Spending the ARPA money

One conclusion is pretty clear from the two meetings at which Council has discussed how to spend the $28.6 million the City will be getting from the federal government under the American Rescue Plan Act:  The majority of Council members want to devote a goodly chunk of the cash to providing more housing in Alameda.

What is not so clear, however, is what kind of housing they want to use the money for.

Two alternatives have been advanced.  The City could use the ARPA funds to build or acquire housing (and offer accompanying social services) for the homeless.  Or it could use those funds to build or acquire “affordable” housing for very‑low‑ and low‑income households (i.e., those earning less than 50 or 80 percent, respectively, of area median income).

Both are worthy goals, and, theoretically, the City could assign a portion of the federal money to each of them.  But splitting the funds between housing for the homeless and affordable housing would limit the scope of the projects the City could undertake in either area.  And it would not eliminate the need to prioritize between the two.

If one were watching last Tuesday’s Council meeting, one would be inclined to bet that housing for the homeless will win out.  Indeed, four Council members supported spending the money – exact amount TBD – to purchase the Marina Village Inn and turn it into “permanent transitional housing” for the unhoused.  By contrast, only Councilwoman Trish Spencer advocated using the funds for affordable housing, and the motion Council passed unanimously did not direct staff to pursue that option.

(We should note that housing was not the only potential application of the ARPA funds discussed by Council.  A majority also appeared to endorse using a portion of the cash to “supplement revenue loss” – which essentially would put $8.5 million into the General Fund for Council to spend as it saw fit.  In addition, various Council members also promoted other projects, such as establishing a city-wide broadband network.)

Thus far, the principal proponents for the respective sides of the housing coin have been the former and current mayors.

When Council first discussed how to spend the ARPA money at its May 20 meeting, Ms. Spencer led off by reading an email from Vanessa Cooper, executive director of the Alameda Housing Authority.  AHA could use the ARPA funds for affordable housing in a number of ways, Ms. Cooper said:  by purchasing 18 deed‑restricted homes for very‑low‑ and low-income families in the Alameda Landing development; by bidding to purchase the 2615 Eagle Avenue parcel owned by the Alameda Unified School District, which could house 30 affordable family apartments; by “expediting” the first two phases of federal tax‑credit applications for the 586‑unit North Housing project with its mix of  senior housing, family housing, and supportive housing for the homeless; or by buying existing units and restricting them to households earning no more than 80% of area median income.

Using one of her favorite words, Ms. Spencer declared that it was “critical” for the City to support efforts like AHA’s.

For whatever reason, neither City staff nor other Council members appeared very interested in following that course.  Staff had not met with AHA before the May 20 meeting, and the staff report did not include any of the AHA projects identified by Ms. Cooper – or, indeed, any affordable‑housing projects – on the list of “proposed projects to be funded by” ARPA.  Likewise, staff did not meet with AHA between May 20 and July 20, the date of the next Council meeting on the topic.  Nor was AHA or affordable housing mentioned in any of the “ARPA spending plans” presented to Council on July 20.  And when Ms. Spencer again urged that the City “work with” AHA to develop affordable-housing projects, Ms. Ashcraft dismissed the suggestion by remarking that “there is nothing that stops the housing authority from using their [own] funds certainly to purchase buildings to address our housing needs.”

If AHA is frustrated by the apparent lack of interest in using ARPA funds to finance its current and future affordable-housing initiatives, Ms. Cooper isn’t saying so – at least to us.  Instead, she diplomatically responded to our inquiry by stating that,

AHA’s housing priorities are unchanged and are focused on permanent, affordable, and supportive housing.  AHA staff continues to move forward and complete most of the preliminary work needed on both North Housing, including 90 units of homeless housing, and the AUSD site.  AHA’s purchase of the AUSD site will be discussed again at AUSD Board on August 10th.

Mayor Ashcraft’s preference for spending ARPA money on housing for the homeless has received a much warmer reception – and made much more headway.

“I do think it’s the time to think big and go big for some things that we’ve just been really wanting to do for a long time,” the Mayor said at the May 20 meeting.  What she had in mind was one project in particular:  purchase by the City of the 51‑room Marina Village Inn, which had provided temporary housing during the pandemic for women and children from the Midway Shelter as part of “Project Roomkey.”  “We would very much like to buy” the hotel, Ms. Ashcraft declared. “It’s a wonderful opportunity for transitional housing.”

None of her colleagues had a chance to respond in any detail at the May 20 meeting – Ms. Ashcraft went last – but, except for Ms. Spencer, all of them jumped on board on July 20.

Councilman Tony Daysog was positively effusive.  “In the Marina Village Inn,” he said, “we have a rare opportunity to do something fantastic.”  The hotel was close to a grocery store and a pharmacy, to jobs, and to public transit, he pointed out.  This “wealth of natural and social amenities makes the Marina Village Inn an ideal place” for housing the homeless.  Moreover, the environment is “conducive to families who are transitioning out of a place of crisis, so that the children can hopefully not only recover, but achieve a full capacity that we expect of any children, whether they’re children of homeless families or children of families in the Fernside or in the west end of Alameda.”

