Sacramento may require affordable housing in some developments to address worsening ‘crisis’

Faced with an entrenched housing affordability crisis, the city of Sacramento is exploring reviving a policy that would require developers to set aside a percentage of units in new housing projects to low-income earners or pay a fee to the city.

The City Council will likely not vote on a new policy until the spring, and a lengthy hearing on a preliminary proposal last week revealed that the council appears divided on the issue. Still, city officials widely acknowledge that not enough housing is being built in Sacramento — especially housing affordable to low- and moderate-income earners.

“We are rightfully focused on inclusion and affordability for everyone,” Mayor Darrell Steinberg said during a City Council hearing in early December. “There are too many people hurting who cannot afford a place to live. And (providing affordable housing) is fundamental to our ethos as a city. The question is: how do we achieve it?”

Among the options city officials will consider are requiring that 10% of units in new developments of more than 10 residences be available to low-income earners, a policy often referred to as inclusionary or mixed-income housing. That percentage could be lower if units are priced to be affordable for very low-income families.

If developers choose not to provide affordable units, they would be required to pay an “in-lieu fee” to the city. That fee would likely begin at $3.54 per square foot of the planned project and could potentially increase to as much as $10 per square foot in the central city, but only in years when new home construction is robust and city officials believe the market could absorb increased fees.

The in-lieu fees would likely be used to support new affordable housing in the city.

Affordable housing advocates, including the Sacramento Housing Alliance, argue an inclusionary housing policy is necessary in Sacramento, where “residents are facing a housing crisis due to a lack of safe, accessible and affordable homes,” the group wrote in a letter to the City Council. Some council members indicated they would support a policy that aims to add affordable housing in all corners of the city, most notably wealthier neighborhoods.

“I want low-income families to benefit from the schools, from the parks, from the amenities that wealthier neighborhoods have to offer,” said Councilwoman Karina Talamantes.

Some business groups, council members and developers are concerned that new regulations, including a mixed-income housing requirement, would hinder housing construction in the city and result in developers charging higher rents to tenants. A little more than 2,200 housing units were produced in Sacramento in 2022, the lowest number since 2016, according to city data released earlier this year, and a spike in interest rates this year has led to some major housing developments being placed on hold.

“Are we creating any unintended consequences (by adding requirements to developments)?” asked Councilwoman Lisa Kaplan. “Just because something sounds good, doesn’t mean it is good.”

Sacramento had an inclusionary housing policy from 2001 to 2015, then replaced it with a fee-based program.

The prior policy focused on new growth areas of the city and helped spark the construction of hundreds of units of affordable housing. However, critics said it also had flaws, pointing to some parts of North Natomas where developers constructed large low-income housing apartment buildings in isolated locations, cut off from services and market rate neighborhoods instead of mixing those low-income units into wealthier developments.

Despite making significant progress in recent years in constructing affordable housing communities, Sacramento is still behind in its goals. An analysis by the Sacramento Area Council of Governments in 2020 determined the city should seek to build roughly 2,100 units of affordable housing each year; in 2022, about 1,300 of those units were built, according to city data.

This story was originally published December 18, 2023 at 5:00 AM.