomes, rental is simply a safer option. In spite of this, the Oakland City Council and the BRC seem to have no interest in examining ways to increase our affordable rental housing stock or augment funding available for Section 8.

But the issue of condo fees provides a very real example of the difficulties in implementing on-site affordable ownership units. Should the other property owners in a development (many of whom may not be earning any more than those in the lottery-assigned BMR units) be required to subsidize on a monthly basis the group costs for maintaining their building? Several of those leaving comments on the Chronicle article think so:

whozzat writes:

why not just use the calculation that Suze Orman uses for couples splitting bills? you pay a proportionate amount based on what you earn, or in this case, the amount you paid for your unit. If the fees are in this proportion, the increase will follow. So Mr. X pays fees based on his unit base price which might amount to $400 a month and Mrs. Y pays $200 a month because her unit cost less. When they Increase the fees $20% for the inprovements, everyone pays a proportionate share, they don’t split it evenly.

mball88 notes

The solution to this problem to me seems clear: legislation limiting the liability of persons who buy affordable housing for these types of special assessments and dues increases. Otherwise, requiring affordable housing to be built is just a hollow act. While this would increase the liability of those who purchase condos at market rents, they, too, would know what they are getting into, and are much more able to bear the costs than those living on fixed incomes.

I’d like to see some answers from the groups pushing IZ and the BRC (since IZ seems to be all they care about) as to how they think condo fees should be dealt with. Should BMR unit owners pay the same fees as everyone else? If so, how do we ensure that they will be able to afford it? If not, then they must admit that it is not only “greedy developers” who they want to bear the costs of subsidizing housing. Once the units are sold, the burden of subsidy will fall on the owners of market-rate condos every single month. Does anyone think this is fair?

3 thoughts on “Who pays for inclusionary zoning?

  1. dto510

    No, nobody (besides the Mission Anti-Displacement Coalition) thinks this is fair. That’s why Oakland doesn’t have inclusionary zoning (yet). Some say developers should “pay their fair share” – is that on top of the enormous property taxes they pay, often on expensive land that’s hung up for years in political BS? How about people who have owned their own home for a decade or more, and therefore are under-assessed thanks to Prop 13 – should they pay their fair share? I don’t see affordable-housing activists asking them to fund anything.

  2. V Smoothe Post author

    Well, apparently mball88 and whozzat find the proposition reasonable. I’d really like to see how Just Cause and the BRC plan to address this problem in the event that we do pass an IZ ordinance.

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