San Luis Obispo County leaders will consider new ways to fund affordable housing throughout the region — including special taxes and bond measures.
The county Board of Supervisors on Tuesday voted unanimously to direct staff to explore new ways to pay for low- and very low-income developments, including a transient occupancy tax hike, a sales tax increase and a bond measure.
Since 2008, the county has funded affordable housing developments through an Inclusionary Housing Ordinance. The program requires that builders construct affordable units as part of their projects, pay in-lieu fees into an affordable housing fund or donate land to be used for cheaper housing.
Most of the county’s seven cities also have some version of this program — only Grover Beach and Paso Robles lack inclusionary housing measures.
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Developers building housing in unincorporated parts of the county typically select the cheaper option and pay a fee rather than construct affordable units.
The fee is charged per square foot and was originally set at 75 cents with plans to increase it every year until it topped out at $3.75. But after the housing market crash and the Great Recession, supervisors opted not to increase the fee until 2016, when it was set at $1.50 per square foot.
From 2009 to 2017, the affordable housing fund has raised $1,143,559 in fees, which has helped build 377 affordable housing units, according to the county. Housing nonprofits primarily leverage the money to acquire tax credits and other funding.
Supervisors voted 3-2 to reject a fee increase in December, in spite of recommendations from a housing study that suggested raising and restructuring it.
Housing leaders push for more funding
On Tuesday, a coalition of economic and housing organizations — including the the San Luis Obispo Chamber of Commerce, the Home Builders Association of the Central Coast and Peoples’ Self-Help Housing — came together to push supervisors to consider a revised fee structure, in addition to other sources of funding.
The group, known as the Coalition of Housing Partners, estimates $2 million to $4 million is needed every year to fund affordable housing — developers’ fees typically bring in $100,000 to $150,000 annually, according to the county.
“We have an urgent problem which requires swift and ongoing action,” said Melissa James of the San Luis Obispo Chamber of Commerce.
Supervisors to explore new funding
County staff suggested several potential affordable housing funding options, including a vacation rental impact fee, a cannabis tax and an affordable housing revolving fund that would draw on general fund dollars.
The board favored looking into a transient occupancy tax hike, a special sales tax and a bond measure, along with an Inclusionary Housing Ordinance fee restructure.
Supervisors Debbie Arnold and Lynn Compton both spoke against potentially raising the developers’ fee. Even so, Supervisor Bruce Gibson pointed out that no one spoke against the fee during public comment.
New taxes or bonds would likely require voter approval. It’s unclear how affordable housing would be funded, should a ballot measure fail and supervisors continue to reject fee hikes.
Arnold and Compton have historically opposed inclusionary housing fees, which they view as a tax on county homebuyers.
“Sometimes, fees make or break the deal,” Arnold said.
The board will likely consider new affordable housing funding mechanisms again in December or January, once staff has prepared recommendations.
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