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A Bay Area-based government program set up to promote the building of low-income housing has instead legally issued a substantial percentage of its low-cost bond financing to high-end apartment construction, according to documents on the agency’s website. It calls into question why an agency program whose self-declared purpose is “to deal with the increasing shortage of affordable housing” has ended up funneling so much potential low-cost financing into housing that is clearly not low-cost. 

The affordable housing financing program of the Association of Bay Area Governments (ABAG) announces on its website that it has “successfully completed 53 affordable housing project financings” throughout California. However, close to half of ABAG’s affordable housing project financings in Alameda County went to seven mixed-used Berkeley facilities built by Berkeley-based developer Panoramic Interests. Eighty percent of the units in each of the seven Panoramic housing projects are market-rate rentals, far out of the financial reach of low-income renters. 

In addition, ABAG’s signed agreement with Panoramic Interests to sponsor bond financing for the Gaia Building specifically exempts ABAG from having to monitor whether Panoramic actually rents the affordable apartments to low-income tenants.  

In its bond funding contracts, ABAG defines affordable housing as housing that charges a monthly rent not in excess of 10 percent of the median monthly income for the area in which the housing is developed. For Alameda County, that means a monthly rent of approximately $650 for a family of four. 

No other developments in Berkeley besides the Panoramic projects received ABAG-assisted funding, and the $72 million in bond financing made available to Panoramic during the eight years of the program far overshadowed the $4.5 million in bond financing that went to all of Oakland in the same period. One possible reason for the politically-savvy Panoramic’s dominance of the local bond issuance is that in order to qualify for ABAG-issued bonds, a development project must be sponsored by a member of ABAG’s Finance Authority For Nonprofit Corporations. Any California public agency is eligible for membership in the Finance Authority, subject to approval by ABAG’s executive board. At least some of Panoramic’s ABAG bond projects were sponsored by members of the Alameda County Board of Supervisors. 

The tax-exempt government bonds are preferred by housing developers over non-government financing because of their lower interest rates. 

There is no evidence that Panoramic misled ABAG in applying for the loans, and Clarke Howatt, ABAG’s Director of Financial Services, insisted in a telephone interview that the financing project has been carried out in compliance with regulations of the federal Department of Housing and Urban Development (HUD), which he says allows tax-exempt bond financing for housing developments so long as at least 20 percent of those developments are set aside for low-income residents. Berkeley “inclusionary” ordinance mandates that all housing developments put up in the city meet that 20 percent low-income set-aside. 

While ABAG-assisted affordable housing developments can be as low as 20 percent affordable, the ABAG bonds are often issued for the construction of the entire housing development, not just for the portion of that development which is affordable. In the case of the $15.4 million in tax-exempt bonds issued by ABAG for Panoramic’s Gaia Building in 2000 for example, the funding was intended for the construction of all 91 apartments in the facility. In practical terms, it meant that $12.3 million in the tax-exempt bonds that might have gone directly into the construction of affordable apartments in another project instead went to the 73 units in the Gaia Building that were not affordable. 

“I think you’re onto a good story,” said Berkeley Housing Director Steve Barton. “If you look at the ABAG program name, it says something along the lines of the ‘nonprofit housing development fund.’ And yet, virtually all of their funds go to for-profit developers. I have real questions about the appropriateness of how ABAG handles their program.” 

Barton said that he knew of one Berkeley nonprofit housing developer that “applied to ABAG and was turned down on the grounds that [ABAG] regarded the loan as riskier than lending to a for-profit developer.” 

Informed of the $72 million in Panoramic bond financing, Ian Winters, Executive Director of the Northern California Land Trust, said merely “wow.” The trust is a nonprofit Berkeley-based group that, among other things, builds low-income co-op and condominium projects of 10 units or less. The ABAG program “doesn’t seem targeted very well,” Winters said, “given that Berkeley’s Housing Trust Fund is about $4 million a year, and there’s five nonprofits who practically trip over ourselves trying to get that money.” Winters added that he’s not “that familiar with” the lending program. “I’d heard little bits about it, but it’s not something that we have applied for yet. I thought that the loans applied only to senior housing projects, which is something we don’t really do. If nothing else, it’s a really, really bad job of publicity.” 

Janice Weston, Housing Development Assistant with the nonprofit Community Development Corporation in North Oakland, said her organization was not aware of the ABAG bond program. “There are so many things going on that some of them just don’t come into your immediate purview, but that’s one that I’m not familiar with,” Weston said. “One of the problems with the nonprofits is that we often operate in a vacuum. So I don’t know about the ABAG program, but everybody else might know.” Weston said her organization currently has developed more than 50 low income housing units for sale and rental in Oakland. 

Todd Harvey, Housing Project Manager for the nonprofit Jubilee Restoration housing developers in Berkeley, said that he was aware of the ABAG bond program because Jubilee had worked with Panoramic on the ABAG bond-financed Acton Courtyard development. Harvey said he did not feel that ABAG should be responsible for getting out information on its loan programs to developers. “How we find out about any of this funding is research,” he said. “HUD didn’t come to us and ask us to apply for any of their programs. What we do is when we need money for certain programs, we would call up agencies and organizations and ask them what money is available. It’s up to the nonprofit developers to do the research themselves. And anybody who’s in the housing field knows all the sources of funding.” Harvey said that Jubilee intended to apply for ABAG bonds for its own future projects. 

Established in 1961, ABAG is the official planning agency for the nine-county San Francisco Bay region. All nine counties and 99 of the 101 cities within the Bay Area are voluntary ABAG members, and one elected official from each governmental body serves as a delegate to ABAG’s General Assembly. The General Assembly representative for Berkeley is Councilmember Miriam Hawley. The representative for Alameda County is Supervisor Nate Miley, and the representative for the city of Oakland is Councilmember Jean Quan. 

ABAG is one of several public agencies that compete for a limited yearly state pool of this bond funding for housing projects. The pool is operated by the California Debt Limit Allocation Committee (CDLAC) of the state treasurer’s office. The money is divided into three separate pots: one for mixed income projects having 50 percent or less affordable housing units (such as the Panoramic projects), one for general projects having more than 50 percent affordable housing units, and one for rural projects. While the different types of projects never compete directly against each other, the financing for one pool of projects (such as those which require only 20 percent affordable housing) necessarily uses bond funds that could otherwise be allocated to fully affordable projects. 

According to Elissa Dennis, an affordable housing financing consultant with Community Economics, Inc. of Oakland, the mixed-income pool is important because the low-interest bond payments it provides give for-profit developers an incentive to build a percentage of affordable housing in projects that would otherwise be totally market rate. Dennis also said that the fact that no nonprofit Berkeley housing developers received ABAG bonds did not mean that those developers were being frozen out of the CDLAC market; she noted that they might have applied for and received CDLAC bonds using sponsorship from another government agency. 

Patrick Kennedy, the head of Panoramic, did not return a telephone call from the Daily Planet to answer questions in connection with this story.