With two weeks to go before a judge is scheduled to resolve a three-year dispute between the city of San Diego and real-estate developers, City Attorney Mike Aguirre says he's hoping both sides can reach an out-of-court settlement.
It's a position that initially caught us off guard; last week, the normally fiery Aguirre was, as one affordable-housing advocate put it, “salivating at the prospect” of a citywide affordable-housing law getting its day in court. On Monday, Aguirre told CityBeat he hasn't changed his opinion that the city's so-called inclusionary-housing ordinance is solid, “but,” he said, “whenever I have a chance to work something out, I always try to do that.”
At issue is a 2003 challenge by the San Diego Building Industry Association (BIA) to the inclusionary-housing law, passed that year by the City Council. The BIA argued the law's requirement that developers either restrict prices on 10 percent of units in market-rate developments or pay a fee was unfair; developers statewide (roughly one-quarter of California cities have inclusionary-housing laws) have argued that the costs imposed on them by inclusionary-housing policies force them to raise the price on market-rate units, thereby reducing overall affordability.
Though the BIA sought to overturn the city's law wholesale, in 2004 attorneys on both sides agreed to a settlement under which the City Council would amend the law in a way that made the fee-paying process more palatable to developers; it then took until this year for the settlement discussion to make it on the agenda.
On April 3, the City Council initially agreed, in a 5-3 vote, to settle. Under the settlement, projects in the approval pipeline would be allowed to pay a lower fee-by far the preferable, less costly option to restricting prices-even though it meant a hit to the city's affordable-housing trust fund of anywhere between $9.6 million and $42 million. Attorney Cory Briggs, who's sued the city in other matters on behalf of affordable-housing advocates and low-income tenants, called the settlement “a gift” for developers.
But, as CityBeat previously reported, on April 17, in a closed-session meeting, the City Council rejected an additional request from the BIA to add language to the settlement that would have allowed the BIA to reinstate its lawsuit should the council, within two years, take any action to amend the inclusionary-housing law in a way that would negatively impact developers. City Councilmember Toni Atkins, for instance, has championed abolishing the fee option, arguing that the law was enacted in hopes of creating a certain amount of much-needed affordable units. With more than 90 percent of developers opting to pay the fee, “I think we're not reaching the goals that we set,” she said.
Paul Tryon, the BIA's president, said his organization was simply looking out for its members.
The additional settlement provision would not have meant “an automatic reengagement” of the lawsuit, he said, “nor is it something that ties [the City Council's] hands. It says, look, if you feel that it's in the city's best interest that you make changes... then we respect that, but you need to respect that if it's fundamental changes that are not in the interest of our membership or our customers, then we have the opportunity to revisit whether we would or would not file our suit.”
Fees started out at $1 per square foot in 2003 and gradually increased to $2.50 per square foot. In July, a new fee schedule kicks in-one that takes into account factors like the area's median home price and median salary-bumping the fee to $7.31 per square foot.
“If you listen to what the [BIA] is saying, this is what it boils down to: After July of this year, the higher fees are going to be imposed,” Aguirre said. “The argument is there might be some unfairness.” Aguirre said that under his proposed settlement, pipeline projects that can prove “some kind of extraordinary circumstance” could be eligible for a waiver.
“We always have to assume the role of reasonableness,” Aguirre said of the settlement offer. “It's never 100 percent cutthroat one way or another unless it has to be.”
If a settlement can't be reached, Superior Court Judge John Meyer on May 18 is scheduled to tentatively rule on the lawsuit. Both sides will get a chance to argue their position the following day before the judge issues a final ruling.
In March, a Sacramento judge threw out a similar lawsuit brought against Sacramento County by the North State Building Industry Association. Sacramento County's inclusionary-housing law, passed in December 2004, is far more stringent than San Diego's, requiring developers to set aside 15 percent of units at a restricted price. While San Diego's ordinance defines “affordable” as a price that a family of four earning $64,900 could afford, Sacramento County's law mandates that the 15 percent of units must reach deep levels of affordability-3 percent of units, for example, must be set aside for extremely-low-income households. If the same law were in effect here, a family of four with an income under $55,000 would have a shot at home ownership. Right now, less than one-quarter of San Diegans can afford to purchase a condo and less than 10 percent can afford to purchase a home.