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City Council approves inclusionary housing amendments

Zillow: San Diego housing near 'crisis level'
Posted at 4:40 PM, Dec 10, 2019
and last updated 2019-12-10 19:43:25-05

SAN DIEGO (CNS) - The San Diego City Council tentatively voted 7-2 today to approve a revised set of amendments to the city's regulations on the percentage of a housing development's units that must be reserved for low- and middle-income tenants.

The amendments to the city's inclusionary housing regulations would require developers to lease 10% of developments with 10 or more rental units at or below 60% of the county area median income for a family of four, which the San Diego Housing Commission and the U.S. Department of Housing and Urban Development calculate at $86,300.

In addition, developments with units for sale would be required to make 10% of them available for a family of four making at or below 100% of the AMI, or 15% for a family of four making at or below 120% of the AMI. Developers also have options to build the requisite affordable units at a separate site, albeit with fewer incentives.

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"The proposal, as prepared, is a very moderate approach to inclusionary zoning and is in line with the best practices identified in the affordable housing sector nationwide,'' San Diego Housing Federation Executive Director Stephen Russell said. The city has had similar rules in place since 2003, but developers can pay a $12.73 per square foot "in-lieu'' fee to avoid offering units below market rate or to families who make less than the area median income.

The amendments -- if passed on second reading and signed by the mayor - - would also offer incentives for building affordable housing on-site, and the in-lieu fee would increase to $25 per square foot by the start of fiscal year 2024.

The council's decisive vote was months in the making and required multiple haggling sessions between City Councilwoman Georgette Gomez -- who first proposed an update to the regulations in 2017 but lacked the council president's power to docket agenda items until her colleagues unanimously appointed her to the position last year -- and development and labor groups.

"It's been nearly 20 years since San Diego has dealt with its inclusionary housing policy and that housing has been overhauled in this city, and it's time for change,'' said Keith Maddox, executive secretary-treasurer of the San Diego and Imperial Counties Labor Council.

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"Working families ... simply can't afford to live in the city,'' he said. "And today is the first step in a longer journey to build affordable workforce housing in every neighborhood and at a pace and skill necessary to house the workers of this great city.''

Until Tuesday, developers decried the original proposal -- which had a quicker phase-in, a lower in-lieu fee ceiling and required them to offer rental units at 50% of the AMI instead of 60% -- as too radical and contended that it would make them flee to cheaper markets like San Antonio, Texas, making development in San Diego stagnate as a consequence.

Previous attempts at passing the regulations resulted in multiple 5-4 affirmative votes, but that left the proposal vulnerable to a mayoral veto. Mayor Kevin Faulconer took that step in September and Gomez could not conjure the six votes necessary to override it, leading to Tuesday's revised proposal.

City Council members Mark Kersey and Vivian Moreno both voted against the proposal when it came before the council in previous months, arguing that the amended regulations would place an undue burden on developers.

On Tuesday, both voted to support the revised amendments. "I could not support the original proposal because I strongly felt that 50% AMI requirement would negatively impact the construction of affordable housing,'' Moreno said.

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"This proposal ... will allow for the construction of more affordable units, which is our bottom line.'' City Council members Scott Sherman and Chris Cate voted against the proposal, with Sherman reiterating an argument he's previously made: that the city's housing growth in the neighborhood of Grantville due to upzoning incentives should be the city's model rather than increasing red tape.

About 2,000 units have been built in Grantville over the last three years, roughly a quarter of which are affordable. "A bad policy with small improvements is still bad policy,'' Sherman said in a statement.

"My colleagues passed this measure with good intentions, however, they are hurting the very people they are trying to help by increasing the cost of housing production.''

Gomez insisted that the proposal's enactment would not be a panacea for the city's housing crisis but would help move the needle toward ensuring housing is affordable for all city residents. "Is this the solution? No, it isn't,'' she said.

"We need to do much more to really ensure that we are housing all San Diegans and that it is a crisis that we have in front of us.'' If approved on second reading and signed by Faulconer, the policy's phase-in would begin July 1, 2020.