Sonoma County Civil Grand Jury calls for stronger oversight of affordable housing compliance

The Sonoma County Civil Grand Jury has called on the county to bolster its oversight of developers with affordable housing agreements that include public funding and other incentives in exchange for building and maintaining low-rent units.

The civil grand jury’s investigation was triggered by The Press Democrat’s reporting last year on allegations of fraud at an apartment complex owned by companies of prominent Sonoma County developer and political donor Bill Gallaher, according to the report.

The grand jury found on-site visits to such affordable housing units, whether scheduled or conducted as a surprise, are rare and in some of the county’s nine cities do not occur at all. Instead, local regulators have relied primarily on developers to report their own compliance with agreements to limit rent prices and verify tenants’ eligibility for low-income units.

“Insufficient personnel, budgetary limitations, and relatively low incentives” have left the county’s housing authorities able to at best deliver “inconsistent and inadequate” compliance monitoring, according to the 13-page grand jury report. Its findings come amid an ever-worsening housing affordability crisis and on the eve of an influx of over $50 million in state funding for projects to house local homeless people.

In August, a Press Democrat investigation revealed Gallaher’s companies paid $550,000 to settle a lawsuit brought by a former housing manager at Vineyard Creek Apartments, a 232-unit complex north of Santa Rosa. Forty-seven apartments at the complex were dedicated to affordable housing in a deal that earned Gallaher a rezoning designation from the county he needed to build the project and $35 million in financing through tax-exempt bonds.

However, in the whistleblower lawsuit, former property manager Mariah Clark accused Vineyard Creek of leasing rent-restricted apartments to family and friends of the Gallahers even though they made too much money to qualify. She also alleged the companies overcharged low-income residents for rent while at the same time gouging government agencies over rental subsidies, among other claims.

The revelations came as Gallaher, founder of Oakmont Senior Living and Poppy Bank, single-handedly bankrolled a failed $1.8 million recall campaign targeting Sonoma County District Attorney Jill Ravitch. More than 76% of voters rejected the recall in September 2021, keeping Ravitch in office.

While the newspaper’s reporting spurred the grand jury report, the civil watchdog panel stayed away from directly investigating those allegations, stating they had been well documented by the press and investigated by county authorities.

The grand jury did not independently review the county’s investigation of allegations at Vineyard Creek. The county’s civil grand juries tend to look into shortcomings in county policies and agencies rather than conduct criminal investigations, according to grand jury foreperson Neal Baker. The grand jury has the authority to request subpoenas through the court, however, and lying to the jurors is a crime.

“The grand jury is empowered to look into criminal matters … but that was not where we were going in this specific report,” said the grand jury foreperson, Neal Baker.

County and state officials have never disclosed to what extent they investigated the fraud allegations at Vineyard Creek.

In one Press Democrat story, two former employees who were named as witnesses in the lawsuit and signed affidavits supporting Clark’s allegations said they were never contacted by government investigators.

The jury focused instead on a broad review of the county and cities’ monitoring of affordable housing projects, largely through interviewing the public officials charged with the task. While it found that monitoring deeply lacking and in need of investment, the jury did not seek to document fraud itself.

“The Grand Jury investigation cannot provide a definitive answer,” to whether there is “significant fraud” in affordable housing, the report read.

“Nor can the housing departments that are charged with monitoring,” it continued, but, “no one the Grand Jury interviewed expressed fears of widespread misbehavior.”

In its report, the jury made a number of recommendations for the county and its nine cities to bolster local oversight of affordable housing. They include:

• Developing “agreed-upon standards and procedures” for compliance monitoring of all affordable housing in the county by Dec. 1.
• Start or resume on-site monitoring by Oct. 1.
• Ensure housing agencies and cities have enough staff to do on-site monitoring and review self-reported compliance data by Jan. 1.
• Start training developers and managers of affordable housing on monitoring procedures by Jan. 1.

Dave Kiff, interim director of the county’s Community Development Commission, its top housing agency, said he was interviewed by the grand jury and described its recommendations as “valuable to the CDC and to cities moving forward.”

Prior to the grand jury report, the agency was already strengthening its affordable housing oversight in light of The Press Democrat’s reporting. In December, county officials started making on-site monitoring visits at all of the roughly 150 affordable housing sites it oversees.

The agency is also working toward hiring additional staff to ensure compliance, Kiff said. When the commission made the changes last year, just one employee was tasked with monitoring over 3,000 units.

Kiff said the commission is reaching out to local cities, some of which are also in the process of hiring more compliance staff, to come up with standard oversight policies and to offer help monitoring affordable units.

“Our goal is to continue to grow our supply of affordable housing units, and it’s critical that we don’t lose those already in service,” he said.

Megan Basinger, director of Housing and Community Services for Santa Rosa, said that while city staff only make on-site visits at around 10% of the roughly 3,300 units at projects with affordable agreements with the city, it doesn’t necessarily mean compliance monitoring is lacking.

A majority of those projects also have agreements with state agencies that help subsidize affordable housing, Basinger said.

“All of those organizations also have monitoring and oversight requirements,” she said.

The Press Democrat’s investigation found that one of those agencies, the California Statewide Communities Development Authority, relied solely on a “certificate of compliance” from Vineyard Creek managers to ensure the site was is in keeping with its affordable housing duties.

The housing authorities of the county’s nine cities and the Sonoma County Community Development Commission are required to respond to the recommendations in the grand jury’s before the end of August.

You can reach Staff Writer Andrew Graham at 707-526-8667 or andrew.graham@pressdemocrat.com. On Twitter @AndrewGraham88