Conversations with Advocates of Fair Growth
Overview | Conversations with Advocates of Fair Growth | Living on the Fenceline
Linda Mandolini
Linda Mandolini is executive director of Eden Housing in Hayward California. Eden specializes in constructing affordable housing in the suburbs. Recent pressure from the state legislature is scaring a number of suburbs into building affordable housing for the first time. While there is still NIMBY opposition to the introduction of affordable housing into the suburbs, a good community acceptance strategy can work. It is particularly helpful if a project can be sited in a place that was previously viewed as a problem area because then the affordable housing is viewed as the community rather than bringing property values down, she explains.
Mandolini sees several problems with the current rules governing the introduction of affordable housing. First, if the California legislature were more aggressive in enforcing the Housing Element law it would provide more political cover for local politicians who are worried that if they vote for affordable housing in their district they will be turned out of office. Second, cities that collect in lieu of payments from developers and large commercial companies -- which are given permission to construct a complex without including affordable housing but are required to pay a fee so they can be built off site — should be required to either spend the money on affordable housing in their jurisdictions or donate it to a regional affordable housing fund. Currently, many of the in lieu of fees that are collected are not spent on affordable housing. Third, since housing prices are so high in the Bay Area, the range of incomes that qualify for affordable housing should be extended upwards. And fourth, insurance rules that prohibit the construction of for-sale affordable homes should be revised. Fourth, a larger subsidy is needed to help extremely-low-income people into our affordable housing. Often the people who need our housing the most are the ones who don't qualify because they can't afford the rent. We need a larger subsidy for these people who don't have Section 8 certificates.
Interview
Steve Lerner (SDL): when did Eden Housing get started?
Linda Mandolini (LM): We are 35 years old and one of the oldest non-profits in California. We were formed in 1968 by a group of concerned citizens who came together around open housing, which was the 1968 term for fair housing. Eden Housing started by doing six units of first-time home-ownership housing where we adopted six self-help families and helped the families build their house. After that we built 150 units of senior housing using the HUD 236 Program in Hayward.
Over the 35 years we have expanded the program to work in six counties in California and we are chartered to work state-wide. We have elected to work in northern California as far north as Sonoma County, as far south as San Jose, and as far east as the Central Valley. In all we have done 4,300 units of housing.
A lot of that has been in partnership with larger non-profits. In our early days we partnered with big developers while we were cutting our teeth. Now we do mostly development for our own account. The smallest project during my tenure has been four units and the largest 194 units. Projects of 4 units do not get us up too much efficiency so we try to do senior projects at about 50 units and we try to do family projects around the magnitude of 70 units or higher.
We have a property management company and a resident services affiliate so we have two core operating affiliates. They provide services to our residents in an on-going way. We also contract out some of our property management depending on our volume at any given time in the pipeline. Right now we have about 1,000 units in the pipeline in the Bay Area and some in the Central Valley.
We still have one founding board member on our board of directors — a member who has been with us for 35 years. We have had a very stable executive tenure. I am the 5th director if you count the first who only worked for six months for six dollars an hour. I have been with Eden for six of the past seven years and executive director for two and a half.
We are one of the best regional developers in California if not in the country and we are a pure non-profit. We care a lot about our mission. We do housing for seniors, housing for people with disabilities, housing for first-time home buyers, and rental housing for families. We do the least amount of housing for first-time home buyers because it is the hardest to do in California. That is because of the liability law that basically favors home-owners and condo associations with deep pockets. There is also no subsidy program that can scale the mountain of California land and construction prices.
SDL: Of the 4,300 units you have built are the vast majority rental units?
LM: Yes. We have 2,600 under management now. In my tenure we have done two home ownership projects: one 14 and one 17 unit projects. We believe keeping these small is in our best interests because of the propensity to get sued.
SDL: You build this housing that is then bought but you remain liable for its construction defects for ten years?
LM: Yes it is called construction defect liability and it usually runs to detached products but homeownership associations have been getting together to sue in the same way that condominium associations have been in the past. The cost structure for single family [affordable housing construction] is so high that we would be most likely to build first-time home ownership units as some sort of semi-detached housing. It is hard to get wrap insurance policies that wrap around the developer and subcontractors [and protect them against construction defect liability]. The insurance costs $15,000 to $30,000 a unit to buy so it is cost prohibitive and there is no subsidy for it. Add that [insurance cost] to the cost of land and the cost of building and it makes for-sale affordable housing harder to do.
