Aug. 1 2012 09:22 AM

A decade later, is San Diego in need of another big day?

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Talmadge Senior Village, which provides housing for low-income seniors, was one of the projects funded by a $55-million bond approved on Housing Day in 2002.
Photo by David Rolland

When Steve Russell thinks back to Aug. 6, 2002, there's an image that comes to mind—the head of San Diego's powerful Building Industry Association "red in the face" over having to negotiate details of a controversial proposed housing law with an advocate working on behalf of San Diego's poorest residents.

Russell, an aide to then-San Diego City Councilmember Toni Atkins, has a newspaper article from that day framed on his wall.

"And every now and then, I look at it and remember that moment with Stephanie," he says.

Stephanie is Stephanie Gut, who was, at that point, the executive director of the San Diego Organizing Project (SDOP), a social-justice advocacy group that had turned out roughly 800 of its members to a special City Council meeting, dubbed "Housing Day." SDOP and its allies, with Atkins' help, had spent months crafting an agenda that would put focus on the city's shortage of affordable housing. City Council chambers can fit 240, with room for another 180 in overflow rooms. To accommodate the turnout of roughly 1,000 people, the meeting was moved across the Civic Center to Golden Hall.

Behind a curtain that provided a backdrop for the council members, details of a proposal to require for-profit developers to either include low-cost housing in their new projects or pay a fee to the city's Housing Trust Fund were being hammered out between Gut and Paul Tryon of the Building Industry Association (BIA).

"What struck me was… here was Stephanie Gut, representing the poor people of these communities all over San Diego, and the BIA has to negotiate with them," Russell says. "And that, to me, was the most empowering thing of the day…. I knew we succeeded with something incredible that she was treated as a legitimate negotiating partner for these people. That [the BIA] had to even negotiate for their future was unheard of before that."

*****

Monday, Aug. 6, marks Housing Day's 10th anniversary. What it accomplished depends on whom you ask. There are the tangible results—roughly 2,500 affordable units have been produced as a result of policies enacted that day. But there's also frustration that the spotlight it put on affordable housing has dimmed in the years since. Many of the recommendations to boost local affordable-housing dollars made by a task force that came out of Housing Day were killed or shelved. With increasingly scarce funding for affordable housing, advocates wonder if it's time to rally the cause—and if they were to try, would they be successful?

"The fact that we had a leader and a council willing to docket a special council meeting around affordable housing is really important," says Susan Tinsky, executive director of the San Diego Housing Federation. "We haven't seen anything like that since…. It was really a monumental day. When you look at who was involved and who turned out and the voices involved, for the progressive movement that was really symbolic of how powerful we can be when we come together around a specific agenda."

Atkins was termed out in 2008 and elected to state Assembly in 2010 where she's still focused on affordable housing.

"It's always been a struggle to keep affordable housing on the list of priorities—always," she says. "Low-income people, do they vote in the same numbers? It's one of those issues, which is why we got the effort done 10 years ago. It was incredible because we had advocates; the advocacy was really important."

The San Diego Organizing Project held a series of rallies leading
up to Housing Day. Photo courtesy of SDOP

By 2002, advocates had been trying for nearly a decade to get an inclusionary-housing law passed in San Diego, says Nico Calavita, professor emeritus in the Graduate Program in City Planning at SDSU, but they faced tough opposition from building-industry leaders who argued that putting a cap on what they could charge for some units would force them to raise the price on others.

"So that was a rather powerful argument, and the developers thought they'd killed inclusionary housing," Calavita says.

Calavita, along with activists Norma Damashek and Richard Lawrence, formed the Affordable Housing Coalition of San Diego and set out to prove the developers wrong. Calavita researched the issue and found that builders tend to offset any increases in development costs by bargaining with landowners to make up the difference. In other words, it's the landowner who bears the cost of the policy.

"That did not convince everybody, but I think it created an argument against the developers," Calavita says.

Another counterargument, Russell says, was basic economics: the market sets the price.

"You can't just raise prices," he says. "Market price is market price, and everybody charges as high as the market can bear at any given time."

Inclusionary-housing advocates briefly found allies in the normally conservative San Diego Association of Realtors, which, along with the San Diego County Apartment Association, proposed an inclusionary ordinance that was stronger than the one the City Council ultimately passed. The city's current ordinance requires that 10 percent of units in new for-sale and rental developments be price-restricted. The Realtors' plan called for twice that.

"They did some calculations, and they found that projects with 20 percent of affordable rental units would still provide good profits for the developers of rental-housing projects," Calavita says. "So, that was sensational."

But there was pushback from the building industry. Two major developers said they would stop hiring Realtors, Calavita recalls. "So the Real Estate and Apartment Associations withdrew their proposal, but that upset some people about the heavy handedness on the developer's side."

To get inclusionary housing out of the City Council's Land Use and Housing Committee, Atkins had to secure the support of committee chairman Byron Wear, a Republican. So, she agreed to give developers the option of paying a fee into the city's Housing Trust Fund instead of setting aside price-restricted units.

"We had to compromise in order to get inclusionary housing passed," she says. "In order to get Byron Wear's vote, I had to agree to an in-lieu fee. I didn't want to agree to an in-lieu fee."