Vice Mayor Malia Vella was less eloquent than Mr. Daysog, but she, too, supported using ARPA funds to buy the Marina Village Inn and turn it into housing for the homeless.  So did Councilman John Knox White.

But both qualified their endorsement.  The hotel shouldn’t be the only housing project for which the City used ARPA funds, Ms. Vella said.  “We always need to be on the lookout for other opportunities for sites where we can either build permanent affordable housing, or build permanent transitional housing, and that’s really what I want to see because these needs are not going to go away.”  Similarly, Mr. Knox White stated that “I also want us to maybe double down and think about where else we can look for sites.” (He suggested the Carnegie Library would be one).  He also cautioned that “before we go too far down the road with Marina Village Inn, there [needs to be] public engagement very early, because I know that it is causing a lot of stress from folks who inhabit that area.”

These caveats aside, the main sticking point for the Marina Village Inn proposal was cost.  When she floated the idea on May 20, Mayor Ashcraft indicated that she didn’t expect the City to assume the entire expense of acquiring the hotel.  Rather, the City would “fill in the delta” between the purchase price and the amount the County of Alameda was willing and able to put up for the property.

And what was that price?  The staff report for the July 20 meeting identified it as $20 million, but Assistant City Manager Gerry Beaudin later told us that “we’re contemplating” a transaction in the “$12‑to‑$20 million range,” which he described as a “very rough estimate of the possible purchase and improvements that would be necessary.”

At the July 20 meeting, no one favored spending a full $20 million to buy the hotel.  But there was no agreement about how much of the ARPA funds the Council members would be willing to lay out for that purpose.  Ms. Spencer stated that “I’d like to actually spread this as much as possible to impact as many people as possible that really have been greatly impacted and left out,” and Mr. Daysog opined that $20 million “isn’t the right number.”  Ms. Ashcraft herself said that she “agree[d] with my colleagues who have said, yes, use ARPA funds toward the purchase of the Marina Village Inn, but not all $20 million.”  (Neither Ms. Vella nor Mr.  Knox White offered any specific number.)

Notably, Council’s consensus in favor of the Marina Village Inn proposal overruled the staff report, which had recommended against the purchase.  Not only did $20 million represent two‑thirds of the City’s total ARPA funds, the report said, but ongoing operating costs would add an estimated $1.5 million per year to the price tag.  Rather than buy the hotel, staff urged, the City should move forward with a “supportive transitional housing program” in which it would buy cabins providing “temporary, transitional housing for up to six months” for 20 “chronically homeless and unhoused individuals who need physical and psychosocial support” – at a cost of $2 million to start up and $600,000 a year to operate.

Nevertheless, given the views expressed by the Council majority, the proposed Marina Village Inn acquisition has taken the inside lane.  Mr. Beaudin told us that staff “will be looking for funding for purchase/setup/construction, as well as operation and maintenance” for the hotel.  But he added that, “We are in the early stages of deciding what type of housing for the unhoused project(s) to move forward with.  The availability of funding will be an important part of the City Council’s decision(s).”

And affordable housing may not be totally off the table, either.  Ms. Cooper told us that “I spoke with the City Manager” after the July 20 staff report was published, and “we are due to meet next week.”

So let’s return to the original question:  Should the City prioritize using ARPA funds for housing for the homeless or housing for very‑low‑ and low‑income households?

There’s no obvious answer to that question.

But a framework for determining which alternative to favor might be drawn from comments by Council members themselves.

“What equity is about,” Vice Mayor Vella declared at one point during the July 20 meeting, is dedicating a “significant amount of resources” to “those who need the most help.”  Well, we’re surely not qualified to opine about “what equity is about” (even if we understood what Ms. Vella means by the term), but her remark implied that severity of need should be the key criterion.  If one posited that people experiencing homelessness, rather than very‑low‑ or low‑income households, “need the most help,” it follows that the ARPA funds Council decides to spend on housing – or most of them – should go to building housing for the homeless instead of housing for the working poor.  Our problem with this approach is that it comes uncomfortably close to forcing a decision about which group “deserves” housing more than the other.  That’s a moral judgment we’re unwilling to make – but maybe the elected officials would have no such qualms.

Similarly, at another point during the meeting Councilman Knox White admonished his colleagues to consider “the work being done” by the county and regional bodies to assess “who[m] we need to help and where we need to help.”  This suggests that Council should focus on where the City’s ARPA money would fit into the overall picture of governmental (and, for that matter, philanthropic) funding for housing.  If one posited that current and future federal, state, county and non-profit sources will be able to supply enough housing for the homeless in Alameda, it follows that the ARPA funds Council earmarks for housing – or most of them – should be spent on building affordable housing instead.  (We hasten to add that Mr. Knox White himself did not state this conclusion, but we think it is where this approach leads.)

The prioritization issue also can be evaluated from a more prosaic perspective.

