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Second Time A Charm For New San Diego Affordable Housing Policy

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Speaker 1: 00:00 A new deal on affordable housing for the city of San Diego has business onboard and a veto proof majority on the city council. After months of negotiations, the city council Tuesday approved a plan requiring developers to build more affordable units or pay a penalty. The last inclusionary housing proposal was opposed by the building industry and vetoed by mayor Kevin Faulkner. But this time the effort led by council president, Georgette Gomez has the support it needs. Here's the council president at yesterday's meeting.

Speaker 2: 00:31 I definitely stand by this update. Um, I do think that it's moving the needle forward. It's is just a solution. No, it isn't. We need to do much more to really ensure that we are housing all San Diego and said that it is a crisis that we have in front of us.

Speaker 1: 00:48 Hey, PBS Metro reporter Andrew bone has been following the negotiations and he joins us now. Hi Andrew. Hi. Now, what's in this new deal? What will developers now be required to do if they want to build housing in the city of San Diego?

Speaker 3: 01:01 Yeah. So if a developer wants to build an apartment complex in San Diego, they have to set aside 10% of the units for low income households and charge those households, uh, affordable rents that households have to be making no more than 60% of the area median income. We're going to throw out a lot of numbers here and it's a little confusing, but basically, let's say there's a four person household, two parents, two kids together, they make 64,000, $200. They would qualify for this affordable housing. Let's say they're renting a three bedroom apartment. They would have to pay no more than about $1,600 a month, which is significantly less than what the market would, would typically charge for a three bedroom apartment. So that's a significant subsidy that the developer is taking on. I know there are a few more options in this policy to the developer. Could look at the numbers, say, you know what, it actually is cheaper for us to pay a fee instead of subsidizing those rents in our, uh, in our apartment complex. And the fee is currently at $12 per square unit, give to a greater foot. That is, um, the fee will more than double to $25. So that's going to change the equation for the developers about which option they decide for. And the fee will be phased in over five years. That's a longer timeline than, than originally proposed last July.

Speaker 1: 02:14 And if the developer does pay those fees to the city, does the city use the fees to build affordable housing?

Speaker 3: 02:20 Yes, it goes into a fund that's controlled by the San Diego housing commission. Um, inclusionary housing fees are one local revenue source that um, funds affordable housing in San Diego, but it's a relatively small one actually. So, um, typically a developer will have to cobble together a number of different funding sources like state and federal tax credits, um, other funding sources out there in addition to perhaps, um, some of these inclusionary fees so that they can actually get enough money to build, uh, affordable housing, which is very expensive to build.

Speaker 1: 02:50 Now this was an upgrade to an existing inclusionary housing plan and they tried to get one in before, as you say this, this, this one now

Speaker 3: 03:00 took months of negotiations. Why did the last effort to get this passed fail the building industry association, which represents developers as well as the chamber of commerce and a group representing commercial, uh, builders, uh, got together to oppose the previous version of this policy that would have set an income threshold for the affordable housing in, in an a development at 50% of area median income. So basically that means, you know, those, those households that qualify for the affordable housing or be making less money and the developer would have to charge them even cheaper rents and the, those, those groups got together and felt, you know what, this is too draconian. It's, it runs the risk of basically making a lot of projects in feasible, economically and feasible cause the developer would not be able to turn a profit or pay back all the loans that they take out to actually build. But this new policy I have to say is not really a clear win for those developers. There was some give and take on both sides. So while that 50% area median income threshold was raised to 60%, the fee is actually higher. The, the in lieu fee is higher than what, uh, Gomez had originally proposed. However, the Republicans on the council were not too pleased with this compromise. Councilman Chris Caden Scott Sherman voted against the policy. Here's Scott Sherman. At yesterday's meeting,

Speaker 4: 04:17 a slightly less painful compromise is still bad policy.

Speaker 3: 04:24 So this compromise was not good enough for Scott Sherman. Scott Sherman just has a fundamental disagreement with the council president about the efficacy of inclusionary affordable housing policies. He has cited evidence from some other cities that these types of policies can chill housing production if the fees or the mandates are too severe to, it's a very complex equation. Um, he actually, during the council meeting pointed to Grantsville as an example of how the market can produce affordable housing without, um, you know, increasing the, these fees or mandates. Grant vole has seen a lot of dense development since the city council approved a plan update there in 2015 and a significant share of that development has been affordable housing thanks to some incentives that were built into that plan update. It is kind of apples and oranges because Grandville was a very under underdeveloped neighborhood, a lot of vacant land or industrial land that they then changed to residential.

Speaker 3: 05:22 And so it's, it's really a, a complex equation that is specific to each individual neighborhood and each city. Are there concerns though even amongst supporters of this new plan that uh, it could shale and slow down development San Diego. So Gomez actually commissioned a study that, that put in a lot of different numbers and tried to sass out some of the economics of this policy proposal that they drafted hypothetical development scenarios to see how much of this new policy, um, how likely it would be to make projects in feasible. That study concluded that most of the projects that could be built in San Diego could absorb the added costs of the more, um, you know, generous policy for affordable housing. There were, however, some that would likely just become infeasible and would never get built. And the question to the council really was, will this policy be a net positive for the housing situation in San Diego?

Speaker 3: 06:16 When you tally up all the pros and all the cons, even if some hypothetical housing doesn't get built, is the added revenue from the higher fees or is the greater subsidy for those low income households were fat cost and clearly the majority decided that it was. And finally going back to a council president, Georgette Gomez, she was just reelected by the council to lead as council president. She's also running for Susan Davis's congressional seat and she led the negotiations, uh, that for this plan that passed. Is this a big win for her? Absolutely. I think this is probably her biggest accomplishment as council president and as since her time since she was elected in 2016. Um, it's been a long time priority of hers. Her district council, district nine, which includes city Heights. It has a lot of low income households, and this is something that she had really been pushing for because she sees herself as really representing those folks. Um, not, uh, you know, what they might term as the, uh, greedy developers, the developers that are looking for, you know, profits above everything else. And she's been a real, um, you know, champion of affordable housing on the council. So it's definitely a big win for her and something that I expect she'll point to in this congressional campaign. I've been speaking with KPBS Metro reporter Andrew Bowen. Andrew. Thank you. Thanks, Maureen.

The San Diego City Council voted 7-2 to approve an update to the city's affordable housing regulations, which require developers to build for low-income renters. An earlier version of the policy was vetoed by Mayor Kevin Faulconer.

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Maureen Cavanaugh and Jade Hindmon host KPBS Midday Edition, a daily radio news magazine keeping San Diego in the know on everything from politics to the arts.