Credit: File

Editor’s note: This article is available in Spanish here.

Developers will now pay a set fee per square foot of development if they don’t include enough affordable housing units in their projects due to changes to San Luis Obispo’s Inclusionary Housing Ordinance.

Last month’s updates to the ordinance are the most recent effort in a years-long process to promote affordable housing projects across a city that lags behind the state housing goals for low to moderate income levels, according to a City of San Luis Obispo email release.

Previously, projects could have the proportion of affordable housing units required reduced with no fee imposed after city approval.

Developments with units for sale will be required to have 10% sell for below market rate, with 5% for low income designation and 5% for moderate income, the ordinance states. If these requirements aren’t met, the project will pay $25 per square foot toward the Affordable Housing Fund — a reserve specifically allocated for building below market rate housing projects at the discretion of city council.

Rental unit projects are required to have 6% of units as affordable housing, evenly split between low and very-low income units; the fee when rentals do not meet these requirements will now be $20 per square foot.

Commercial construction projects will also be forced to pay a set fee per square foot. In 2020, an Affordable Housing Nexus Study revealed that commercial developments increased demand for housing, causing the council to add the “commercial linkage fee” into the ordinance’s revisions, according to the news release.

Office, hotel, service and retail spaces will be charged $6 per square foot while industrial and institutional construction will pay $5 per square foot.

The first draft of the Inclusionary Housing Ordinance was adopted in 1999 and was amended in 2004. Businesses, residential communities and other stakeholders gave feedback for the original 1999 draft to city staff in preparation for these revisions. 

Very-low income is designated to be less than 50% of the city’s median income and low is defined as having no more than 80% of the median. Moderate-income is considered to be within the range of 80% to 120% of the median. For a four person household in San Luis Obispo, the median household income is $109,200.

Just 208 units out of 1,411 built from 2019 to 2021 — totaling less than 13% of units developed — were for moderate, low, or very-low income levels. According to the city’s demographic report, around 61% of the city’s population has an income level that falls in those categories.