San Diego County Taxpayer Association Opposes City Council’s Vote to Approve Inclusionary Housing Requirements

** New provisions do not benefit taxpayers or address critical needs of the San Diego community **

SAN DIEGO – July 31, 2019 – In response to the San Diego City Council’s decision today regarding inclusionary housing requirements, San Diego County Taxpayers Association (SDCTA) is concerned the new ordinance will have a negative impact on the local building industry, thus impacting the development of middle and lower-income housing production. As a result, this could cripple the ability of San Diegans to acquire housing.  

It’s known San Diego is one of the least affordable cities in the nation. Take this data into consideration:

• From 2009 through 2017, San Diego rents and housing prices have consistently gone up more than inflation. 

• Between January 2017 and January 2018, the median home price grew 8 percent, from $560,000 to $605,000. 

• The average cost of living in San Diego is approximately 33% higher than the national average. 

• Rent is a big driver of that number, where 44.1% of the population pays 35% or more of their household income in gross rent.

SDCTA believes the new inclusionary housing requirements could be devastating to the local housing market. While factors affecting housing affordability cannot always be controlled, such as poor job market or market competitiveness, providing an attractive market for real estate builders to develop is an opportunity San Diego cannot ignore. 

“We commend the work that has been done thus far by the City of San Diego and recognize these efforts come from a good place,” says Haney Hong, president and CEO of the San Diego County Taxpayers Association. “But facts are the facts. Based on the results of their own commissioned study by Keyser Marston Associates these changes to the Inclusionary Housing Requirements are not recommended.”

The Keyser Marston Associates (KMA) study estimates that in most, if not all scenarios, the addition of a prevailing wage requirement in development would increase rents by approximately one-third. The KMA study further argued overall development would fall by nearly five percent and rents would increase by three percent due to the changes from the proposed ordinance. What’s more, for every low-income household finding a new apartment or home, five other households would be shut out of the market.  

Inclusionary housing can be a strong avenue for the region to provide housing opportunities to low to middle-income residents; however, there were three specific areas the SDTCA would have liked included with the new requirements:

1. Prevailing wage requirements should not be imposed on new development

Per the KMA study, this would impact rents drastically in a city that is already challenged with housing affordability. 

1. Put forth a realistic in-lieu fee at $18/square foot

Developers have the option to pay an in-lieu fee rather than adding low-income units to their projects. Currently, the fee is at $12.73/square foot. The City Council has moved forward with a $22/square foot fee over three years. SDCTA recommends a more manageable jump to $18/square foot. The concern is upping the fee to an already tight housing market will stifle production of affordable and middle-income units.

1. Need for a Sunset Clause

SDCTA would also like to recommend the addition of a Sunset Clause allowing for accountability measures that allow the regulations to change if they are not working as intended.

“When the region already faces a severe housing shortage, we have to look at the bigger picture of the net benefit to all taxpayers along with addressing the needs of the community as a whole,” continued Hong. 

For more information on the history of inclusionary housing and the timeline of the current revisions, please see SDCTA’s May 2019 Inclusionary Housing Policy Proposal. 

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