October 2002

Planning

Copyright by American Planning Association

San Diego Adopts Inclusionary Housing

By Nico Calavita

The San Diego City Council on August 6 voted 7 to 2 to adopt an inclusionary housing strategy. The city joins a long list of California cities and counties that have approved inclusionary housing, most recently San Francisco and Pasadena. But with a population of more than 1.2 million, San Diego is probably the largest city in the country to do so.

The San Diego approach, when eventually incorporated in an ordinance, will require developers to make 10 percent of their units affordable to a family of four earning less than 100 percent of median income ($60,100 in San Diego) for ownership units and less than 65 percent of median income ($39,050) for rental units. In lieu of building these units, developers may pay a fee, which will grow to $2.50 a square foot after three years, to a city fund that will finance affordable housing for moderate- and low-income people.

Two factors explain passage of inclusionary housing in such a conservative city: a housing disaster and a well organized and effective grass roots campaign. The median price of new and resale single-family houses and condominiums rose from a median of $267,000 in July 2001 to $333,000 in July of this year, an increase of 25 percent. Only 20 percent of households can afford the median-priced home.

Moreover, the rental vacancy rate has hovered around 1.5 percent for the last two years while rents have jumped an average of 10 percent a year over five years. Evictions have multiplied, especially in neighborhoods close to downtown.

The affordability crisis has raised the concern of organizations not usually involved in housing issues, such as the Chamber of Commerce and the Economic Development Corporation. While not actively supporting inclusionary housing, those organizations and businesses in general stayed out of the melee, effectively signaling their support. The San Diego Union-Tribune, a bastion of conservatism, surprised many by twice supporting the policy on the editorial page.

When discussion of inclusionary housing began, developers made the rounds of council offices attacking the idea at many levels. The most damning charge was that the costs would be passed on to market-rate home buyers, making market housing less affordable. Developers came away from those meetings believing that inclusionary housing had been put to rest.

Coalition challenges builders. But the San Diego Housing Coalition — a network of social service, environmental, educational, labor, and neighborhood organizations — challenged the builders' assertions. They pointed out that developers were already charging the highest price the market could bear, and that economists agree that in the long run the added costs of inclusionary housing are borne by landowners who have to sell to builders at a price reflecting the added development cost.

A complementary campaign was launched by the San Diego Organizing Project, a faith-based community organizing effort by 23 congregations representing 40,000 families across the city. The group mobilized its members in a series of town meetings that culminated in an event attended by more than 1,000 people. At that meeting, business, civic, and religious leaders and four city council members pledged to cooperate to solve the housing crisis.

Another factor in the plan's success may have been an inclusionary proposal by the San Diego Association of Realtors and the Apartment Association. It showed that projects with 20 percent affordable rental units would still provide handsome profits for the developers. Such a breaking of ranks raised the ire of the development industry, and two major builders announced that they would stop paying commissions to agents selling new homes. The real estate and apartment associations withdrew their proposal, raising charges of a heavy-handed industry power-play.

The builders had defeated a 1994 attempt to establish inclusionary housing. But this year the crisis was much worse, and the political landscape has become more variegated. Business and the development industry have traditionally dominated politics in San Diego, but other groups, such as labor and environmental groups, are making their presence felt.

The city council on August 6 also declared a housing state of emergency, launched a program to speed permits for affordable housing, agreed to issue up to $55 million in bonds to be repaid with redevelopment set-aside funds, and charged the city manager to establish a task force to develop other proposals for affordable housing, including new financing sources for the Housing Trust Fund.

Nico Calavita, a professor in the graduate program in city planning at San Diego State University, is coauthor of "Inclusionary Housing in California: The Experience of Two Decades," in the spring 1998 Journal of the American Planning Association, and a founding member of the San Diego Housing Coalition.