Inclusionary housing in California and San Diego Essay

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The housing crisis in California has been gaining momentum over the last two decades. Awareness on the issue has increased in the past few years and as housing and rental prices continue to sky rocket even moderate income families are finding it very difficult to buy houses of their choice. For low-income families, the implications are even more severe, as families may be forced to forgo necessities or live in substandard or overcrowded conditions in order to afford shelter.

From a broader perspective, the shortage of affordable housing or, in some areas, any type of housing has serious implications for the health of the state economy. Businesses struggle to recruit and retain employees, workers are forced to choose between overcrowded or substandard housing and long commutes, and families have less income to spend on other necessities. (Locked Out: Californias Affordable Housing Crisis, 2003).

The roots of Californias housing crisis originated in the nineties with production of housing declining significantly due to a number of reasons that worked together to build up an acute housing shortage. The shortage in supply was due to changes in several state and federal laws, the system of financing and local neighborhood opposition more commonly known as the Not In My Backyard (NIMBY) factor. This lack of supply contributed the steady increase in prices of housing and rentals.

In spite of lack of growth in housing jobs continued to grow and ked to the generation of imbalances created by the rate of job growth outstripping the availability of housing. This phenomenon forced people to move far away from their places of work in order to get affordable housing with consequent problems of increase in traffic and commuting time. While the rate of growth in jobs is less in the current decade than in the nineties, workers still find it difficult to live near their places of work.

As housing assistance by the government is more through tax benefits available on home construction, the real gainers have been the people in the high-income bracket with members of the lower income groups left to fend for themselves. Lack of governmental assistance through federal government support, declines in Housing and Urban Development (HUD) budgets and prepayment of HUD assisted mortgages and their consequent conversion to market rate housing have contributed to the housing shortage that has now assumed alarming proportions.

The housing crisis has of course seriously affected the living conditions of thousands of families. Apart from this problem, the issue has a number of implications that can affect social and economic life. The issue has extremely adverse implications for industry as employers in areas with acute shortage find it difficult to attract employees from other parts of the country. People from lesser income groups who, however, provide extremely vital basic services like teachers, nurses and firefighters find that they cannot live within the communities they service but must commute for long distances.

Housing pressures, as they intensify, force people to move out from areas that they have been living in for decades and reduce the economic and social diversity of areas. Frequent changes in housing, caused by the search for more affordable housing causes people to go further and further from their workplaces, forcing children to change schools and leading to larger urban sprawls. The increase in homelessness leads to a number of social problems, including substance abuse and mental and physical illnesses. California today faces an enormous housing crisis.

People who live in rented houses pay a very significant portion of their income just to keep their rents going and have to save for years to buy their own properties. Greater outgoings on rent and commuting costs mean that lower and moderate-income families have less to spend on food, education and children The California state legislature introduced laws for inclusionary housing in the seventies. Spiraling property prices led to the enactment of an inclusionary housing requirement for redevelopment areas and the adoption of a model inclusionary zoning ordinance.

There has been significant progress in the last thirty years but obviously much more needs to be cone. Current figures show that an increasing number of cities and municipalities are adopting inclusionary housing policies to overcome the housing crisis. This report ( Inclusionary Housing in California: 30 Years of Innovation) confirms what many observers had suspected all along, that during the recent past the number of inclusionary housing programs in California has proliferated.

According to this new survey, as of March 2003, there were 107 cities and counties using inclusionary housing in California, one-fifth of all localities in the state. At least a dozen more cities are considering inclusionary housing, including Los Angeles. Clearly, inclusionary housing has emerged as a powerful tool to expand the supply of affordable housing in California. (Calavita, 2004) Most of the inclusionary programs in California contain provisions for income eligibility criteria, pricing norms for affordable units, restrictions on resale and provisions for in-lieu fees.

Locally based incentives come I the form waivers of zoning requirements, including density, area, height and use of open space, local tax rebates, reduced parking requirements, permit fee waivers and subsidization of local infrastructure creation for the developers. In-lieu options include the payment of a per-unit fee that is pooled in a local affordable housing fund, permission for construction of off site set aside units by the same developer and the recognition of set aside units as transferable credits that can be exchanged between developers of local residential projects.

The city of San Diego adopted inclusionary housing in 2003 and was at that time the largest city in the country to do so. Residents of the city were among the worst affected by the housing crisis and had median income levels that were significantly inadequate for purchasing homes, whose prices had outstripped the incomes of local citizens. In San Diego the income needed to purchase a median-priced home was 52 % more than the median income of the city, putting the purchase of homes beyond the reach of most residents. San Diego.

