City leaders are divided over whether Santa Fe should relax affordable-housing requirements in the midst of a housing slump.

Several city councilors favor reducing the portion of new housing projects that developers must devote to the city's affordable-housing program.

But the idea already is meeting opposition from Mayor David Coss, who says it's not a good time for the city to back off its commitments.

Currently, the developer of a housing project is required to build and sell 30 percent of homes in a subdivision within a certain price range to income-qualified buyers. However, four councilors on the city's nine-member governing body support a proposal to reduce that mandate for the next two years to 15 percent.

City Councilor Rebecca Wurzburger said she rallied councilors Carmichael Dominguez, Ron Trujillo and Matthew Ortiz behind the plan because she's concerned the 2005 rules are further stalling a sluggish economy.

"This is my trying to come up with something that would, in the short term, see if we can get some affordable housing, which is better than none," she said.

Kim Shanahan, executive director of the Santa Fe Homebuilders Association, said his group is behind the effort. The problem for small builders is that the gap between the cost of producing city-mandated affordable units and what the market will bear for other new homes has narrowed to the point where subsidizing the affordable-housing program from profits isn't possible, he said.

"As far as local builders or local developers who have been saddled with a 30 percent requirement," he said, "they now go to their banks and say, 'OK, we are ready to go,' and the banks are basically telling them, 'There is no way. Your subdivision will not pencil out. And we will probably wind up having to take it back from you because you will not be able to sustain yourself.' "

Coss isn't convinced that banks would be any more open to lending for development at the 15 percent level for affordable housing than they are at the current level.

"What I have heard has been pretty glum — that they are just not able to lend, and they cannot lend on speculation and the idea that if you build it they will come," he said.

The city Business and Quality of Life Committee voted Tuesday to endorse the rule change. Voting in the minority against such a rule change were Coss, who said he considered the affordable housing rules part of Santa Fe's "signature" legislation along with its minimum-wage law, and committee member Dena Aquilina.

Aquilina said she opposes changing the rules because of the economic consequences of the city's workforce having to live outside the city limits.

Mike Loftin, executive director of Homewise, a nonprofit affordable-housing program, shares that concern. The demand for housing through the city program has not dwindled, he said. More than 430 people are in the process of applying for help buying a home through the agency, he said.

"There is a huge need for affordable housing and we just need to be very careful that we honor our commitment to them to be able to buy a home in their home town," he said. "We have to be careful that an attempt at economic stimulus does not result in economic stagnation, because enabling our workforce to live in Santa Fe is economic development."

The City Council is scheduled to decide today whether to hold a May 25 public hearing on the idea. The city Planning Commission last week unanimously approved the ordinance amendment.

Contact Julie Ann Grimm at 986-3017 or jgrimm@sfnewmexican.com.