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HomeMy WebLinkAbout3/1/2022 Item 6b, Jeffries Delgado, Adriana From:Krista Jeffries <krista@yimbyaction.org> Sent:Tuesday, March To:E-mail Council Website Subject:Public Comment 3/1, Item 6b Attachments:SLO CC 3_1 Public Comment-2.pdf This message is from an External Source. Use caution when deciding to open attachments, click links, or respond. Good Morning, Please find attached our organization's official public comment for the Inclusionary Ordinance Study Session. We understand that this is the first session for this item and there will be further opportunities to hone the policy. We look forward to working together on this issue of great importance to our community. SLO County YIMBY Leadership Team 805.904.7325 To help protect your privacy, Microsoft Office prevented automatic download of this picture from the Internet. 1 To The City Council of San Luis Obispo, In 2016, The Economist published an article detailing the results of their meta-analysis on which laws intended to reduce child sex trafficking were actually working and which ones were making the problem worse.Their study found that laws written with the intent to punish abusers were being pursued at the expense of laws that actually prevented child sex trafficking and were in many instances worsening the abuse against victims.From the article linked above: “As awareness of child-abuse has grown, the punishment of past crimes has sometimes taken precedence over the prevention of future ones.” Their conclusion, when considering which policies to pursue and which ones to reform or discard, was to say to lawmakers “First, save the children.” High housing costs and child sex trafficking are two completely separate issues; home builders are hardly villains, like child sex traffickers. And yet, regardless of the issues being addressed, the problems of writing effective policy to deter an undesirable outcome (the former being homelessness, traffic, and poverty, the latter being violence against other humans) can be elusive unless decision makers ask themselves critical questions about (1) the fundamental nature of the problem at hand, and (2) examine how well the end results reflect the desired outcome. Instead of asking “Does this save the children?”we strongly urge the Council and staff to ask “Does this bring down the rent?”Not just with the Inclusionary Ordinance, but with all policy decisions. Housing is absolutely critical to the success of every single council goal. SLO County YIMBY believes that while inclusionary ordinances are important tools and can be used effectively to produce housing the market will seldom meet on it’s own, the conclusions of this study are not connecting the appropriate causes and effects, and the nexus study started off asking the wrong questions. Instead of asking “What is causing this policy to be less effective than we hoped?” it appears to have started with “How can we justify adding costs to a certain type of housing?” which is counterproductive, to say the least. Please accept these responses we have provided to the EPS memorandum and staff report, and the links we have provided for further information. Thank you for your service to our community, and please do not hesitate to reach out with any questions or comments. Sincerely, Kevin Buchanan and Krista Jeffries MEMORANDUM NOTES “While such fees may be technically justifiable, it is not uncommon for the maximum nexus-based fees to render new development infeasible and, as such, cities typically adopt affordable housing fees at much lower levels.” -Inclusionary housing fees (IHF) can render projects infeasible even though IHF is not the highest cost item, indicating we can afford a higher inclusionary fee like the ones proposed if we trim the costs somewhere else. “Developers opting to pay a fee rather than providing the units onsite as part of the development would pay an in-lieu fee charged per square foot of $25 for new for- sale housing and $20 per square foot for new rental housing. For new commercial developments, EPS recommends a per square foot commercial linkage fee amount of $5.00 for office, service, hotel, and retail uses, and $4.00 for industrial and institutional uses.” -This inequity between residential and commercial is counterproductive. While housing development at a large enough scale does induce commercial development, commercial development more strongly induces the need for housing, and since SLO County has added almost 4x as many jobs as we have housing over the last 10 years, the lion's share of contribution towards IHF should be born on commercial development. “EPS analysis finds that under current market conditions, new units of these sizes rent for approximately $3,000 per month (as shown on Figure 2), which is not affordable even for moderate-income households (households earning 120 percent of AMI). Therefore, units of at least 1,100 square feet are no longer ‘affordable by design’, as was the intent of Table 2A.” -The intent of Table 2A was to provide instruction on how to calculate affordable housing burdens for new development, not bring down the price of affordable-by-design units. Those units are subject to the forces of the market, and since affordable units are not market units, it’s illogical to tie the price of these by-design units together with non-market units in this manner. The cost of those market units is determined primarily by the regional and neighborhood vacancy rate, which currently sits at historically low levels. See tables and charts listed below from Apartment List, the Biden Administration, and the 2020 SLO Housing Element Update. “Residential developments of less than four units are exempt.” -This leaves out a significant source of contributions to AHF from the population with the most to gain from a continued overall shortage in housing - single unit, SFR projects. It also inequitably targets the missing middle housing we need the most. The council should strongly consider excluding multi-family projects of 2-10 units from the IHF, zoning more land to make these projects feasible, and shifting the funds anticipated from projects of 4+ units to be garnered from other sources. Larger developers, who have large amounts of capital and investors to pay back upon sale of units, are not interested in these smaller projects anyway, so it does not constitute a loss of funding. “While an 800 square foot unit is affordable to a moderate- income household of two, a family of three would experience an affordability gap of $15,400 for an 1,100 square foot unit. A moderate-income household of four would experience an affordability gap of $32,650 for a 1,500 square foot unit, despite having a higher income than the household of three.” -This excerpt indicates that the affordable-by-design program is effective for a certain size of units and certain households.However, there continues to be a severe shortage for larger units more suitable for families, particularly higher up the income ladder. These are the people who are continually commuting to work in the city from surrounding areas, damaging SLO’s goals of DEI and climate neutrality.Adding more of these kinds of units