Workforce housing was recently addressed by The Tribune. The editor rightly pointed out that workforce housing should be a policy priority for cities and counties. The Board of Supervisors enthusiastically agrees. We recently put together an ad-hoc committee to address this issue, consisting of two supervisors (Frank Mecham and myself), and members of the Home Builders Association, architects and other industry experts.
As we begin to discuss solutions, it’s important to distinguish “workforce housing” from “affordable housing.” When we talk about housing that is affordable, often a different picture comes to mind, where huge apartment complexes are built close to quiet neighborhoods. The kind of housing I am speaking of is different: stand-alone, three bedroom/two bath units that are affordable to those who meet workforce housing income levels.
It may be surprising to see who would qualify for workforce housing. As defined in San Luis Obispo County Housing Element, workforce housing applies to those households earning between 120 percent and 160 percent of area median income. The amount varies by size of household. As an example, a family of four that earns between $90,500 and $120,640 per year falls into this category. A three-person household could make between $81,450 and $108,560. A two-person home qualifies at $72,400-$96,480. In San Luis Obispo County, it is difficult for families in these brackets to find homes they can qualify to buy.
Who are these families? Typically, these are our public servants. Police officers. Firefighters. Nurses. Teachers.
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Workforce housing is a different category than “affordable,” and it applies to a large swath of our community. We need to provide housing that is both affordable and desirable for this group.
So why is it a problem that this middle class is shut out of the real estate market? The answer lies in geography and taxes. The people earning at this level are desperately in need of tax relief, and a mortgage deduction is a significant strategy. When people cannot afford to live in communities in which they work, they are forced to purchase homes in neighboring communities where housing is cheaper. This has consequences for all of us.
When people choose to live in another community, their dollars are not spent in our businesses. When they live elsewhere, they impact our infrastructure but do not pay taxes toward its upkeep, shifting the tax burden to the residents of our community. When workers have to commute, a disproportionate part of their incomes must be spent on transportation, making them more costly employees, which we in turn pay for through higher prices. Services go where the people are, so over time service levels will shift toward these communities and away from ours. And in the long run this translates into a shift in public and private economic and political power. Money goes where the people are.
Environmentally speaking, there is the obvious increase in pollution, but also the cumulative impact on public money that we direct toward projects like green belts, agricultural preserves or recreational opportunities.
In short, workforce housing benefits not only these middle-class families, it benefits the entire county, both qualitatively and quantitatively.
Why don’t developers just make homes that meet this need, since there is such high demand?
It’s simple economics. There is a “sweet spot” in residential housing, where the maximum profit lies in homes that are typically 2,500-3000 square feet, based on per square foot construction costs and fees. We often hear that reducing fees would encourage more workforce housing-type projects. That’s obvious, yet can be difficult from a policy standpoint if we simply reduce them across the board. Are there other creative solutions?
As it stands now, our inclusionary housing requirements discourage developers from building workforce housing. One idea is to exempt housing that would qualify as workforce from the in-lieu fee, since it is already meeting the goal by definition. Another would be to allow “granny units” to fulfill the inclusionary housing requirements (which would also allow buyers to make income off their own properties, helping them pay their mortgages.). We could also graduate the fee structure to favor smaller square footages, instead of having a flat fee per square foot.
The ad hoc committee will look at many solutions and make recommendations to the Board of Supervisors in the coming months.
If we wish to encourage workforce housing, our community must buy in to its value, as any changes in policy would be subject to public review.
It is my hope that by opening the discussion here and continuing to engage the public in finding real solutions, our county can make real progress toward bringing workforce housing to bear.
Caren Ray represents the South County on the Board of Supervisors.