|
Getting your Trinity Audio player ready...
|
Mountain View city staff plan to submit their second draft of the Housing Element – a once-every-eight-years process where cities prove they’ll be able to meet state-mandated housing goals – by the end of this week.
At a Nov. 16 meeting, the Environmental Planning Commission (EPC) heard updates on what’s new in the second draft and how staff expects the rest of the Housing Element process to go.
Senior Planner Ellen Yau said the California Department of Housing and Community Development (HCD), which is leading the Housing Element approval process, has recommended that cities submit revised drafts before adopting and submitting their final Housing Elements. This gives jurisdictions a chance to have a back-and-forth with HCD on what needs to change, rather than having to change an already-adopted, non-compliant Housing Element.
The other parts of the Housing Element project, such as rezonings the city is undertaking in order to meet its Regional Housing Needs Allocation (RHNA) – the number of new housing units that cities need to build over the next eight years, set by the state – and the Housing Element’s Environmental Impact Report will be presented at a separate public meeting, Yau said.
“After the last round of study sessions with EPC and council, which was in May and June, we revised the draft and submitted it to HCD for their 90-day review,” Yau said. “So they sent us comments Sept. 29, and since then we have met with the HCD reviewers several times to go over the comments that we received.”
In that Sept. 29 letter from HCD, the department identified some problem areas the city needs to address. Most of the comments HCD made in the letter and subsequent meetings with staff were around adding specificity, data analysis, timelines and action items to the Housing Element, Yau said.
“They wanted more information on how our needs and constraints tied to housing programs, and how the programs are addressing public comments and overall housing needs,” she said. “And then they wanted additional information for each of those programs regarding timeline and metrics.”
Here are some of the key changes staff made to the draft in response to HCD’s comments, and what happens next.
Sites inventory
The state requested that the city add information and clarification about the redevelopment of already developed sites that still have the potential to become housing in the next eight years. The new draft includes a few specific changes to the sites inventory, the list of potential sites where cities think housing will get built in the next eight years, as is required by the Housing Element update process.
Some of those newly added sites include 1250 Grant Road, a supermarket site that’s currently occupied by Nob Hill Foods, and 1500 North Shoreline Boulevard where Century Cinema is located.
“We also updated the sites inventory based off of newly submitted applications,” Yau said. “Based off of HCD guidance, we also included some projects that are under construction, but didn’t receive their final certificate of occupancy at the start of the planning period, which was June 30 of this year.”
But staff took a more conservative approach in other changes to the draft, such as reducing the estimated residential capacity for sites that are currently shopping centers, “to account for their lower likelihood of redevelopment, especially given state guidance that multi-tenant centers may be a constraint on redevelopment,” the draft Housing Element states.
While Mountain View is required to build 11,135 units in the next eight years, the latest draft puts the city’s capacity at 17,779 – an increase from the first draft by about 2,000 units. However, staff attributed that increase largely to “the addition of the already approved projects” to the sites inventory, Yau said.
Affirmatively furthering fair housing
HCD also asked Mountain View for more analysis and data on the location of lower-income units that the city intends to build. As part of the Housing Element process, jurisdictions are required to show that future developments affirmatively further fair housing by increasing affordable units and ensuring that housing ends up in well-resourced areas – parts of the city that are close to shopping centers, good schools, transit, parks and other public amenities.
Yau said staff looked at four major areas to see if proposed affordable housing was equitably distributed: income, opportunity, education, and race and ethnicity.
“The data analysis shows that the city’s Housing Element is not concentrating new, lower income housing in lower resourced or segregated neighborhoods,” Yau said.
Rather, she continued, the sites that are included in the sites inventory are located in areas with generally higher income households, in the highest resource areas and in areas with high educational scores.
Yau mentioned that the analysis did exclude the North Bayshore census tract because it’s something of an outlier: while it’s identified as a low resource area, the city’s plans for the area will “overall improve access to opportunity for residents out there.”
Programs
In addition to creating a sites inventory, cities must also provide HCD with the constraints they face that make it harder to build housing – such zoning that makes residential development challenging, for instance. For every constraint identified, cities must come up with a corresponding program to mitigate the issue.
