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Sparks fly when new developments come in front of San Diego City Council for approval and developers have not included affordable housing in their projects.
Under the existing regulations, developers can choose to reserve 10 percent of a project’s units for low-income residents or pay a fee into a city fund used to help build homes reserved for low-income residents. This program is known as inclusionary housing.
The newest City Council members want the rules changed to require developers to include the affordable units within their projects, which is much needed. But for all developments? Perhaps a more nuanced approach would work better.
We need to take a closer look at the pros and cons of both options. But first, a reminder that the inclusionary housing program is not only about producing affordable housing but fostering social and economic integration.
Those who favor developers building the units on site typically cite two reasons. Low-income households, they say, are likely to benefit from living close to higher-income people because their social and economic opportunities are enhanced by living in the same building as the wealthier next-door neighbors. They also point out that in-lieu fees do not cover the full cost of construction of affordable units, so it’s not an even trade-off.
In response, those in favor of developers paying an in-lieu fee often point out that there is insufficient evidence to show that low-income and wealthier tenants actually “rub shoulders” in a meaningful way. In fact, some research shows that such forced propinquity between families that are socially and economically different might have negative consequences. For these reasons, urban sociologist Herbert Gans many years ago proposed homogeneity at the block/building level and heterogeneity at the neighborhood level.
This way, the argument goes, integration would be achieved at the community level in the common use of public facilities and services, such as schools, parks, streets, plazas, libraries and other public spaces. More units can be provided with in-lieu money because such funds are usually leveraged three or four times with federal and state funding by nonprofit housing developers, leading to complexes that provide long-term housing affordability — often with deeper affordability and social services on site — than what market-rate developers can reasonably provide.
Even with a 10 percent requirement, projects smaller than, let’s say, 50 units would generate few affordable units. The administrative and monetary costs for both the developer and the city to control a few units may not be worth the effort, and an in-lieu fee would probably be more efficient. When considering eliminating in-lieu fees, then, it might be appropriate to consider the size of the project, with developments above a certain number of units required to build the affordable units on site. Also, economies of scale resulting from larger projects make the inclusionary units more economically feasible.
Those in favor of developers building more affordable units as part of the inclusionary housing program, regardless of scale, are justifiably concerned that in-lieu fees would be utilized to build affordable housing projects in existing low-income communities. What is essential is to require that the affordable units be built near the developer’s project — generally in higher-income areas — so that integration can occur at the neighborhood level.
The City Council should move quickly to stop larger projects from paying the fees, but should also consider maintaining the in-lieu fees for smaller projects.
Nico Calavita is professor emeritus in the School of Public Affairs at SDSU. He is the coauthor of the book “Inclusionary Housing in International Perspective: Affordable Housing, Social Inclusion, and Land Value Recapture.”