John Stewart is chairman of San Francisco-based The John Stewart Co., a builder and operator of affordable housing projects since he started it in 1978.
It has about 1,400 employees in five California offices, managing over 32,000 existing units and 17 projects, including a plan to transform the historic former cannery in Santa Rosa’s Railroad Square into senior housing. Stewart acquired the property in 1999, received project entitlements in 2013 and was set to receive $11 million in state money to help finance the project. However, the City Council opted that year not to move the project forward.
Over $4 million has been spent on groundwater cleanup and shoring up the brick cannery walls to be reused in the project.
Ahead of his speaking at the Business Journal’s May 29 Building the North Bay conference, we talked with Stewart about the environment for constructing affordable housing and transit-oriented development, both of which intersect at the Railroad Square project.
What’s the outlook for affordable housing?
In 1978, it was a (U.S. Department of Housing and Urban Development)-centric world. The federal government was heavily involved. They actually had large subsidies in the form of project-based Section 8 (rental assistance) or mortgage insurance.
There were more affordable housing units producing the United States in the late ’80s, early ’90s, than there are now. The quality of the housing, HUD’s architectural standards, were not good. There was a lot of stuff that was produced that was pretty schlock — early Texas penitentiary, we use referred to it as. But they were the major game in town.
That low-income housing tax credit program didn’t come along until the mid-’80s. And that was a tax-driven concept that was proffered by (President Ronald) Reagan. It has pluses and minuses: You can’t take the rents down to the same level of affordability you can with the Section 8 deals, but generally speaking, the quality of the product was better.
So we’ve done both. We’ve done HUD stuff, and we do low-income housing tax credits. As of late, some of the things that we’re working on entails a variety of sources. Things have gotten so difficult to finance, with the fact that HUD is really missing at the table; they’re not players anymore. They tend to focus on vouchers, not project-based subsidies. Most of the affordable product in the United States now is driven by the low-income housing tax credit program, and that requires a combination of public money and private money.
Everything that we are doing in Sacramento, San Francisco, communities in between and a couple projects in L.A., in order to make the projects go, cities have to provide gap financing, and we put in equity. The problem we have right now in the project that we’ve been working on in Santa Rosa is the city has no money.
You cannot put together low income housing tax credit project with 4% tax credits, unless the local town or city puts in a substantial subsidy, along with equity from the developer. You need both, or it won’t work.
Well, we have a lot of business now, because we’re working with a lot of communities that can match our equity. The predevelopment timeline used to be maybe 18 months to two years. Now, from the time that you actually have site control to the time that you actually break ground — get entitled, permitted, financed and closed — it’s typically three to four years.
Santa Rosa project timeline
1999: Property purchased
2009: $11.4 million state bond money secured
2013: Planning Commission approves the project; City Council doesn’t
2018: Measure N fails