Calling it a "tax" on new market homes and ineffective policy, the San Luis Obispo County Board of Supervisors voted on March 15 to repeal its inclusionary housing ordinance—its only source of local revenue to support affordable housing.

The 4-1 vote came after supervisors heard an update on the ordinance and after the building industry lobbied against it. Inclusionary housing requires developers, in certain instances, to incorporate a small number of affordable units into their projects or pay in-lieu fees starting at $8 per square foot to support future affordable housing production.

Building industry representatives said they were tired of paying the fees while the county dragged its feet on creating its promised "broad-based" funding solutions for low-income housing.

"It's time to share that burden with others. We can no longer bear this societal issue alone," said Lindy Hatcher, executive director of the Homebuilders' Association of the Central Coast. "Neither can our homeowners and renters who ultimately pay this fee."

According to the county's report, inclusionary housing fees have generated as little as $130,961 and as much as $816,235 annually between 2017 and 2021. Those funds contributed to eight new affordable housing projects that totaled 222 units.

But the numbers did not impress 1st District Supervisor John Peschong, who argued that they amounted to small contributions to what were multi-million-dollar projects. His conclusion about the program: "I don't think it's been a success."

"It's not making as big of an impact as it should be," Peschong said. "We wanted to give this a chance. I don't believe it's working."

SLO County's debate over inclusionary housing dates back years.

In 2019, amid a stalemate on the policy, the board assembled a coalition of stakeholders to discuss a path forward on affordable housing. The coalition—citing a need for between $2 million and $4 million in annual funding—agreed to support the inclusionary fees for another three years, while the county investigated other funding sources.

The pandemic derailed those efforts, according to county officials. But without any plan to replace the revenue generated by inclusionary housing fees, 2nd District Supervisor Bruce Gibson said it would be irresponsible to abolish it.

"The repeal of this is going to eviscerate our affordable housing program," Gibson said. "Exactly a month ago, we allocated $500,000 to three different projects out of the inclusionary housing fee. It doesn't pay for the entire project, but we know it's a key component to leverage [outside] money."

Despite voicing similar concerns to Gibson about "not having a path forward," 3rd District Supervisor Dawn Ortiz-Legg ultimately supported the ordinance repeal.

"I think for the housing industry to carry the complete weight of all of this is something that's unfair and I can't support," Ortiz-Legg said.

Fourth District Supervisor Lynn Compton echoed that view and called the fees a tax passed down to homebuyers.

"A tax on top of a home does not make it more affordable," Compton said.

But Gibson argued that the ordinance already exempts new homes built at 2,200 square feet or smaller. Any house larger than that is likely unaffordable to most moderate-income residents anyway, he said.

"I can't see any case to be made that the inclusionary housing fee affects the 'missing middle' here," Gibson said. "I can't see any way we should be repealing this inclusionary housing fee."

The formal repeal of the ordinance will come back at a future board meeting. Δ