Chanaporn Tohsuwanwanich
The recent California Social Housing Bill AB-2053 was introduced on February 14, 2022, to achieve the dream of equitable access to affordable housing. The bill discusses rental and homeownership models, accommodating various household income ranges. The project states rent and mortgage cross-subsidization—a system to use profits from one branch to fund a different part of the project—as mechanisms to generate self-revenue. However, as there are many uncontrollable factors regarding mix-income tenants, there is still a challenge if the system encompasses the total expenditure. The discussion arises: are there any possible resources for self-sustained public housing?
To further the financially-sustainable housing development, Hong Kong is worth discussing due to its unique public rental housing and homeownership scheme. The Housing Authority of Hong Kong inaugurated independent finance through their build-for-sale housing scheme and available rental spaces for commercial facilities.
Because of the constraint on land availability in Hong Kong, Ngai Ming Yip—the program director in Housing and Urban Development of the City University of Hong Kong—claimed that housing policy has been “the only long-term strategy” since the 1990s (Monkkonen & Ngai, 2021). As part of the housing production, the comprehensive planning comprises mixed-use development and build-for-sale houses for the Homeownership Scheme—creating financially independent public housing with only an initial capital injection from the government. In any public housing project, the first floor of those high-rise buildings integrates commercial and public facilities in the area. These stores not only provide convenient access to those activities, but the rents from those businesses also help to support the development. However, the most considerable portion of the revenue of the public rental housing in Hong Kong comes from the build-for-sale houses provided through the Homeownership Scheme. The housing authority charges the land for home-owning and gets the equity of the resale units, which restricts the owner not to sell in the free market within the first ten years of occupancy. After ten years, the houses can then be listed on the open market, but the owners must divide the profit to the authority on the first sale (Monkkonen & Ngai, 2021). The revenue was used to subsidize other public rental housing, which generally does not produce enough income to cover the management budgets because they need to establish affordable prices for the tenants.
In the United States, residential zoning has been a significant issue in urban planning, as zoning law makes it harder to produce mixed-use development. Although it is not a common approach in the States, Jordan Downs’s public housing development constructed mixed-use and mixed-income urban villages, providing new retail, commercial, and light industrial spaces. Located in the Watts neighborhood, Los Angeles, the Jordan Downs Master plan dramatically transformed the existing community and created local jobs for settlers (Jordan Downs 2021 Impact Report, 2021). In addition, this program shows that mixed-use development is possible, and the income can be used to promote the housing management of the project.
Even though the current California Housing Bill incorporates rent and mortgage cross-subsidization, whether or not the system would cover the cost of all projects is still up for debate. Because the project would comprise dwellers with a mix in salary levels to create mixed-income neighborhoods, each resident would pay different rental prices, calculated by 30 percent of the renters’ income. Theoretically, the units’ payments from higher-income tenants would balance and subsidize the lower-income rental units to meet the overall development and operations costs, as required by the Bill (AB-2053 The Social Housing Act, 2022). The bill also allows the authority to lease the area “to qualifying small businesses and nonprofit corporations,” which encourages mixed-use development in the project (AB-2053 The Social Housing Act, 2022).
The rent and mortgage cross-subsidization enables the public housing to generate revenue; however, the income level of tenants is practically uncontrollable and might not be able to meet the expenses. Moreover, the selection process of inhabitants regarding concern for cross-subsidization with various levels of payments may lead to possible barriers against lower-income renters. Therefore, policymakers should incorporate other comprehensive self-financing sources to further the development. The bill also does not establish any cross-subsidization between housing ownership and rental units, which might be an opportunity to apply Hong Kong’s system to fund both parts of the program. From Hong Kong’s Homeownership Scheme, the owners’ restriction to share the equity of resale units and commercial leasing may be applicable to fund the rental units and further public housing construction.
The cross-subsidization may be an apparatus to further any public housing development. The Hong Kong model is an outstanding example of constructing a financially-sustainable housing project. These approaches could add to the cross-subsidization of rental units from different income levels, ranging from mixed-use shares to equity from resale units. Combined with Hong Kong’s finance approaches, California Social Housing Bill AB-2503 is an excellent start to equitable social housing production.
References
AB-2053 The Social Housing Act (2022). bill. Retrieved March 6, 2022, from
Bridge Housing. (2021). Jordan Downs 2021 Impact Report. Retrieved March 6, 2022, from https://bridgehousing.com/wp-content/uploads/2021/01/bhc-jdimpact.pdf
Monkkonen, P., & Ngai, M. Y. (2021, March 8). Housing Lessons From Around the World:
Hong Kong Public Housing. other. Retrieved March 6, 2022, from
About the Author: Chanaporn is a geography student minoring in Urban and Regional Studies and Geographic Information System and Technology at UCLA. She is an Undergraduate Research Assistant at UCLA Lewis Center for Regional Policy Studies, analyzing the 5th and 6th cycle of housing inventories in California cities. She has done more than 20 sites of fieldwork in Thailand, focusing on urban land use and development.
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