Teacher Housing

9 min read

Good idea, steep learning curve and some resistance

It’s a well-known problem in many areas of the country: A pernicious combination of high land values, mounting construction costs, super-gentrification and lagging wages have conspired to put decent housing out of reach for the workforce on which the increasingly affluent community depends. But now, through a series of legislative actions and municipal policies, California is attempting to restore the “missing middle” for schoolteachers, educational personnel and other government employees.

It is a term that has gained growing purchase in the affordable housing realm. “There are different ways to define it,” explains Kimberly “Kim” McKay, executive vice president of BRIDGE Housing of San Francisco. “But here in California, the way we’ve looked at it is the gap between the housing subsidies for the lowest-income residents on one side and the luxury market on the other: about 60 to 120 percent of Area Medium Income [AMI].” McKay has wide-ranging experience in all aspects of multifamily affordable housing on the West Coast. Trained at U.C. Berkeley and MIT, she is also a licensed architect.

California is often the leading edge for American trends and its major cities have become increasingly difficult for ordinary people to afford. Annual median rent in California has climbed 21 percent since 2000, while the typical renter has seen his or her income drop by eight percent in the same time frame. Los Angeles residents need to make at least $68,000 annually to afford an “average” apartment, but the median household income is only $55,000.

According to the City of Los Angeles General Plan, “Los Angeles needs 80,000-plus units to fill the housing demand before 2021, with over 50 percent of the units affordable to moderate income level or below.”

By some estimates, the San Francisco Bay area, home to the nation’s largest tech boom, has become even more unaffordable.

“This has gotten the attention of the state legislature here,” McKay says. In 2017, it found that state homeownership had fallen to the lowest level since World War II; a third of renters were paying 50 percent or more of monthly gross income on housing; the projected need for new homebuilding was falling short by 100,000 units per year; and new K-12 teachers coming into the profession was at a 12-year low when expected demand was projected to rise four to eight percent yearly for the next decade.

Lessons learned
The learning curve has been just as steep for the committed developers, like BRIDGE Housing, a nonprofit whose mission is to strengthen “communities by developing, owning and managing high-quality, affordable homes for working families and seniors;” one “that pays close attention to the double-bottom line of financial and social return on investment.”

As an example of lessons learned, McKay cites Sage Park, a 90-unit affordable project at 1302 W. 177th Street in L.A., comprising one-to-three-bedroom apartment units. “The Los Angeles Unified School District [LAUSD], one of the largest in the country, focused on teacher and employee housing. It put out three RFPs. BRIDGE was selected for one, on the Gardena High School campus. Initially, their plan was, ideally, to provide teacher housing. When we approached this, we didn’t look at it with truly the missing middle in mind, and while teachers were a first objective for the school district, we ended up using nine percent tax credits and some money from the city of L.A. [along with Bank of America, the California Community Reinvestment Corporation and the New Generation Fund] to do this project on ground lease property and so, as a result, teachers are paid too much under the nine percent tax credit structure.

“This gives a snapshot of what we’re seeing here in California, and a common story around the rest of the country, that rents are far exceeding what folks are able to pay, against what their incomes are.”

At Sage Park, BRIDGE spent about $1 million on facilities and amenities, including classrooms, an art gallery, community garden and even an athletic obstacle course, to justify that the property wasn’t surplus school district land. The schools ended up not even using the facilities. Residence was limited to 60 percent of AMI to access equity through tax credits and scaled the project back from the originally planned 130 apartment units.

“If I had it to do again,” McKay reflects, “I would make it a slightly denser project and use the excess land to do some unrestricted units that we could have gotten to some households that were over 60 [percent of AMI]. We had to wrestle with a number of fair housing concerns because the local money had come from HUD, so it had some complexities with it. But the local school district had viewed this as sort of a set-aside in their minds – that’s how the board had been sold doing this transaction.

“But it wasn’t a set-aside. We did very aggressive marketing to LAUSD employees and didn’t set aside any units for them. But because of the sheer volume of LAUSD employees in the area, we ended up with a very good outcome: 95 percent of the units were leased to employees.” These included janitors, maintenance, cafeteria and child care workers and some administrative staff.

