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San Diego Looks to Toughen Standards for Affordable Housing Development

JULY 16, 2019 | LOU HIRSH, CoStar

Business Groups Oppose Strict New Inclusionary Proposal Aimed at Boosting Supply

San Diego officials are debating standards for the inclusion of affordable units in new apartment and other housing projects. - CoStar

Real estate, building industry and other business groups are lining up against a proposal to toughen San Diego’s requirements for inclusion of affordable units in multifamily and single-family housing projects, including a proposed almost doubling of current "in-lieu" fees charged to developers opting not to build those units.

The proposal is set for City Council review on July 30, as San Diego and other California cities deal with a chronic shortage of affordable workforce housing in the nation's most populous state.

City Council President Georgette Gomez has proposed changing existing San Diego laws requiring that 10% of units in a residential project be affordable to local households making 65% of the region’s annual median income – currently $53,500 – or that the developer otherwise pay a project fee that’s currently $12 per square foot.

Gomez’s proposal would lower the income threshold to 50% of the regional median and almost double the in-lieu fee, which is paid to the city in the place of adding affordable units, over the course of three years until it reaches $22.

In a recent statement, Gomez said changes were needed to put more residents into homes they can afford, and that the in-lieu fee paid by developers "does not come close to covering the cost to build a new affordable housing unit, meaning that a sufficient number of units haven’t been built."

"When passed, these new regulations are expected to increase the production of affordable housing, which will result in more San Diegans being able to have a clean, safe and affordable home," Gomez said in the statement.

City Council’s Rules Committee recently voted to recommend the measure to the full council, but it was opposed by the San Diego Planning Commission. At its own recent meeting, the commission voted to instead endorse an amended measure put forward by a coalition of opponents to the Gomez proposal.

The compromise – setting the income threshold at 60% and capping the in-lieu fee at $18 per square foot – is backed by a coalition that includes the San Diego County Building Industry Association, San Diego Regional Chamber of Commerce, Downtown San Diego Partnership and the commercial development industry association NAIOP, originally known as the National Association of Industrial and Office Properties.

The Planning Commission agreed with the coalition’s assessment that the changes as proposed in the Gomez measure could discourage the building of affordable units by making projects financially unfeasible, especially if there is an economic downturn.

"I can’t get behind a policy that’s going to worsen the crisis," said Planning Commission member Matthew Boomhower, according to a meeting transcript.

City Council is scheduled to decide whether to incorporate the Planning Commission’s recommendation as it deliberates the Gomez proposal.

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