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Affordable housing

We need to reduce the costs of building in order to meet the community's need

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Most elected leaders in our community talk about the need for more “affordable” housing. In fact, last January, your SLO City Council made “housing” one of its top priorities for the 2015-2017 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 that the housing will be built, as a requirement for approval of a project, by developers that can be purchased or rented by a household that meets specific income requirements. Typically 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 in financing the 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 that they can’t resist the opportunity to build more affordable units by design? We can start by reducing our impact and permitting 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 up-front 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, sending a clear message that they’re not committed to helping the housing shortage in the unincorporated communities in our county. Our city, 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 PLNU) 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 that 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, insuring permit approval times, and replacing full cost recovery by 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 San Luis Obispo City Council member. Send comments through the editor at clanham@newtimesslo.com.

-- Dan Carpenter - Candidate for 3rd District Supervisor, 2016, San Luis Obispo

-- Dan Carpenter - Candidate for 3rd District Supervisor, 2016, San Luis Obispo

-- Dan Carpenter - Candidate for 3rd District Supervisor, 2016, San Luis Obispo

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