Businesses voice fear of increase in fees for new affordable housing

Thursday, September 3, 2009
Lori Weisberg and Helen Gao
San Diego Union-Tribune

San Diego's business community turned out in force yesterday at City Hall to head off what it feared would be an increase in fees levied on commercial development to help subsidize new affordable housing.

Equally well represented were the city's affordable housing advocates who pointed out that even in good economic times, businesses and developers have been loathe to increase fees for housing needed to serve their lower-income workers.

While there was no proposal before the City Council's Land Use and Housing Committee to hike the affordable housing fee, the mere discussion of the levy continues to be a polarizing force, as it has been since it was implemented nearly two decades ago.

Before the committee was a July report from the city auditor that took the San Diego Housing Commission to task for not having updated the fee since 1996, when it was cut in half.

Inaction has been costly, resulting in a loss of nearly $2.8 million in revenue that could have been collected between 2006 and 2008, the audit concluded.

The housing agency did in fact attempt to increase the fee in 2005, and while a compromise plan was supported by a council committee at that time, the proposal ultimately faded away and never advanced to the full council.

With the economy still in a precarious position and job losses mounting, council members agreed now was not the time to raise the fee.

“This is not something we should be pursuing right now,” said Councilman Kevin Faulconer. “If you're looking to open a construction business, you'll look at every single fee. We don't want to be in a position of being at a competitive disadvantage.”

The committee finally agreed to send the matter back to the Housing Commission, which will hire someone to more fully study the matter, including looking at the connection between new commercial and industrial development and the need for low-income housing.

The study will also take a look at the fee structure, said Housing Commission Chief Executive Rick Gentry. A report could be back to council members by June.

The premise behind the fees is that employment growth from new hotels, shops, offices and warehouses generates a need for more affordable housing.

The current fee, which varies depending on the wages in various industries, ranges from 27 cents a square foot for warehouse uses to $1.06 for offices.

“The hotel industry is in the worst shape that it's ever been,” said Namara Mercer, executive director of the San Diego County Hotel-Motel Association. “We've laid off more people than we've ever laid off. . . . For our industry to get back on track, we need financing and investment, and any fee increase will limit that.”

Affordable housing advocates countered that many of the same arguments they were hearing yesterday were made four years ago, when San Diego was in the midst of an economic and real estate boom.

“Back in 2005, we recognized the linkage fee had not kept pace, and the measure very nearly passed then,” said Jeremy Kaercher, of the San Diego Organizing Project, a faith-based group that works on the behalf of low- and middle-income households. “We could have produced $5 million a year in new funding for affordable housing. We urge you to keep this measure moving.”

In addition to returning the issue to the Housing Commission, the committee also said it wants the matter reviewed by a citywide Citizens' Revenue Review and Economic Competitiveness Commission, which is not yet fully formed.

Also under discussion yesterday by the council committee was a proposal to hike development fees by an average of 10 percent to raise an extra $2.7 million in revenue each year. Fees for city staff to review plans for mechanical, plumbing and electrical systems and conduct inspections on them are proposed to go up by as much as 32 percent. Fees for new construction could go up by 6 percent.

Kelly Broughton, director of development services, said the fee hikes are necessary to maintain adequate staffing levels to process projects. Without additional revenue, Broughton estimated that the department will have to further downsize its staffing by 30 percent. It has already cut staffing by 37 percent because of the slowdown in construction.

The committee unanimously voted to forward the fee-increase proposal to the City Council, which will make the final decision.

Associated General Contractors and the Building Industry Association objected to the increases, saying they will hurt the construction industry at a time when it's already hard hit by the recession.

Union-Tribune

Helen Gao: (619) 718-5181;
Lori Weisberg: (619) 293-2251;

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