The San Diego City Council on Tuesday unanimously rescinded a previously approved increase in a construction fee that goes toward paying for affordable housing.

Opponents from the business community collected more than enough signatures to qualify a referendum for the ballot, forcing the council to choose between a repeal or placing the so-called “linkage fee” issue to a public vote.

Councilman David Alvarez speaks on linkage fee. Image from NBC San Diego via
Councilman David Alvarez speaks on linkage fee. Image from NBC San Diego via

Councilman David Alvarez, a supporter of the hike, made the motion to rescind after several business leaders — including former Mayor Jerry Sanders, who now leads the San Diego Regional Chamber of Commerce — promised to help craft a plan to tackle the lack of affordable housing in the city.

“I don’t know if it took (the increase) for you to be serious about saying that you want to come forward with a solution — work collaboratively … I can only take you at your word,” Alvarez said.

The fee was first established 24 years ago at 1.5 percent of construction costs. In 1996, the council halved the levy as an economic stimulus. An audit five years ago found that the city had not been following a requirement to review the fee on an annual basis.

In 5-4 votes in November and December, the City Council restored the fee to 1.5 percent. However, opponents said some types of businesses would be charged increases of more than 700 percent, while making only a minimal impact on San Diego’s affordable housing shortage.

Rescinding the ordinance was a top priority and campaign theme for Kevin Faulconer, who was sworn in as mayor on Monday.

“This repeal of a massive increase to the linkage fee is a victory for jobs and the local economy,” Faulconer said. “The City Council made the right decision, avoiding a costly election battle and creating an opportunity to reach a bipartisan compromise to address affordable housing that doesn’t negatively impact San Diego’s economic development.”

Sanders said creating an adequate supply of affordable housing is important to the city, but placing the burden on job creators would drive businesses out of San Diego. Several cities near and far have been courting local companies recently, according to the fee’s opponents.

Sanders said he hoped to work with the City Council on a “broad-based solution.”

Faulconer, in his statement, said he would help business and housing advocates to find a reasonable fix for the affordable housing problem.

The council members asked business representatives to discuss their ideas with the San Diego Housing Commission, which will report back to the Smart Growth and Land Use Committee in three months.

Council President Todd Gloria said the panel would take up the issue again next year, whether a compromise is in place or not. He bristled at accusations that the council was not business-friendly and outlined several initiatives undertaken in the past year to help local commerce.

According to City Clerk Elizabeth Maland, the Registrar of Voters Office estimated that a 15-page referendum on the June 3 ballot would cost the city up to $250,000. The price tag would rise to over $300,000 in November, Maland said.

—City News Service