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ITEM II C 1  

White paper on compact development in the San Joaquin Valley, Implementing the SCS:

With the adoption of AB 32 and SB 375 the policy direction of the state has been toward more compact . This pattern of development while economically viable in the major coastal areas of the State of California has faces significant development challenges in the San Joaquin Valley, where income levels are much lower than the rest if the state

Under the provisions of SB 375 Metropolitan Agencies are required to include in their regional transportation plan (RTP) a sustainable communities strategy (SCS). The objective of the SCS is more compact development to decrease greenhouse gas emissions resulting from new development. The challenge for the San Joaquin Valley is that the available income for new units does not align with the cost of the proposed compact development. Specific site studies have shown that the cost of making infill development economically viable in the San Joaquin valley requires a subsidy of $40k to $100k per unit. Specific project pro formas were done for sections of Shaw Avenue in the of Clovis. These project analyses looked at both ownership and rental units of varying sizes and density. The average subsidy just to bring the units to market rate was approximately $80k. In another analysis along the same corridor the conversion of an older shopping center was looked at. Even under a scenario where the land was provided at no cost the project was not economically viable. Even getting the units to work at market rate doesn’t mean affordability for many .

What valley and state policy makers lack is specific and detailed information about the economics of development in the San Joaquin Valley. The type of development which has worked in the major coastal areas of the State of California is largely not applicable in the San Joaquin Valley. Even within the San Joaquin Valley economic conditions vary significantly. A convening in October 2013, by the infill builders Association, with valley leaders here in Fresno touched on this issue. The discussion included projects that were economically viable in the Sacramento area which were not economically viable in the Fresno area. While infill developments could be sold for two dollars a square foot in Sacramento similar developments in the Fresno could only generate about $.99 a square foot. It is not likely that expedited processing or waiving fees will close the gap between market level economics and the reality of infill development in the San Joaquin Valley. More specific analysis is needed to confirm this disconnect between market economics and infill development. Even where market demand exists for higher density housing within the San Joaquin Valley, the households that desire that type of housing, in many cases lack the resources to afford that housing. There's a significant disparity in household income in the San Joaquin Valley and the major coastal areas the state. This disparity is reflected in the higher and supported families in the valley. Even assuming the ability to change the model of development toward new infill projects the gap between household income and the likely rental or purchase for these units will continue to be a major disconnect for the implementation of the sustainable community strategies in the valley. One response is to limit greenfield development. Doing so will add to the overall cost of housing and will further reduce the number of households able to afford market rate housing. Further if these households are not able to afford housing here, where will they be able to find ? Better information is need about the specifics of this issue and the possible solutions. ITEM II C 1

The other challenge for higher density infill development in the valley is that the basic pattern of development. Particularly within the small communities of the San Joaquin Valley there is very different pattern of community scale and development than that found in the major metropolitan areas. On its surface the valley does not appear to lack sufficient land to accommodate future growth in the historic pattern of development. While there is a growing understanding of the of the agricultural and resource lands in the valley there is still significant opposition to shifting to a significantly higher pattern of urban infill development. The valley lacks good relevant examples of higher density/efficient . Good examples are a key to changing attitudes about more compact development and therefore the implementation of the SCS’s. With the lack of and other community-based resources to close the gap in making these projects economically viable, the building and banking industries will continue to look to proven patterns of land development.

There is a path forward for the San Joaquin Valley. The three critical steps necessary to address these issues are: • First; A more complete analysis of the economics of infill higher density development within the major and in the smaller cities of the San Joaquin Valley; • Second an analysis of patterns for higher density development which are appropriate in the San Joaquin Valley particularly within the small cities in unincorporated communities; and, • Third and analysis of revenue sources which can be used to close the gap between cost of compact and infill development and what valley households can afford.

The first action proposed is to seek funding for additional analysis of development types and costs. This would include an analysis of infill and higher density projects in both urban areas and in smaller communities. This will provide information on the components of cost and the gap to achieve market viability. Unless this economic reality can be documented and addressed, the valley will not be able to realize the pattern of development that is the basis for compact/infill development in the SCS’s.

The second action would be to use this information to explore more compact, valley appropriate development types. This effort would consider the of the valley, community size and type, construction methods and affordability of valley households. Elected officials and residents need to see viable patterns of development that can help them achieve the objectives of the SCS’s

The third action would be to identify available or possible funding sources to address the affordability gap. It is highly unlikely that market rate developments will be able to meet the housing needs of the valley. We, hopefully, will be able to increase the percentage of households which can afford market rate housing but we will need to provide funding to assist lower income households. Options which need to be explored include indirect source review funds, cap and funds, successor redevelopment funds/tools and funding from SB 391, the California Homes and Jobs Act. Other sources will be considered as the project work is carried out.

With the support of the Valley Planners Network I would request that the Fresno COG sponsor a request for Planning for Sustainable Transportation grant for $300,000.