The 3% Solution – A Response to the City’s Proposal to Add 24,000 Residents to the Peninsula at Midway.

The City Is Posed to Begin a Massive Redevelopment of the Midway District

By Michael Winn

We are told there are 550,000 homeless people in America. We’re also told of a crisis, called, “housing affordability” in urban coastal California cities. Statements of politicians of every stripe: Brown to Cox, Beane to Zapf, Faulconer to Fletcher, all assume we will address housing affordability by developing more housing. This assumption is politically motivated by a desire for endorsements from local governments and for campaign contributions from a development industry that financially benefits from development.

To mortgage lenders and property managers, “affordable” means that a household’s mortgage payment or rent amounts to no more than 28% of gross income. Using this definition, “affordable” housing cost is easily extrapolated from income data. However home and rental unit prices are affected by cash purchases and investment projections. Increasing supply into this kind of market hasn’t lowered prices, and can’t do so, unless  rents are artificially restricted in some way. This restriction is the logic of “workforce housing” projects, in which taxpayer subsidies are tied to rent restriction agreements and annual rent increases are pegged to changes in the area’s annual median income.

It cost the San Diego Housing Commission about $400,000 per 2 or 3 bedroom apartment, using financing from Low Income Housing Tax Credits with State housing bond financing, which are both taxpayer subsidized finance vehicles. At $400k/unit, it would cost more than $55 billion to meet the current need for 143,000 affordable apartments in San Diego. However, $55 billion in tax credits and state bond financing isn’t available, not to mention that adding 143,000 homes in San Diego communities would require a huge new investment in infrastructure, and all this combined would reduce livability.

Affordability is part of a big issue for Californians: that our state and local officials are beholden to a development industry that finances local and state election campaigns. So we see government officials telling constituents that we must permit development, even when not it’s sustainable and infrastructure doesn’t support it. Land use planning that supports this agenda pre-dates our current knowledge about human causes of climate change, as well as water shortage,  energy cost and waste disposal issues, and that the impact on quality of life in communities like Point Loma is horrific, and where real estate investment in mortgage-backed securities supports new business plans based on converting homes to short-term vacation rental in residential-zoned neighborhoods.

In view of the impact from all these conditions, there is no reason to believe affordable rent can be preserved by building more homes, nor that the affordability problem will be significantly addressed by subsidized “workforce housing”. In the longterm the strategy is unsustainable and promises to diminish quality of life for everyone in San Diego. At this moment, our city is proposing to add 24,000 residents to the Peninsula at Midway.

Fortunately, we needn’t invent the wheel. There are tried and proven ways to address the affordability issue, which are fair for both renters and landlords: The city can directly address affordability by tying rent increases to changes in area median income, or it can simply cap annual increases at 3% per year. The City can also limit short-term occupancy (vacation rental) in residential neighborhoods to 30 days per year.