HomeMy WebLinkAbout7/19/2022 Item 7b, Moresco
Delgado, Adriana
From:Jim Moresco <JMoresco@midlandpacific.com>
Sent:Monday, June
To:E-mail Council Website
Cc:lhatcher@hbacc.org; Max Zappas; Jeremy Freund
Subject:San Luis Obispo's Inclusionary Housing Ordinance
Attachments:SLO City IHO 6 13 22.pdf
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Dear Mayor and City Council Members,
Please see the attached letter in regards to the new proposed inclusionary housing ordinance in the city of San Luis
Obispo. Thank you for time and consideration.
Sincerely,
Jim Moresco
Chief Operating Officer
Midland Pacific Building Corporation
www.midlandpacific.com
1
June 13, 2022
Re: San Luis Obispo Inclusionary Housing Ordinance
Dear San Luis Obispo Mayor and City Council Members,
I’m writing to you today in regards to the City of SLO’s proposed new inclusionary housing ordinance
(IHO). I am a member of the Board of Directors of the Home Building Association of the Central Coast
(HBACC). As I’m sure you are aware, the HBACC is the local trade group for the home building industry
and the most knowledgeable local source for issues related to housing. I am also the Chief Operating
Officer of Midland Pacific Homes. Midland Pacific Homes is the oldest, locally owned home building
company on the Central Coast. We have built over fifteen hundred homes up and down the Central
Coast since 1976.
As the industry most directly affected by the IHO, one would assume we would have been allowed to
offer input in the shaping of it. And as the industry with the most knowledge of the economics of
homebuilding, one would also assume we would be allowed to offer our expertise on the likely
consequences should this IHO be implemented. Other groups and industries were given that
opportunity for input but for whatever reason we were not.
Let me take this opportunity to share with you the economic impact the proposed new IHO would have
on residential development. By way of example, I will use our Toscano project in San Luis Obispo. After
over 15 years of entitlement work, we started building and selling homes in this community in 2017. The
average size home is just under 2,000 sf. One of the first homes in this community sold for $697,000.
Today we sell that home for $872,000. An increase in price of $175,000. However, our cost of
construction for this same home has increased $200,000 over that same span of time. Today we are
making $25,000 less per house than we were 5 years ago. And 5 years ago, our margins weren’t that
great having just come out of the great recession, as I am sure you will recall.
The proposed new IHO would institute a fee of $25 per square foot. For an average 2,000 sf. home the
fee would be $50,000. The total amount of IHO fees for 159 homes (the number of homes at Toscano)
would come to $7,950,000. I can assure you that had this fee been in place before we started Toscano,
Toscano would have never been built, and thus fees collected would have been $0. Benefiting neither
the market rate home market, or the affordable home market.
We all know there is a housing crisis and we are not against affordable housing. We believe it is an
important segment of the housing market that market-rate builders cannot accommodate. But our
housing crisis is a community wide problem, it is not a “new home construction” problem. After years of
a failed IHO, SLO County recently came to this conclusion and repealed their IHO while finding
alternative funding mechanisms that do not punish new home buyers while providing significant
additional money for affordable housing development.
If the city council wants to shut down home building at all price points in their city, then the IHO is the
perfect tool with which to do that. But if the city council truly wants to help solve the housing crisis
along with ensuring there is an adequate supply of affordable housing within their community, then a
different solution is required.
The City of SLO prides itself on being progressive and implementing policies and ideas that spread
throughout the state and nation. From the smoking ban in bars many years ago, to the recent all electric
mandate, the City of SLO has always been a forward-thinking leader. I encourage the city council to
continue this tradition. Don’t pay lip service to the housing crisis in our community, actually do
something about it. Think beyond punishing the market-rate housing industry for a problem they did not
create and come up with the solutions our community needs.
Sincerely,
Jim Moresco
Chief Operating Officer
Midland Pacific Homes