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SAN DIEGO-City officials have approved new rules requiring developers to set aside a portion of the dwellings they build for low-and moderate-income households–or pay hefty fees to help finance affordable housing elsewhere.

The council also declared a “housing state of emergency” at a meeting that drew more than 1,000 people from the multifamily and residential building industry, as well as buyers and tenants. Local housing advocates have tried for more than a decade to get affordability mandates from the city.

Both housing activists and building industry officials used words like “historic” to describe the City Council action Tuesday. Dismissing the concerns of building industry officials, the council voted 7-2 to support the affordable housing requirements. Mayor Dick Murphy and Councilman Jim Madaffer opposed the measures.

Councilman Scott Peters says the county’s rapidly escalating prices and rents amount to a full-blown housing crisis. He pointed out that economic factors are forcing working people to move to Temecula and other parts of the Inland Empire in search of lower prices.

Mayor Murphy says the new law, ironically, “will make housing less affordable to the rest of San Diegans.”

Builders will be required to set aside 10% of dwellings for low-or moderate-income households earning no more than $39,050 a year for a family of four. Builders can dodge the set-aside by paying into a fund of as much as $2.50 per sf to build affordable housing elsewhere.

The law will go into effect in about six months. Michael Neal, president of the Building Industry Association, says the city’s setting up of a task force to help builders will help somewhat. But he agreed with the mayor that most people will pay even higher housing prices as builders pass on costs to renters and buyers.

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