SDL: How poor are the people who live in your rental units? Do you get down to 30 percent AMI?
LM: We like to have tiered affordability. The way the tax credit program works in California we pretty much have to make our complexes 100 percent affordable for folks at or below 60 percent AMI. We like to do 30 percent at 30AMI, 30 percent at 50 AMI, and 30 percent at 60 AMI. In a perfect world we would have some at market rate or some moderate-income housing in the mix. But because the costs are so extreme to develop here we have to restrict the whole project to subsidized units. Because most of our projects are property tax exempt we typically don't let people stay past 80 percent AMI and move them along so we can get the benefits of the property tax exemption.
SDL: Do you have to kick people out when they start earning more than the income limits?
LM: Sometimes, in order to retain the exemption. Each year we are required by law to certify the incomes of our residents. We have to certify to the assessor that everyone living in our building is below 80 percent of median income and if they are not we pay property taxes on a pro rata basis for each of those units.
SDL: I have met other groups that have a wider range.
LM: You can do market rate and mixed income. We tend to work in communities where when you build a project of around 75 to 100 units then the locations of the developments don't necessarily guarantee us top dollar.
SDL: Is this a polite way of saying that you are building these in low-income areas?
LM: Sometimes, yes, but not always. I do have a project in San Jose that will that will be 75 percent affordable. I think if I had it to do over again some of it could have been market-rate because it is a good location. In San Jose even the affordable units are close to $1,400 a unit. It is really expensive and a lot of people can't afford that so we end up renting to a lot of Section 8 tenants and we end up with less income stratification. We like stratification in our developments because it gives people the opportunity to move upwards. We think it creates a better tenant mix. Most of our families are employed because our rents aren't cheap. I think if a project is under 100 units in size it is fine that it be 100 percent affordable. When it gets bigger than that I think it helps to think about how to create some mixed-income housing. There is huge economic pressure to make our projects 100 percent affordable because of the tax situation and because of the gap subsidy that you get from syndicating the entire building.
SDL: What is the gap subsidy?
LM: The way the tax credit works is that if it costs $100,000 to build a unit, your basis is a percentage of the $100,000. If your whole property is restricted [dedicated to affordable housing] you get basis on every unit in the property. So you get to generate tax credit equity based on 100 percent of the development. Whereas, if you unrestrict some of the units [make them market rate] you can't raise any tax credit equity but it still costs you the same amount of money to build. So someone else has to subsidize a higher income resident. And no one wants to subsidize higher incomes. So it pretty much has to be 100 percent affordable.
SDL: I gather that would vary from place to place. For example, Patrick Kennedy at Panorama Interests in Berkeley builds buildings that are part subsidized and part market rate.
LM: He can do 80 percent market-rate and 20 percent affordable. We wouldn't do that. That is not our mission. If he didn't need to do it [include affordable units] he probably wouldn't. I have only competed with Patrick once in Berkeley and it was for a project that the city wanted to be at least 50 percent affordable. It was only time I have gone head to head with him because we have different incentives. It doesn't mean that we don't work in mixed-income contexts. We have partnered with Hercules and with Cattelus Development Corporation. They are developing a high-end residential subdivision of 600 homes. And we are meeting their affordable requirement by building 133 affordable apartments.
SDL: Mixed in?
LM: For one dollar they gave us seven acres with all the off-site work done and the site fully graded. It was a good deal. It is in Hercules north of Richmond. It is on the former site of a refinery that Catelus cleaned up and master-planned. The city said that in order to meet the development requirements they had to build 20 percent affordable units. So they partnered with us. Hoffmann and Brody are doing the same thing. And the houses are selling between $600,000 and a million dollars. So we do work in that context [where wealthier homes are for sale]. But we are not market-rate developers. Bridge Housing has done a lot of market-rate stuff. And we have been looking at whether we want to take the market risk and we are not really used to being market rate developers. My management company is not very good about what we should do when we have vacancies and how can we aggressively market our properties. So if we were to do it we would either have to change the way our management company functions or bring in a partner to deal with the management aspect. We have not had to take on the risk of market-rate housing. Until last year it has been a no-brainer in California [because the real estate market has gone up]. But the last two years there have been severe vacancies and market pressure with the market ebbing. We have insulated ourselves from that it is not something we wouldn't look at. It would have to make economic sense because we like to run our own deals so we don't have to partner with somebody. If it is a good market-rate project and made sense we would do it.
