SLO County doubles developer fee to help build more affordable housing

In a move designed to increase funding for affordable housing projects, developers will soon be required to pay in-lieu fees that are double the existing rate as part of San Luis Obispo County’s Inclusionary Housing Ordinance.

Under the new fee approved in a 3-2 vote by the county Board of Supervisors on Tuesday, developers will pay an in-lieu fee of $3,150 for construction of a 2,100-square-foot home, up from $1,575. The fee for a 10,000-square-foot building will be $13,600 instead of the previous $6,800. The increase goes into effect July 1.

The housing ordinance, created in 2008 because of a shortage of affordable housing, requires developers of market-rate projects to either build affordable housing or pay an in-lieu fee to help augment funding for units built for low-income residents by nonprofit agencies such as Habitat for Humanity or the Housing Authority of San Luis Obispo.

Most builders have chosen to pay the fee over building affordable housing, according to county officials.

“What People’s Self-Help Housing and other local organizations do is so critical to our county,” Supervisor Adam Hill said. “In-lieu fees are one of the few ways to help get these things built.”

Supervisor Bruce Gibson noted the fees haven’t been raised since the program was initiated eight years ago.

Gibson said other funding mechanisms, including a countywide voter taxation initiative as suggested by homebuilder representatives, would face steep challenges for success and don’t seem likely.

Gibson cited this year’s Measure J proposition to increase county spending on local transportation infrastructure, which narrowly lost in the Nov. 8 election with a 66.31 percent vote in favor of the project. The measure needed a 66.67 percent “yes” vote for approval.

“It seems to me the homebuilders are trying to protect their profits at the expense of poor people,” Gibson said. “Let’s put this into full effect so we’re doing more than just providing lip service.”

Supervisors Debbie Arnold and Lynn Compton voted against the fee increase. Compton recommended keeping in-lieu fees at the same level, arguing that homebuyers may not be able to afford the costs that would be passed on to them.

“People leave when their taxes are too high,” Compton said. “Taxes discourage a sale.”

Since 2009, the county had collected between $60,000 and $80,000 in fees. But in October, the latest phase of the large-scale Monarch Dunes project in the Nipomo area paid $614,531 in fees as part of the ordinance.

County senior planner Ted Bench said the county’s median home price is more than $500,000, and buyers need an annual income of $123,360 or more to buy a home at that price. The original in-lieu fee represents 0.00314 percent of the price of a $500,000 house, Bench said.

This year, $125,268 has been used to support construction of three affordable housing projects — the Rolling Hills 2 Apartments in Templeton, Humbert Avenue Apartments in San Luis Obispo and eight single family homes in Arroyo Grande on Brisco Road that are being built by Habitat for Humanity.

Scott Smith, the executive director of HASLO, said local money raised through the ordinance helps nonprofit groups leverage funding from other public funding sources, including federal low-income tax credits.

“You have a better chance of getting tax credit funding if your local government provides more support for a project,” Smith said. “We’re competing against other counties for that funding.”

This story was originally published December 6, 2016 at 7:18 PM with the headline "SLO County doubles developer fee to help build more affordable housing."