The rates for a fee the city assesses on commercial development haven’t been updated since 1996, meaning the city missed out on about $2.79 million for its affordable housing fund between fiscal years 2006 and 2008.

That’s according to the second part of an audit of the San Diego Housing Commission by City Auditor Eduardo Luna focusing on the city’s affordable housing fund — the renewable pot of money for helping the city assist households earning very low, low and median incomes.

The fund has two pieces: the Housing Trust Fund and the Inclusionary Housing Fund. The auditor said the fund’s accounting needs “immediate attention” and said it might not be fully funded.

Here are some key findings:

  • The fees assessed on commercial developments are outdated and substantially lower than comparable cities. Those fees are charged to developers of commercial projects and go into the Housing Trust Fund. The schedule for how much those fees are hasn’t been updated since 1996 — even though they’re supposed to be reexamined every year, the auditor said. The fees would likely increase by 41 percent if they were updated through 2008, the auditor said — so the unrealized fees total about $2.79 million that was not charged to developers between fiscal years 2006 and 2008.

The auditor compared San Diego’s fees on various types of development to Sacramento, Oakland and Los Angeles:

… we found that the City of San Diego’s linkage fees for all use types were substantially lower, in some cases up to 195% lower than the second lowest fee in our list of sample cities.

  • The commission received more than $1.9 million in inclusionary housing fees directly from developers instead of routing them through the city, which violates the municipal code:

Allowing developers to make payments directly to the SDHC bypasses the City’s internal controls and related processes, and can result in additional ongoing differences in reporting between the SDHC and City recorded amounts. … Direct payments of [Affordable Housing Fund fees] to SDHC by developers creates a difficulty for the City to accurately account for how much City fee revenue is collected and, ultimately, how much affordable housing and related services the people of San Diego should anticipate receiving.

  • The city and the commission report different fee revenue amounts, with a net discrepancy between fiscal years 2006 and 2008 of $1.3 million.
  • The commission’s policies and regulations for the Inclusionary Housing Fund are “inadequate or poorly defined” and need to be updated and effectively communicated to developers and other interested parties, the auditor said.
  • The process of reporting, monitoring and disbursing affordable housing money is fragmented and disjointed between various city departments and the commission, the auditor found.

The Housing Commission responded to the auditor’s findings, pledging to address many of the issues illuminated. The commission said upon viewing the audit, it already stopped the policy of collecting fees directly from developers and will rout those through the city instead.

Jay Goldstone, city COO, also responded to the audit and pledged to streamline the processes in which city departments are involved.


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