Inclusionary Housing Ordinance | Frequently Asked Questions

Affordable Housing. At its core, Affordable Housing just means a house someone can afford. In reality, for many people, that just won’t happen under market conditions. So officials use deed restrictions (read on to see what that means) to make some houses Affordable, then adopt scales for qualification based on median household income levels and bedroom count. 

Deed-restricted. This could refer to any manner of restrictions on what you can do with your property. But in the context of Affordable Housing, it typically means a home must be owner-occupied, limits what you can sell it for and to whom, and can impose other measures to preserve affordability. 

Affordable by design. Affordable by design is an important component of the housing market — these units cost less because they are small and efficiently designed. This is a housing type that benefits the lower middle class and it is precisely in this middle income stratum of the market that we have struggled to serve. Given that median home prices hover around $840,000 in SLO, and that the City’s inclusionary housing program creates units priced between $163,000-$405,000, there is a need to create units priced somewhere in the middle that don’t require public subsidy.

Market rate. Housing that is sold or rented on the open market, does not have any subsidies.

Inclusionary housing. Translates roughly to: Don’t leave out Affordable Housing. This requires new projects either to include Affordable (aka deed-restricted) housing or to pay a fee that goes toward building Affordable housing elsewhere in the community.

A community’s economic stability and success rely heavily on a healthy housing market. Because of the decades of federal, state and local policies on housing, the market will never be able to deliver housing that is Affordable to everyone. But we all need housing, and even if you already have a place to live or are able to purchase market rate housing, you benefit from the creation of Affordable Housing. A lack of housing hurts our economy, our environment and the fabric of our community.

Nonprofit housing developers like The Housing Authority of San Luis Obispo and People’s Self-Help Housing exclusively develop Affordable Housing and are experts at leveraging a smaller amount of local funding to build more Affordable homes. It is not uncommon to be able to turn each $1 value of that local funding into a multiplier of $10 or more funding for a project. 

Affordable Housing developers go beyond the basic requirements imposed by a City to produce even more affordable units, and at deeper (lower) income targeting levels, including for the most challenging extremely low-income earning households category.

Additionally, many Affordable developments are designed to specifically support a certain segment of the community. Whether it’s seniors, people transitioning from years of housing instability, first time homeowners, or those with specific medical needs, housing built by nonprofit developers often comes designed to support and provide essential services.

On the flip side, when a market rate developer includes an Affordable unit in their project, it is not eligible for state and federal funding and support is not built in.

The City is proposing taking away incentives for smaller, more Affordable Housing which will result in an even wider chasm between Affordable and luxury housing in our community, with nothing in between.

Economic stability and success rely heavily on a healthy housing market; currently, our most disadvantaged are suffering, the majority of our local workforce commutes, and one of the most significant barriers to recruiting and retaining employees is housing. The Chamber’s Inclusionary Housing Task Force is a group of concerned citizens looking critically at the City’s housing policy and offering recommendations to more efficiently and effectively get housing of all kinds built.

We had an outstanding group of members who brought their collective decades of experience and expertise in different parts of our economy and housing market to this deep-dive effort. Huge thanks go out to:

• Aaryn Abbott | Abbott|Reed Inc.
• LeBren Harris | Hampton Inn & Suites/TownPlace Suites SLO
• Rachel Kovesdi | Kovesdi Consulting
• Donna Lewis | Guaranteed Rate 
• Damien Mavis | CoVelop
• Kerry Morris | Morris & Garritano 
• Stephen Peck | Peck Planning & Development
• Ken Triguero | People’s Self Help Housing

In our series of task force, committee, and board meetings, the goal of our recommendations became clear: the inclusionary housing ordinance is an opportunity to more efficiently and effectively get housing of all kinds built, not just secure a fixed number of deed-restricted Affordable units. To achieve this goal, key principles need to be considered:  

• Keep incentives for smaller units by tiering fees and rewarding those who chose to build smaller units in a development. Affordable by design is an important component of the housing market – units that cost less because they are small and efficiently designed.
• Custom homes should not be exempt from the ordinance but should instead be part of a tiered structure. Imposing a flat $25 per square foot fee is not feasible for a single home or a larger subdivision.
• Fees should be calibrated to a proportionate share of what a nonprofit developer’s needs to secure state and federal funds – not just extract as much money as is legally possible from a market rate developer. 
• It is imperative that we consider additional ways to produce Affordable Housing – not just the inclusionary housing ordinance and fees.

Absolutely not. While historically, the debate around how to address our housing crisis has pitted Affordable against market rate housing, we are currently living with the failure of that strategy — not enough of either has been built. Doubling down will only widen the chasm between Affordable and luxury housing, with nothing in between. 

For years, we have been looking for ways to incentivize housing that is affordable by design to create the stairsteps in price and type that are critical for a healthy community. With a few changes to the proposed draft, the City’s Inclusionary Housing Ordinance can be a piece of that puzzle.

No. Local governments have many ways to generate local support for the development of Affordable Housing. Affordable Housing experts look to sources that are predictable, permanent and not dependent on volatile markets as the gold standard. Here is a short (incomplete) list:

• Fees on housing that is not occupied. Fees on vacation rentals or other housing that is not used on a regular basis can be used to build Affordable Housing.   
• Enhanced Infrastructure Financing Districts work by freezing the property tax revenues that flow from a designated area to the city, county, and other taxing entities at the “base level” in the current year. Additional tax revenue in future years is diverted into a separate pool of money, which can be used either to pay for improvements directly or to pay back bonds issued against the anticipated revenue. When Cities and Counties fund infrastructure maintenance and housing development, and other projects this way, it does not increase property taxes and all housing that is developed must be Affordable.
• Dedication of tax revenue. Some communities dedicate a percentage of sales tax, transient occupancy tax (also known as TOT), or even a set number out of the general fund (a combination of sources) to build Affordable Housing. This year, the City of SLO dedicated millions of their federal COVID recovery funds to Affordable Housing. 
• Bonds. Governments sell tax-exempt Housing Bonds, and use the proceeds to finance low-cost mortgages for lower-income first-time homebuyers or the production of housing  Affordable to lower-income families.