Responding to Sacramento’s severe housing shortage, Sacramento Mayor Darrell Steinberg has asked the City Council to vote Tuesday, Jan. 28 to create a $100-million affordable housing trust fund with Measure U proceeds.

The Sacramento Affordable Housing Trust Fund proposal was crafted by Mayor Steinberg’s office with help from Councilmember Steve Hansen. It would be funded by new city bonds backed by future revenues from Measure U, future state allocations for affordable housing and money raised from public, private and non-profit partners. The trust fund would lend or grant money to both rental and for-purchase affordable housing projects to fill financing gaps and accelerate construction.

“This trust fund will get more affordable units built in our city while spurring construction of quality housing that can be erected quickly and for less subsidy than traditional units,” Mayor Steinberg said. “Increasing our supply of affordable housing is crucial to preventing more people from becoming homeless and housing the thousands of people currently living on our streets.”

Read entire Housing Trust Fund framework here

City Council members last year approved a conceptual bonding plan proposed by Councilmember Hansen during the 2019/20 budget debate. Plans call for the city to issue two rounds of housing bonds, $50 million this fiscal year and another $50 million in 2020/21 or later, once the initial funds are spent. The bonds would be repaid through the new portion of the Measure U sales tax, which brings in about $50 million annually.

Bonds will not be issued until the city treasurer has conducted a stress test to ensure that the general fund could absorb the additional debt service. The first $50 million for the housing trust fund would be part of a larger, $125-million bond that would also include funds for catalyst neighborhood projects and public facilities.

Repayment for the $125 million bond would total $7.5 million annually for 30 years.

Forty percent of the trust funds would be targeted to house residents classified as extremely low income, meaning that they make no more than 30 percent of the area median income, currently $25,750 or less for a family of four.

The need is particularly acute in this category. Between Oct. 31, 2013 and Dec. 31, 2018 the city issued building permits for just two units of extremely low-income housing while at the same time issuing 208 permits for units aimed at very low income tenants, 427 for low income tenants and 7,984 units for tenants with moderate or higher incomes.

“Every day, I hear stories of people needing affordable housing, and we just don’t have enough, particularly for those with very low and extremely low incomes,” said Councilmember Steve Hansen. “This bond is imperative to expand housing affordability and reduce housing insecurity.”

Bonds will not be issued until the city treasurer has conducted a stress test to ensure that they won’t have a negative effect on the general fund.

Mayor Steinberg’s proposal would reserve 30 percent of the money in the trust fund for housing projects that require a subsidy of no more than $100,000 a unit — an attempt to spur construction of efficiency units, manufactured housing and other creative housing types that can be built for much less than the traditional cost of $400,000 and up per unit.

“We cannot afford $500,000 in public subsidy per unit and expect that we’re going to build the volume to house the people who are most vulnerable and fragile,” Mayor Steinberg said. “We need to spark a Silicon Valley moment for manufactured housing, efficiency housing and tiny homes by sending a market signal that we are serious about investing in these housing types.”

Between 2012 and 2017, the median sale price for a home in the Sacramento region rose 59 percent, and rents increased 33 percent. More than half of renters in Sacramento are spending more than 30 percent of their income on housing.