Mayor vetoes new regulations for inclusionary housing

SAN DIEGO — Mayor Kevin Faulconer announced Friday that he will veto a controversial set of amendments to the city’s regulations on what percentage of a housing development’s units must be reserved for low- and moderate-income tenants.

The San Diego City Council held a second vote Tuesday to ratify the amendments after tentatively approving them at the end of July. However, the amending ordinance still needed Faulconer’s signature. Both votes were 5-4 and the council would need at least six votes to override Faulconer’s veto.

In his veto announcement, Faulconer said continuing to work with the council to combat the city’s affordable housing crisis would remain a top priority. “We have to remain focused on cutting red tape, increasing supply and removing the barriers to new housing,” he said. “Unfortunately, this new ordinance does the exact opposite and I refuse to support any proposal that would make it more difficult to build the housing we so desperately need for San Diego’s working families.”

The amendments to the city’s “inclusionary housing” regulations would require developers to lease or sell up to 15% of a development’s rental and for-sale units at below-market rates capped at certain percentages of the county’s area median income for a family of four.

Developers also would have options to build the requisite affordable units at a separate site, albeit with fewer incentives.

Under the city’s current inclusionary housing regulations, developers can pay a $12.73 “in-lieu” fee per square foot to avoid offering units below market rate or to families who make less than the area median income. The amendments would offer incentives for building affordable housing on-site and the in-lieu fee would increase to $22 per square foot by the start of the 2023 fiscal year.

Councilwoman Vivian Moreno and Councilman Mark Kersey joined colleagues Scott Sherman and Chris Cate in opposition in July, and on Tuesday. Moreno and Kersey suggested they could flip their votes if changes were made to the ordinance like lowering the in-lieu fee ceiling and adjusting the AMI rates required for certain percentages of units.

Councilwoman Georgette Gomez, who first proposed the amendments in 2017 and helped shepherd them through the legislative process, said she had already made enough compromises with developers to alter the proposal any further.

Gomez’s justification for the amendments was based on a study by the consulting group Keyser Marston Associates, which found that the ordinance would be economically feasible due to its three-year phase-in and incentives for development like the elimination of the city’s development impact fee on affordable housing units that are built on-site.

Faulconer concurred with developers and other housing experts who argued the study was flawed and the amendments would only result in higher rents, fewer units being built and an exodus of developers to friendlier markets for development like San Antonio, Texas.

With Gomez running for Congress and five council seats up for grabs in next year’s election, the proposed amendments seem likely to be shelved for now. A future, more liberal council and mayor could potentially approve similar regulations, but that would be some two years away at minimum.

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