Will updated rules fix SLO’s affordable housing shortage? Here’s what local groups say
Updates to San Luis Obispo’s inclusionary housing ordinance take the wrong approach to solving the city’s affordable housing shortage, one community group said.
“I’m not sure inclusionary zoning is the answer here,” said Kevin Buchanan, an organizer with SLO County Yes In My Backyard (YIMBY). The group support the building of as much housing as possible to alleviate shortages.
In contrast, People’s Self-Help Housing and the San Luis Obispo Chamber of Commerce praised the updated ordinance.
Chamber of Commerce President and CEO Jim Dantona said the updated ordinance is a step in the right direction for the city’s housing policy.
“While we have different perspectives on how to make that happen, we were encouraged to see some modifications to the original proposal that will work toward those ends,” Dantona said.
How did SLO’s inclusionary housing ordinance change?
The inclusionary housing ordinance was initially adopted in 1999 to encourage developers to build affordable housing in new developments or pay fees to the city to pay for future affordable housing projects.
Developers can meet IHO requirements by building affordable units, dedicating property for development of affordable housing to the city’s housing authority or a nonprofit housing builder or paying an in-lieu fee — or a combination of these three methods.
The updated ordinance, which the San Luis Obispo City Council unanimously passed Aug. 16, increases in-lieu fees for developers who do not include affordable housing in new developments.
The latest version of the IHO also eliminates Table 2A, a guideline that encouraged construction of market-rate homes by requiring developers to build a set number of inclusionary housing units.
Instead, the updated ordinance bases its inclusionary housing requirement on percentages: 10% affordable units for for-sale developments and 6% for rental developments.
For new developments of homes for sale, 5% of those units must be affordable to low-income buyers and 5% must be affordable to moderate-income buyers. Similarly, when new rental developments are built, 3% of those units must be affordable to low-income renters and 3% must be affordable to very low-income renters.
The updated ordinance goes into effect Sept. 15.
Housing activist: Inclusionary zoning is not the answer
Buchanan, whose group opposed the updates to the IHO in their reading and revision stages, described inclusionary housing practices as “a Band-Aid” as opposed to a true solution.
“Instead of changing the status quo around what kinds of housing we allow to be built, we simply demand builders to provide more affordable housing,” Buchanan said.
Placing the burden of building more affordable housing on builders discourages the construction of housing of every kind, Buchanan said.
Instead, he said, “We really need to start talking about rolling back exclusionary zoning so that people can build missing middle homes, apartment buildings (and) townhomes, with smaller setbacks (and) smaller parking requirements across the board.”
Exclusionary zoning is predicated on keeping housing of different economic values and types — such as single-family and multi-family homes or apartments — from being built, Buchanan said.
While inclusionary zoning incentivizes the creation of more affordable housing, rolling back exclusionary housing involves loosening restrictions on what can be built in specific areas of the city.
With those restrictions loosened, Buchanan said, it’s easier to build more housing for people at every level of income, which in turn lowers the costs for consumers at most economic levels.
Buchanan said building as much housing as possible is the best strategy for keeping people housed.
Buchanan said the city could also look into other strategies that take the financial burden of building affordable housing off of builders to subsidize affordable housing, which he said “we absolutely need to do.”
Those strategies focus on changing the means of value capture of affordable or market-rate homes. Buchanan cited a UCLA Lewis Center for Regional Policy study to explain how shifting costs onto developers can harm the growth of housing.
According to the study, when cities allow more development, value is created. That value goes to the developers when the city does nothing.
The city can capture value in the production of housing when it is used for public benefit. In policy terms, “this often means that cities should only make it easier for developers to build market rate units (enabling private gain) if they also build some low-income units (delivering public gain).”
Buchanan said policies such as upzoning — the rezoning of existing parcels of land to allow for the construction of more housing on less land — could help alleviate some of SLO’s housing and space shortage problems in a way that will not disincentivize new building or drive up home prices.
With more housing in the city as a result the city would be able to raise property taxes enough to subsidize housing, Buchanan said.
If the city is determined to set aside affordable housing under a more inclusionary philosophy, Buchanan said, it should be weaker than the current IHO.
“Maybe a dialed-back version of the policy could be less burdensome to home builders,” he said.
People’s Self-Help Housing CEO praises funding from developer fines
People’s Self-Help Housing president and CEO Kenneth Trigueiro said some developers may opt out of building in SLO because of the fines they could face in lieu of building affordable units, but the in-lieu fines will ultimately benefit affordable housing efforts.
He said the nonprofit organization’s Broad Street Place and Tiburon Place developments will create 40 and 69 new affordable apartments, respectively.
Those benefited from developer fines under the previous iteration of the IHO, Trigueiro said.
According to Trigueiro, affordable housing funding created by the IHO gives housing organizations “ big leveraging value” that allows them to apply for more state grants, he said.
“(The city) contributing some some local dollars really boosts us alongside of other applicants that are going to the state for an allocation of tax credit financing,” he said.
Trigueiro agrees that the city and local developers must do more to fill in “missing middle” housing
However, he said the solution to SLO’s housing problems doesn’t need to be exclusively based on rolling back exclusionary zoning or implementing only inclusionary housing policies.
Both are “pieces of the puzzle,” he said, adding that there is no “silver bullet” that can resolve the city’s housing woes.
“I‘m hopeful that the community at large will continue to work on creating other sources of funding for affordable housing” such as bond measures, interest and sales tax, Trigueiro said, “so we don’t have to depend on just one thing or just a couple things.”
SLO Chamber of Commerce supports updated housing ordinance
The city and Chamber of Commerce “share the same ultimate goal” of creating a regulatory framework for different housing needs of the community, Dantona said.
The chamber had initially advocated for a “more holsitic approach” to the IHO update, recommending the construction of more housing to satisfy the housing needs of people at all income levels.
“To address our housing crisis, we need to consider the entire housing ecosystem when policy is being developed,” the chamber said on its website. “This update to the inclusionary housing ordinance is an opportunity to get needed housing of all kinds built, not just secure a fixed number of deed-restricted Affordable units.”
The chamber also recommended that the updated ordinance pursue more funding sources for affordable housing beyond fees of new construction and support affordable housing developers with a tiered fee structure, instead of the flat fees levied by the current ordinance.
Dantona said the final version of the IHO was more in line with the chamber’s goals.
“In particular, we appreciated the city’s commitment to ensuring incentives for more compact units will be incorporated into other policies and look forward to continuing to work together to make that happen in a timely manner,” he said.
This story was originally published September 5, 2022 at 5:00 AM.
