Is SLO housing market really ‘doing well’? That depends on your definition

Building in San Luis Obispo is “hot,” from what I hear. “Way over the top…doing very, very well,” according to the City Council.

The Tribune wrote about how, on the “unrestricted market,” even smaller homes are unaffordable to most workers — homes that are intended to be affordable by design.

But what makes us think the market is “doing well”?

“Wellness” tends to be used holistically, referring to the optimal function of all components in a system. A body is not “well” when only one part is benefiting at the expense of the others.

In our housing system, established homeowners and property heirs are “doing well.”

Can we say the same for everyone else?

What makes us think our market is “unrestricted?” Is it because SLO permitted 1,000 new homes from 2019 to 2020?

If the city meets its state-imposed housing goals for 2028, it will achieve a 350% increase in new home construction from the previous decade. We must be building a lot, right?

Not really. Historically, our best construction days are behind us. In the 1960s, SLO added 3,000 homes or 14 homes per year per 1,000 residents, according to an analysis of tract-level housing units using US Census data published in the journal Nature.

In the 1970s, the city added 5,287 homes or 18 homes per year per 1,000 residents.

After all that, we did it again!

In the 1980s, we added 3,500 homes or 10 homes per year per 1,000 residents. Even with increases in population, we were building more homes decades ago — and more affordable homes — at a similar rate that Houston builds today, where housing costs less now in real dollars than it did in 1980.

From 1940 to 2000, San Luis Obispo averaged over 10 homes per year, per 1,000 residents. In contrast, for the last 20 years, we’ve built less than half that. Why? Who pumped the brakes on housing our own people?

Contrary to what some might think, we actually have plenty of restrictions on the market.

It’s illegal to build multifamily homes on much of the city’s land. If you want to house humans, you’re required to set aside some pricey land for housing machines as well. What you are allowed to build has restrictions on heights, densities, open space, landscaping and more.

Any new construction undergoes an extensive discretionary review process, largely by unelected bureaucrats. This process can take years, lead to expensive design changes, and is largely out of budget for anyone who can’t afford their own legal team or didn’t inherit land.

Add impact fees on top of all that, at tens of thousands of dollars per door. That doesn’t sound unrestricted to me. Think about this in terms of how many people would like to call SLO their home: retirees, new graduates, not to mention the 40% of SLO’s workers who live outside the city.

What about people who are already here and need a different place to live, like newly married couples? At SLO’s current vacancy rate of less than 3%, that’s tens of thousands of people competing for a few hundred homes at any given time.

Demand is hot! But supply? Not so much.

There are three pillars to a healthy housing system: Supply, Subsidy, and Stability. SLO is reviewing their inclusionary housing ordinance (IHO) to provide more of the second component — subsidy.

But the IHO is not their only subsidy tool or their most effective one. Moreover, these tools should not work against one another. A poorly designed IHO, like the one SLO is considering, just becomes a clumsy source of subsidy that ends up countering the effects of abundant supply.

Portland attempted a more aggressive inclusionary housing policy in 2017 only to see new home building drop by two-thirds; they expected almost 600 new income-restricted units a year but produced less than half of that, while housing costs for everyone else went up twenty percent.

This IHO policy isn’t useless; it can be tweaked to incentivize the kind of homes people are clamoring for, along with liberalizing the development code, the approval process, and adjusting impact fees. But using it to fund the construction of low-income housing is like using a hammer to screw in a lightbulb.

Could you make it work? Sure, but you’ll probably break something in the process. Why is there any responsibility to build homes at all?

Why can’t people serving coffee, bagging groceries, cleaning hotels, teaching our children, or engineering new products just work somewhere else?

SLO High School’s 350 graduates can just leave if they can’t afford a home here, right?

But here’s the thing: SLO is a city of close to 50,000 people and a job center for the whole county. It’s not a small town or an HOA. The city exists on borrowed authority from the state in order to more effectively provide services to and meet the needs of its citizens.

Are those needs being met? When half of all residents are overburdened with housing costs or struggle to find housing altogether, it’s clear that our housing system is not “doing well.”

Kevin Buchanan is a lead organizer with SLO County YIMBY (yes in my backyard) and lives with his family of five in Arroyo Grande. Email responses to sloco@yimbyaction.org.