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The San Diego City Council voted 8-1 on November 10, 2014, to adopt amendments to the Housing Impact Fee Ordinance (San Diego Municipal Code Section 98.0601, et. seq.) to create additional affordable housing.
The amendments, introduced to the City Council on October 21, 2014, reflect a compromise proposal presented by Councilmember Myrtle Cole regarding the Housing Impact Fee Ordinance. A Memorandum of Understanding negotiated by the San Diego Housing Commission (SDHC) and the Jobs Coalition became the foundation of the compromise proposal.
As drafted by the City Attorney, in accordance with prior direction from the City Council, the amendments include the following elements:
On October 6, 2014, the City Council requested that the San Diego Housing Commission (SDHC) bring forward an action reflecting a compromise proposal presented by Councilmember Myrtle Cole regarding the Housing Impact Fee Ordinance. The City Council also requested that the City Attorney’s Office draft amendments to the Municipal Code to be presented to the City Council no later than October 21, 2014.
At that meeting, the City Council adopted a resolution directing that the City Attorney draft ordinance amendments. In addition, the City Council:
Based on historical data collection, the compromise proposal is expected to generate an additional $3 million over a five-year period above the current fees.
Councilmember Cole’s proposal followed her dialogue with the Jobs Coalition, which she initiated based on the terms of the MOU between SDHC and the Jobs Coalition that had been presented to the Smart Growth and Land Use Committee (SG&LU) on July 17, 2014, and September 24, 2014, and was presented to the full City Council on October 6, 2014, for consideration.
San Diego City Councilmember Lorie Zapf, Chair of SG&LU, on September 24, 2014, forwarded the proposed MOU between SDHC and the Jobs Coalition, to the full City Council without a committee recommendation.
SG&LU voted 2-2. The City’s Municipal Code allows the Chair of a City Council committee to forward items to the full City Council without a recommendation when a tie vote occurs.
SG&LU voted on July 17, 2014, to have the proposed MOU return to SG&LU on September 24, 2014, for further consideration.
SG&LU also requested that the Mayor’s Office and the Office of the Independent Budget Analyst (IBA) provide additional information at the September 24, 2014, meeting, such as:
In action related to the City of San Diego's (City) Housing Impact Fee Ordinance on March 4, 2014, the City Council directed SDHC to continue the dialogue with the Jobs Coalition about affordable housing options and report back to SG&LU with an update and proposed actions to take.
SDHC and the Jobs Coalition presented a report to SG&LU on July 17, 2014, at 10 a.m.
The City Council on March 4, 2014, rescinded its previous approval of updates to the City's Housing Impact Fee Ordinance, which funds affordable housing through a fee on new commercial development in the City.
The City Council had given its final approval on December 10, 2013, to an amended version of SDHC’s recommendation to update the City's Housing Impact Fee Ordinance.
A petition advocated by the Jobs Coalition was filed on January 22, 2014, to rescind the City Council’s December 10, 2013, action. The Registrar of Voters verified the petition signatures on February 14, 2014. As a result, the City’s Municipal Code required the City Council to rescind its decision or submit the issue to voters at an election.
An updated jobs-housing Nexus Study estimated that $10 million per year will allow the construction of 100 new affordable housing units each year through the updated ordinance.
Based on the City Council’s December 10, 2013, action, the Housing Impact Fee would have been adjusted annually on a ministerial basis by SDHC based on the Engineering News-Record Building Cost Index, beginning on July 1, 2017.
The City Council action on December 10, 2013:
The City Council gave its preliminary approval to the updated ordinance on November 4, 2013, and again on November 21, 2013.
In March 2013, SDHC contracted with Keyser Marston Associates Inc. (KMA) to update a Nexus Study regarding the Housing Impact Fee, also known as Commercial Linkage Fees, charged to nonresidential developers to help finance affordable housing in the City of San Diego.
The update was completed August 2013.
San Diego Municipal Code section 98.0619 requires SDHC to recommend revisions of the Housing Impact Fee to the City Council annually.
SDHC President & CEO Richard C. Gentry has discussed the current update of the Nexus Study and the timetable for its completion at multiple public meetings:
Housing Impact Fee Background
On April 16, 1990, the San Diego City Council passed the Housing Trust Fund (HTF) Ordinance. Funded through impact fees assessed on nonresidential development, the HTF was enacted to finance affordable housing for low-income workers whose jobs were created by commercial, industrial or retail development.
The Housing Impact Fee was established after a Nexus Study commissioned by the City Council in 1989 concluded that commercial development creates jobs that warrant the need for more affordable housing due to employment growth.
The Housing Impact Fee is calculated by the City’s Facilities Financing Department, collected by the Development Services Department and deposited into the City of San Diego’s HTF, which is administered by SDHC.
Annually, the City Council adopts a plan to allocate HTF monies to a variety of eligible uses, including rental housing development, special needs housing, first-time homebuyer programs and housing rehabilitation grants and loans for low-income residents.
The HTF Ordinance set the Housing Impact Fee at 1.5 percent of total development costs in 1990.
In 1996, the Housing Impact Fee was cut in half by the City Council and currently range from $.27 to $1.06/ square foot, based on the type of commercial development.
In 2004 and 2008, the Nexus Study was updated but never formally presented to the City Council.
On September 2, 2009, the San Diego City Council’s Land Use & Housing Committee (LU&H) directed SDHC to update the earlier Nexus Studies after the City Auditor concluded in a July 29, 2009, report that the "Housing Trust Fund-related commercial linkage fees are outdated, substantially lower than comparable cities, and were not adjusted as required by the municipal code, resulting in an estimated underfunding of $2.79 million for fiscal years 2006 through 2008."
As part of the update, SDHC was also directed to collect data on the Housing Impact Fee being assessed by other cities of similar size to San Diego.
SDHC paid for two independent studies, which were conducted by KMA and Bay Area Economics (BAE), respectively, and completed in October 2010.
Creation of the Best Practices Task Force
At the request of LU&H on September 2, 2009, SDHC created the Best Practices Task Force to update the Housing Impact Fee Nexus Study and explore other potential sources of funding to create more affordable housing.
The reports were presented at an LU&H Committee workshop on Wednesday, November 10, 2010, at 2 p.m. on the 12th floor of the City Administration Building.
On March 30, 2011, SDHC presented a report with recommendations on the Housing Impact Fee to the San Diego City Council’s Land Use & Housing Committee (LU&H).
On July 11, 2011, SDHC presented a report with final recommendations on the Housing Impact Fee to the San Diego City Council. The recommendations failed on a 4-4 vote. SDHC was asked to return with alternative, sustainable revenue sources.
On July 20, 2011, SDHC presented a report to LU&H regarding the "2011 Affordable Housing Best Practices Task Force Recommendations."
On October 26, 2011, SDHC returned to LU&H and presented an informational status report about the Best Practices Task Force’s discussions regarding potential alternative revenue sources. SDHC stated that the task force would come back to LU&H with a comprehensive, final report.
On November 16, 2011, SDHC returned to LU&H with the Best Practices Task Force’s final recommendations for additional revenue sources dedicated to affordable housing. LU&H took no action on the recommendations.
Stakeholders Meeting, Linkage Fee Recommendations PowerPoint, March 22, 2011
Stakeholders Meeting PowerPoint, January 19, 2011
1122 Broadway, Suite 300, San Diego, CA 92101
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