Housing availability and affordability dominated discussions for hours on Monday night as Merced City Council received updates on the local real estate market and listened to many residents push for a new inclusive zoning policy ( IZ).
Loren Gonella, longtime real estate agent and analyst for Coldwell Banker Commercial Gonella Realty, provided market information to executives, as he has done periodically for many years.
Meanwhile, Sheng Xiong of the Fresno-based Leadership Counsel For Justice & Accountability has promoted the idea of equitable access to local housing through a policy that requires a certain percentage of housing development in the region. market rate to be designated as affordable housing.
Xiong was supported by a multitude of voicemail messages – 45 recordings in total – sent by residents responding to an agenda item regarding a request for direction from staff on various affordable housing options, including the possibility of a new IZ prescription. Most of the voicemail messages were in favor of IZ to Merced, although some were not. A few dozen emails were also sent to executives on the matter, but these were not read aloud during the meeting.
- Interest rates are low right now, Gonella said, and in 2020 they have fallen below 3%, bringing a lot of people into the market. “We are in a wonderful interest rate environment,” he said, with numbers “not seen since the 1950s”.
- These low interest rates fueled an extremely strong demand for mortgages.
- Both existing home sales and new home sales rebounded in the second half of 2020.
- Home sales in the Central Valley increased 22% in 2020 and the median selling price was $ 395,000, up 15.5%.
- About 50 percent of residents of Merced County can afford to buy a home at the median price.
Said Gonella, “If the goal is to increase the homeownership rate in the town of Merced, a few suggestions: Implement a down payment assistance program. Charge developers a small fee that goes into a jar that buyers can then use for their down payments. Usually, it’s not the monthly payment that slows buyers down, it’s the down payment. In addition to this, the city can partner with non-profit companies that help buyers build credit as there is no point in having down payment assistance and having poor credit and not to be eligible for a loan.
- The median selling price of a home in the Merced-Atwater area is $ 315,000, 14% more than a year ago.
- The average number of days in market for the Merced-Atwater area has dropped to 21 days. “It’s a very hot market that we are dealing with,” said Gonella.
- “We are also facing inventory issues. There is 1.3 months of housing supply in the Central Valley and statewide, which means that’s the length of the inventory if sales continue and no new homes is added to the market. (A balanced market has 6 months of inventory.)
- In Merced, there was 0.7 months of inventory in the Merced-Atwater area recorded in March. “This is my 43rd year in real estate, and I’ve never seen inventory so low.”
Why: The elderly do not stay put. The sellers are not moving. “From 2008 to 2013, when the city of Merced should have built 1,800 homes, it built 39, and we’re still trying to catch up. “
- What to do about new builds: Help developers by allowing higher density development and speed up their processing time for provisional and final board approval.
Suggestion from Gonella: “Try to minimize government influence in the private market. “
- 723 single-family homes were built in Merced last year. 668 in 2019. “The town of Merced is doing a great job building a number of houses (compared to neighboring areas), unfortunately that’s not enough,” Gonella said.
- There are eight active subdivisions underway in Merced with hundreds of buyers awaiting purchase. There are housing estates in all corners of the city. “We just need to do a better job to get them moving quickly,” Gonella said.
- The inventory of local tenants remains very tight. Less than 1% vacancy factor with increasing rents while COVID-19 restrictions are capped at 10%.
- Even though many UC students were not at Merced during the pandemic, they kept their units and renewed leases. New rental calls come from families, not students.
- A 3 bedroom (1,800 square foot) house in North Merced rents for around $ 1,700. Meanwhile, the monthly payment of $ 1,244.68 per month at 2.875% for 30 years would give a home buyer a home loan of $ 300,000. “It’s cheaper to own than to rent,” says Gonella.
- In 2020, there were 20 multi-family buildings installed in Merced, with 389 units.
- There is a strong demand for “good” office space and a strong demand for medical space, but again the supply is limited.
- Nationally, 2.5 million mortgages are in forbearance, meaning borrowers have missed their payments. That could translate to 600,000 foreclosures nationwide, and possibly 60,000 in California. In the area of Merced, Atwater and Winton, according to Gonella, the number of seizures could be close to 500.
