Nearly ten years ago, your intrepid writer worked for a metropolitan newspaper otherwise known as the Press-Telegram.
In this mild-mannered guise, he covered trade and transportation, but as fortune would have it, he sat next to two of the most talented business reporters to grace the old 604 Pine Avenue P-T building in its final years.
One of these talented reporters (I guarantee, the only reporter to ever start an award-winning story with the sentence “There was something suspicious about the dead parrot”), leaned over one day and asked your writer to cover a Council meeting dealing with his redevelopment beat.
Fully expecting at some time in the future to barter this favor for a parrot-quality opening sentence, your writer agreed.
At the meeting, the Council was set to approve the development of one of the high-rises on Ocean Blvd. Your writer forgets which one, but it had some name like Aqua-something or Ocean-something or maybe even Aqua Ocean Vista-something. Before the vote on the project, the project developer presented the Council with the latest batch of renderings and blueprints of the project.
Your writer and the rest of those there that day were all awed. The building was a vision of 1920s magnificence, replete with the lines, details and accoutrements so pleasing in the Art Deco school. It was as though NYC’s Chrysler Building had been merged with the 1939 World’s Fair, capturing the architectural history of Deco Long Beach in one graphical expression.
Needless to say, the motion passed, the building was built, and it was years before your writer thought about it again.
There is a reason for this, despite the fact that he passed by the completed building nearly everyday for more than five years.
The final building, instead of being the crowning Art Deco-inspired masterpiece in the renderings, instead wound up looking like a bad pastel-encumbered Miami hotel on steroids built to sit amid some new Disneyland-esque Roaring 20’s-land. It was like making a photocopy of a photocopy over and over again until the once crystal-clear design was little more than a smudgy and hollow afterimage.
Your writer learned an important lesson from this experience regarding urban development–a drawing does not a building make.
Tuesday, the current City Council got to see another rendering–this time for a new residential and retail development at the southwest corner of Long Beach Boulevard and Anaheim Street. The proposed project includes a 13-story condo building and two smaller apartment buildings along with a separate parking structure.
The rendering was offered up as the Council considered a simple motion to authorize the city to apply for $37 million in state funds to help build the $200 million project with Los Angeles-based developer Meta Housing Corp.
The available state money comes from something called the Transit Oriented Development Housing Program, which aims to increase regular and affordable housing near public transit facilities—in this case, the Blue Line.
Part of these funds, if awarded to the project, will be provided as low-interest loans to the developer for construction.
Another portion of the funds would be granted to the city to provide “silent second” mortgages to first time homebuyers who qualify for one of the project’s “affordable” condos.
These “silent second” mortgages basically pay for the 20 percent down payment, that’s the second mortgage part, while at the same time preventing the lender of the primary 80 percent of the selling price from knowing that the down payment is actually a loan, that’s the silent part. The city would not charge anything for the “silent second” loan until the condo was resold, at which time the city’s investment must be paid in full including a nominal amount of interest.
While this is a common way of subsidizing home ownership by municipalities, it is curious that a no-down-payment 80/20 loan model is being advocated by the city, especially for lower income buyers. It is no secret that 80/20 mortgages, which saddled buyers with dual payments and often lulled them into thinking that they could buy more than they could actually afford, led in part to the current housing market crisis.
Another hidden danger of these no-down-payment loans is that if the value of the house drops at all, the owner is now upside down because they have no real equity. Keep in mind that during the previous 12 months, the average condo in the project area fell by nearly 14 percent.
But, your writer digresses.
The project calls for the construction of about 170 condos with the remaining units of the project being rentals for qualifying senior citizens.
According to the city, 30 percent of the 356 units proposed in the development, mainly rentals but some for-sale condos, will be “affordable” housing.
Now, affordable is a funny word that seems to spit in the eye of the beholder.
State TOD guidelines actually define the “affordable” housing target group as very-low-income, low-income and moderate-income people.
Very low-income is defined as a household with an annual income less than 50 percent of the area median income, or AMI; low-income is between 50 and 80 percent of AMI; moderate income is below 115 percent of AMI. According to the feds, the 2008 AMI for the Los Angeles-Long Beach-Santa Ana survey area is $65,100. This means an eligible very-low-income family in the project area could make no more than $32,550, a low-income family no more than $52,080 and a moderate-income family no more than $74,865.
The average price of a condo in the project area is roughly $320,000, according to Zillow (which is always very optimistic in its valuations).
The monthly payment on the 80 percent first mortgage of a $320,000 condo–for a 30-year fixed rate FHA loan at 3.25 percent (the prime rate) including taxes–would be about $1,600. According to the federal government’s formula, this requires an annual salary of just over $69,000. In other words, the only families that could qualify for “affordable” condos in the project would be those that that make a combined income between $69,100 and $74,865 a year. No very-low-income or low-income families would seemingly be eligible as “affordable” homebuyers.
Even if the city managed to arrange for the price of the new condos to be in the $250,000 range (the lowest sale price in the past year for a 2-bedroom post-2005 built condo in the project area was $265,000), the resulting calculations would still require $52,732 per year in household salary–still eliminating all very-low-income and low-income prospects from buying a condo in the project.
In simple terms, this is certainly not a low-income homebuyer project.
Even when looking at the very-low-income and low-income groups as renters, the math seems to fall short.
The maximum rent possible for “affordable” units built with the state funds would be $976 per month. For a year, this would cost a low-income family just under $12,000 in rent, or about 24 percent of their income.
By comparison, a household making $130,200, that is a two-income family with each making the median income for the area, would have to pay $2,600 a month to equal the same percentage of income to rent. And yet, a more typical apartment rent in Long Beach, even in the more upper middle class areas, is in the $1,700 a month range. This median family would in reality be paying almost 35 percent less of their income in rent, almost $11,000 a year, than a very-low-income renter in this new project.
Certainly many of us can agree that low-income housing is vital to our city, especially given our income demographics and the growing number of seniors on a fixed income.
But given this need to address these members of our community, and given that the city is seeking nearly $37 million in taxpayer money to build it (plus a previous $5 million in state funds that helped acquire the property), it would seem possible to make a more prudent use of these scarce dollars in addressing this housing issue. Four apartments out of more than 350 for very-low-income residents?
The nice thing about the latest rendering is that you can always just cut and paste a few low-income people into the picture. In real life however, a drawing does not a home make.