The Morning Report
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Analysis: The City Council this month voted to raise the fee the city charges non-residential developers for new projects. The fee goes toward defraying housing costs for city residents who can’t otherwise afford San Diego’s sky-high rents.
It goes by many names: the affordable housing fee, officially “The Workforce Housing Offset,” and is often referred to as the “linkage fee,” because the legal justification for the fee relies on proving a “link” between low-wage jobs likely to take place in the new developments being built and the demand for below-market-rate housing created by those jobs.
The money goes into a pot called the Housing Trust Fund, which the San Diego Housing Commission uses as part of a menu of options to help residents pay for housing.
The program most often associated with the demand created by low-wage jobs, known as affordable housing, involves building housing projects where rent is subsidized, and qualified residents on a waiting list are awarded a slot by winning a lottery for available units. There are far more qualified residents than there are subsidized units.
But at a City Council hearing on the fee increase, the president of the San Diego County Taxpayers Association (SDCTA) said there’s a disconnect between how everyone understands the fee to be used, and reality.
“You’ve made a linkage fee — a link to the idea to the need, of the need for affordable housing,” said Felipe Monroig. “The reality is that last year, 63 percent of the Housing Trust Fund went to pay for transitional housing, which is in fact a different type of housing.”
Transitional housing is a homeless services model aimed at bringing homeless residents off the streets temporarily while they complete various programs like substance-abuse treatment and job training. The length of the programs varies but can be as long as two years.
The Connections Housing project downtown is an example of the transitional housing model. It was built with the help of $2.1 million in affordable housing funds.
“It speaks to the fact that the linkage … doesn’t actually make any sense whatsoever,” he said. “The idea that you’re using to rationalize and justify this fee doesn’t make any sense, and then the fee itself isn’t used for the purposes that you’re claiming are necessary. Doesn’t make any sense whatsoever.”
The Housing Trust Fund was created in 1990 when the City Council first approved the affordable housing fee. In 2003, the city amended the ordinance to add a second fund, the Inclusionary Housing Fund, which is also used for affordable housing needs but gets its revenue through fees charged to residential developers, not commercial developers. Together, those two pots of money are called the Affordable Housing Fund.
The primary purpose of the Affordable Housing Fund, per the municipal code, is to “meet a portion of the need for housing that is affordable to households with very low-to-moderate incomes.”
The Housing Commission must provide an annual report outlining the money it collected in housing fees and how those fees were used.
That’s where Monroig got his numbers on the share of the fund.
And sure enough, the report says Monroig’s numbers are accurate.
The Housing Trust Fund brought in $1.16 million in the 2013 fiscal year. Affordable housing fees accounted for $717,000 of that total, with loan repayments and interest earnings accounting for the balance.
The city spent $1.35 million on various housing programs, however, and 63 percent of those funds ($979,700), was spent on transitional housing.
That money helped provide 836 transitional housing beds.
Based on data going back to 2002, it’s pretty typical for more than half of the fund to be spent on transitional services. Here’s how those numbers look.
“I would say that, given the low levels of collection of the trust fund in recent years, it’s typical of years in low collection” that transitional housing accounts for a majority of spending, said Ann Kearn, of the San Diego Housing Commission.
Assessing Monroig’s comment, then, that 63 percent of the money collected through the affordable housing fee is used on transitional housing is pretty straightforward. It’s true for 2013, and 2013 isn’t an outlier from recent years.
It’s a bit tougher, however, to decide whether the city is using the fee for the things it says make it necessary. Monroig believes it’s not.
The city ordinance that created the housing trust fund built in specific requirements about how the fee must be used. During the 2013 fiscal year, the commission complied with all of those requirements.
It says “at least” 10 percent must be used for transitional housing. By spending 63 percent, the housing commission meets that rule.
At least 60 percent needs to be spent on households whose income is at least 50 percent below the area’s median income. With the 63 percent it spends on transitional housing, and another 18.2 percent spent on permanent housing for very low-income families, the Housing Commission checks that box too.
The commission can’t spend more than 20 percent of the fund on low-income households (households with income between 50 percent and 80 percent of the median). It spends 5.9 percent on those households.
And it can only spend 10 percent of its funds on first-time homebuyers with incomes over 80 percent of the area’s median income. Zero percent of the fund was spent in that way in 2013.
The Housing Commission met all its city-imposed requirements on how it can spend funds from the affordable housing fee.
But Monroig is essentially saying that the amount spent on transitional housing breaks the spirit of the law, since it is intended to offset the effect of low-income jobs created by new commercial projects. If those jobs aren’t being filled by homeless residents, then the logic of the fee no longer holds up.
Does he have a point?
The study on the affordable housing fee doesn’t specifically mention transitional housing, but it does deal with the extent to which the homeless population is part of the labor force.
The study says specific data on employment among San Diego’s homeless population isn’t available, but cites three other studies that attempt to answer that question. One of those was a survey of homeless people in Sacramento that found 12 percent of respondents were employed at the time of the survey.
“Given the survey information suggesting homeless individuals do participate in the labor force, it follows that a small portion of jobs added by new workspace buildings are likely to be held by homeless individuals, particularly with jobs near the lower end of the pay scale,” the study says.
The study isolates the percentage of jobs within each type of commercial property that are held by “very low-income” residents. Hotels (18.3 percent) and retail (18 percent) have the highest contribution of space that could be held by homeless residents.
The study, then, does establish that some homeless people are likely employed by the types of low-wage jobs that require developers to pay the affordable housing fee.
In the 2013 fiscal year, the Housing Commission’s annual report shows just 24.1 percent of the Housing Trust Fund went to building subsidized rental units, rehabbing homes for lower-income workers or assisting first-time homebuyers.
But it’s also true that most of the City Council conversation over the fee has excluded transitional housing.
Monroig told me he was using the amount spent on transitional housing to question the link between low-income employment and housing affordability.
“I know there’s a little overlap, but they’re fundamentally different things, affordable housing and transitional housing,” Monroig said. “The majority of the fee isn’t used for affordable housing, and we should be honest about that.”
But Kearn emphasized the same point the survey touched on: Affordable housing fee and homelessness are related.
“There are people who have jobs, but they make extremely low incomes, and they can’t afford the rent in San Diego, and oftentimes they become homeless,” she said.
Opponents of the affordable housing fee have promised to sue over the legal basis for the fee. If that happens, a judge might eventually weigh in on whether spending on transitional housing breaks the link.
Because the factual component of Monroig’s statement is backed up by the Housing Commission’s self-reported allocation of funds for transitional housing, we’re rating this statement true.
If you disagree with our determination or analysis, please express your thoughts in the comments section. Explain your reasoning.