Cities have limited tools for creating affordable housing. Usually, it requires an interest by the housing developers to partner with a nonprofit organization or the availability of funding to push the rents below the market rate. However, one way that cities can directly generate affordable housing is through inclusionary housing. What that means is for cities to require that new market-rate, multifamily, residential developments above a certain size, such as 10 units, offer a minimum percentage of their housing with rents suitable for lower- and moderate-income residents (such as below 30 percent of the household’s income). Jurisdictions may also allow developers to pay fees in-lieu instead of providing the units on-site.
There is no requirement for cities to use an inclusionary housing authority. In addition, for those that use this tool, the percentage varies considerably. For rental properties, Oakland and Chula Vista require 5 percent of units in new housing developments to be deed-restricted, affordable units, San Diego requires 10 percent, San Jose requires 15 percent, and San Francisco requires 19 percent. Among for-sale housing, the inclusionary housing requirements are generally higher, with Los Angeles’ mandate rising as high as 40 percent in some cases.
One way for the state to add more affordable housing is to mandate that for any region with an employment-housing imbalance, such that housing costs make up at or greater than 30 percent of the salaries of essential workers, cities must establish an inclusionary housing zoning requirement, with a percentage of no less than 20 percent. Developers would be able to satisfy this requirement, either directly by building on-site housing or by paying an in-lieu fee that the city can use to fund a housing voucher program or to build their own affordable housing elsewhere.