will bring down the rents, even if they don’t contribute to the IHF. “This analysis shows that 1,100 and 1,500 square foot units are unaffordable and thus contributing to an affordable housing shortage, because their construction is not required to contribute to the development of housing that is affordable in the community.” -This statement is logically unsound. It insists that by adding costs to aff-by-design units of housing (which has been indicated to be effective for certain unit sizes and income levels), that it will yield more affordable housing overall. The conditions that facilitate production of inclusionary units are more complex than funding alone, otherwise no one would be contributing to the in-lieu fee and would be building the units instead. Additionally, there are other activities that drive up housing costs but do not contribute to AHF, the most significant ones being (1) gutting and rehabbing older, smaller homes and thus making them more expensive (2) sale of any above-moderate housing between private parties Yet this memo does not call for 10% capital gains tax on the sale of homes above a certain price-point, nor a 10% share of estimated construction value before permitting. If we need a 15% profit margin to allow new construction to be feasible, why does the report leave out the homes sales that are leaving their sellers with far more than 15% profit?Click here to read some locals on Facebook share what they paid for their home and what they sold it for. “The purpose of the nexus study was to determine the extent to which new market-rate residential and non-residential development in the City increases demand for housing…” -The availability of housing does not induce demand for more housing. If this were the case, larger developers would all flock to places with higher vacancy rates, like Omaha and St. Louis, and expect to make more money than in places with lower vacancy rates, like San Luis Obispo. Employment and commerce is the demand-inducer. We know this because housing closer to shops, restaurants, and employment is more expensive per square foot than housing that is further from it, even if both homes are generally expensive. “… and exacerbates the City’s shortage of affordable housing.” The city does not merely have a shortage of affordable housing, but a shortage of housing overall. The number of new homes has gone down by 20-35% each decade since 1979. This was despite the fact that the population continued to grow at above average rates through the 1980s and kept pace with the state and national average through subsequent decades. -70s to 80s: 35% decrease -80s to 90s: 29% decrease -90s to 00s: 21% decrease “DRA states that the basis for the fee is that development increases employment, which also increases the demand for housing for the added employees.” -Every county in the state of California has created more jobs than they have new units of housing over the past several decades. This has been replicated in almost every major metro area in the country. Employment increases the demand for housing, not the other way around. Now we are at a point where we struggle to fill the jobs we do have because of the shortage (and thus high market price) of housing. “EPS’s recommended inclusionary approach would see an increase in the percentage of required affordable units, from 3-5 percent (depending on affordability) to 10 percent.” -This is not an unreasonable overall percentage at face value, but it is a significant percentage increase, over 300% depending on the project. This additional cost will be borne easily by large-scale developers who will continue to plow over greenfield lots with expensive SF homes, and the missing middle builders, who are largely local and do not have investors to pay back, will be unable to produce the kinds of homes our workforce needs. Trade-offs must be made in order to overcome this substantial cost. The current entitlement environment is not amenable to it for the homes we need the most. We strongly urge the Council to consider allowing projects that build these units and meet objective standards to go through a ministerial process instead of a discretionary one. “For for-sale residential, the recommended fee level is $25 per square foot, while for rental units, the recommended fee level is $20 per square foot…For commercial developments, EPS recommends a commercial linkage fee as opposed to an inclusionary program. The proposed fee amounts are $5.00 per square foot for office, service, hotel, and retail uses, and $4.00 per square foot for industrial and institutional uses.” -As discussed earlier, commercial development induces demand far more than housing development. Therefore the higher fees should be borne by commercial development rather than residential. Single family homes induce demand for service workers like housekeepers, babysitters, and landscapers who need housing that is not typically available in proximity to their workplace. Multi-family homes induce more demand for waitstaff and entertainment, but are less expensive to live in than SFR and suitable housing can be provided closer to those jobs. The difference between these two kinds of housing and the demand they induce should be reflected in a lower cost for MFR (over 10 units) and the maximum fee for SFR. STAFF REPORT NOTES Table 1 -The recommendations of the study involve simplifying the calculations, which is good, but it also suggests adding costs to missing middle housing units while relatively sparing commercial development, which is not good. Those reasons are discussed earlier in this public comment. “The nexus study analyzed if new market- rate residential and non-residential development in the City increased demand for affordable housing and included an analysis on the historical performance of the City’sIHO program.” -This is asking the wrong question. The goal of affordable housing funds and the IO is to provide housing currently not met by the market. The entire problem of affordability is being viewed within a very narrow lens. The nexus study should have started with the question of “Does this program meet the goals of lowering the cost of housing? Why or why not?” “The approach for defining the appropriate affordable housing commercial linkage fees was built off a similar exercise performed by DRA in the Nexus Study that relied on surveying commercial linkage fees in other jurisdictions.” -Why do we look at what other cities are doing when all other cities in California are performing poorly on housing affordability? Why do cities insist that they are unique enough to be exempt from state law, yet look to other cities for guidance on policy? Almost 150 cities have currently had their housing element updates rejected by HCD. This practice needs to be scrapped. “Construction cost estimates are based on assumptions used in the Nexus Study analysis, adjusted for inflation, with total direct and indirect costs (except affordable housing fees) assumed to be approximately $650,000 per unit.” -If we expect homes to cost this much to build, which renders them unaffordable to most workers, why are we considering adding costs and expecting it to create more affordable housing?