SLO County is killing its affordable housing fee. Here’s why that’s a win for the wealthy

Just when the county’s affordable housing fee is starting to make a real difference, the county Board of Supervisors votes to abolish it.

The reason?

“I don’t think it’s been a success,” Supervisor John Peschong said at Tuesday’s board meeting. “It’s not making as much of an impact as it should.”

Here’s what this “failed” program has accomplished: Over the past two fiscal years, the inclusionary housing fee generated nearly $1.2 million and helped finance 222 new units.

Try telling the occupants moving into those homes that the program is a failure.

The decision to drop the fee isn’t quite final — it will take another vote to repeal it — but as the head of People’s Self-Help Housing put it, “The writing is on the wall.”

How the affordable housing fee helps

The fee hasn’t generated ginormous sums of money — in large part because it only applies to high-end homes with lots of square footage.

It’s valuable for a different reason: It helps nonprofit home builders leverage other sources of revenue.

Even a small amount of local government funding earns points in the highly competitive application process for state financing, explained Kenneth Trigueiro, CEO and president of People’s Self-Help.

Losing that support is a step back for nonprofit builders, he said.

“I would hope they could at least leave the inclusionary housing ordinance in place longer, while we all work further on developing better resources or additional tools for financing projects,” Trijueiro wrote in an email.

That appears unlikely.

Three of the supervisors — Peschong, Debbie Arnold and Lynn Compton — made it clear that they want the ordinance scrapped immediately.

Supervisor Dawn Ortiz-Legg argued unsuccessfully to delay a decision for a few months until an alternative plan can be developed, while Bruce Gibson supported keeping the ordinance for the time being.

Supervisors did say they are open to finding an alternative funding source — and might put an affordable housing bond measure on the ballot. But passage is far from guaranteed.

Homebuilders say it’s a burden

The latest version of the affordable housing fee was approved in 2019, with the understanding that it would be repealed in three years if a “broad-based” funding option was in place by then. But then COVID hit, and the effort to find replacement funding stalled.

Given the circumstances, it would make sense to keep the fee for at least another year or two, while alternatives are pursued.

But the local building industry opposes that; several members of the Home Builders Association urged the board to drop the fee now, given increasing costs of materials, regulatory hurdles and other challenges facing their industry.

“Our projects our struggling to pencil...,” said Lindy Hatcher, executive director of the Home Builders Association of the Central Coast. “We can no longer bear this societal issue alone. Neither can our homeowners and renters (who) ultimately pay these fees.”

Yet the fee is applied only to a small subset of units: larger, more expensive homes affordable to wealthy homebuyers. Units under 2,200 square feet are exempt.

Most new homes fall into the exempt category. Over the past two fiscal years, the county issued 595 residential permits, and the fee applied to only 90 of those, according to the county Department of Planning and Building.

And frankly, the fee is modest compared to what some other jurisdictions charge. For a 3,000-square-foot home, it’s $8,400 — not a huge burden for those who can afford homes going for $1 million and more.

Alternative strategies

Still, opponents of the fees believe there are more equitable ways to increase the supply of low-cost housing.

Some examples: Density bonuses for developers who build affordable homes. (The county already offers those.) Rezoning land for residential use. (The county considered that, and nothing much came of it.) Donating county-owned lots for affordable housing projects. (Where, exactly?) Using general fund money. (What programs would be cut to come up with that money?)

A bond measure is the most promising idea, though it would require a two-thirds majority vote to pass.

The county did some public opinion polling in March 2020, and the response was fairly positive. Two weeks later, though, the COVID shelter-in-place order was issued, and the idea was put on hold.

It’s time to revive it, and if possible, to put a bond measure on the November 2022 ballot.

Given the current economy, another bond measure may seem like a lot to ask of voters, but the amount property owners would pay is reasonable. Under the 2020 proposal, it would work out to $3.85 per $100,000 in assessed value. For a $500,000 home, that amounts to $19.25.

That’s a small price to pay to ease one of the most critical problems in the county.

We recognize that the current board majority is reluctant to ask voters to approve any type of tax increase — Supervisor Arnold has already indicated that she’s opposed to that — but we’ve reached a tipping point.

We can’t afford waiting another four or five years for the board majority to finally get around to taking some meaningful action on housing, all the while wringing their hands and paying lip service to the need for lower-cost homes as prices continue to rise.

We’ve waited long enough. If supervisors don’t believe an affordable housing fee is a success, it’s time they delivered an alternative.

This story was originally published March 20, 2022 at 5:30 AM.