New legislative tools
Since Sage Park was completed, two key legislative tools have been put into place:

  • Assembly Bill 1157 exempts school district employee housing on district property from having to go through the “surplus property” process and exempts such housing from having to pay property taxes.
  • Assembly Bill 1637 is a pilot program that allows two housing authorities—San Diego and Santa Clara—to provide gap financing for housing from 120 to 150 percent of AMI.

According to the California Education Code, there is an elaborate procedure for characterizing school district land as surplus. But with AB 1157, McKay says, “If you’re interested in providing teacher housing, you don’t have to go through this cumbersome process. This applies to any publicly-funded school and it is a great start.”

In San Diego, BRIDGE came in to work on a project on school district-owned land, dubbed COMM 22, at the corner of Commercial and 22nd Streets. “It’s on the trolley line into downtown, an old school maintenance yard. We built 130 family units, 70 senior apartments with a HUD 202 [supportive housing for the elderly] component, day care, 15,000 square feet of retail, and Habitat for Humanity is building some for-sale townhomes,” says McKay.

At the geographical center of the project, not redeveloped, is an old book depository building. “Our original idea was we wanted to do market-rate lofts, but it is still too edgy a part of town for that to be financially viable. So, we’ve approached San Diego Housing Commission about doing workforce housing in this development.

It would end up being about 36 units in the existing building and 32 new construction behind it.” BRIDGE would partner with the commission and the school district would hold the ground lease.

In the city of Santa Rosa, Fir Ridge is a subdivision built by a private developer in 1988. Within it is a six-acre tract set aside for teacher housing that, as McKay describes, “Has been sitting there all these years. The school district has site control and we’ve been working with them to build 36 units. The structure we’d use is certificates of participation [secured by lease revenues] in lieu of traditional bonds, and a small amount of gap financing.”

The project is still in pre-development, slowed by the spate of fires in the past year. But with free land available, this is a model of how teachers could be affordably housed in one of the most expensive areas of the country.

Teacher housing set-asides, however, are not a universally embraced concept. In Mountain View, CA, smack-dab in the middle of Silicon Valley, residents are resisting the plan to use excess land owned by the Mountain View Whisman School District for affordable rental housing for teachers and other district employees. A feasibility study suggested 82 three-story townhouses on a 9.5-acre site on the northern end of Cooper Park. Construction costs would be paid off by an estimated $700,000 in annual rental income.

No sooner had the project been announced than opposition mounted. The Mountain View Voice reported, “Residents near Cooper Park made clear at the Feb. 15 [school] board meeting that they would strongly oppose any effort to develop the land into homes, describing the site as an infeasible spot to plant higher-density development given the traffic impacts and the community’s loss of valuable open space.”

In the neighboring community of Palo Alto, home to Stanford University, as well as one of the nation’s most acute affordable housing shortfalls, a January 26, 2018 editorial in Palo Alto Weekly favored the idea of workforce housing in general but questioned the wisdom of building 60 to 120 below-market-rate apartments for teachers on county-owned land on a 1.5-acre parcel across the street from the courthouse.

“While we heartily support [the] initiative to use land already owned by the public to develop subsidized housing, we are skeptical about the demand for such housing by teachers and whether the inherent complexity of financing and building housing that isn’t eligible for federal affordable-housing funds makes this idea realistic.”

The editorial goes on to question “whether and why teacher housing should be a higher priority than other subsidized housing when considering the re-purposing of limited public property.”

Similar controversies about subsidizing teacher housing and whether it is necessary to attract and retain high-caliber personnel are being played out in such other high cost-low housing stock availability communities as Aspen, CO.

But McKay is convinced that any initiative that “chips away at the problem” is worth exploring, because “the situation is not sustainable the way it is now.

“The next step,” she says, “is for school districts to be able to sell surplus land and use that revenue to provide teacher housing. That could make a great impact on the San Francisco area, for example.

“The good news is that there is a growing appreciation and sensitivity to the subject, but we’re just at the beginning of where this is going. We all have to talk to our legislators about property tax exemptions, expansion of state and federal tax credits and the need for soft funding.”

She also believes that leadership will need to come from the state level. “Local jurisdictions may be perplexed about how to go about this.” Under the current administration, federal involvement in educational support has been uncertain.

“There’s no mystery or silver bullet, and there is still room for more awareness and initiative.”

Story Contact:
Kimberly McKay