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Good news, bad news for Santa Fe’s housing efforts

Santa Fe officials hope a new fee program will boost the construction of more rental housing. (Eddie Moore/Albuquerque Journal)

There’s good news and bad news in the latest report on Santa Fe’s efforts to encourage housing development and more affordable dwelling options.

For years, developers in Santa Fe have been able to pay a one-time fee in lieu of meeting a city requirement to make 15% of new rental housing units affordable as determined by city standards. The fee option was intended to break an apartment construction logjam after developers balked at including affordable units as not feasible economically and a hassle to operate, requiring apartment managers to keep up with tenants’ income levels.

In a new iteration approved by the mayor and City Council in December, the fee-in-lieu provision was retained. But the fee will increase 20% each year for five years until it doubles.

The idea was to provide an incentive for developers to get apartment projects in the pipeline now to help solve Santa Fe’s chronic rental housing shortage. Vacancy rates are below 2%.

The new rules have worked. Over the past six months, seven developers have paid the city more than $814,000 of fees to avoid having to include affordable units in their housing projects. Some of the checks came in just before July 1, when a higher fee kicked in.

That means the city received as much from the fee-in-lieu program in a half year as it had in a previous three-year period. The money typically goes to subsidize rents for low-income tenants. With the City Council’s approval, the fee revenue now will be used to provide rental assistance to people whose income has taken a hit from the economic shutdowns caused by COVID-19 pandemic. “Without those $800,000 we’ve collected over the last six months, we would be dealing very differently with more homelessness,” Alexandra Ladd, the city’s affordable housing manager, told Journal North.

The bad news here is that those recent collections mean no affordable housing units will be included in the projects of the seven developers who paid the fees.

Rental subsidies for low-income families and individuals facing homelessness is crucial, and the fees generated by the fee-in-lieu program at least help address that problem. But once again, actual construction of housing for the poor or for people who aren’t impoverished, but really can’t afford Santa Fe’s high rents – be they young professionals, artists, blue collar workers or what the city likes to call “workforce” families – gets left in the dust.

City officials and housing advocates say that, even without a hard and fast requirement that developers include affordable units, encouraging more market-rate rental housing will loosen up the market and drive down rents under the basics of supply and demand. It’s an economic process that could take years to play out.

For now, that may be the best Santa Fe’s beleaguered renters searching for an affordable place can hope for.