The area median income is more than $31,000 below what is needed to purchase a median-priced home, and is not even sufficient to purchase a median-priced home with a 20 percent down payment. An elementary school teacher making $51,000 per year earns nearly $41,000 less than the income needed to purchase a median-priced home. (Calavita, 2004) The San Diego policy for inclusionary housing aimed to ensure that ten percent of the units of every new housing development comprised of housing affordable to lower income families.

The decided limits for eligibility were 65 % of Area Median Income (AMI) for rental housing and 100 % of AMI for sale housing. In case developers chose not to build affordable and low priced housing they had the option to pay in-lieu fees that would go to an Affordable Housing Fund, designated for financing development of affordable housing. Proposals for the introduction of inclusionary housing policies have faced strong resistance in san Diego from builders for years, who had, in fact, defeated a similar proposal in 1994.

As spiraling property and housing costs gave builders access to increased profits, year on year, all efforts to introduce inclusionary housing faced opposition from local developers, who argued that the costs of inclusionary housing would result in market rate housing costing more. In 2003, the housing crisis had however worsened drastically and even in an inherently conservative city, the benefits of inclusionary housing had become apparent to citizen action groups and local newspapers.

While inclusionary housing does result in the developer getting a lesser market price on an earmarked percentage of production the Inclusionary policy for San Diego had stipulated a percentage of only 10 % , one of the lowest such figures in the country. While most economists agree that inclusionary housing has the potential to reduce the profits of developers, its introduction does presage a reduction in local land prices, thus making land more affordable to builders.

Furthermore, bonuses and incentives allow builders to make profits on additional units that otherwise would not have been possible on the same site. Most councils who have adopted inclusionary housing do not show any signs of abatement in housing development. In San Diego, even though the builders had agreed to the introduction of inclusionary housing, the passage of the ordinance sent the Building Industry Association (BIA) to court, first to overturn the ordinance and later to ask for a reduction in the in-lieu fees.

Critics of inclusionary housing in San Diego state that apart from increasing costs of market rate houses it will shift the burden of providing affordable housing from the state to the higher income groups, lead to further ghettoisation among the people who will get left behind in the inner city and result in overcrowding in the newer locations being taken up for development. The official website of the BIA puts forward a number of arguments against the adoption of inclusionary housing in San Diego, ¢ Inclusionary zoning policies add anywhere from $6,000 to $14,000 to the price of a new home ¢ Inclusionary zoning generates little affordable housing production.

¢ Inclusionary zoning does not achieve the supply goals. Experts predict that it will take 100 years to meet the Bay Areas 5-year needs. ¢ Inclusionary zoning taxes market-rate homebuyers ¢ Inclusionary zoning cheats families out of the full benefit of homeownership by restricting their appreciation values.

¢ Inclusionary zoning is an illegitimate public policy that retards the creation of real solutions. Elected officials seldom, if ever, promulgate changes or push for a comprehensive housing solution that brings about real affordability. (Our Position, 2006) The above arguments are restatements of arguments put forward by opposers of inclusive housing for many years now. As such, while it is too early to assess any outcome of inclusionary zoning, the courts have struck down the ordinance on grounds of insufficient information about waivers.

A new ordinance is yet to see the shape of the day and the issue is again up for discussion and debate. 4. Conclusion Inclusionary housing policies now exist in more than a hundred counties and states in California. This number is steadily growing and municipalities and city councils obviously see it as part of the solution to the housing crisis that has overtaken the state. An investigation of the various needs that lead to the requirement for introduction of inclusionary housing indicate the need for its overwhelming adoption by county and city regulators.

While the objections raised by the opposers of inclusionary housing do make a certain amount of sense the need for addressing the rapidly growing social imbalances and inequities that have arisen due to the housing policies and practices until now is more important in a caring and compassionate society. Advocates of inclusive housing in San Diego state that the ruling of Judge Myer, striking down the ordinance, happened because of a small technicality. This needs appropriate correction and reframing.

It is a bit of a shame that the introduction of inclusive housing in San Diego has been stone walled by local builders and developers for more than ten years while the housing crisis has continued to grow and it has been known for many years now that the average citizen earning a median salary simply cannot afford a home and perforce has to stay in expensive rented housing. It is very possible that the action groups of the city will now get together once more and ensure the enactment of appropriate legislation that will make inclusionary housing in the city a much-needed reality.

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