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The housing crisis in San Diego – and all other coastal regions of the state – is ultimately due to a deep imbalance between jobs and housing. This situation has existed for quite some time but has been made worse by the huge boom of the high-tech and biotech sectors.
These clusters of intense economic activity create a nearly insatiable demand for high-paying/highly skilled jobs that generate – according to UC Berkeley economist Enrico Moretti – close to five more low-paying service jobs for each high-paying job. The resulting demand for affordable housing is enormously compounded.
The housing crisis, then, is really a crisis of affordability for the increasing number of low-wage workers, a crisis of “job-housing fit.” The result is that additional sources of funding for very-low and low-income housing become necessary.
There is a possible approach that could help address this imbalance: to extend to the regional level commercial linkage fees that some localities in the state have adopted individually.
These fees are based on the reality that nonresidential development – office, office/research, retail, warehousing, hotel – is responsible for generating many low-paying jobs, thus creating a need for housing affordable to those workers. It works this way: Once a locality decides to pursue commercial linkage fees, it prepares what’s called a nexus analysis to establish the range of fees that are justifiable legally and economically. Then, based on that analysis, the legislative body adopts a politically acceptable fee for each specific commercial use to be paid by commercial developers. These fees are usually placed in a housing trust fund to be used for affordable housing.
Only about two dozen localities have passed commercial linkage fees in California, including Oakland, San Francisco and San Diego. This low number is due to concerns about losing economic competitiveness. The argument is that, if a city passes commercial linkage fees, commercial development could move to adjacent cities. This fear of losing competitiveness causes the localities with commercial linkage fees to keep the fees much lower than what nexus analyses support, thereby limiting its potential. For example, the city of San Diego, the only city in the San Diego region with commercial linkage fees, sets its fees at levels much lower than what nexus analyses support.
And yet, even at lower fee levels, the city has collected more than $65 million since its adoption in 1992 and, according to the Housing Commission, these fees have supported the construction of approximately 5,000 affordable housing units. Imagine the potential for affordable housing funding that could be generated if all 19 jurisdictions in the San Diego region had commercial linkage fees.
There are different ways to move in this direction, from a state mandate, like the recently passed AB 1487 for the San Francisco Bay Region, to a volunteer/bottom up approach, like in the San Mateo County “21 Elements” process – a process organized by the San Mateo County Department of Housing to help localities address state housing requirements – or somewhere in between.
Localities are being criticized for not producing enough, especially low-income housing; but let’s be honest: They have few resources to do so. This approach could effectively nudge them to create local funding that can be leveraged up to five times with outside funds to build more low-income housing.
The housing crisis requires a creative approach that engenders partnerships between the private and public sectors at the regional level. A regional commercial linkage fee has the potential to generate thousands of low-income housing units in the San Diego region. We can no longer afford to take a pass on this opportunity.
Nico Calavita, is professor emeritus in the Graduate Program in City Planning at SDSU. He was vice-chair and chair of the Housing Trust Fund Board of Trustees of the city of San Diego in the mid- and late-1990s.