Ideas to turn abandoned Oakland properties into affordable homes
[Published in the San Francisco Chronicle On January 31,2016 under the title "Build Homes, Attack Blight".]
Oakland leaders scrambling to address the city’s shortage of low- and moderate-income housing are confronting the harsh reality that the obvious targets — such as fees on new development and taxpayer-backed bonds — either will not generate a significant number of units or have little chance of happening any time soon.
Meanwhile, Oakland — along with Alameda County — is overlooking a potential opportunity to capture land and housing funds that is not available to more affluent Bay Area municipalities: acres of vacant lots and abandoned property.
By some counts, there are 3,000 vacant lots in Oakland, many of which are saddled with defaulted tax bills and outstanding blight citations. Adding insult to injury, the city spends hundreds of thousands of dollars annually to clean up the derelict parcels, which often attract illegal dumping and other crime.
But, despite a persistent blight problem and a severe housing shortage, the city and county have been notably conservative in exercising their authority to auction off troubled properties and put them back into circulation. This mostly is because state law generally prohibits county tax collectors from auctioning properties until they have accrued at least five years of back taxes. The maximum time that a tax-defaulted property can sit without an auction is a full four years later — or nine years.
Yet, while state laws translate to long-stagnant parcels, there are exceptions that could make a big difference in Oakland. The state tax and revenue code allows property to be auctioned after only three years if a city, county or nonprofit organization produces a plan for developing a tax-delinquent property into affordable housing. In addition, when property has been offered at auction once and failed to sell, the tax collector may, with approval from the Board of Supervisors, offer the property for any price he or she deems appropriate.
There are reasons Oakland and Alameda County have not aggressively pursued the fast-track and discount price options: They require a city or county resolution and coordination between governments. And, to auction properties more quickly in any significant number would mean more county manpower to provide notice to owners, process sales and surmount myriad other bureaucratic hurdles.
There is little debate that any strategy to create affordable housing, or free up land to build it on, requires a public investment. What matters is getting the most bang for the buck. The two strategies I noted initially — fees on new market-rate housing construction and issuing housing bonds — included costs that would be passed on to buyers and taxpayers. In comparison, adding county staffers to focus on selling derelict property more quickly and cheaply might turn out to be a bargain. And remember, few alternatives for generating housing offer the bonus of directly fighting blight.
After spending nearly a year and $1 million on studies, Oakland recently proposed fees on new market-rate housing and commercial construction. However, the studies showed that fees would need to be relatively modest to not push development costs so high that builders would simply opt out. As a result, even with the fees increasing gradually over time, they are not expected to generate more than a few hundred affordable housing units in the next eight to 10 years, based on historic rates of housing production and the cost to build new affordable units.
Local and regional housing bonds require a two-thirds vote, which means that a bond must have virtually no organized opposition in order to prevail. Regional bonds also include massive bureaucratic coordination. Recently, a nonprofit organization proposing a regional bond threw in the towel for now, recognizing that it had an uphill battle.
The good news is that since 2012 Oakland and Alameda County have collaborated on two pilot programs intended to remove liens and sell property with long-overdue taxes and blight fees. According to a city of Oakland report, the 2012 program generated nearly $1.2 million in proceeds from the sale of 16 properties that are now in the hands of taxpaying owners. An August 2014 pilot program removed tax liens from 59 tax-defaulted properties to facilitate the sale of 34 parcels directly to affordable-housing developers. Sale proceeds from the other 25 properties were earmarked for code enforcement and blight operations.
Unfortunately, the 34 properties are still winding their way through the county and state bureaucracy. And the city pulled the other 25 properties off the auction in March 2015 with no explanation to the county or the general public. City Council members I spoke with about the 2014 program don’t recall voting on it and are not up to date on its progress (or lack thereof).
My goal here is not to berate local government. Rather, it is to urge the city and county to take their promising fledgling efforts and expand upon them. California law allows exceptions so that municipalities can sell derelict properties faster. Other states have approached the issue more proactively, recognizing that counties rarely collect long-unpaid property taxes.
According to Generally Accepted Accounting Principles, unpaid bills (tax or otherwise) outstanding for more than 360 days are considered doubtful for collection. After three years, collection is a fantasy. So does it make sense that the city of Oakland and Alameda County are waiting five years before they sell tax-defaulted land that is a scourge to neighborhoods and could add badly needed housing?
Oakland and Alameda County should pass legislation lowering the auction sale trigger from five years to three years when it will translate to affordable housing. And state legislators should consider shortening that time frame even further — particularly in urban areas with housing shortages. A next step might be to follow the lead of states such as New Jersey and Pennsylvania, which have taken a more aggressive approach and used eminent domain to take tax-defaulted property and resell it for affordable housing.
The bottom line is that, with few resources available, Oakland must find creative ways to produce more affordable housing and get a handle on its blight problem. With thousands of vacant lots in its midst, the city may not need to look far.