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Severe housing shortage is keeping people out of SLO. Is building up the answer?

San Luis Obispo is famous for its scenic, rolling hills — notable both for their beauty and lack of development.

But in a city that prides itself on preserving open space and keeping homes off hillsides, that leaves only a couple of options for developers: build vertically or squeeze units onto smaller lots.

A sizable number of the housing units currently under construction in San Luis Obispo are apartments, condominiums and townhomes — high- and medium-density developments that condense more living spaces onto a single site.

The biggest housing projects in the city pipeline, such as San Luis and Avila ranches, are still mostly made up of single-family homes. But for renters and residents not yet ready for that kind of housing, denser units can be attractive.

The big question is, will these kinds of developments make San Luis Obispo affordable? The short answer: No.

However, more units may make take pressure off the city’s tight housing market, according to developers and housing policy analysts.

“There’s a market for everything,” developer Chuck Braff said. “There’s a shortage throughout the board.”

Need for higher-density housing in SLO

San Luis Obispo city codes define high-density housing as residential development with up to 24 units per net acre. Medium-density housing complexes contain up to 12 units per net acre.

This category of housing is attractive to younger, middle- to lower-income residents, from students to service workers to young couples. And it’s of particular importance in areas with an inflated cost of living, where the barriers to purchasing a home are high.

BEHIND OUR REPORTING

Why did we report this story?

The Tribune is exploring housing affordability in San Luis Obispo — specifically, who can afford to live in the city and who cannot.

In a city that prides itself on keeping development away from its prized open spaces, building tighter and vertically would seem to be strategies developers might consider to keep costs within range of middle-class residents.

But will that strategy work? That’s what we wanted to know.

Click the arrow in the top right to read more.

How we reported this story

For this story, we started by attending a San Luis Obispo City Council meeting to learn more about how leaders and residents view tall developments proposed for downtown.

We then interviewed three private developers, two affordable housing advocates, San Luis Obispo’s Community Development director and a UC Berkeley housing policy analyst to get varied perspectives on building denser housing.

For more information on why it’s so challenging to build housing in California, check out a policy paper written by David Garcia of UC Berkeley’s Terner Center for Housing Innovation, who was interviewed in this story.

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This story is part of a series on SLO County housing and affordability. Subscriptions from readers like you support our work to bring you important stories such as this.

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In San Luis Obispo, about 62% residents rent their housing, according to U.S. Census Bureau data. The median household income — meaning half of residents earn more money and half earn less — is $49,640.

Cal Poly students clearly sway the data, as 56.5% of family households earn more than $75,000 per year, while 54.5% of nonfamily households earn $35,000 or less.

Even so, only a small group of San Luis Obispo residents can likely afford a median-priced $728,100 home.

Despite the clear need for quality rental and condominium units, only about 22% of the city of San Luis Obispo’s zoned land is designated for multi-family housing, according Michael Codron, Community Development director. In contrast, 61% is zoned for low-density, detached single-family homes.

“It is also worth noting that the city also allows multi-family development as part of mixed-use projects in all of its commercial zones except business park,” Codron wrote in an email.

Why denser housing is a tough sell

Historically, denser housing and developments have been a polarizing issue in San Luis Obispo.

Younger residents — many of whom have trouble finding affordable places to live — often favor taller buildings and more housing. Older residents who’ve lived in the city for decades tend to oppose increased development, saying they’re concerned the area will lose its character and hillside views.

This dynamic was evident at a September City Council meeting, where residents commented on plans for a six-story, mixed-use building at the corner of Marsh and Chorro streets that would include 50 units of housing.

Twenty-five percent of the units would be kept moderately affordable, with income-restricted studio apartments going for $1,275 per month, one-bedrooms for $1,400 and two-bedrooms for $1,600.

About half of the residents who spoke during public comment were in favor of the development, while the other half were against it.

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A rendering of the proposed buidling at 1144 Chorro St. Ten Over Studio

“I look at this, and I think, ‘This doesn’t look like San Luis Obispo at all,’” said Betsy Schwartz, a 40-year resident of the city. “Six stories in San Luis Obispo is outrageous. I’m very concerned that this is even on the agenda. That’s very scary for a lot of people.”

The younger residents who addressed the council said they want more housing and walkable neighborhoods.

Krista Jeffries — who recently started the SLOCo YIMBY group to push for housing affordability — said she and her family purchased a house in Grover Beach because they couldn’t afford anything in San Luis Obispo.

“My husband works a good-paying job, but we were unable to find any suitable housing here,” she said.

Jeffries spoke favorably of the project, saying it would “let more people live the SLO life.”

The difference in opinion on this issue can be expected any time a larger-scale project is proposed in San Luis Obispo. For developers, the backlash can be enough of a deterrent to make them ditch their plans or not even consider them to begin with.

Nick Tompkins, a San Luis Obispo developer, said community opposition and the potential for delays forced him to remove the housing element from a proposed 75-foot-tall project near the corner of Monterey and Santa Rosa streets.

The 2016 version of the project called for multiple buildings, including one with 60 units of Peoples’ Self-Help workforce and affordable housing. But the development ultimately shrunk to a 45-foot, three-story building with office, retail and restaurant space that’s under construction now — and the housing component was lost.

