The Oceanside City Council on Wednesday voted to more than double the fees developers can pay instead of including affordable units in their projects. Those fees, known as in-lieu fees, will go from $8.96 per square foot to $20 phased in over the next two years.
Councilmembers and the city’s housing commissioners broadly agreed the fee was too low, but they got into a heated disagreement over how much to raise it, concerned that higher costs would hinder development.
Oceanside’s $8.96 fee was the lowest in North County, according to a consultant’s report for the city. Carlsbad, for instance, charges $15 per square foot, while Encinitas charges $20 and Del Mar $32.
The city’s consultant concluded a fee of $30 to $45 per square foot would be justified, but recommended $25. Oceanside’s Housing Commission agreed.
City staff, though, recommended a $15 fee with a two-year phase-in. Residents and advocacy groups rallied against the staff’s recommendation, asking why they did not go as far as the consultant said was justified, and the Housing Commission said was appropriate.
Even Oceanside Mayor Esther Sanchez criticized staff, saying the city’s housing department had “failed” the city.
“I’m very disappointed in the presentation that we had,” Sanchez said during the meeting. “I don’t think it reflects the advocacy that we’ve traditionally had in our city for building affordable housing.”
But city staff and other councilmembers disagreed.
“We are mindful that it’s a doubling of the current fee and that it could adversely impact future housing development,” said Leilani Hines, director of Housing and Neighborhood Services, during the meeting. “An increase to any cost – fees, labor, materials – these costs can amount to roughly $43,000 just in development impact fees, and inclusionary housing in-lieu fees are included in that.”
Kelly Batten, a representative of the Building Industry Association of San Diego, a countywide developer advocacy group that regularly lobbies against cities raising their housing fees, in an interview with Voice of San Diego argued that high housing fees are counterproductive.
“Cities that have $30 and $40 in-lieu fees are not getting any housing,” Batten said. “They’re not really getting market-rate or affordable housing developed.”
Del Mar, she said, has multiple policies that hinder development, but its $32 in-lieu fee plays a significant role in deterring development in the expensive community.
“They talk about wanting housing and then the regulations are so stringent that it discourages development,” Batten said. If Oceanside had raised its fee to $30 or higher, she argued it would push developers out of the city.
Councilmember Christopher Rodriguez said developers have to make up the cost of fees by raising the prices of the market-rate homes. The higher the fee, the more expensive the other market-rate units will be.
“If you have three units, and one of them is government subsidized, and the other two are not, the developer is going to add on to the cost of the other two to help pay for the one that they just paid a fee on,” Rodriguez said. “It goes on the backs of everyone else.”
Residents in favor of a higher fee said it would pressure developers to build more low-income housing in their projects, rather than paying the fee.
“The in-lieu fees should encourage developers to build affordable housing,” said resident John McDowell. “We have people of different income levels … we should be providing affordable places to live in Oceanside for people who are working here.”
Inez Williams, the chairperson of the Housing Commission, criticized city staff for not being following the recommendations of the consultant and the Housing Commission.
The Housing Commission made a recommendation based on the affordable housing needs of the city, Williams said, urging the council to listen to the experts that they paid to do the study.
Ultimately, the council unanimously approved a phase-in increase of $15 next year and $20 in the years following.