For example, a quantitative approach would compare the number of homeless people who would benefit from the “transitional” housing that could be built with ARPA funds with the number of people who would benefit from the affordable housing that could be built with the same amount of money.  If the City spent $20 million to buy the Marina Village Inn, how many families could be housed there?  (The Inn has 51 rooms, but some of those rooms undoubtedly would need to be converted to other purposes.)  If, instead, the City spent the $20 million on affordable housing, how many new housing units could it create?  (As Ms. Cooper reminded us, governmental funds are leveraged with private capital to finance affordable-housing projects.  As a rule of thumb, $10 million in government money will yield 30 new affordable-housing units.)

Even if the benefits can’t be quantified, Council could allocate the ARPA funds to be spent on housing based on its assessment of which option would “do the most good for the most people.”  This approach gets tricky pretty quickly, since it raises the question of how one defines a “successful” outcome.  In the short run, one alternative would provide a “transitional” home for a homeless person; the other, an “affordable” home for a poor person.  But whose “quality of life” will improve more as a result?  And in which case is a new home more likely to lead to longer-lasting gains – for the recipient and for the city as a whole?  That’s another issue above our pay grade.

In any event, lack of housing (or affordable housing) is only part of the socioeconomic problem being addressed, and more housing is only part of the solution.  Providing shelter for a mentally ill homeless person won’t do her much good if she doesn’t get treatment as well.  Providing an apartment for a low‑income family won’t do them much good if they don’t get better‑paying jobs as well.  But if the relative utility of housing for the homeless versus housing for the working poor can’t be measured with any degree of precision, it would seem difficult to decide which is the more efficacious use of funds.

Enough philosophizing for one day.  We don’t claim to have raised all of the relevant considerations, but we hope that, in deciding how to prioritize spending the City’s ARPA funds on housing, the more thoughtful members of Council will consider similar issues – rather than just pick the priority that strikes them as the more “progressive.”


7/20/21 staff report: 2021-07-20 staff report re ARPA funds; 2021-07-20 Ex. 2 to staff report – Option 1 Staff Recommendations; 2021-07-20 Ex. 3 to staff report – Option 2 Housing Proposals; 2021-07-20 Ex. 4 to staff report – Option 3 Non-Housing Proposals

About Robert Sullwold

Partner, Sullwold & Hughes Specializes in investment litigation
This entry was posted in Budget, City Hall, Housing and tagged , , , , , , , . Bookmark the permalink.

7 Responses to Spending the ARPA money

  1. Really says:

    Council member Spencer is correct. Spread the money around. Let Newsom buy the motel for the homeless. “Housing first” is a failed policy like the War on Drugs. The homeless are ever increasing in California, and it doesn’t address the overwhelming drug and mental health problems which contribute to more than 60% of the homeless problems.

    And that’s not enough. Parks, small businesses, and our police department need beefing up.

    Building low cost housing will help people for the next 50 years and address our most urgent need-more housing, AND get us closer to the state mandated housing number that is a constant source of city wide anxiety.

    • MP says:

      Do transitional and affordable housing units, as those terms are used here, count differently towards Alameda’s RHNA allocation?

    • dave says:

      “overwhelming drug and mental health problems which contribute to more than 60% of the homeless problems. ”

      What is your source for this stat? I’m really keen to see a breakdown of root causes of homelessness. What is the mix of contributing factors? Job loss? Mental illness? Substance abuse? I’d love to see some valid data.

    • Reality says:

      “the overwhelming drug and mental health problems which contribute to more than 60% of the homeless problems.” This is a completely made up stat that seeks to vilify a group of people for their poor choices. The true number is somewhere around 25-35%, and oftentimes that is the RESULT of, and NOT the CAUSE of, the traumatic experience of becoming homeless. The larger contributing factors are economic ones – loss of job, not being able to afford housing, etc.

      Housing first absolutely does work. The problem is the number of people falling into homelessness is happening at a faster rate than the existing providers can keep up with, so what we’re seeing is a massive overflow that manifest as more people living on streets. This makes us think these policies are failing, but that is an observation bias – what you’re not seeing the large number of homeless people that are successfully being housed, receiving services, and are returning as functioning members of society.

  2. William says:

    It appears that the “homeless” camps we see through California have been problems. When we cleared out the Jean Sweeney Park of the “homeless,” there were all kinds of needles. Alameda spent $200,000 clearing the junk that was there. Dave, it sounds like you are sensitive to the “homeless” issue which is fine, but, much like politicians, there are more bad ones than good. We must look at reality and make sure there are funds for Police patrols and maintenance if we purchase the Marina Village property. As CA becomes weaker in law enforcement, problems will increase here.

    • Reality says:

      Why is “homeless” in quotes? It’s a shame that you think there are “more bad ones than good,” which tells me you don’t even know the homeless population at all. 20% of them are children. 40% of them are females. Most women chose to become homeless to escape domestic abuse situations. 200,000 of them are families. 40,000 of them are veterans. At least 100 Alameda Unified School District children are homeless. Turn off Fox News and OAN and have some humanity, William.

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