In the last three years we have talked with many of the major builders who came to us because we work in a lot of suburban locations in California. We have a good reputation for doing appropriate scale affordable housing in the suburbs. We have done suburban affordable housing in Dublin and Livermore. Other communities that have not done affordable housing before now have track records with us of not just one project but multiple developments. And they have had a really good experience doing it on a scale that made sense for their community.
SDL: So in those cases did the community came to you?
LM: Yes, that is often how we do business.
SDL: The municipality comes to you?
LM: Yes, they call us up.
SDL: And they say they want to build some affordable housing?
LM: Yeah. They say: can you talk to us: we have a site and can you talk to us about whether this makes sense. They have never done this kind of project before and they want us to tell them how they might do this. That has been some of our very best business and best repeat business.
SDL: Why are they suddenly interested in building affordable housing? Is it out of the goodness of their heart?
LM: Recently there has been a lot of pressure through the California Housing Element Law. There has been a lot of pressure on cities to meet their affordable housing requirements. Housing Element law has had no teeth but recently there has been a lot of legislative pressure for communities to not just build single family homes for the highest price they can get in the market. That has resulted in a lot of inclusionary housing ordinances and a lot of discussions between cities and Eden. Some of the cities that we work in — Livermore, Petaluma, Hayward, Freemont, San Leandro — are communities that already are home to people at the lower end of the economic spectrum. These communities really need to solve the problem for people who work there already and need high-quality, decent, affordable units. A lot of them contact us to do this work because they have a real need that they want to fill. Some of the newer communities that are mostly single-family subdivisions have never really had any pressure to do affordable housing. Those are the ones that have been calling us more recently.
SDL: What has changed in the California Housing Element Law?
LM: Basically, Joe Dunn put a piece of legislation in two years ago, SB 972 that said that if cities didn't start making good on their fair share of their affordable housing allocation that they would start losing state transportation dollars. One of the tie breakers for allocations of prop 46 funds is whether or not a city has a certified housing element. So the cities got scared. The bill went far enough for people to get extremely nervous.
San Diego builds a lot of affordable housing so they were not necessarily worried. The suburban communities that are growing huge numbers of jobs in the Bay Area were worried because of the huge jobs/housing imbalance and what their regional fair share allotment was. Some of these communities take in lieu of fees for development of affordable housing and then they don't build a thing. They take money for impact mitigation fee for housing and then they don't do anything with it. Or they charge in lieu of fees through their housing inclusionary zoning program and they don't do anything with that either.
SDL: Do you know this for a fact? Is there evidence of this?
LM: There is one city I know, where I used to chair the housing commission, which charged Sun Micro Systems a huge housing impact fee and I think they still have the original $2 million. That is Menlo Park and Dublin.
SDL: So these are the more affluent communities that are not interested in seeing poor people move into their communities.
LM: Yes, but they are growing jobs at a whopping rate or they were for a period-with no thought to mitigation. And I am not saying that in Menlo Park, given its entire land mass, could satisfy all the job growth/ affordable housing problem. Part of the issue is that this is a regional problem in California and very few of us think beyond our jurisdictional boundaries. So whether or not Menlo Park could ever meet its fair share given its job growth is questionable to me. But they should be doing something.
SDL: Why doesn't the state of California take them to court and say that they cannot take this money saying they are going to use it for affordable housing and then not use it. Doesn't that sound illegal?
LM: It does raise some questions. It is a policy question. There is a wave of inclusionary zoning. A lot of us say: don't just charge the in lieu of fee; require that the units get built. We think there should be some requirement that you either spend them or pay them into a regional fund that can spend them in your sphere of influence. Both San Mateo and Santa Clara have Housing Trust Funds. If someone is collecting commercial in lieu of funds and they can't spend it there, then there should be a way for it to go into a regional fund that pays for affordable housing. It helps mitigate the regional problem because I don't think it is just the city's problem. I don't think anyone would want us to stop job growth but if you charge a mitigation fee you should have to spend it somewhere in the region. If you don't want to spend it within your own boundary, fine, but spend it somewhere else. Others would disagree with me on that. They would say if they are going to generate jobs then they should build the housing there. But the way we are laid out on the peninsula and in parts of the Bay Area I don't think that is practical. But I am not politically correct on that issue.
