ORANGE COUNTY, Calif. — Mark Asturias of the Irvine Community Land Trust was looking forward to celebrating new homes with families this winter.
As the executive director of the Irvine-based affordable housing developer, he and his team were slated to complete its latest affordable housing project, the $35 million, 80-unit Salerno, in the city in December and welcome new families into their new home.
“This was a great opportunity to have people move in during the holidays,” Asturias said. “This was supposed to be a great time because there’s nothing like seeing people move into a new home.”
But the coronavirus pandemic has upended ICLT’s plans this year. Now, questions swirl for the developer about when the affordable housing project will come into the market and if there is enough money to finish it.
As the coronavirus continues nationwide, affordable housing developers in Orange County are bracing for and experiencing the financial impact of the pandemic on their current projects and pipeline. Projects are being delayed and the state and city are experiencing lower sales tax revenue used to fund affordable housing.
In a state that needs 1.3 million affordable housing units just to meet the current demand, the longer the pandemic continues, developers say, fewer affordable housing units will come into the market for moderate, low, or extremely low-income families, in a time when it is going to be most needed.
Many of these residents that qualify for affordable housing are already experiencing financial insecurity or job loss due to the coronavirus-catalyzed downturn and could be left homeless, move out of the area or just have no place to go.
“You’re going to see a lot of people leaving our communities,” Asturias said.
There is a great demand for affordable housing in Orange County. When ICLT began accepting applications to live at the Salerno a couple of months ago, the nonprofit received more than 6,800 applications for a spot in one of the 80-units. Rent at the Salerno for a one-bedroom starts as low as $587, a two-bedroom $1,100 and a three-bedroom at $1,468. The average market rate rent in Irvine is $2,468, according to Rent Cafe.
Brilliant Corners Senior Asset Manager Alicia Bramble said California is already facing a severe housing shortage, and the coronavirus is making it worst.
“We have so many high rent areas and high rent markets that we need affordable housing,” Bramble said. “The people that are going to get hurt the most are the everyday working class, the low-to-middle income.”
Unlike its market-rate counterparts, many affordable housing developers rely on federal, state, and local government subsidies, tax-credits, or grants to partly fund affordable housing projects.
When state and city officials ordered the shutdown of non-essential businesses and instituted a shelter-in-place strategy, that hit the state and city’s coffers. Many cities use a small portion of their sales tax to fund affordable housing projects and initiatives. And lower revenue means fewer funds for affordable housing.
“We are starting to see the impacts of it, but we’re really going to see it in 2021,” Innovative Housing Opportunities President and CEO Rochelle Mills said. “The timeline is dragging out. We’re noticing what should be a two-week process is taking a couple of months. We’re also noticing that the funding and tax increments isn’t there.”
Mills has a handful of affordable housing projects in Orange County and Los Angeles in various stages of construction, planning, and development.
Mills said while IHO’s low-income senior housing project, The El Verano Apartments in Anaheim, is not impacted by the coronavirus, her other projects in Santa Ana and Los Angeles are already being delayed.
Though construction is seen as an essential business in the state that can continue during the pandemic, new health and social distancing guidelines have slowed and delayed construction projects.
IHO was planning to break ground on a 160-unit project, broken up in two phases, next year in Santa Ana and opened by 2022, Mills said. But the coronavirus has added 18 months into the timeline, and now, if things go smoothly, the project will commence in 2022 and complete in 2024.
The city of Santa Ana, Mills said, has also asked that the affordable housing project have a commercial and retail component, just so it could generate some sales tax for the city. Mills said the project was already going to have it, but it caught her off guard that the city requested it as a requirement.
“Fortunately, for us we have some retail and commercial in it, but now we see that this is not just something nice to have but it is a requisite,” Mills said. “For affordable housing developers, we’re not commercial real estate people, so we usually minimize the amount of commercial.”
Mills said she sees the commercial component might take a larger role in affordable housing projects in the future.
Spectrum News 1’s message to Santa Ana officials was not returned as of press time.
ICLT’s Salerno project is also feeling the impact of the coronavirus. Construction has been delayed. Time is money and ICLT is running out.
ICLT has tapped into $350,000 of its $400,000 contingency fund, Asturias said. That leaves $50,000 left to cover anything unexpected between now and when construction is finished.
The 80-unit Salerno broke ground in September 2019 and slated to finish at the end of 2020. Now, it is expected to complete in March 2021.
“Normally, there are 110 or 150 people on the job sites,” Asturias said. “Now, there are about 60… the slowdown has increased our cost. Like a lot of developers, we have a small contingency budget and it’s almost wiped out.”
Asturias said if there any further delays, there will be an economic impact on the nonprofit.
“We’re analyzing and working with our contractors,” he said. “We are not going to cheapen this project in any way.”
ICLT's Board of Directors has asked Asturias to start looking at fundraising options just in case the nonprofit's contingency reserves are wiped out.
Raising funds in a time of the pandemic is going to be difficult, he said.
"It's not the best thing that could happen," he said. "Many people are feeling the [financial] pinch and hopefully, there are some people out there that are seeing people feeling the pinch and can contribute to a great cause."
UPDATE: After this story was published, ICLT contacted Spectrum News 1 to say that despite tapping into its reserves, if their budget is wiped out, it does still plan to complete the Salerno project through other means. (Sept. 22, 2020)