“Overall, HCD requested specific metrics and objectives and timelines attached to actions for all of the programs,” Yau said. “So what we did was we completely reformatted the housing plan in order to accommodate all those details. … By doing so, we also created an implementation schedule (that) highlights how we’re going to implement the proposed programs.”
Some of those programs include reducing parking requirements for affordable housing, creating an incentives program for ADU (accessory dwelling unit) development, and partnering with employers to address the city’s jobs-housing imbalance.
HCD also asked the city to provide specific, concrete actions it will take to achieve these proposed programs.
“These action items do add specific programming, like adding live-work opportunities, updating our impact fees (and) adding steps to improving affordable housing development within our Notice of Funding Availability processes,” the process by which the city allocates funding for affordable housing developers, Yau said.
Next steps
Yau said the latest draft Housing Element will be submitted to HCD by the end of the week, so by Nov. 18. That will be followed by a 60-day review period, during which “HCD has stated that they will work with us to make minor revisions,” Yau said.
The rezonings that are associated with the Housing Element and the Environmental Impact Report will be brought to the Environmental Planning Commission on December 7, and then to city council January 24.
“Then depending on HCD’s determination of our draft and the input that we get from the city sessions, from tonight and in December from council, we anticipate (an) adoption hearing in early 2023,” Yau said.
Each city and county in the Bay Area must update their current Housing Element to meet state requirements by Jan. 31, 2023.
Commissioners at the Nov. 16 meeting were generally supportive of the changes staff had made in the second draft Housing Element.
A few commissioners suggested erring on the side of higher density to ensure the Housing Element meets state requirements when it’s adopted by the city council early next year. Cities that don’t meet requirements may have to face Builder’s Remedy, a stipulation of the 1990 Housing Accountability Act that allows developers to bypass a municipality’s zoning laws if that city is not in compliance with California’s housing development goals.
“Quite frankly, this is the Housing Element that I wish we had seen in round 1,” said Commission Chair William Cranston of the draft. “The level of detail, the specificity – I’m happy with what’s there.”
Just an observation,
This rework is going to have to have significant improvements. But unfortunately the fact that all properties both real and intellectual, in the state are so overvalued, it is going to cause a serious shake up of the state.
Some are banking on only a .5% increase in the fed rate in December, but more importantly, there is no indication WHERE the target rate will eventually end up. Curranty every mortgage company is dropping rates because pending sales are down 50%. They are desperate to get sales closed by Dec 31. They KNOW they are going to have a VERY bad year. This kind of action is NOT a good omen for the market that will occur in 2023.
In fact since sales pending dropped by half, MANY real estate and development businesses are going to have to close. In fact, I suspect that as much as 50% of all projects approved in Mountain view will be cancelled. And given that the City only reports on permits issued and NOT completed projects to the City, that makes the picture VERY GRIM.
Time to ADJUST to the real market, and stop trying to only sell 93 Octane housing in the City, it MUST start aggressively in building 87, 89, and 91 Octane housing, FAST!!! In fact the City has such a surplus of 93 octane housing, that it might require restricting development to the other groups moving forward, based on the RHNA statistics.
I take issue with the phrase “jobs-housing imbalance,” which gets repeated over and over in these papers on the peninsula.
We don’t have a jobs-housing imbalance, we have a housing shortage. Jobs are good, actually, and it shouldn’t be an objective of a housing plan to reduce them.
Just an observation,
Yes plenty of jobs, like when Twitter is dumping more than 1000 workers and is in effect self destructing. And also so many disclosed hiring friezes and lay offs. Amazon is actually cutting workers, during the holiday season? Somebody here is not really understanding how bad the job market is getting. But it does take about 60 days for the impact to start showing.
Yes we have a SHORTAGE of the proper types of housing, as I said earlier, EVERY builder wants to build luxury units, but the REAL scary thing is that they do not properly document the quality of the materials and building, it is gambling for a home, condo buyer, and many news reports are indicating BAD BUILDING.
You should research how little these places do not document or certify whether housing is actually built properly. Now in CA you hear little because insurance has to pay out for it, but that makes home owners insurance VERY expensive in CA.
Granted it is reported that CA has on average a 17% less average rate, BUT that is becausse a large deductable, and a LOT of exemptions regarding the policies shift expenses on the home owners.
