The Bad Math and Bad Faith Behind San Diego’s Housing Policies – OB Rag

A Deep Dive Into San Diego’s “Regional Housing Needs”

By Mat Wahlstrom

On July 13, there was an extraordinary story by Voice of San Diego on San Diego’s current Regional Housing Needs Allocation (RHNA, pronounced “ree-na”) cycle, which was implemented in 2021. This mandates the number of units that a city must have planned to be built by 2029, or else face having more of their oversight on land-use decisions transferred to Sacramento.

And what’s extraordinary about it is that, for once, the RHNA projections were called out as the farce that experts usually only privately admit they are. No less than *the* go-to guy on local land-use economics, Gary London, was quoted as saying, “I don’t think it’s possible” to meet the state’s RHNA goals, as “15,000 units a year is a fantasy.”

And when we ‘sharpen our pencils,’ as developers like to say, to drill down through the numbers, the situation is even worse.

Total RHNA counts are divided into four categories of percentages of the Area Median Income (AMI) for a region: very low, low, moderate, and above moderate. The AMI is determined by the Department of Housing and Urban Development (HUD) — but municipalities specify what percentages of which tier define a program or project as “affordable.”

In San Diego, for 2022, the AMI is $106,900 — with ‘very low’ defined as between 50-70%, ‘low’ as 80%, ‘moderate’ between 90-120%, and ‘above moderate’ everything more than 120% of that AMI. (Another term for more than 120% AMI is “market rate.”)

HUD also has a category for ‘extremely low,’ for those making below 50% AMI; but RHNA does not treat that as a separate concern. So the target number of new units for those making only 30% or $27,350 is lumped in for meeting the needs of those making 80% or $72,900.

Further, AMI is a regional assessment, that is, for all of San Diego County — an area nine-tenths the size of Connecticut. And it is not adjusted based on location, so neighborhoods in the City of San Diego such as Carmel Valley, with an actual AMI of $145,100 , are considered the same as San Ysidro, where the AMI is $46,562 .

(The County has its own RHNA targets for the unincorporated areas , but only distinguishes between ‘lower’ and ‘moderate’ incomes, with the dividing line being that same 80% AMI  .)

Even if we assumed other things being equal — which they aren’t — the reality on the ground isn’t remotely being faced.

Compounding the situation, Senate Bill 35  was passed in 2017 (with the approval of then-Assemblymember Todd Gloria), which implemented by-right approvals of multifamily housing projects in cities that don’t issue enough permits per income targets. But since it is developers who apply for permits to build housing not cities, its mandate that municipalities identify opportunities for and remove limits on new housing is one-sided.

Also, RHNA numbers aren’t determined in a vacuum but under the influence of lobbyists, which explains why the target of all units for Southern California was set from just over 409,000 in the previous eight-year cycle to almost 1.35 million now — an increase of 330%  — in a state with a net population loss. And shockingly, it still calls for 42% of that total go toward those making an ‘above moderate’ 120% of the $106,900 AMI, the “market rate” housing segment for which there’s already a glut.

Now for the really dirty open secret:

Although the RHNA numbers are divided into those four tiers based on income, there is no requirement that the targets per those income levels be met: the only thing that counts is the total number of units permitted for construction, regardless of income or whether those units are actually built.

And as noted earlier by Mr. London, it’s just not possible. But cities would still have to continue to loosen zoning across the board in meet arbitrary and unattainable goals.

Our situation is that those in the know realize cities are placed in a “heads I win, tails you lose” position with developers; yet our electeds continue to rig the game against community input and community benefit on land-use decisions rather than resist.

Three months before the Voice of San Diego story already cited, KPBS posted a rapturous report about the supposed success of Complete Communities . Passed in November 2020, under the previous mayor yet championed by our current one, it allows multifamily housing with unlimited height and density beyond the base zoning, if one in ten units are deeded “affordable” — again, as defined by the city — to meet its backstopped RHNA goals.

The results so far? Fourteen projects of 864 individual units, where only 286 would be permitted. With just 211 of them, or 24% — many as small as 200 square feet, renting for no less than $1,400 a month  — meeting the ‘very low’ 50% AMI of $45,550 for a single person.

Given San Diego’s RHNA target of 21,977 new ‘very low’ income units, at this rate, nearly 88,000 total units would need to be built to reach it.

Oh, and given that all units less than 500 square feet are exempt from paying *any* development impact fees for their added strain on infrastructure and amenities — and only a sliding scale if larger — Complete Communities projects do not offset their impacts on existing energy and water supplies, sewers and roads, or parks and public safety.

A prime example is the Secoya project  in Bankers Hill — the first in the city permitted under Complete Communities. Built without community review on land with a base zoning of 25 units, the project is 103 micro-units — with a generous 11 termed ‘rent restricted’ — which the builder claimed to be free from subsidy.

But in order to meet the electrical requirements, it required a new feeder being run from a quarter a mile away to handle the density, depleting its neighbors. And since these projects get the expenses for this and for undergrounding waived as par for the course, the true costs are buried in the community’s ledger.

(Mark your calendars: within a year, I predict at least one brownout and/or water main burst related to these fourteen projects, that city and utility officials will unite in describing as the fault of deferred maintenance under the prior mayoralty.)

And adding insult to injury, Secoya’s developers have the audacity to term those few deed-restricted units as “naturally occurring affordable housing” (NOAH) — an Orwellian arrogation of the definition for long-standing habitations that too many of these projects demolish to replace — and which the San Diego Housing Commission in May 2020 issued an urgent report as needing protection

In sum, we find ourselves in a bezzle. Coined by the economist John Kenneth Galbraith in his book, The Great Crash of 1929 , it is the term for the window of time “between the commission of a crime and its discovery. (This is a period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. There is a net increase in psychic wealth.)”

It is the result of policies that punch endless loopholes in constraints to speculation on land use under the pretense that this will negate the consequences of speculation on land use — so long as token commitments to provide affordable housing yield token amounts of it.

It’s the equivalent of spending $100 to get a coupon for $10 off and thinking that is a net increase in actual wealth.

(Because the data for the fallout from doubling down on the same flawed premises as Complete Communities is not yet available, I can’t provide the same level of detail on our current mayor’s “Homes for All of Us,” “Blueprint San Diego,” and “Build Better SD” initiatives that were similarly rolled out in the name of ‘equity.’ But suffice to say, they look to be throwing more good public money after bad.)

Circling back to Gary London: “That’s the crisis the city has to adjust for – we’ve significantly overlooked large households, principally families,” he said. “There is a severe shortage, there is, but at some point there will be a wakeup call that we’ve only been accommodating the people who can be accommodated by small units.”

Until then, don’t expect any relief from our electeds to our affordable housing crisis.