How you can significantly decrease supply and demand gap in affordable housing?

If you’re a developer or home owner, you can be part of the solution. However, this involves following a path of understanding and action.

  1. Understand the scope of the problem
  2. Assess your role in it
  3. Modify your project to make the situation better, not worse

Scope of the problem

There are two primary aspects to this: the gap between the income of people in the very-low to low categories and the rise in housing costs, especially rents. Bob Kent’s Keys 4 Homes presentation shows how this gap has been widening:

Chart is for SD County as a whole, and was supplied by the office of District 3 County Supervisor, Terra Lawson-Remer

Since 2016, this gap has only widened. Front line workers were hit the hardest, and those families are the ones who tend to fall in the very-low to low income categories. While incomes for these families fell during the pandemic, rents increased. The average rent at the beginning of 2020 was $2,073, and by August 2021, that had climbed to $2,241, an 8% increase.

Exacerbating this problem is the imbalance between housing supply and demand, as noted in the report from the office of SD County Supervisor, Terra Lawson-Remer.

As this graph shows, families in the above moderate income category ($131K or more) are not in dire need of more housing – 92% of the units needed in this section were built in the last 10 years. In the very-low to moderate-income categories, the situation is reversed: only 10% of the units needed were built. The total shortfall is 88,000 units, but 94% of that shortfall, or 83,000 units, falls into those categories.

Be part of the solution to significantly increase affordable housing

As a developer or home owner you are not a charity. But you have a choice.

For developers, density bonus laws have created powerful incentives to load up a property with the maximum number of units. Currently, there is no requirement for the units added to adhere to the inclusionary rate guidelines applied to the base units allowed by zoning laws. For example, an R-30 parcel may allow 250 base units, requiring 50 units in the low income category. By utilizing maximum density bonuses, that parcel may gain up to 200 more units. But there is currently no requirement for the total number of units built to conform to inclusionary rates. So the original project, which had a 20% inclusionary rate, now has 50 low-income units out of 450, or 11%.

Your choice: you can maximize profits, utilizing bonus densities, regardless of the effect on our housing crisis. Or you can build a project like Fox Point Farms that maintains the inclusionary rate even inclusive of the density bonus units to be added.

As a home owner, you may be in the position of renting out a second home or perhaps building an Accessory Dwelling Unit (ADU). Many home owners in Encinitas bought their homes years ago, and have even sent their kids through college with no college loan debt, simply by refinancing every time home prices increased. A family in this position might could easily be paying a monthly bill of less than $2,000. These home owners have a choice: maximize rent and make a profit of $1,000 or $2,000 a month; or set a rental rate that provides for a smaller return but alleviates the housing shortage.

Some homeowners also have the option of building ADU’s or Junior ADU’s. The City of Encinitas has a variety of permit-ready plans. It is also trying to develop programs to promote and encourage ADUs affordable for low and moderate income households, including exploring loan programs, financial incentives, and assistance for existing or un-permitted ADU units.

Modify your project to improve Encinitas

E4E will not endorse a project that does not meet the inclusionary guidelines set by the City. In many cases, the addition of just a few units in the very-low to low income categories would bring a project up to that level. While we realize that not every development can have as high a percentage of low income units as Fox Point Farms, many projects could add more very-low income or low-income units  and still be profitable.

Also, please note that meeting the City’s inclusionary rate is one of the most important criteria for E4E support, there are others. These include things like the number of 2- and 3-bedroom units for low income renters, history of dealing with community concerns, and experience in affordable housing development.