A North County-based developer behind Fox Point Farms has an idea to stimulate more housing production, and it involves more state intervention.
Sean Kilkenny is a founding partner of Nolen Communities, a North County-based developer that created Fox Point Farms, a new development in Encinitas that’s receiving attention for its unique approach to mixed-use development.
Kilkenny was one of the presenters at Voice of San Diego’s recent Politifest: Solutions Showdown. He was on a panel that I moderated exploring one of the region’s toughest questions: How can we create more housing in San Diego that people can afford?
It’s no secret that California is experiencing a severe housing shortage. In North County, like many other communities, families are paying more than they can afford for housing or are being pushed out of their neighborhoods entirely because of the area’s high cost of living.
Kilkenny and two other panelists were each asked to present a solution to the housing shortage that could actually result in more housing people can afford. At the end of the panel, the audience voted on which solution they thought would work best.
Kilkenny suggested that Gov. Gavin Newsom declare a statewide housing emergency to streamline the approval process for projects that already conform to local general plans and zoning.
“Big problems require big solutions,” Kilkenny said.
What a Statewide Housing Emergency Would Look Like
San Diego County faces a shortage of hundreds of thousands of housing units. But across the region, general plans and community plans account for a lot more housing than is actually being built.
Kilkenny said this gap is caused by things like long permitting processes, limited land availability, a lack of diversity of housing types, too many regulations, high construction costs, the high cost of borrowing money and more.
He acknowledged that the state has already introduced a slew of housing laws over the past several years that aim to encourage and streamline housing production, but he says it’s not enough.
“An emergency declaration would allow for any residential development that proposes a general plan and zoning consistent project to be approved administratively,” Kilkenny said. “Why else do we have general plans and zoning laws if we’re not going to use them?”
Approving projects administratively means approving them “by-right” or ministerially, based only on objective standards and codes. In this case, projects wouldn’t have to go through public hearings or political influence.
New housing would have to be consistent with the general plan and zoning, and at least 10 percent of the units would have to be deed restricted as low income or 20 percent at moderate income, Kilkenny said.
Homes would also have to be reviewed and approved by the fire department, and they would have to demonstrate sufficient water, sewer, storm drain and utility capacity.
“This proposal doesn’t allow for general plan amendments, and it wouldn’t create a pathway for rezones,” he added. “It would allow us to build what we have planned today.”
How it would work: Once the emergency declaration is made, the state would give jurisdictions two years to update infrastructure plans, coordinate with utility districts and work with property owners and applicants. That would also give labor markets enough time to staff up, Kilkenny said.
The declaration would then last for seven years, consistent with the 7th Cycle Regional Housing Need Assessment (RHNA) cycle, which begins in 2028-2029.
After those seven years, the governor would have sole discretion to either end the program or continue it on with the ultimate goal of producing 3 million new housing units statewide.
More Ideas to Solve the Housing Crisis
Kilkenny wasn’t the only one who presented interesting potential solutions to the state’s housing crisis.
Ricardo Flores, executive director of LISC San Diego, a nonprofit that finances affordable housing, argued that the heart of the housing crisis is single-family zoning, which forces people to buy at least 5,000 square feet of land for a single-family home.
His main point: Letting homeowners subdivide their lots into smaller parcels could create more affordable, middle-income housing like townhomes. This would also significantly increase the city’s property tax revenue, according to Flores.
And last, but not least, Stephen Russell, the executive director of the San Diego Housing Federation, focused on the need to create more for-sale, multifamily options.
His main point: Building more townhomes, row homes and condos is essential for creating ownership opportunities, but a major barrier to building condos is the current construction defect litigation system, which needs reform.
Construction defect litigation refers to lawsuits over problems in new homes or buildings, like poor workmanship or faulty materials. The rules keep developers and builders on the hook for costly repairs, which can slow or stop new housing projects.
And the winner is: Flores’ solution of decreasing lot sizes was the favorite, receiving the most votes from the audience.
In Other News
- The Oceanside City Council delayed its decision on a years-long plan to redevelop the Oceanside Transit Center into housing, offices, retail shops, a hotel and more on the property owned by the North County Transit District.
- The San Diego County Board of Supervisors has approved the controversial Harmony Grove Village South housing project in an unincorporated area near Escondido and San Marcos despite community concerns about fire risks. (Coast News)
- Several North County cities are speaking out against SB 79, a housing bill that would allow high-density housing near transit stations in California. (Coast News)
There is no “housing shortage”. Did we suddenly have a huge amount of people moving into California that we don’t know about? What we have is an “affordable housing shortage”. Most of this, as per this story, is being propagated by developers themselves in order to build more homes, and thereby make more profits. In this article the developer is stating that only 20% of the homes built would be affordable and yet they want the Government to bend the rules for them for that?! The law of “supply and demand” still works, if we can keep the greed and corruption out that is.
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One of the big drivers of the housing shortage is Prop 13. I have many elderly neighbors who live alone in 2000+ s.f. houses because their property taxes are so low there is no incentive to downsize. They pay less than 10% of the amount of property tax a buyer would pay today.
Prop 13 basis is “portable” under Prop 19, so that is not as much a deterrent to 55+ homeowners selling as is the elimination of the rollover credit (in 1997 under the Tax Relief Act). The long-term capital gains (20%, plus 3.8% if high income) and state tax (ordinary income at 10-13%) is a strong deterrent to selling. A homeowner bought in 1987 for $200,000. Today the home is worth $1.5 million, a likely scenario for a 70-year old homeowner. Let’s say that’s a gain of $1.0 million after home improvements and selling expenses ($300k). A married couple can claim a $500,000 exclusion. The remaining $500,000 will be taxed somewhere around $180,000. That leaves the seller with a budget of about $700,000 to invest in a new (much) smaller place – – likely with HOA dues. The homeowner, on a fixed income, pencils it out and determines “it’s cheaper to keep her.” Upon death, s/he reasons, the property’s basis steps up to $1.5 million (or more?) and the heirs sell with no gain (an actual loss after expenses of the sale), no taxes, and $1.4 million in hand. S/he’ll let the kids have the house, sell it, and then the state gets its windfall in tax revenues from $5,500 to $18,000. Economic man; taxation influences behavior. If we want more turnover in housing, especially by Boomers and even Xers, the tax code needs to change.
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