The Affordable Housing Debacle

Robert Geis, the County auditor-controller, released recently a final report on his department’s audit of the County’s “for sale” Affordable Housing program. His audit began more than a year ago after persistent public complaints to the Board of Supervisors that the program was rife with fraud and should be examined before they continued to expand the program by adding thousands of new units.

In March 2006, the Auditor’s office issued a preliminary report that found as many as 25% of all owners in violation of the sale, rental and occupancy restrictive covenants on their deed-restricted affordable units.

The final audit report confirms the high rates of violations in the entire population of affordable housing units. It also finds high rates of borrowing by affordable owners in excess of the restricted market value of their homes and transfers of title to unrelated third parties and entities; both of which are illegal actions given the restrictive covenants recorded against the properties.

The audit report fails to reveal whether any of the owners of the units who have engaged in these illegal activities, or the unrelated third parties and entities to which title has been transferred, are County employees or related to County employees or developers. The public has a right to know this information.

The public also has a right to know how many units found their way into the hands of non-citizens or people who are not legal, permanent residents. Though the report references such occurrences, it does not reveal the number of times this happened, nor does it make a recommendation as to what the County should do about it.

The auditor’s final report is dated October 9, 2006, but was not released until January. One can only imagine the machinations and “editing” suggestions from on high that went on in that three-month period.

In the interim, Housing and Community Development has put forth various ordinances and proposals to the Board of Supervisors, no doubt trying to create the appearance of reform before this audit hit the public. In hearings on these proposals, County counsel laid the ground work for the supervisors to take the position that there is nothing that can be done legally to deal with current violators.

The oft heard mantra from County counsel is that the current restrictive covenants are not sufficient to support legal claims against violating owners relating to borrowing against the units, transfers of title, complete or partial rentals and non-occupancy.

This position is a political one, not a legal one. There are a variety of legal remedies and claims that can be made to hold these owners responsible for impairing the County’s equity rights in these properties and to recover ill gotten gains from improper rentals, transfers or sales.

In a County with an unfunded pension obligation for County employees in the millions of dollars, we do not have the luxury of walking away from millions of dollars of real estate because no one in government has the political guts to correct their mistakes made over many years. Perhaps if the money lost to dishonesty in the Affordable Housing program came out of the pension fund, the taxpayers, who fund the pensions of all County employees, would get some redress. As it stands now, only the taxpayers are left holding the bag.

The fundamental issue now before supervisors is whether to scrap or continue the “for sale” program. Given the history of the County’s incompetence in running a “for sale” program as reflected by the final audit report, the answer is resoundingly clear: Get out of the housing business, now.

Then the issue becomes how to create housing solutions for low- and moderate-income residents. There are many ways to do this. The County can still pursue housing dollars from the federal and state government and from developers in the form of in-lieu fees. It can then partner with non-profits and large employers for them to create, build and operate different housing options. The County can then focus its energies and available funds on resisting the arbitrary and burdensome demands of state housing mandates that in number and density are completely unsuitable to the small amount of undeveloped land left in Santa Barbara.

A Board of Supervisors hearing on the auditor’s report is set for Tuesday, February 13 at 9 am. The hearing will be held in the Board Hearing Room on the fourth floor of the County Administration Building, 105 East Anapamu Street.