Supervisors repeal SLO County’s built-in funding for affordable housing
The San Luis Obispo County Board of Supervisors squashed a funding source for affordable housing projects on Tuesday.
In a 3-1 vote, the board voted to repeal the inclusionary housing ordinance that required developers to make 8% of their housing projects affordable or pay a fee based on the home’s square footage. Fees were then deposited into a fund used for affordable housing projects in the county.
Supervisors John Peschong, Debbie Arnold and Lynn Compton all voted for the repeal, with Peschong and Compton saying that developers would pass the fees onto home buyers, driving up the cost of housing in the county.
Supervisor Bruce Gibson cast the lone vote in favor of the ordinance. He noted that the fee only applied to larger developments and urged the board to find funding to replace the fee before repealing it.
Supervisor Dawn Ortiz-Legg abstained from the vote but said she’s collaborating with for-profit and nonprofit developers to support the construction of affordable housing in the county.
Did the ordinance raise enough money?
In 2019, the board expanded in-lieu fees imposed on developers who didn’t build affordable units into their projects. The policy’s goal was to raise $2 million to $4 million to develop affordable housing in SLO County.
Fees were tiered based on home size, starting at $8 per square foot and capped at $16 per square foot. Homes smaller than 2,200 square feet were exempt from fees, in order to keep them affordable for the workforce, according to county documents.
By March 2021, the fees had generated about $1 million and financed 222 affordable housing units. Still, the board directed staff to start the repeal process for the policy.
As of Tuesday, about $2 million was left in the fund. The county has committed about $1.3 million of those funds to organizations that build affordable housing, leaving $737,987 in the fund for future use, according to county staff.
Because the ordinance didn’t generate $2 million to $4 million as planned, Peschong said he though the program failed.
Gibson, however, thinks the ordinance worked, as the 2019 fee adjustments led to a “dramatic increase” in funds, he said. He also said the county’s money goes a long way, as nonprofits can leverage the funds to apply for state funding.
Krista Jeffries, a community organizer at YIMBY Action, said it’s too early for the board to decide if the ordinance generated money effectively — because it was passed right before the COVID-19 pandemic.
“The policy was only in effect for three years, and two of those years were under quarantine from COVID-19 when everything else stopped,” Jeffries said. “Of course it didn’t raise a lot of money.”
Jeffries said repealing the ordinance before establishing a new funding source is “premature and irresponsible.”
The fee “could have been streamlined and tweaked to make it more effective and easier on builders,” she said.
She noted that the county could also change its zoning code to facilitate building.
“It’s not a tool that should stand on its own,” Jeffries said.
How do fees impact SLO housing?
Ken Trigueiro, president of People’s Self Help Housing, said his organization used funding from the fees for multiple projects.
A few hundred thousand dollars supported the construction of 50 units of affordable housing in Pismo Beach and 36 units of housing for low-income seniors in Templeton.
“It’s not a huge amount, but it was definitely helpful,” Trigueiro said. “I will be sorry to see this go.”
Trigueiro said that receiving local funding makes the organization more competitive when applying for state funding.
But Peschong and Compton were convinced that developers would pass the fee onto home buyers — making housing more expensive and defeating the purpose of the ordinance.
Peschong called the ordinance a tax, because its purpose is to raise money, while a fee compensates for the cost of providing a service.
“Taxing ourselves into affordability is nonsense,” Peschong said.
Jim Moresco, the chief operations officer at Midland Pacific Homes, said developers have to account for every new cost imposed on a project. They set home prices based on the project’s cost — so the more expensive building costs, the more expensive the home.
“As a home builder, costs continue to spiral out of control,” Moresco said. “We have no choice but to pass it on to the home buyer.”
Lindy Hatcher, the executive director of Home Builders Association Central Coast, agreed.
“The more expensive it is to produce housing, the less housing is produced,” Hatcher said. “Taxing builders to help relieve a housing crisis is like taxing grocers that provide food because people are hungry. It just doesn’t make good economic sense.”
Gibson, however, noted that the fees only apply to expensive homes.
Gibson’s office used Redfin to review prices and size for 282 homes sold in San Luis Obispo County from April 25 to May 25. He found that 74% of those homes were smaller than 2,200 square feet, and therefore exempt from the fees.
Homes from 2,200 to 2,500 square feet made up 9.2% of the homes. Their median price was about $1.1 million, which Gibson said is “not affordable in any way, shape or form to anyone in the workforce.”
“We have no need to encourage production of luxury homes,” Gibson wrote in the report.
Like Jeffries, Gibson said it was irresponsible of the county to repeal the ordinance without replacing it with a new funding source.
Ortiz-Legg agreed that it’s critical for the county to support affordable housing.
“What we’re talking about is whether or not our county grows and thrives,” Ortiz-Legg said. “Affordable housing is a major factor on how we house our families, how we house our seniors, our children, our workforce.”
However, the inclusionary housing ordinance isn’t the solution, she said.
After meeting with nonprofit and for-profit developers, Ortiz-Legg said she wants to see a “multi-prong approach” to supporting affordable housing, with multiple revenue streams, updated zoning rules, a streamlined permit process for building and more.
