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Developers Have Sold an Incomplete Narrative About the Housing Crisis

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In my quarter-century of observing and participating in San Diego housing policies, I have never witnessed such a complete capture of the city’s decision-makers by the development industry as exists now.

Developers and their allies have been wildly successful in concocting and selling to the public an incomplete and misleading narrative about the causes of the housing crisis — a narrative that now dominates public discourse in the city.

Voice of San Diego CommentaryTheir story blames the housing crisis and skyrocketing housing costs on four bogeymen: over-regulation, high development impact fees, long processing times for development proposals and NIMBY obstructionism.

Not coincidentally, this self-serving narrative shapes policies in favor of the building industry.

Their story leaves out some essential facts. For starters, the city has run out of large tracts of land once available for efficient, quick development (think of Mira Mesa, Rancho Bernardo, University City and Carmel Valley). Second, land for infill and redevelopment is scarce and expensive. By nature, it is time-consuming, problematic and costly to develop. And most importantly, the economy has been churning at full speed for almost a decade, generating an extremely high demand for housing that developers cannot meet, especially considering the shortage of residential construction workers.

These facts explain this housing crisis. But keep in mind that regulations, NIMBYism and development impact fees have been around a long time, yet in response to the prevailing narrative regulations are being slashed, development impact fees — especially for parks — are under attack [1] and community planning has been trampled on.

And now, worst of all, we have the proposed middle-income housing regulations [2], the main component of Mayor Kevin Faulconer’s housing plan called HousingSD. With them, developers would be allowed to increase the number of units on site by 25 percent in exchange for setting aside 10 percent of the total units to be affordable to households at 150 percent of the city’s median income — which is $118,950. In addition to the density bonus, developers would receive other incentives, such as reduced parking ratios and setback requirements.

At the affordable rent standard of 30 percent of household income, rent for a two-bedroom apartment produced under the mayor’s proposal would be approximately $3,000 — exceeding current market rate rents. These “middle income” households are already being served by the housing market, making an incentive program for this income group unnecessary.

It is generally understood in planning that land owners and developers benefit financially when a city confers additional density on their tract of land and that they owe the city something in return for their windfall. Clearly, an economic analysis should be performed to measure the benefit to developers of a density increase incentive against the cost of the (supposedly) below-market units for this middle-income housing program. But proposing housing policies devoid of unbiased economic analysis seems to be the pattern at the city these days.

During a discussion of expedited processing for development plans at a City Council meeting I attended last year [3], an astute Council member asked the city’s planning director where certain requirements had come from. The answer? “Developers had done analysis and came back and told us that higher requirements would not financially pencil out.” Councilwoman Georgette Gomez’s response? “I have an issue with staff proposing policies without having the proper data. It is not the right way for us making decisions for the sake of developers telling us what to do.” There was applause from the audience. There was silence from the rest of Council.

The absurdity of this giveaway to developers seems to have generated enough pushback that the middle-income housing regulations have been put on hold [4]. Good. They need to be completely overhauled on the basis of economic analyses. Further, the city should make sure that no new regulations will interfere with a similar program — the Affordable Housing Bonus Program — that is already producing low-income housing.

It is ironic that so much attention is focused on accelerating the production of market-rate housing and providing incentives for developers to build “middle-income housing” while the city has done practically nothing to produce low-income housing or preserve existing low-income units. It is damning that a ballot proposal to generate financing for housing for the homeless and low-wage workers has yet to receive an endorsement from Council and the mayor. It is deplorable that amendments to the Inclusionary Housing Ordinance requiring developers to produce more housing, and on-site, have not been considered. It is a sorry testament to the headlock that the development community still has on the city of San Diego decision-makers.

Nico Calavita is an author and professor emeritus of San Diego State University graduate program in city planning. He was also chair of the San Diego Housing Trust Fund Board of Trustees and co-founder of the San Diego Affordable Housing Coalition.