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Proposed Update To City's Affordable Housing Policy Would Change Equation For Developers

Andrew Bowen
Construction crews work on a 24-unit apartment building in North Park, July 23, 2019.
San Diego City Council members are set to vote next week on a new "inclusionary" housing policy that would make developers pay larger fees to avoid building affordable homes.

San Diego City Council members are set to vote next week on a new housing policy that would make developers pay a larger share of the costs to provide affordable homes.

The change to the city's "inclusionary housing" policy is a long overdue effort to alleviate the housing crisis, said Council President Georgette Gomez, who proposed the update.


Gomez's proposal would nearly double the fee developers pay to avoid including low-income homes in their projects. It would also lower the income threshold for affordable housing units when they are included in projects, meaning families would have to make less money to qualify for the homes and would pay less in rent.

"I think it should have been done earlier, but no one wanted to look at it," she said, adding that the policy has not been significantly updated since 2003.

Affordable housing advocates and labor unions are generally supportive of the move, saying it will help ensure that developers do not build homes for only the wealthy. But developers claim it will chill the market at a time when home building is already failing to keep up with population growth.

Proposed Update To City's Affordable Housing Policy Would Change Equation For Developers

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In a vote earlier this month, the city's Planning Commission sided with the building industry, recommending a proposal that would require less from developers.

San Diego's current inclusionary housing policy gives most developers two choices: Set aside 10% of their homes for low-income households at affordable rents, or pay a fee that supports affordable housing elsewhere in the city. Most developers choose to pay the fee.

Gomez first indicated she wanted to update the policy in her 2017 Housing Action Plan. She gained new authority to accomplish that goal late last year when she was elected council president.

The proposal, which would be phased in over three years, is more moderate than previous drafts and includes some concessions to developers. Projects with fewer than 10 units would be totally exempt and mixed-income projects would get a discount on certain other fees the city charges. Also, developers would have a list of alternatives to fees, such as donating a piece of land for future affordable housing development.

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"The developers love that, they think that was very creative," Gomez said of the larger menu of options. "There's different ways in which we can meet the need."

Despite the concessions, most developers have come out against Gomez's proposal. Among them is Beri Varol, an architect and developer who is currently building a 24-unit apartment building in North Park.

Varol's project made use of San Diego's density bonus program, which gives developers a break on certain regulations if they agree to restrict the rents on a greater share of their units. Three of his apartments will be affordable to "very low-income" households — which could be, for example, a single parent with one child making $42,800 per year.

Varol said he liked some aspects of Gomez's proposal but fears adding more costs to home building would compound the housing shortage. San Diego is one of the costliest markets in the nation to build housing, he said, and developers have options for where to do business.

"Perhaps some of the bigger developers are going to choose to go elsewhere," he said. "There's a lot of developers that want to do the right thing and provide affordable housing as well. We just need to create the right atmosphere to where that can be done."

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Gomez commissioned a study from Keyser Marston Associates that examined the impact of her proposal on the feasibility of new housing development. The study indicated in most cases the added costs could be reasonably absorbed into a developer's budget.

But several developers have attacked the study, saying its assumptions are unreasonable. Gomez said she is not surprised groups such as the Building Industry Association of San Diego and the San Diego Regional Chamber of Commerce are against her proposal.

"I think they would have opposed anything I would have presented," Gomez said. "I'm not saying that this is going to resolve the crisis at all. But … would we get more funding if developers choose to pay the fee? Would that get us to supporting more housing? Yes."

Gomez's proposal could push the current City Council to a place it has not gone before. Mayor Kevin Faulconer, a Republican, is under pressure from his supporters in the building industry to veto the policy should it win council approval. But six votes on the council can override a mayoral veto — something the council's Democrats have not yet done since they gained a sixth seat on the council last year.