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When housing didn’t pencil out, developer Nick Tompkins scaled back this building now under construction at 1101 Monterey Street in downtown San Luis Obispo. Laura Dickinson ldickinson@thetribunenews.com

“Politically, it just looked like, at that time, the battle was going to be long and tough,” Tompkins said of the groups opposing the project.

With the reduced size of the development, housing no longer made sense economically, he said.

“That math would’ve been difficult to make work,” Tompkins said. “It’s not a simple thing to just resolve.”

How developers can help

Properly zoned land can sometimes compel homebuilders to include denser housing in their projects.

When developer Robbins Reed acquired land for Noveno — a 67-unit housing development off Orcutt Road — the property included pieces of land that were zoned for medium- and medium-high density units, said Aaryn Abbott, vice president.

So, they configured the project to include the Vintage, an additional 105-unit development that offers studios, one-bedroom apartments and townhomes.

“We wanted to have on the overall tract a mix of uses,” Abbott said.

However, for-rent housing must compete against for-sale units, which can rake in premium prices, he said. High land costs make all development challenging, but especially rental projects.

“It is hard to get for-rent projects to pencil in San Luis,” Abbott said.

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High-density housing under construction on Orcutt Road includes two developments: Noveno and The Vintage. Noveno is a single-family home project and The Vintage is apartments and townhomes. Laura Dickinson ldickinson@thetribunenews.com

For their rental units, Robbins Reed is targeting young professionals, including MindBody, Cal Poly and government employees, Abbott said.

He said prices will be comparable to those at De Tolosa Ranch, an apartment development near the intersection of Madonna and Los Osos Valley roads. A two-bedroom, two-and-a-half-bathroom unit costs $2,475 per month, according to the complex’s website.

“To make those things (rentals), developers have to charge high rent,” Abbott said.

Off Broad Street, developer Chuck Braff is wrapping up the first 20 units of townhome-style condominiums that make up The Yard.

Twelve of the units have already been sold at the site, which was previously home to the San Luis Co. Garbage Yard.

This kind of denser housing makes economic sense to Braff, as more people per square foot equals more value for the builder, he said.

“At this location, this product fits really well here,” he said.

Braff’s 1,500-square-foot, two-bedroom, two-and-a-half-bathroom condominiums will sell for $550,000 to $720,000. That’s a price tag that’s attractive to people who can’t afford comparably sized $950,000 homes downtown, he said.

“They can’t believe the square footage they’re getting for the price,” Braff said.

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Chuck Braff is building a 43-unit housing development called The Yard off Victoria Avenue. This is the master bedroom in a two-bedroom condo. David Middlecamp dmiddlecamp@thetribunenews.com

Braff is also planning a large rental housing development at the old Atoll business park on Laurel Lane. The original project was to include more than 600 units of rental housing.

“We went into this building through the lens of attainable, affordable housing, “ Braff said.

But Braff and the other developers have since decided to keep the sprawling industrial building that occupies a large chunk of the site, which will reduce the number of units, he said.

Initial planning for the development revealed a need for additional office and industrial space, which prompted developers to augment the project design, Braff said.

The plan still includes housing units, which will be more affordable through efficient design and shared amenities, he said.

“It’s a beautiful property,” he said. “People will get to live there and work there.”

Higher density may not be affordable

Although denser developments are seen as potentially more affordable, that’s not true across the board in San Luis Obispo.

“The new units that are coming online are affordable only to upper levels,” said David Garcia, policy director for UC Berkeley’s Terner Center for Housing Innovation.

Private developers are only building new housing for high-income earners, while low-income residents are largely reliant on nonprofit- and government-funded units, Garcia said.

“No matter how much supply you have, the market is never going to provide housing for the lowest levels,” he said.

Building in California tends to fall into two categories — high-priced housing on the private market and a limited number of affordable units that are funded by nonprofits or government agencies, Garcia said.

This means few developers are building housing projects targeted at middle-income residents, he said.

To help encourage this kind of construction, local officials should open up more areas for development and encourage the construction of different types of housing, such as duplexes, triplexes and fourplexes.

“There’s a whole segment of the market developers would love to serve,” he said.

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Chuck Braff is building a 43-unit housing development called The Yard off Victoria Avenue in San Luis Obispo. David Middlecamp dmiddlecamp@thetribunenews.com

John Fowler, president of nonprofit Peoples’ Self-Help Housing, said higher-density housing is frequently cheaper for developers to build and provides supply needed to soften prices.

“We’re not creating more land, so we have to be creative with the land that we have,” he said.

Even so, new housing won’t have an immediate impact on prices for most people, Fowler said: “It’s still such a big gap between the market and what people can afford.”

Jerry Rioux, executive director of the San Luis Obispo County Housing Trust Fund, said most of the development he sees in San Luis Obispo is still low-density, meaning new single-family homes that are unlikely to be sold at an “affordable” price.

Because of that, officials must push developers to build affordable housing, Rioux said. It won’t occur naturally.

“The only way to build affordable housing is through a series of incentives and requirements,” he said.

Fowler agrees — intentional public policy is needed to create the kind of housing people need.

“Just waiting for supply and the market to soften isn’t going to get us where we need to be,” he said.

Lindsey Holden writes about housing, North County communities and everything in between for The Tribune in San Luis Obispo. She became a staff writer in 2016 after working for the Rockford Register Star in Illinois. Lindsey is a native Californian raised in the Midwest and earned degrees from DePaul and Northwestern universities.
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