SLO is changing the way it thinks about affordable housing. Here’s how
The San Luis Obispo City Council will hear an updated inclusionary housing ordinance Tuesday evening, overhauling the policy for the first time in more than two decades.
The ordinance was initially adopted in 1999 to encourage developers to build affordable housing in new developments, or, in lieu of building the required housing, pay fees to the city to pay for future affordable housing projects.
City Director of Community Management Michael Codron said while the city has already met its Regional Housing Needs allocation target for above-moderate housing, which informed the city’s decision to update the IHO, it has not met its goals for lower-income ranges.
“Where we really need to focus is on the very low, the low and moderate income,” Codron said. “Fundamentally, that’s where the recommendation currently in front of the City Council to increase the inclusionary housing requirement comes from, and we have other programs that we’re working on that are identified in our housing element.”
Currently, developers can meet IHO requirements by building affordable units, dedicating property for development of affordable housing to the city’s housing authority or a non-profit housing builder, paying an in-lieu fee or a combination of these three methods if it meets the community development director’s approval.
There are several key differences between the existing ordinance and the recommended update, as laid out by the city’s website on the subject.
The update will adjust the inclusionary requirement to a 10% requirement in for-sale developments and 6% requirement for rental developments.
This means 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.
“This is an increased requirement for some and a reduced requirement for others,” Codron said.
Codron called the Planning Commission’s recommendation to the City Council a “middle of the road proposal for increasing affordable housing in the city,” as these proposed rates are less than the 15% inclusionary rate for sale and rental developments suggested by the 2020 Affordable Housing Nexus Study by David Paul Rosen & Associates.
Projects with less than 10 units will have the option to pay an in-lieu fee for fractional requirements rather than rounding to the next whole number to determine if it meets the inclusionary requirement.
Those in-lieu fees would be calculated by square footage of habitable space within the development project under the new updated plan.
Mixed-use development projects would become subject to the inclusionary housing ordinance for both residential and non-residential portions of the project.
Equity share units will be provided as an option for affordable housing units that exceed the project’s requirement for inclusionary units.
Under an equity share agreement, buyers of affordable dwellings enter an agreement with the city that guarantees affordability for at least seven years after the initial date of sale. When the property is resold, “the agreement ensures that the city’s equity share returns to the city for use in other affordable housing developments,” according to SLO’s 2021 Affordable Housing Standards.
Table 2A will also be removed from the ordinance entirely, which Michael Codron, director of community management for the city of SLO, said is the “biggest change” proposed in the update.
Under Table 2A, the city’s priority was to encourage the construction of market-rate homes with a requirement for the minimum number of inclusionary units a developer must build, with the intention of balancing the profit margin of developers with the city’s need for affordable homes.
“What we’ve learned over the years of monitoring the performance of Table 2A is that those homes do not sell at a price point that’s affordable to even moderate income households, which is defined as a household that’s earning 80 to 120% of the area median income,” he said.
He said Table 2A’s effect has not been what the city had envisioned for the ordinance, resulting in the city underutilizing deed-restricted affordable housing in its new developments.
That includes the “missing middle” range of housing prices. Codron said new developments like Avila Ranch or San Luis Ranch, which are supposed to meet affordable by design criteria, don’t really fill in that middle point because the prices are still too high.
“(The) missing middle is a different type of strategy that recognizes that throughout California at least, but also other places, we have an abundance of R1 single-family zoning, and that’s not the most efficient use of land when you’re trying to ensure that, everybody has a home,” Codron said.
“In order to achieve the affordable housing goals included in our Housing Element, we need to see more deed-restricted, affordable housing constructed,” Codron said in an email.
This story was originally published July 19, 2022 at 10:00 AM.