SDL: Tell me about your screening practices. There is a history in public housing of having concentrated large numbers of poor people together under terrible conditions and having had bad things happen. What I hear from you is that the way the system is set up it is hard to do anything other than create 100 percent affordable housing in California.
LM: Right: it is mostly market or mostly affordable.
SDL: Then how do you keep from having the problems of concentrated poverty reoccur. Most of the people you are working with have jobs.
LM: Yes, they are working families. Our rents range from $300 in the Central Valley up to $1,300 in San Jose for a three bedroom unit. You have to have an income to pay our rent. We require you to have two and a half times the income of your monthly rent. We are fairly strict on our screening criteria. You can't have prior evictions. We do criminal background checks across the board. So we are fairly aggressive in how we screen. We do landlord references. We don't do site visits; it is too labor intensive. But we have house rules we try to enforce relatively aggressively. You screw up and we are not going to tolerate it. The lists are long to live in our housing. There is a contract between us and you and it is a privilege to live here. So we will hold up our end of the bargain and you hold up yours. We will provide you a really nice place to live that in some cases is nicer than what you could get with your budget anywhere else. We will care a lot what your property looks like and will try to provide you with good service and go the extra mile with homework clubs for kids and computer rooms and all of that stuff. But you have to pay the rent and live by the rules. That is what makes us different.
I am not a big fan of high concentrations of extremely low income residents. I don't think it is productive. I have seen good projects that are like that. I have owned 100 percent project-based Section 8 developments in Boston. But it is about the rules and the enforcement of those rules. A lot of families on Section 8 are working families and they get the help because they need the help because it is so expensive to live here.
SDL: What happens to the people who are not working?
LM: Some of them have a Section 8 certificate. We have some women who don't work who live in our properties and they live there only because they have a Section 8 certificate. If you don't have one you will never be able to live in our property without a job or some source of income.
SDL: So most of the people who live in your properties have jobs. However, there are some who don't have jobs who have Section 8 certificates.
LM: As long as people have not been evicted elsewhere and know how to live by the rules we can work with them. With the way Welfare got reformed you have to do community service or Cal Works or something. It is almost impossible to be on General Assistance. It is really hard for us to accommodate someone who lives only on General Assistance in our housing. Those folks are probably living in shelters. A lot of folks are not that far away from living in their car or a shelter or doubling up and overcrowding. Our economic model is based on the ability of these properties to generate rents. Our families work mostly in service jobs such as Longs Drugs, Santa Rosa Community College, Kaiser Permanente, the gas station, or Starbucks. These are the folks we are helping and a lot of them have multiple jobs which is why we do after school and homework stuff because parental presence is a little more of a challenge for some of the families.
SDL: How important is it that the affordable housing you build be located near mass transit?
LM: For senior housing it is critical that it is on a bus line or near transportation. Family housing it is very important but not as crucial because most of our families own cars. But for seniors a lot of them don't drive. And for people with disabilities we want to be on a major bus line or near a Bart station or the light rail.
SDL: When you are prospecting for places where you might want to put up affordable housing do you write off middle-class communities where you will get a lot of opposition to introducing affordable housing?
LM: Oh God no. Hell no. We are talking to some communities I never thought I'd even be considering. We view some of the communities that haven't done a lot of affordable housing as one of the best places for us to be working right now. In Lafayette we will do affordable housing even if it is senior housing. Dublin is a classic example. They had not done any affordable housing before three years ago. Then the Housing Element stuff just put the fear of God into them and they started calling us up and asking if we wanted to work with them. Union City had never done affordable housing before Eden and USA Properties, a for-profit developer, started talking with them. Petaluma. We work in a lot of communities that have a lot of middle class people. I actually think it is better for us to work in those communities than to work in Oakland because we have a model that works in those communities. It is our bread and butter.
SDL: So you do more suburban development than some of the other groups?
