Most elected leaders in our community talk about the need for more “affordable” housing. In fact, the San Luis Obispo City Council last January made “housing” one of its top priorities for the 2015-17 budget cycle. It’s easy to say we want housing, but do we put our money where our mouth is? What innovative or creative options have we offered to our local builders as of late?
Our city provides funding through in-lieu fees paid to the city by developers as an alternative to the production of inclusionary housing, to be used in the acquisition, construction or rehabilitation of affordable housing. An inclusionary housing unit is a dwelling that meets the city’s affordable housing standards, which means the housing will be built, as a requirement for approval of a project, by developers. It can then be purchased or rented by a household that meets specific income requirements, which typically has a very low, low or moderate income.
So how do we as a city leverage resources and incentivize builders to build truly affordable housing? Inclusionary is a start, but we can’t realistically expect to meet the number of units needed through this program alone. Inclusionary policies categorically drive up prices in the next tier of affordability, contributing to a new lack of affordability in workforce housing. Let’s face it: Builders are investors, and they are in business to make a profit. Most lenders won’t take the risk of financing developments without the security of a positive financial outcome.
What better way to encourage them to build affordable housing than to offer something that makes it so attractive they can’t resist the opportunity to build more affordable units by design? We can start by reducing our impact and permitting fees — such as transportation, water and wastewater fees — to get their attention. Partnering on infrastructure costs and standardizing sub-standard lot sizes would go a long way. I can’t imagine any builder I know who would not be enticed by such an opportunity. It sounds easy, doesn’t it? Well, this is where politics come in, which typically is the fly in the ointment.
This approach would be called “investing in our community.” It requires a willingness to sacrifice the upfront revenue from the builder to provide housing, while waiting for that return on the investment to mature in the form of ripple and multiplier effects such as increased jobs and tax revenue to the city. That takes a visionary mindset with some level of risk and the courage to embrace the leap of faith.
The county itself continues to raise fees, as it did in November when it increased fees for environmental impact reviews; development plan check and inspection; track maps, parcel maps and lot line adjustments; and pre-application meetings with planning and building staff. This sends a clear message that the county is not committed to helping the housing shortage in the unincorporated communities.
San Luis Obispo, like the county, is so consumed with immediate revenue gratification for new and ongoing programs and services that it can’t see the forest for the trees and invest in our future. Until it can, we will continue to be deficient in the type of housing our residents need.
A recent study (2015 Opening San Diego’s Door to Lower Housing Cost — Fermanian Business & Economic Institute at Point Loma Nazarene University) exposes that the cost of regulation amounts to about 40 percent, on average, across the various price segments. I realize regulatory costs vary considerably among municipalities; however, this study provides a basis to address the paradigm builders must operate under.
Regulatory costs can include the statutory fees of building permits, water and sewer connections, schools, traffic, mapping, environmental review, etc. — ultimately culminating in an exhaustive and intense public review process. The time involved in approving a housing project is often prolonged and complicated, and this cost driver can increase the price of a new house by as much as 15 percent.
Regulatory reforms are needed to preserve the public objectives for affordable housing. That can be accomplished by lowering costs, ensuring permit approval times and replacing full cost recovery with a flat fee for standardized building. Reasonable solutions can and should be implemented to pare down the cost of housing, which has been the greatest single impediment to fulfilling our housing potential.
Dan Carpenter is a member of the San Luis Obispo City Council.