ExpertInsuranceReviews noted that the second factor why home insurance in California appears misleadingly small is that homeowners in the state face risks not covered by standard home insurance. They may be paying less for traditional insurance but are forced to purchase separate add-ons for coverage against earthquakes and floods.
“The benefit of slightly lower home insurance rates for California residents helps offset the extra cost of earthquake insurance and any additional necessary coverage,” said home insurance expert Melanie Musson of ExpertInsuranceReviews
Please bear this in mind
“Senior Planner Ellen Yau said the California Department of Housing and Community Development (HCD) … has recommended that cities submit revised drafts before adopting and submitting their final Housing Elements. This gives jurisdictions a chance to have a back-and-forth with HCD on what needs to change, rather than having to change an already-adopted, non-compliant Housing Element.”
This also gives HCD supreme power. The goal is to gain approval from HCD, right?, regardless of the opinions of the residents. All hail the HCD! And now that we are heading into the holiday months, residents will be distracted just as the deadlines approach. It’s such a clever strategy to hurt most of the public without them even seeing what happened.
“The other parts of the Housing Element project, such as rezonings the city is undertaking in order to meet its Regional Housing Needs Allocation (RHNA) – the number of new housing units that cities need to build over the next eight years, set by the state – and the Housing Element’s Environmental Impact Report will be presented at a separate public meeting, Yau said.”
This seems ridiculous. The RHNA goals show that more than 50% of the new housing needs to be created for households who earn less than 120% of AMI, or about $185,000 according to the 2020 census. Focusing on how to build 11,135 units is ENTIRELY MISSING THE POINT, if 90% of those units are built as expensive, market rate units and UNAFFORDABLE to the majority of the population. The goal should be to ACHIEVE THE RHNA targets, not simply to “build 11,135 units”.
“In addition to creating a sites inventory, cities must also provide HCD with the constraints they face that make it harder to build housing”
One of the “constraints” faced by MV is the hoarding of land by Google, and its hiring practices. Will that be highlighted on the list? Such behavior makes the costs of housing rise here, which in turn makes it more difficult to build AFFORDABLE housing.
One of the BIGGEST constraints to building AFFORDABLE housing is the lack of funding for it. Will that be highlighted on the list? If not, why not? Without a LOT of such funding, there is no possible way that MV’s RHNA targets will be met for households earning less that $185,000 or so. So we will have experienced all of this sound and fury just to enable developers to build tons of market-rate units for Google.
“updating impact fees” is code for reducing funding that is used to add needed capacity to schools and parks. So disappointing to see this on the list, unless it is completely tied to affordable housing. Otherwise there is no guarantee that developer savings will translate into lower housing costs instead of increased developer profits; however there is a 100% guarantee that less $$$ will be available for schools and parks.
We are indeed likely in for a recession. Failing that we will surely see a big slowdown in the economy compared to recent fervor, which was full of corporate hiring growth not substantiated by their actual need. So we see plenty of layoffs, even short of an actual recession.
The YIMBY attitude has been totally extremist. It will do the YIMBY element a lot of good to go through a real recession. So every cloud has a silver lining.
In Mountain View the only shortage of units we have is the officially affordable units for those with specific limits on household income to quality. The city target for that over the next 8 years is over 6000 new units. That’s enough for all the homeless in the city and plenty more besides. So that shortage is real and plans are to over-address it.
The other 10000+ new units aren’t really needed and they won’t ALL be built by market forces as it is. With a likely economic slowdown, we really won’t see much new investment in for profit housing develoopments. We have to wait and see how bad the slowdown turns out to be.
What’s true is that HCD has ridiculously rosey projections of creation of new jobs for California over the next decade. That’s the only reason the RHNA quotas are so high. Without the new jobs the housing production won’t happen. We only have a shortage going foorward if the crazy ooptimistic new job growth actually turns up. I don’t think it will. History showed a mass exodus after the 2000 dotcom bust. This may well be similar. You can see it happen in San Francisco right now where jobs are disappearing. It will happen here too.
Just an observation,
The PRIVATE market has to solve the affordable housing market, the City, the County, The State, nor the Country has any responsibility for that failure. And it cannot be used to BAIL OUT this PRIVATE housing industry. Again since the 1980s with Reagan changing the Privatizing the Federal housing market, and the State doing the same at the same time, you cannot EVER require ANY public money to solve this problem.