Inclusion zoning (IZ)
Inclusion zoning, according to Sheng Xiong, can help Merced pursue its fair housing goals, increase affordable housing opportunities, and prevent displacement of individuals and families who have lived here for years.
“Every city has a moral and legal duty to promote fair housing in a positive way,” said Xiong. “As the sixth fastest growing city in California, Merced is at a critical point in its development. The projected growth for UC Merced is 17,000 by 2030, with the overall projected growth of Merced reaching 160,000 by 2030. The city must have the foresight to be proactive in developing its housing plan, pursue its housing objectives and meet the housing needs of residents. of all income levels.
Xiong showed the leaders a map showing where the people of color live in Merced. “Although diversity is a strength of our city as a whole, there are clear paths of segregation like in other cities,” she said. “Merced residents of color are concentrated in areas to the south and west and have less access to housing opportunities in the rich north of Merced. Making sure affordable housing is a part of all new real estate developments will make our city more equitable and inclusive, especially as Merced continues to grow north and east.
Xiong pointed out …
- Almost all – 94 percent – of the very low-income residents in Merced County are overburdened with costs, and 74 percent are severely overcharged. At Merced, a 2017 study found that 54% of tenants are overcharged with costs and 25% are heavily overloaded with costs, spending 50% of their income on rent.
- In Merced County, the average renter’s wage is $ 14.23 per hour, but the hourly wage needed to afford an average 2-bedroom apartment is $ 18.21 per hour.
“For our workforce to continue to live here, we need to provide enough affordable housing opportunities,” she said.
- From 1999 to 2006, 170 “IZ” programs across the state produced 29,281 affordable housing units
- 80% of IZ programs take place in towns with less than 100,000 inhabitants.
- 8 of the 10 cities with UC campuses have an IZ program.
- 1 in 10 IZ programs are in the central valley.
- A study of 55 Bay Area ZI programs found no evidence that ZI had an impact on the prices or production of single-family homes at market prices.
“Looking at Merced’s housing production, we see that the city is on track to meet its moderate and above-moderate income needs,” Xiong said. “But Merced is failing to meet the housing needs of low-income households. [From 2017 to 2019] there was 0 approved housing for low income residents. It was not until the end of last year that the city council approved the Childs & B project. However, this project will not be completed until the end of 2022.
On the other hand, Merced is in a good position to meet or exceed its need to develop at market rates by 2024. ”
In recent years, had Merced adopted an IV program devoting 25% of new developments at market rate to affordable housing, according to Xiong, the move would have supported hundreds of struggling local families.
After the two presentations, Mayor Matthew Serratto asked Gonella, the real estate agent, a good question.
“How many units do you think the city of Merced should add to find a balanced market with six months of supply?”
Gonella replied, “I should say somewhere between 1,500 and 2,000.”
And then the mayor followed, “We have 2,250 collective housing units that have been approved by this body, and for the most part, the developments weren’t built for a number of things. How do you understand the delay in these projects?
Gonella replied: “Well probably Frank Quintero [the city’s economic development director] could answer the question better, but if you want to get a glimpse of what we had … Many times when we went to lenders for multi-residential projects they weren’t very receptive to loans in our area because that they still think we are in the depths of the Great Recession. We can’t make them understand that our rents have gone up, etc., and it’s a good market to place them. 30 to 50 percent in a year, and as a result, many of these projects struggle to get drawn. They are just afraid that the rents in this area will not support it. Well, we try to convince them that it is not. And this is the constant battle that we wage.
Lots of reaction
The 45 voicemail messages regarding zoning for inclusion were all played during the meeting, and it lasted well over an hour. And then the city council members weighed a few opinions before giving some advice to the city manager and department heads. A new city-specific IZ ordinance was not before leaders for approval on Monday evening. However, it was evident that a majority of the council was not in favor of such a policy.
Unfortunately, the Times ran out of space and time in this week’s newspaper. Stay tuned for more details on what was said at the final meeting of next week’s edition!