Atkins came to Housing Day prepared for arguments that inclusionary housing would further hurt the struggling building industry. Some of the developers worked for publicly traded companies, so Russell dug up their Securities and Exchange Commission filings and found they were making significant profits.

"So, [Atkins] sat up there with a supreme sense of satisfaction, basically asking them, ‘So, are your 10K reports correct? You're saying this market is trending down.' She basically put them on the spot to answer; either their filings or their statements in front of the council were true, but not both. That got very murky very quickly."

The measure passed 7 to 2 with Mayor Dick Murphy and City Councilmember Jim Madaffer opposed.

While Murphy didn't support inclusionary housing, Atkins was able to secure his vote to have the city's redevelopment agency issue a $55-million bond to help boost affordable-housing production, especially Downtown. Up to that point, the Centre City Development Corp. (CCDC), the city's Downtown redevelopment arm, had been falling short of the requirement that it spend 20 percent of its annual tax revenue on affordable housing. "CCDC was in no way meeting its affordable housing obligations," Tinsky says.

Atkins suggested the bond idea to the mayor.

"If they bonded their entire 20-percent revenue stream, it would have yielded something on the order, at that time, of $75 million," Russell recalls. "We went to the mayor with that notion and his first thought was, ‘Why would we do that?' Our response back was the headline: ‘Mayor creates $75 million affordable-housing fund.' And John Kern [Murphy's chief of staff ] looked at him and said, ‘Mayor, we should talk about this.'"

By the time the proposal made it to the full City Council, the bond amount was $20 million less.

"The ultimate version didn't look at all like we had planned," Russell says, "but we got a pretty significant number of projects Downtown."

The proceeds from the bond ultimately helped build 722 affordable units, according to the city's Redevelopment Agency. And, according to the San Diego Housing Commission, the inclusionary-housing in-lieu fee has helped finance 1,409 rental units and 75 first-time-homebuyer loans. Developers have built 288 affordable units on-site with another 264 under construction—this despite legal challenges from the building industry that successfully changed how the in-lieu fee is applied.

"The BIA just basically, systematically, chipped away at it," Tinsky says. "It's a much weaker program. It wasn't exactly a stellar program to begin with, but it was good as compared to not having anything, but now it's like a tenth of the program it was."

*****

Tinsky says she'd hoped Housing Day's 10th anniversary would prompt another Housing Day.

"We asked several members of the City Council to help us move an agenda… and it just didn't happen," she says.

Topping that agenda is revisiting linkage fees—fees levied on commercial development based on a formula that looks at whether the project will create a demand for affordable housing. Put in place by the City Council in 1990, the fee was cut in half in 1996 and hasn't been increased since then. In 2009, the City Auditor's office found that San Diego's linkage fees were "outdated, substantially lower than comparable cities"—in some cases by 195 percent—"and… not adjusted as required by the municipal code." Between 2006 and 2008 alone, the audit found, the city's Housing Trust Fund lost out on $2.79 million.

When California's redevelopment agencies were dissolved earlier this year, with them went affordable housing's most significant funding source, and housing advocates are struggling to find a replacement. In April, Sen. Mark DeSaulnier introduced a bill­, coauthored by Atkins, that sought to provide permanent funding for affordable housing—an estimated $525 million annually statewide—via a $75 fee on certain real-estate transactions (home sales excluded). The bill failed to get the required two-thirds of votes in the Senate.

Tinsky says there's a funding option that could from redevelopment's dissolution. Once the city pays off its debt obligations, some tax dollars that used to stay in the redevelopment area will now go to the city's general fund.

"We think they should set aside some of those general-fund revenues for the Housing Trust Fund," Tinsky says. "The initial estimate is $18.7 million a year, and we're saying that 20 percent [of that] should be set aside."

SDSU's Nico Calavita sat on the Affordable Housing Task Force that was created on Housing Day. To boost the Housing Trust Fund, the task force recommended that the city up its hotel-room tax—also referred to as transit-occupancy tax, or TOT—by 2 percent. The recommendation was almost immediately rejected by a City Council committee. Calavita says he was disappointed when the City Council recently approved a hotel-tax increase to pay for the convention-center expansion and tourism marketing.

"It is, for me, very disturbing that an increase in the TOT of that magnitude has been passed without any concerns about the implications of the low wages of people working in the tourism industry," he says, "and the implications low wages have for housing affordability for the people working in that industry."

When it comes to affordable housing, it's all about priorities, Atkins says.

"If people can be housed, then they can focus on education, job training—all those things that help people become productive members of society and taxpayers."

The lingering question is how that housing's best built. Developers argue that fees and regulations slow down production and increase demand. Fiscal hawks point to affordable-housing subsidies and say they're too high. Meanwhile, there's the larger issue of infrastructure.

"We still haven't got open space and public spaces in a lot of our older urban areas," Russell says.

"We in government subsidize all kind of things," Atkins says. "We subsidize roadways for the driver, we subsidize public transit, we subsidize all kinds of development, and the question is: What do we get out of it as taxpayers? And I think making sure that people are adequately housed benefits communities and benefits our state. I do think it's worthwhile to subsidize. It doesn't mean we shouldn't question [the cost], but I would like it to be a dialog where we can get some real information we can use to do it better."

 

David Rolland contributed reporting to this story.

Email kellyd@sdcitybeat.com or follow her on Twitter at @citybeatkelly.

   

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