It is increasingly disheartening to find virtually all proposals to provide more affordable housing choices in San Diego are at best inadequate and, at worst, worsen the housing delivery gap. Many good suggestions were put forward two years ago by the city’s Affordable Housing Task Force, and more recently by the San Diego Regional Chamber of Commerce, such as pushing communities to accept more housing by promising infrastructure improvements. Yet these ideas still fall short of creating truly workable programs to build affordable housing.

First, let’s put the housing issue in perspective: housing is not the core problem. While we continue to demand more than we supply — we are almost 80,000 housing units short of a balanced delivery system in this region — if you have the resources you can find a house. More than 60,000 housing transactions took place last year — 45,000 resales and 16,000 new and conversions — and listings remain plentiful.

The core problem is inadequate income. Median income in San Diego is $50,000. Median housing prices are $500,000. But you need an annual income of more than $100,000 to afford the median house. This income level is out of sync with housing prices. Suggestions to increase densities and lower city fees are helpful, but the ultimate solution is to find ways to build more affordable housing.

Inclusionary Zoning Is No Solution

Inclusionary zoning, in particular, is the wrong approach to solving housing delivery issues. It has proven inadequate to ask builders to provide a certain percentage of low and moderate priced housing in every project they develop. A recent study by San Jose University economists (Housing Supply and Affordability by Powell and Stringham (rppi.org/ps318.pdf) states, “In the 33 cities with data for seven years prior and seven years following inclusionary zoning, 10,662 fewer homes were produced during the seven years after the adoption of inclusionary zoning.”

The movement at the city of San Diego today is to walk even further down this path: to force builders to build more of this ‘inclusionary’ housing and not simply provide fees in-lieu because that approach apparently has not succeeded in building housing, either.

This approach is wrong. Builders do not create the demand for housing any more than toothpaste manufacturers create the demand for cavities.

A Demand-Based Solution

The solution is redirecting the burden. Put simply, the programs proposed are largely supply-side. What we need are demand-based solutions.

A better approach might be to create incentives and programs to encourage employers and unions to provide housing benefits to their employees and members, as a form of “virtual” income increases.

San Diego grows principally because its economy grows. People either stay here because the economy has been good to them, or they move here for opportunity. If economic growth is truly jeopardized by housing costs, then the burden should be shifted from developers to employers.

The simple solution is to raise salaries. But if you are intent on meddling with the housing delivery system, the agenda should be changed. Approaches worth considering include:

• Investing in off-campus company housing targeted to employees. This means joint venturing with developers, as equity participants, to produce reduced house prices for employees.
  
  
• Going a step further, corporations should form alliances to purchase a portfolio of properties that would house new employees. This would achieve the advantage of giving employees a choice where to live.
  
  
• Direct subsidies to employees. Several companies already implement this type of program, principally to keep key employees or entice new ones from less expensive housing markets. This concept needs to be broadened.
  
  
• City incentives through taxing and zoning to encourage companies to get involved by creating a system of fee reductions and taxing bonuses.

Collocation Is Right

Another important concept, called collocation, is to re-zone commercial and industrial properties to residential, integrating land uses. This has the added benefit of reducing commuting trips. Target areas would include Kearny Mesa, Miramar, Sorrento Mesa/Valley, Carlsbad and Rancho Bernardo.

This is a tricky issue because there are concerns, voiced by local industrial firms and a revised city policy (to be considered by the Planning Commission and City Council this month) addressing collocation, that we could be depleting so-called “industrial” lands if we were to build residential units on those same properties. I see no empirical basis for this concern. Just as with residential, we can address the need for more commercial space through density. And this theory also presupposes that there needs to be a separation of industrial from residential. But the world is going mixed-use. We are effectively collocating everything.

The other concern is the compatibility issue: undoubtedly instances will arise of potentially toxic or hazardous manufacturing practices that are incompatible with housing. But the concern is vastly overstated. San Diego firms are largely clean. Most large San Diego companies conduct practices in office buildings or quasi-office buildings, known as flex space, incubator, tilt-up space and other names. That space is not in the least bit industrial. Residential can collocate next to these structures.

What Cities Should Do

Several basic steps need to be taken by cities and the state. They include:

• Zoning revisions to increase densities. We think of density as high-rise. Yet, in many existing neighborhoods, we can achieve density by simply chopping in half the single-family lot size requirements, prospectively doubling the inventory. We haven’t run out of land, we are running out of flexibility and creativity.
  
  
• Change fiscal zoning practices. Presently, it is infinitely more advantageous to cities to zone property commercial: jurisdictions receive about 11 times more revenue if they develop the same size parcel as a retail establishment rather than a single-family home. We need to increase the fiscal incentive for jurisdictions to allow more housing units to be built, an issue which the San Diego Association of Governments has addressed in a report encouraging this change.

We are in a cyclical imbalance period, where the gap between the median housing price and median income is very high. While this will eventually correct itself — we were in a similar gap period in the late 1980s — the point is that if the cities, chambers of commerce, employers and unions really wanted to participate in something useful, it would be to encourage supply-oriented programs, coupled with encouraging density and housing, particularly given the dismal failure of all other approaches.

Gary H. London is president of The London Group Realty Advisors Inc., providing real estate consulting and economic analysis. Check him out on the Web at www.londongroup.com or e-mail him at glondon@sandiegometro.com.