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Construction of affordable housing in Sonoma County impacted by coronavirus

Nearing a month into the local shutdown to slow the coronavirus, the region’s push to build affordable housing is in danger of being overwhelmed by yet another crisis - that of even greater demand for lower-income units as the economy slows and housing funds shrink.

Expanding the supply of workforce housing is a struggle under normal conditions, but the challenge has become even more difficult as budgets tighten and competition intensifies for limited government subsidies that help deliver affordable units.

Most active projects around Sonoma County aren’t at risk of anything more than temporary construction delays, according to local government and affordable housing officials. But questions surrounding longer-term prospects for financing such low-income projects is creating unease within the industry.

“I think there’s a lot of uncertainty. And uncertainty creates trouble in and of itself,” said Rich Wallach, director of housing development for Burbank Housing. “It’s anybody’s guess.”

The Santa Rosa-based nonprofit oversees about 3,500 affordable housing units between Sonoma and Napa counties, and has hundreds more in the pipeline. Burbank has just begun building 48 new units in southwest Santa Rosa and is moving toward construction of 36 others in Rohnert Park, for example, while also working on upgrades to existing apartment complexes it owns and manages in Petaluma, Healdsburg and Sebastopol.

Most projects remain on track, despite some initial confusion among developers whether the shelter-in-place order allowed them to continue working. The county’s order authorizes construction of affordable housing, as well as wildfire rebuilds, by labeling them essential work during the shutdown.

In the short term, there’s plenty of work to do on projects that await only final city permits or the arrival of construction crews. But outside of the approved residential and commercial developments with income-restricted housing, it’s unclear how the coronavirus pandemic will impact subsequent projects to provide more affordable units.

“We just keep getting more and more behind,” said Dev Goetchius, founder and executive director of Land Trust of Sonoma County, which helps maintains units as permanently affordable. “We certainly have a long list of applicants and the need for affordable housing keeps growing and growing with each crisis, from the fires now to this.”

Beyond federal and state tax-credit subsidies that are so frequently the basis of low-income, multifamily housing projects, affordable developers depend upon partnerships with local governments for land, money or both. The economic downturn is expected to take a bite out of those affordable housing funds, hindering cities’ ability to advance projects.

In Healdsburg, where voters approved in 2016 a 2% tax on hotel stays to build and preserve workforce units, those dollars could dry up quickly as people stop traveling. The fund brought in more than $730,000 last year and is one of the few ways the city can finance the creation of affordable housing.

“I can tell you, I’m definitely worried about impacts on our funding stream generated through (the tax),” said Stephen Sotomayor, Healdsburg’s housing administrator. “Because people are not staying at hotels. And any drop in hotel tax will be a decrease in revenue for affordable housing.”

Working with Burbank Housing, the city in 2019 contributed more than $1 million from the fund toward three apartment complexes to protect 40 units of below-market apartments as low-income housing. That strategy for maintaining affordable units would be weakened with less funds, increasing competition for the federal tax credits that nonprofits also rely upon.

The Mill District, another large-scale project approved last year in Healdsburg, is slated to include 70 income-restricted units. Of those, the first 40 are designated for low- and very low-income workers and supposed to be finished by 2021, along with a boutique hotel and 40 market-rate units.

The current state of construction could hamper that timing, according to a representative for resort developer Replay. Eden Housing, the affordable housing developer on the project, said it would do its best to stick to target dates. In the meantime, it is bracing for the financial impact of public heath orders that have shut down much of the economy and eliminated the jobs of untold tenants. The Hayward-based nonprofit, which manages 3,200 units across the Bay Area, including 600 in Sonoma County, is determined to help laid-off tenants remain in their homes.

“Our primary focus is to keep our residents housed while also ensuring the health and wellbeing of our staff,” Daniela Ogden, Eden Housing’s vice president of communications, advocacy and fund development, said by email. “One of the most immediate challenges our nonprofit faces is how rent payments will impact us.”

Burbank Housing already faces similar strain with dozens of its tenants, said Larry Florin, the nonprofit’s chief executive officer. Operating on the thin margins that are standard in the world of affordable housing, delayed monthly rents could create yet another obstacle in sustaining current units and keeping people housed.

“When our residents don’t pay rent, which is our only source of income … we don’t have a way to pay our mortgages,” Florin said. “We expect that to get worse in May and June. We haven’t before been through anything on this scale, absolutely not. We’ve never been foreclosed on, so we’ll figure out a way to get these people housed and the properties solvent, but they’re going to be stressed.”

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