The PRIVATE market said it can solve the problem, it told the Federal and State governments to get out of the way. They DID IT. And now they are saying they cannot fix the problem the PRIVATE industry created without a BAIL OUT.
NO MORE BAIL OUTS, WE DID THAT IN 2008. To bad only those that are REALLY EFFICIENT, and do QUALITY work can survive. There is going to be a major killing in the market, and everyone knows it.
REAL CONSERVATIVE GOVERNMENT ALLOWS FOR THE UNFIT TO DIE. TIME FOR IT TO FINALLY HAPPEN.
I do not want to hear anything about “funding” affordable housing by the PUBLIC ever again, unless the market wants the PUBLIC OPTIONS to exist. Meaning that they will release land or properties for tax credit purposes to a PUBLIC MANAGEMENT.
That’s as far as any funding can be provided.
@JAFO, you wrote “The PRIVATE market has to solve the affordable housing market”.
History shows that for profit developers have little interest in creating housing that is affordable to households earning less than $185,000. They wildly prefer to create housing for the highest wage earners, because there is more profit in it for them. Over the past 8 year RHNA cycle, almost 90% of all units being created were for those earning more 120% of Area Median Income. The other 10% are only created because of government regulations that force developers to provide BMR units, which means the developers are “providing the funding”. Developers lose $$$ on affordable units. For profit businesses don’t like to lose $$$.
Relying on for-profit developers to lower the cost of housing … that is essentially what we are doing today. Do you honestly think that this “solution” is working? A lot of people are in pain because the rent is too darn high. Seems to me that relying on for-profit developers to solve this problem is like waiting for the day when pigs start flying. That day will never come.
@LongResident, you wrote “The YIMBY attitude has been totally extremist. It will do the YIMBY element a lot of good to go through a real recession. So every cloud has a silver lining.”
I agree, it seems like many YIMBYs have never experienced the valley’s busts and the effect busts naturally have on construction (it slows or stops). But as far as I can tell the YIMBYs have already won, they are pretty much getting what they want as far as new legislation goes, state politicians are doing their bidding. I fear that those who think that these laws are going to lower the cost of housing will have to learn the hard way that they bet on the wrong horse. SFH zoning is dead, new laws to end parking spot construction, reduction of impact fees … YIMBYs are getting their way with all of these. MV will be forever altered for the worse when all the dust has settled, too bad so sad.
Just an observation,
Given that the PRIVATE housing market is NOT going to sell anything, look at the fact we are 50% of pending sales yoy at this time.
You are still under the impression that the SUPPLIERS control the market. No, it is the DEMAND that controls the market. If these businesses need to sell to stay afloat, they need to adjust their offerings.
In fact the information coming from a lot of reliable sources are supporting the fact that the market is about to see a drop off far more intense than 2008. This was because that was a “inflection” point where affordability to supply was already in a bad place. The Central Banks gave the market free money in order to slow down the collapse it would have had back then.
Then Covid hit and the Central banks did it again. The problem was by not adjusting market supply to market demand for more than 20 years, the PRIVATE market set itself up for the worst case scenario.
The facts are the cost of CORRECTING this problem is way too high for any governmental action to fix. Again when a property like 184 Centre Street losses $1 Million in building values as established by the County Tax Bills or 45% in the last 2 years, you know the situation is REALLY bad. I can imagine if anyone was tracking the property taxes in the last 4 years, the majority of homes and apartments have lost major amounts of value.
That happens when people decide that trying to claim they have a great home means property taxes are too high.
I feel bad for anyone that got conned into overpaying for properties for so long, and for the fact that the market is not “EFFICIENT” enough to prevent so much bubbling. But this is what it is.
again, NO MPORE GOVERNMENT MONEY for any housing and that is FOREVER. The PRIVATE market got what it wanted and now has to RECONCILE the fact that it messed up badly.
It’s not supply or demand that completely determines how a market operate, but rather the two operating in concern and with a lot of nuance.