LM: Yes, we like that. We are not in San Francisco or Oakland at all. I have one joint venture in Oakland. But we do a lot of work in Richmond, which is a community development thing where we partner with CHDC that is a non-profit up there. I and a bunch of my staff come from a pure community development background. I like that work. We are working in Richmond and East Palo Alto with a small non-profit and with the Community Housing Development Corporation to help them figure out how to meet their affordable housing needs. But we are about affordable housing. According to my board one unit is enough for us to get involved in a project. But it is not the most practical way for us to get involved. And we don't really care where it is as long as it is within our region.
The Central Valley has huge growth pressure. Mantiqua, where we have two new developments, provides 60 percent of its population labor in the Bay Area. They are a huge single family home Mecca right now and the Counsel has said they really need to be sure they make room for other kinds of housing. So we are doing a senior project with them and have redeveloped a slum into nice quality affordable housing for families. The area used to be their drug dealing haven. These Central Valley communities understand they have this mix of agriculture and the middle class and they have to figure out how to have folks living side by side.
SDL: How do you deal with NIMBY opposition?
LM: We plan a community acceptance strategy very carefully and we plan way ahead. You line up your supporters. One of our biggest supporters has been the whole Interfaith Network of the Bay Area. A lot of these folks in wealthy communities think that we should be doing something about affordable housing and they have been putting pressure on their city councils to do something. The reason Dublin is doing something is because the Intrerfaith Community got on the Counsel's case. And these are folks that go to church side by side with Council Members. They stand up and tell the Council that not only is it ok that you do this but that they need to do this. So they provide some political cover for them. I also think that the Housing Element Law has given the Council in some of these smaller communities a leg to stand on. In the bigger communities it is actually a little easier because the Council can vote yes without fear of not getting re-elected.
In San Jose we had a nightmare NIMBY process where it took two years to get a project approved. But the thing about San Jose is that it is so big that people can get re-elected [even if they support affordable housing in one area]. But in a 50,000 person community like Livermore you won't get re-elected. So you have to figure out a way to get acceptance. We always look at what we are willing to give up in our projects before we go into a process. The last project we did in Livermore we worked with the Mayor on what we should give away to the neighbors if the going got tough. But it is about political will. It is about the Council having the backbone to stand up and say: we want affordable housing, we want it in this community, and we are willing to vote for it even if we don't get re-elected.
Land use in California is done by full open process. There is no as-of-right zoning. You don't design a building and go in and get it approved (like I used to do in Boston). Here you go through endless amounts of public hearings. It can take two years. You have to meet with the neighbors in small groups. In highly contentious situations you want to do design charettes. You have to plan it. You take them on tours of existing properties.
SDL: Do you involve them in the planning process?
LM: We have done charettes. We just did one in San Leandro where we didn't really have to. We had a lot of community support. We bought an auto wrecking facility. That is the other thing: you look for sites that people hate- sites where you are really doing people a service [by getting rid of a problem area and building a high-quality project]. That is not an accident for us. We bought this hellishly awful wrecking yard and we are doing a second phase of housing for people with developmental disabilities next to a first phase that we already own. We wanted to get the Mayor involved in planning for this property because they were going to give us a lot of subsidy and we wanted them to feel that this was something about which they would be quite proud. We did the same thing in San Jose where we are doing a second phase development next to an existing first phase project and we have very good relations with a Council member. We did a community process — not a full-scale-you-design-it-with-us process but we talked to them about their key issues and worked with them on the design. Then we went back to talk to them because we wanted buy-in for the process. It makes for a better product and it makes the Council feel better about what you do. The we are going to cram it down your throats at all cost approach doesn't usually do you much good particularly because we do a lot of repeat business.
We have 52 affiliates and 12 have separate subsidiary boards that are made up of community people.
SDL: Do you have projects turned down?
LM: No. We withdrew from a project that cost too much money. But we have never been turned down. Mid Peninsula got turned down and sued the city to get the deal. We have never had to do that. It doesn't mean we wouldn't consider it. You are spending a lot of money on these projects so you try not to pick ones where you think you are going to have to go that route. So we pick projects where we think we have a chance of being successful.
SDL: If you could what would you change about the process that pushes you to do 100 percent affordable buildings?
