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Housing Bond Measure Heading to Voters in San Diego

November Passage Would Provide $900 Million to Build Affordable Units

Image Via CoStar: A bond measure heading for the November ballot would finance construction of 7,500 affordable housing units in San Diego. (Getty Images)

By Lou Hirsh CoStar News

July 14, 2020 | 05:20 P.M.

San Diego voters this fall are expected to decide the fate of a $900 million housing bond measure, geared to building at least 7,500 new units as the nation’s eighth-largest city deals with a serious shortage of affordable housing and one of the nation’s largest homeless populations.

The City Council Monday voted 6-3 to place a measure on the Nov. 3 ballot, requiring two-thirds voter approval to finance housing construction through the issuance of general obligation bonds. The bonds would be issued in phases over the course of seven years and paid off over the course of 46 years.

“Affordable housing is our most critical need in San Diego, and the coronavirus pandemic has only exacerbated it,” said Councilwoman Jennifer Campbell, who supported the ballot measure placement, at the council meeting.

The bonds would be paid off through a hike in the city’s property tax on residential and commercial structures. Officials said the tax would begin at $3 per $100,000 in assessed value starting in fiscal year 2022, rising to $21 per $100,000 in assessed value starting in fiscal 2028.

In addition to six council members, the measure received endorsements during the council meeting from representatives of two prominent local development industry groups: the Building Industry Association of San Diego County and the regional chapter of the commercial real estate organization NAIOP, known originally as the National Association of Industrial and Office Properties.

The two groups expressed support after city officials worked out provisions to provide tax credits under the bond measure to residential and commercial developers that have already opted to participate in the city’s inclusionary housing programs. Those programs provide breaks on certain fees for developers that incorporate a specified level of affordable housing in their projects, which is currently a minimum of 10% of all units in a development.

The ballot measure placement was opposed by City Council members Chris Cate, Mark Kersey and Scott Sherman. The opponents said property owners are already under siege in the current pandemic economy, and that the city should focus on bringing down the cost of building housing with regulatory and other types of relief for developers.

Cate said at the meeting that the property tax hike could impose an extra burden on business operators who rent their spaces under “triple net” leases, where the tenant pays taxes and other property-related expenses in addition to rent. “Therefore, we’re going to increase the cost of running your own business,” Cate said, noting small business operators are already facing challenges paying their rents because of revenue losses created by the pandemic.

A citywide poll conducted in May by the San Diego Housing Federation, a regional affordable-housing advocacy and research organization, found that 69% of city residents support the bond measure. It requires approval from at least 66.7% of voters in order to pass.

The San Diego measure is similar to those enacted in other cities, including San Francisco, which passed a $600 million bond package designed to boost affordable housing production in November 2019.

San Diego Housing Federation estimates that the San Diego region has a deficit of 140,000 housing units that are affordable to working families, due largely to severe under-building relative to rising demand over the past two decades. Housing advocates have also noted that the city is in danger of losing much of its existing stock of affordable units by 2040 due to replacement of older properties and expirations of affordable-housing deed covenants placed on existing properties at the time they were developed.

Regional officials reported earlier this year that almost 5,000 San Diegans are homeless and about half of those are unsheltered. Federal data last year ranked San Diego's homeless population as the nation’s fifth-largest after New York, Los Angeles, Seattle and San Jose, California.

Local officials said while the upcoming bond measure would address just a small portion of total housing unit needs, the tax income is expected to make the region eligible for other matching state and federal programs, totaling more than $1 billion, that could further address the affordability and homelessness issues.

Proponents also acknowledge that tax hike measures of any kind face challenges in the current economic climate, noting that San Diego voters earlier this year, before the pandemic, narrowly defeated a measure to boost homeless services and expand the convention center by hiking hotel taxes on tourists, with no new burden on city residents.

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