Weighing in on SLO’s Housing Crunch
Originally Published By: Cynthia Lambert, San Luis Obispo Tribune
Marinelli’s husband, Peter, would quickly try to bring her back to reality. You understand we can’t buy a home here, he’d say. Or he’d estimate how much they’d need for a down payment.
“Over time, Peter wore me down,” Marinelli, 25, recalled this past week. “He told me, ‘You have to stop looking. We have to pin our dreams on something else.’ ”
Many of their friends are facing a similar dilemma.
“No one really talks about the future,” Marinelli said during an interview in the 350-square-foot home she and her husband rent for $1,200 a month. “I haven’t heard anyone talking about buying a home because it’s not feasible.”
According to a 2014 workforce housing survey by the Economic Vitality Corp., 1 in 4 employees who responded rents and would like to own a home. Twenty-seven percent of employees said they are likely to move out of the area because of the high cost of living.
And local employers have repeatedly said that the area’s high housing costs make it difficult to attract and retain talented staff.
“One of the biggest problems (is) when you try to recruit from out of the area, people can’t afford to live here,” Mike Cannon, president and CEO of San Luis Obispo consulting firm Cannon Corp., told the county Board of Supervisors during an update Oct. 4 on affordable housing.
“You either rent or leave the city of San Luis Obispo,” he added. “You go deep into the county … and commute. These failed housing policies of not building where the jobs are — look at the streets at 5 p.m. They are clogged with people driving to places where they can afford to live but driving (from) where the jobs are.”
County supervisors heard some sobering statistics during that Oct. 4 meeting. But they also discussed policy solutions that could eventually lead to the development of more affordable and market-rate units.
San Luis Obispo County is the seventh most unaffordable place to live in the United States, according to a recent survey released by RealtyTrac, a national real estate firm.
The report found that 91.2 percent of average weekly wages were needed to buy a median-priced home in San Luis Obispo County.
There’s also been a lot of buzz over the term “workforce housing,” or homes for those earning up to 160 percent of the median income. Homes for this group have sometimes been called the “missing middle.”
Marinelli said she and her husband fall into that gap. A Cal Poly graduate and former production designer for Apple in the Bay Area, she and her husband moved back to the county after Peter Marinelli took a job as a manufacturing engineer in Paso Robles.
Natalie Marinelli found work as an executive assistant at information technology services company TekTegrity. She said the couple earns too much to qualify for low-income homes but not enough “to afford the crazy home prices.”
Even with a drop in housing prices from 2006 to 2011, owning a home is still out of reach for many residents.
Only 47 percent of San Luis Obispo County households could afford to purchase an entry-level home in the first quarter of 2016, according to the California Association of Realtors’First-time Buyer Housing Affordability Index. The index defines an entry-level home as 85 percent of the median home price — or $464,627.
The association also analyzed how much a median-income household could afford and found a large gap between income and the cost of a median home in the county, said Lisa Howe, a county administrative analyst. In the second quarter of 2015, the median income of $62,960 could afford a home that costs $318,210 — but the median home price was $499,050, leaving a 57 percent difference.
In the second quarter of 2016, the California Association of Realtors reported that a minimum annual income of $107,178 would be needed to purchase a median-priced home that costs $546,620.
Several speakers on Oct. 4 urged the supervisors to enact policies that would make more housing attainable to middle-class households, such as increasing density in residential areas, allowing more secondary dwellings and reducing abuse of the environmental review process.
Others urged the county to encourage a more diverse housing stock for a range of incomes, noting that workers in the county’s larger tourism and agriculture industries earn a wide range of incomes.
“While some worry about and desire homeownership, tens of thousands in this county have bigger problems,” said Anne Wyatt, a former San Luis Obispo County planning commissioner. “They struggle just to maintain modest rentals.”
Jerry Rioux, executive director of the county’s Housing Trust Fund, said it’s critically important to give developers more incentives to build smaller and more affordable homes.
“The government has increased regulation so we have wonderful, beautiful, energy-efficient homes that no one can afford,” he said. “If a developer can build a home or apartment more easily or quickly without every neighbor arguing that it should be a different color or have a different roof … just so they can delay the project or cause it to go bankrupt. … We’ve got to make it easier to build.”
Last year, county supervisors decided not to raise affordable housing fees levied on new homes and commercial developments. They asked staff at that time to bring back a discussion about affordable housing and the county’s role in encouraging it.
Now, supervisors are moving ahead with eight policy ideas and a few potential financing programs, several of which were developed by the Economic Vitality Corp., the San Luis Obispo Chamber of Commerce and the Home Builders Association of the Central Coast. Those organizations released a report in June after conducting a series of workshops with industry leaders.
Those ideas include scaling fees to the size of the unit, not the number of units being built; looking at the timing of when fees are paid; exploring zoning more land for residential uses and expanding multifamily residential zoning; and increasing flexibility for secondary units.
County staff will also investigate first-time homebuyer programs.
The policies will help speed up the time spent processing projects, make the approval process more predictable and remove barriers to building smaller, more affordable units, Economic Vitality Corp. President and CEO Michael Manchak wrote after the meeting.
Need to collaborate
Still, even with changes, home prices and rents will likely remain above average for the foreseeable future, county staff and business leaders said. That’s due in part to the high demand to live in San Luis Obispo County, a limited amount of land for development, concerns about water availability and the lengthy amount of time it takes to move a project through the environmental and permitting process.
“If we had more housing, the law of supply and demand says the housing would be more affordable,” said Cannon of Cannon Corp. “Everyone who gets here wants to shut the door behind them. We have to have the courage to stop that.”
Over the past 10 years, the county and its cities have produced homes at a rate below that prescribed by a regional housing plan that sets goals for the county and each city, and Cal Poly’s on-site housing hasn’t kept pace with its enrollment growth, according to the report by the chamber, the EVC and the Home Builders Association.
The result: a low supply of housing and unfilled high demand, which leads to higher home prices.
And the county can’t move the housing needle on its own, planners and supervisors said.
The cities — particularly San Luis Obispo, where many jobs in the county are clustered — need to work in conjunction with the county to develop policies to build more housing. That could include regional financing of infrastructure such as roads needed to support new development or trying to expand a city’s boundaries to allow larger developments.
There are larger housing projects in the pipeline in San Luis Obispo, such as Avila Ranch in southern San Luis Obispo and San Luis Ranch along Madonna Road, but other developments are smaller, infill projects.
One of those projects is 9 on Rockview — nine two-bedroom homes of about 1,300 square feet under construction near the Marinellis’ home in southern San Luis Obispo. Prices for five of those available homes range from $565,000 to $587,500, according to Richardson Properties.
Those prices are discouraging to Natalie Marinelli, who said she would be happy to simply be able to afford a fixer-upper.
“I would love to just have an old home,” she said. “I’m not looking to buy a mansion. I don’t think what we want in terms of our American dream is crazy.”