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Santa Fe housing construction incentive generates $800,000 in six months

Copyright © 2020 Albuquerque Journal

SANTA FE – Changes to a city program meant to increase the construction of housing units in Santa Fe appear to be having their desired effects.

In December, the Santa Fe City Council approved changes to the “fee in lieu” program, which offered housing developers the option of paying a one-time fee to the city rather than making 15% of their units affordable housing. The changes stipulated that, among other things, the fee would increase 20% on July 1 every year until 2024, by which time the fee would essentially double.

Developers took notice. Since the start of 2020, seven separate housing developers have paid the city more than $814,000 in fees, city records show. The largest payments came from Blue Buffalo LLC, at $130,712; Storm River LLC, with $280,195; and $302,983 from TA Las Soleras LLC.

The city started the fee in lieu option in 2016, but Affordable Housing Manager Alexandra Ladd said the money in 2020 is far more than they usually receive in this span of time. In a Journal article from 2019, Ladd said they had collected $800,000 in three years, while this total took six months.

Ladd said that quick accumulation of fees was by design – an incentive to stimulate housing construction to help meet demand for housing in Santa Fe.

“We wanted to create a little pressure for (developers) to pay their fees,” she said.

Several developers responded by submitting their checks to the city with just a few weeks or days to spare before fees increased.

On City Council approval, those fees will go toward providing rental assistance to those affected by the pandemic, Ladd said.

“Without those $800,000 we’ve collected in the last six months, we would be dealing very directly with more homelessness,” she said.

Ladd said the idea is to expand the stock of housing units in Santa Fe – where vacancy rates are just below 2% – to increase supply and force landlords to lower rents to be competitive. She acknowledged, though, that rental prices have not yet declined.

In fact, the average rental price in Santa Fe increased 13% to $1,038 a month between 2016 and 2019, according to yearly CBRE rental surveys. Ladd said CBRE’s 2020 survey, which will be released in September, will indicate how new housing developments have affected pricing.

Many have criticized the fee in lieu program for allowing developers the chance to opt out of building affordable housing.

Daniel Werwath, executive director of New Mexico Inter-Faith Housing, said he believes new housing units will lower rental prices for the area. However, he said the poorest residents probably will not benefit as much.

“Even in a healthy balanced market, we still have a lot of folks who can’t afford decent housing,” he said. “So it doesn’t solve the whole problem.”

But given Santa Fe’s desperate need for any sort of housing, the city can’t be picky, Werwath said.

“Frankly, we also just need whatever rental housing we can get and we can’t really afford to put more barriers there,” he said.

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