For example, what if Google has a 5% layoff? What would that do to demand? How would the shock wave affect speculators who are considering a new development that wouldn’t be ready for 4 or 5 years anyway? Hmmm? The investors have decision to make about creating supply and even a PERCEPTION of an issue with demand can have an effect. To date all they build for profit is based on ever increasing rent prices. What if they think this is unsustainable? They have to factor in the trend to encourage remote work as well. A lot is in flux. It all interoperates. Also besides Google we just lost office workers from Meta in two whole new office buildings at San Antonio Center. A lot is in the works.
Just an observation,
Long, you seem to see the bigger picture as well.
THe facts are Microsoft just laid off most of the AZURE line of engineers, which is the primary enterprise services that Microsoft Provides for multiple site and domain network control and relaince.
That means that the services either are becoming no growth, or worse becoming obsolete. That means Microsoft is about to see a major drop off in their revenues and staffing. The same is occurring all over IT at this time.
For most people, it was assumed that these businesses would be stable. But anyone knowing product life-cycles would know that they cam be VERY short.
And now there really is NO INNOVATION to achieve in the tech market. It has evolved to the point where the only thing that can happen is cost cutting and repackaging the same thing.
So if this is the foundation of the valley economy, OMG are we in for it. THe truth is that many of these companies had inflated values, and are in the correction phases. Especially Internet Realty and Rental markets. The area is still not even close to recovered from Covid, most revenues are the same as they were in 2016.
A lot of investors are going to be forced to liquidate here, unless they decide that a more realistic profit margin will be adjusted to.
But the real problem is that especially for rentals, ois that demand drop off will not allow for any inefficient or profit losses to be transferred to either current or future residents or tenants. This is a long term and likely permanent phase.
What is happening is a MAJOR shock, and a lot of people are going through various stages of grief regarding the future, and a lot of them are simply trying to blame the FED, but since the FED cannot actually correct the market, it can only do what is necessary for the future of the economy. And right now, the inflated costs of housing is the biggest threat. This system of borrowing to project the appearance of wealth is a lie.
Yeah, just like the “dotcom crash” permanently hobbled the regional economy. And the departure of silicon manufacturing before that. And the shrinking of the aerospace industry…
JUst an observation,
Actually, the dotcom crash DID cause PERMENANT damage, but many people ignore the destroyed values Just like Enron and WorldCom and others did in fact BURN UP billions of dollars that cannot be recovered. In fact that came to $5 Trillion
In a 2015 book, venture capitalist Fred Wilson, who funded many dot-com companies and lost 90% of his net worth when the bubble burst, said about the dot-com bubble:
A friend of mine has a great line. He says “Nothing important has ever been built without irrational exuberance.” Meaning that you need some of this mania to cause investors to open up their pocketbooks and finance the building of the railroads or the automobile or aerospace industry or whatever. And in this case, much of the capital invested was lost, but also much of it was invested in a very high throughput backbone for the Internet, and lots of software that works, and databases and server structure. All that stuff has allowed what we have today, which has changed all our lives… that’s what all this speculative mania built.”
But since Theranos proved that FAKE IT TILL YOU MAKE IT is a false promise. The facts are the valley suffered PERMENANT DAMAGES from Dotcom, and again the implementation of AB5, Covid proving that the valley is obsolete, and now no real new markets or products are in sight. That all “social media” companies are being corrected for the fact they had no real value, just advertising revenues that are drying up. The reality is that those that ignore history constantly repeat it.
In the end, it just looks like people are simply overwhelmed by the reality and will deny anything that will disrupt their selective perception. The city of Mountain View is no exception.
@JAFO, we seem to be talking about two different things.
The bulk of my comments relate to ongoing efforts by CA YIMBYs to “solve the housing crisis” (a vague term which many YIMBY followers believe means “bring the cost of housing down”) via State mandates that end “local control” of zoning and REQUIRE towns like MV to explain what they will do to achieve RHNA targets for lower-income households. My comments relate to the topic of the article.
You seem to now be focused on the recent bust that seems to be underway and the effect that bust will have on housing prices.
I agree with you that a bust seems to be happening. Yes it will bring prices down somewhat. Whether the impact will be “far more intense than 2008” is debatable. Back then we thought that the entire banking system and world economy was going to collapse, it was a pretty terrifying moment. I don’t think the situation today is quite as grave, but I agree that the Fed lowering interest rates to nothing for as long as it did is going to result in a lot of economic turmoil now that they’ve decided to raise them back up again.
