SLO County city wants to help developers build affordable housing faster. Here’s how

The city of Atascadero wants to help developers build affordable housing more quickly and cheaply.

At its Tuesday meeting, the Atascadero City Council held a public hearing on a resolution to defer impact fees for affordable housing developments.

However, that could cost this city a total of $3 million in lost revenue, which could mean a budget shortfall for infrastructure projects over the term of the deferment, according to agenda documents.

Mayor Heather Moreno said the deferrals were needed to make good on the city’s Regional Housing Needs Assessment goals.

“What we are trying to do is help facilitate developers and investors that would build (low, very low and extremely low-income) units, and where we fall short is in the low-income and below category,” Moreno said.

How would development fees change for affordable housing?

Community development director Phil Dunsmore said city staff has been working on a fee deferral resolution for affordable housing since April 25.

That’s when the City Council instructed staff to pursue the idea as part of Atascadero’s Housing Element.

The proposed resolution would make changes to the financial component of the city’s municipal code, Dunsmore said.

Under those proposed changes, developers building housing projects with five or more affordable rental units could defer the payment of development impact fees and wastewater capacity charges by using a 17-year loan that’s subject to interest, Dunsmore said.

At the end of the 17-year loan, developers would pay back the fees, Dunsmore said.

That $3 million shortfall would most likely effect future infrastructure upgrades and repairs, according to the agenda document.

The city uses development impact fees to pay for expansions to roads, parks and police and fire facilities, the document said.

According to the agenda document, development impact fees are adopted at a rate of 60% of full facility costs, and there is currently a “large backlog” of needed expansion projects that do not have funding.

The development impact fee for a high-density multi-family project — a common building choice for affordable housing — ranges from $12,000 to $15,000, the agenda document stated.

Another cost that would be deferred by the proposed resolution are wastewater capacity charges.

Revenue from those fees are reserved for necessary expansions of the city’s wastewater system, which is currently operating at maximum capacity, the agenda document said.

Depending on the size of the unit, wastewater impact fees typically range from $3,350 up to $4,188 per unit, the agenda document said.

Affordable housing developers could use the deferral of fees and shortened time to development to be more competitive when applying for state tax credit awards, Dunsmore said.

“We’ve got affordable housing developers that are seeking these deferment agreements in order to gain additional points towards their grant applications,” Dunsmore said. “We don’t have policies that can handle these (deferments).”

At the start of the building process, developers must request fee exemptions ahead of the permitting process, and will only receive deferments after an affordability covenant has been signed for the property.

The proposed city ordinance would go into effect immediately if approved, but could be subject to a 30-day wait period if a second reading is requested by the council.

Atascadero City Council to look at impact on staff, revenue

During public comment, Atascadero treasurer Gere Sibbach advised the Atascadero City Council to delay its approval of the program until some revisions had been made.

Sibbach said there are still “way too many questions” about the deferment resolution and its implementation at this point, highlighting future budget impacts as a potential drawback.

“There is a staff impact besides the loss of revenue that Councilman (Charles Bourbeau) was mentioning — you have to have somebody has to keep track of these accounts forever, basically,” Sibbach said. “You need to think through these things.”

Sibbach said the city should safeguard itself and its loans by adding a so-called “due-on-sale provision,” which requires a loan be paid in full if a house or asset is resold.

What’s next for deferment resolution?

Though city staff recommended the City Council approve the resolution, the council ultimately voted to delay approval to a later meeting after discussing the resolution and receiving public feedback.

Although the city will have to account for the budget shortfall, Moreno said, the deferments would ultimately be worth it if they mean more affordable housing projects.

“This is something we can handle — our wastewater treatment plant isn’t suddenly not going to get built because we’re doing this,” Moreno said. “We’re not going to not pave roads because we’re doing this.”

The City Council voted unanimously for staff to bring the resolution back at its next meeting, after adding a provision that limits fee deferrals to residential zoned property, a due-on-sale provision and a clarification of what constitutes an affordable housing unit.

The resolution will appear on the consent agenda for the City Council’s Sept. 26 meeting.