In the May 28 edition of the Daily Journal, the guest perspective of Nick Humann (“SB 50’s pause will embolden housing activists”) makes the tired old case that inclusionary housing policies that require developers to rent or sell a small percentage of new units at below-market rates cause a proportional pricing increase for the market-rate units. Basic common sense reveals the problem with this claim. Market-rate housing is called market rate because developers charge what the market will bear (what prospective tenants and homebuyers are willing to pay). A developer is responsible to their investors; it is a developer’s job to charge the highest price possible. If a developer could charge higher prices, they would certainly do so now, regardless of whether an inclusionary housing policy is in place or not. The market rate is market rate.
Faced with the additional cost of providing a small percentage of units at affordable prices, developers will negotiate with landowners on the price of land. This concept, called “residual land value,” is well known by those in the development community.
San Mateo County desperately needs new homes at all income levels. Inclusionary housing policies ensure that, when much-needed new market-rate homes are built, a percentage of them are made affordable to low-income households: the teachers, child care providers, restaurant workers, and others who help make San Mateo County a great place to live.