You seem to think that I am advocating more funding for affordable housing as kind of a bailout to help developers, now that a bust is happening. That is NOT AT ALL what I am trying to say. Like you, I am peeved about the bailouts given to help Wall Street in 2008, with no strings attached. I don’t want to provide assistance to developers to help them recover any losses based on the current downturn.
We are in a very odd moment now. We are continuing down a path to comply with legislation that YIMBYs hoped would drive housing costs down. Meanwhile, costs will NATURALLY come down a bit because of the recession (that happened independently). I suspect the impact on market-rate prices will be different than the impact on “affordable housing” prices because those are two different pools of buyers, it will be interesting to see how this plays out.
Please put the recession aside for a moment. MV is now required by State law to explain what they will do to achieve RHNA targets for lower-income households. The truth is that every unit built results in a loss to someone, because they could get more $$$ for it by selling it at market rate instead. I’m not sure that you have been thinking about this part of the situation. Imagine a new law that demands you to explain in extreme detail what you are personally doing to feed 200 poor families in the community. How much $$$ do you think it would take for you to comply? If you cannot raise the funds to purchase the food somehow, the only way to obey the law is to make cuts elsewhere in your own budget in order to “fund” the food.
In the article, we see that MV is being asked to explain how we will achieve RHNA targets. One answer is we are “updating our impact fees”. These fees have historically been paid by developers to provide funding to add capacity to schools. “Updating” really means “reducing”. MV is looking at reducing these fees in order to get the funding needed to build more BMR units. Do you see the problem? We will be robbing Peter in order to pay Paul. State politicians (and YIMBY supported legislation) are putting MV in a position where we will essentially be forced to UNDERFUND the creation of new schools at a time when we are also forced to massively increase out population. Public schoolchildren will suffer so that Newsom can brag about his efforts to “solve” the housing crisis. But the details are so complex, most of the public doesn’t even see what is happening. The problems won’t be visible until the new residents move in.
Sadly, the recession is turning out to be the only bright spot in this situation. It will likely slow the increase in population, at least for awhile.
Just an observation,
I feel like I keep getting my wires crossed, Leslie, I am not trying to be critical of you, I am just pointing out that in MANY ways you are spot on.
The facts are sooner or later the PRIVATE development market and in fact all PRIVATE markets are going to FINALLLY see the correction it prevented in 2008.
The facts were that the Federal Government gave them a chance to self-correct by giving them what they needed desperately in 2008, TIME. But it looks like they wasted it.
The idea was the market was correcting SO FAST that it was destroying any stability of the financial markets.
MANY investigations and good documentaries from Frontline, 60 Minutes, and others tried to educate the people about how dangerous it was then.
But what happened? WE DID IT AGAIN.
And because of the Damage already done from 2008, AND Covid, AND the lack of ACCURATE REAL VALUES of business. has radically changed ecumenic situation of labor shortage as well as long haul, it would appear that no government, or central bank, or anything else at this time can prevent the oncoming situation.
Especially when Covid has not yet been controlled, it still is a wildfire.
The history of Spanish Flu connected with the Dust bowl created the Great Depression. The Covid and Climate Change situation is extremely similar. The fact that water is so short in many areas on agriculture right now, not just the plains means we are due for major cost increases for food.
It just seems that we are in a trajectory that no one can stop. And unfortunately, we have not yet seen the full damage.
If that’s what you believe, sell your house and move before it loses value!
Just an observation,
IVG, the reality is that this situation is the same as the film MARGIN CALL.
What I am doing is reporting that the severity has ALREADY happened. The time for doing what you suggested has ALREADY passed. Given that I know one property has already crashed in value, and that where 1 property in a region does, they ALL do.
It is called regional contagion. It is funny that many real estate agents like to say each property is unique it is NOT so.
Also a recent report indicated that 800,000 realtors did not sell a single property in 2022. Just look up “Realtors are BROKE and Quitting in Record Numbers (Housing Market)”
Also that property sales crashed 37% in the year as well in CA. You can see that by looking at “The California Housing Market Just Got HAMMERED”.
Unfortunately it is simply TOO LATE.