LM: In the old days we did some projects with some market-rate units. Particularly for the Bay Area because it is so expensive to buy a house, tenants in our affordable housing can't necessarily leave us to buy a house in this region. So it would be nice to have some level of middle-income housing in the rental product. I'm not speaking for all non-profits because a number of my peers would disagree. One of the things I think is problematic in the high cost areas is that 60 AMI the rents are so high and the window of who can qualify is so narrow that I think that if up to 80 percent AMI could qualify for those units that might be provide a real service. If the rents were at a 60 percent level but you could qualify in a 60 to 80 percent income level that might actually be doing a real service in this area for people who can't afford to get into their first home. This would be a place that they could stay long enough to save enough money to buy a house. And you might adjust the rent somewhat to cover your property tax burden but not so much that you are going to the $2,600 a month that the private developer is charging: there is some happy medium. That would be a good product for this region because it is so expensive. To leave us and buy a house, our tenants have to move to Mantiqua or Stockton or Antioch or Pittsburgh [where housing is affordable]. So I don't think we are creating a product for that tier. That is missing.
I also don't think we are doing a very good job of helping people below 30 percent AMI. Those folks are desperate for housing and they can't meet our guidelines for how to get into housing. So we can't get enough money to subsidize folks on this other extreme of the income spectrum. That is the flip side of the challenge. If you have less that 30 percent AMI without a Section 8 certificate and if you don't have an income that meets two and a half times the rent standard, then you can't live in our housing despite the fact that you are most in need of living in one of our units. We do make some exceptions for demonstrated ability to pay but we have found that when you really push the envelope people are not able to pay the rent. Maybe there should be some narrow band of subsidy for the people at the lowest end of the spectrum. It helps when people can see the range of possibilities and that you can move up. We have people who leave us to buy homes. Pretty regularly people leave Eden Housing to go buy a home. That week we had three people leave a live/ work project and purchase a house. This is where they typically go. Having some upward mobility economically is a good thing.
This would take change both at the state and federal level and at the local level because it would require a change in the way the housing subsidy works. It is hard to do. Everyone wants to get to the lowest extreme. At the state and federal level there is a default in favor of the biggest bang for your buck and getting to the lowest levels of affordability.
SDL: What you just said is that you don't get to the lowest levels of affordability.
LM: But they push you hard to get some at the 30 percent level. So there is a real bias there but there is not enough money.
SDL: Why don't they push to help people below 30 percent AMI. Do they figure that is covered by Section 8?
LM: HUD is the only party we work with to help extremely-low-income people. We use the HUD 202 and 811 programs, which are senior and disabled housing programs. We are a non-profit but we need to sustain our operations so we charge a developer's fee. When we do a 202 or 811 we don't make nearly the level of developer fee that we would if we were doing a tax credit project but we do them because on the back end we will pay 30 percent of what they make. Most of our seniors are on fixed incomes at 22 percent of AMI. They are making, on average, $11,000 a household. So we are meeting that need in the senior and disabled population but not in the general population. In San Francisco there is more subsidy from the locality but they don't have the same subsidy in the suburbs that they have in the cities.
SDL: Tell me how you came to do this work.
LM: It was mostly by accident. I was a political science major at Wheaton College in Massachusetts and spent a year at Trinity College in Hartford, Connecticut, where I did a round of field work in urban studies. I had two potential internships: one with the legislative liason between the capital in Hartford and the city hall; and the other was with this company called Imagineers Incorporated. They needed someone to write a paper on affordable housing in Hartford. I went back to Wheaton for my senior year to graduate and asked my boss at the time if I could get a job and landed one at the mayor's office on housing. I spent a lot of time surveying their vacant and abandoned land in Roxbury and Dorchester. I met a bunch of people who were working in Dorchester and one of my bosses on the planning staff was running a CDC and I became a project manager at 23. I went from there to Boston Housing Services, and then to a development corporation. I spent most of my career either lending to our working on the revitalization of inner cities in Massachusetts. Then my husband had to move here because he was in biotech. I read an ad in the newspaper that Eden was looking for a project manager. I had a good friend who worked for one of our tax credit partners and called her up and she said I must apply and use her name. So Eden hired me as a budget manager six and a half years ago. It was a shock to go into doing regional development.