Subsidizing High-End Housing for Middle-Class Renters

Using joint power authorities, local governments can purchase luxury buildings, avoid property taxes, and offer lower rents for qualifying tenants.

2 minute read

August 26, 2021, 7:00 AM PDT

By Diana Ionescu @aworkoffiction


Los Angeles County

trekandshoot / Shutterstock

In response to the ongoing housing affordability crisis, "some California government agencies are purchasing buildings, usually luxury ones, and doing the opposite of most real estate buyers. They’re lowering the rent," reports Andrew Khouri. "The programs are geared toward middle-income workers — including police officers, teachers and nurses — who make too much to qualify for most traditional subsidized housing but still struggle to afford a place near their work, according to government authorities and the private partners involved."

The programs work through "a unique financial model that involves local property tax subsidies" using government agencies known as joint powers authorities. "The most active authorities purchasing buildings are the California Statewide Communities Development Authority, or CSCDA, and the California Community Housing Agency, or CalCHA, which launched the first program in 2019." As government entities, the agencies don't pay property taxes, allowing them to charge lower rent to tenants. In places with such programs in place, "building-wide rent declines have averaged about 10% from what the previous owner charged, with greater decreases seen for the lowest income units." 

"Joint powers authorities, which issue and manage bonds on behalf of local governments that join as members, help fund the middle-income programs. They issue bonds and use the proceeds to purchase a property, as well as pay the private companies that arrange the financing and manage the buildings."

But some cities are reluctant to start similar programs. "The Los Angeles City Council is awaiting a staff report on the possibility of joining. In Northern California, the San Jose City Council declined to participate after city staff concluded 'the risks and costs of joining ... outweigh the potential benefits.'" 

Meanwhile, "cheaper rent can be found in many of the cities where the programs operate, raising scrutiny of the affordability the program administrators are marketing." An analysis by the California Housing Partnership "found that the new rent, even when reduced, was higher than the citywide average for an apartment with the same number of bedrooms." While the concept is creative, says Jacky Morales-Ferrand, director of San Jose's housing department, "we want to make sure there is significant public benefit when we forgo property tax."

Monday, August 23, 2021 in Los Angeles Times

Aerial view of Oceanwide Plaza skyscrapers covered with graffiti tags.

LA’s Abandoned Towers Loom as a “$1.2 Billion Ruin of Global Capital”

Oceanwide Plaza, shuttered mid-construction after its developer filed for bankruptcy, has stood vacant on prime Los Angeles real estate since 2019.

May 21, 2024 - The Architect's Newspaper

Entrance to a drive-through car wash at night with green 'Enter' sign.

Ohio Towns Move to Ban New Car Washes

City officials in northeast Ohio are putting limits on how many car wash facilities can open in their towns.

May 16, 2024 - News 5 Cleveland

Ornate, tan stone capitol building with a gold dome roof and low-rise city buildings in the background.

States Are Banning Guaranteed Income Programs

Four states now have laws in place that prevent cities and counties from creating or continuing guaranteed income programs, and several more have tried or are trying.

May 23, 2024 - Bloomberg CityLab

Close-up of apartment rental listing on iPad or tablet device.

Colorado Becomes First State in US to Regulate AI for Bias

Under the new law, developers, deployers, and businesses using AI systems at “high-risk” for bias discrimination in critical areas like housing will be required to account for risks and be transparent about how the technology is being used.

31 minutes ago - People of Color in Tech

3D rendering of blue flying car over a cityscape and buildings, a river, and bridges in the background.

Minnesota Legalizes Flying Cars

A new Minnesota law outlines state registration of “roadable aircraft” and legalizes their use on state roads and highways.

1 hour ago - The U.S. Sun

Green highway signs on Highway 23 for Ann Arbor and Flint, Michigan.

Michigan DOT Nixes Ann Arbor Highway Expansion

In response to public feedback, the Michigan Department of Transportation is no longer considering options to widen U.S. 23 on Ann Arbor’s east side.

2 hours ago - MLive

News from HUD User

HUD's Office of Policy Development and Research

Call for Speakers

Mpact Transit + Community

New Updates on PD&R Edge

HUD's Office of Policy Development and Research

Urban Design for Planners 1: Software Tools

This six-course series explores essential urban design concepts using open source software and equips planners with the tools they need to participate fully in the urban design process.

Planning for Universal Design

Learn the tools for implementing Universal Design in planning regulations.