@JAFO, thank you for your comments. I haven’t felt criticized by you, per se, it’s just that I fear that the points that I am trying to raise get muddled because we are talking about two different things. The housing bubble that collapsed in 2008 changed my life significantly for the worse, I know a great deal about it, I was eager to figure out What The *&$%& Had Just Happened to me. Both conversations relate to housing costs, so I think I am following your train of thought, but IMHO 2008 was very different.
Back then, bankers had cleverly discovered a way to SHIFT THE RISK of mortgages from themselves onto others using new financial instruments called CDOs, and new insurance policies from AIG. Bankers were EAGER to approve unqualified buyers, because bankers no longer had skin in the game (or so they thought). New loan types were issued to approve buyers who would “normally” not qualify (NINA – No Income No Assets, NINJA – No Income No Jobs No Assets). These crap loans were turned into a form of hamburger that was sliced and diced into the CDOs, and sold to those who did not truly understand what they were buying. And loan ratings agencies gave the crap loans false ratings too (much too high). It all was fun and games until the market eventually turned south, the hamburger started to rot, and AIG’s insurance policies turned out to be crap. At that moment, all of the banks that relied on AIG’s insurance were going to all fall down like a bunch of dominos. The government intervened to prevent that from happening.
We are not at that moment today. And that moment affected Wall St and the banking industry, not housing developers pe se. However, we DO REMAIN at risk for another 2008 because – unlike 1929 – no laws were passed so that those events will never happen again. In fact, the reason we got 2008 was because the “never again” laws passed in 1934 to put a solid wall between mortgages and Wall St were finally dismantled to make bankers happy (and rich!) in 1999. The situation is so complex, much of the public still does not understand what even happened.
But getting back to the Housing Element … RHNA goals for MV show that more than 50% of the new housing needs to be created for households who earn less than 120% of AMI, or about $185,000 according to the 2020 census. Those goals are like a mandate from HCD for the community of MV to feed 6000 new families. A token amount of food will be given to help us, but not nearly enough. State law requires us to have a highly detailed plan about how we are going to do it, even though the cost would be extraordinary. It’s kind of like a certain moment in time when King George levied a new tax on tea. Only it is much more subtle so most people don’t see what is happening and revolt. Instead of issuing new taxes to raise the $$$, cuts are being made to the services normally provided to the community. When developers don’t have to pay to fund the creation of new schools, that $$$ can instead theoretically be used to create more BMR units. Similar with parking spots. We are forced to rob Peter in order to pay Paul.
Only the devil is very much in the details. The big problem is that most people don’t understand how city services are funded, so when cuts are made to the funding, they don’t understand what will be lost as a result. And politicians are clever, they use phrases like “updating impact fees” instead of “REDUCING impact fees”, which helps keep most of us in the dark as well. And the details are being concocted mostly behind closed doors between HCD and MV city staff, without an opportunity for public feedback, during the holiday season when nobody is really paying much attention anyway. Hooray for Democracy!
Just an observation,
Leslie, I think again we agree far more than disagree about a lot.
You did a great job is describing the 2008 debacle. THere literally were 4 transactions where people tried to make profits off of one home purchase. First the initial sale, then the packaging to sell to investmewnt banks, then the banks tried to use AIG to insure the purchases, then finally they tried to resell the mortgages back to “consumers” with prifits collected at every level.
I used to work for Radio Shack, they had the same marketing model, they wouldf purchase raw goods and then send to manuacturing charging a profit on them, then they would mmanufacture the goods, and charge a profit to the distribution warehouses, then they would charge a profit to the local stores, where finaly they sold it to the customers.
That model failed terribly because they could rarely sell anything on list price, and in fact has a predictable yearly cycle of what products would be “on sale”
Real Estate simply did the same thing. But they change names. CDOS are not sold but renamed Bespoke Tranche Opportunities, and that market is the same as before.
And recently most Mortgage Companies are starting to drop mortgage standards, in fact a NEW credit rating system is being introduced to provide more loans to those that are NOT qualified for them, just like NINJA.
This is a VERY SCARY repeat of the same song. Again, if the market will resist to adjust to accommodate the REAL economics of the market, it is doomed to fail. Yahoo finance reports the affordability of housing is at the same place it was in 2008, thus putting the brakes on any new transactions look at “Affordability Falls to Its Lowest Level Since 2008, According to First American Real House Price Index”
In effect once transactions die, then the whole house of cards collapses