Leveraging New Policy Tools to Accelerate Affordable Housing in California

Leveraging New Policy Tools to Accelerate Affordable Housing in California

Vela is an 87-unit affordable housing development built by Affirmed Housing in San Jose, California. The project provides 43 units of rapid rehousing and permanent supportive housing for people experiencing homelessness alongside other income-restricted affordable units. Photo credit: Argast Photography

San Jose, California, is the Bay Area's largest city and the seat of Santa Clara County. Amidst Santa Clara's ongoing crises of affordability and homelessness, county voters approved Measure A in 2016, authorizing the county to borrow up to $950 million to "provide affordable local housing to vulnerable populations." At the state level, the passage of Senate Bill 35 (SB 35) in 2017 streamlined development processes by allowing for ministerial rather than discretional approval of qualifying projects with a certain minimum of affordable units. New state affordable housing tax credits, approved in 2019, are an additional resource for bringing needed affordable housing online. In December 2022, developer Affirmed Housing opened Vela, the first affordable housing development in San Jose to make use of Measure A funding for projects with rapid rehousing units. The project also is the first approved under the SB 35 streamlined approval process and makes use of the new state tax credits. Vela consists of 87 total units (including 2 manager units), 43 of which are set aside for people experiencing homelessness. Onsite supportive care and services are available to Vela residents, including those living in the 29 permanent supportive housing units and the 14 units reserved for rapid rehousing.

Addressing the Need for Affordable and Supportive Housing

At Vela, 43 units rent to households earning no more than 50 percent of the area median income (AMI), and the remaining 42 units rent to households earning no more than 60 percent of AMI. In practice, however, most units rent to households earning no more than 30 percent of AMI, with rental support provided through project-based vouchers connected to Vela's supportive units. Vela features 29 studio units, 13 one-bedroom units, 22 two-bedroom units, and 23 three-bedroom units, with the larger units better able to accommodate families. Financing for the $67 million project included $28 million in tax credit equity, $16 million from Santa Clara County, a $12 million permanent loan from Banner Bank, $9 million from the city of San Jose, and a $1.5 million deferred developer fee. Measure A made possible the county's contribution to Vela's funding package. Project amenities include a common kitchen, a lounge, offices for property and services management, outdoor decks, bicycle storage, and an onsite food pantry. Green features at Vela include a solar thermal hot water system, solar-generated electricity, and energy-efficient appliances and windows.

In the Alum Rock Avenue Urban Village Planning Area, where Vela is located, city planners are prioritizing displacement prevention for businesses and residents and increasing access to affordable housing. Most of the neighborhood's housing stock consists of rental units, and renters are more likely to experience eviction or displacement than homeowners. In addition, the median household income of the area is approximately $62,000 compared with $112,000 for the city overall. The neighborhood is nevertheless amenity rich, with transit, parks, a grocery store, schools, a library, and a medical center located near Vela.

Leveraging New Policy To Accelerate Development

Affirmed Housing used several new policy measures intended to facilitate the production of needed affordable housing in California and in Santa Clara County, including new state affordable housing tax credits; a county-level affordable housing bond initiative (Measure A); and the streamlined approval process for qualifying affordable housing projects authorized by Senate Bill 35. Photo credit: Argast Photography

Although Measure A funding may now be winding down 7 years after voters approved the initiative, Rob Wilkins, Affirmed Housing's vice president for Northern California, reports that it was critical for jumpstarting efforts to increase the number of permanent supportive housing units in the county. The projects benefiting from Measure A, including Vela, have helped reduce the number of people experiencing homelessness in San Jose after a yearslong rise, says Wilkins. When fully implemented, Measure A is expected to support the preservation or creation of approximately 5,000 units of affordable housing in Santa Clara County; in response to this sustained public focus, says Wilkins, supportive units have now become commonplace in new Affirmed Housing developments.

Vela is also notable as the first project to leverage the provisions of SB 35. Because it permits ministerial approval of qualifying affordable housing projects, SB 35 speeds the approval process and helps ensure that projects can ultimately move forward, particularly in jurisdictions that have underproduced affordable housing. In general, so long as a proposed affordable housing project is an infill project that meets existing residential and mixed-use general plan or zoning provisions and complies with other requirements, such as locational and demolition restrictions, a jurisdiction is required to approve the project. Qualifying proposals under SB 35 are exempt from certain review requirements under the California Environmental Quality Act. The bill specifically targets areas of the state that underproduce affordable housing, because only infill projects located in jurisdictions that have failed to meet their regional housing needs allocation qualify for SB 35 provisions. Wilkins reports that for Vela, Affirmed Housing worked closely with city officials and conducted extensive community outreach to ensure that the streamlined approval process under SB 35 led to a productive experience for community stakeholders.