Source: San Francisco Business Times
By: Roland Li
Date Posted: January 12, 2016
Supervisor Jane Kim will introduce a charter amendment today to more than double San Francisco’s affordable housing requirements for market-rate projects to 25 percent.
The change would require voter approval in the June election. The city currently requires market-rate projects to provide 12 percent of their units below market rate. Alternatively, developers can now build 20 percent of their units off site or pay a fee equal to 20 percent of the value of the units. Kim’s proposal also increases the off-site units and the fee to 33 percent each. The charter amendment would also allow the Board of Supervisors to make additional changes to the inclusionary housing policy without going back to voters by removing the existing policy from the charter.
The proposal is likely to spark a fight. Market-rate developers have argued in the past that increasing affordable housing requirements may result in less — not more — affordable housing since the costs could make some housing projects financially infeasible.
Urban think tank SPUR characterized Kim’s new proposal as “undoing the grand bargain” that established the Affordable Housing Trust Fund in 2012. Following the loss of state redevelopment funds for affordable housing, voters approved using general fund revenue to support affordable housing. In addition, the city lowered the affordable housing requirements to 12 percent for market-rate projects. Gabriel Metcalf, president of urban think tank SPUR, is critical of proposing new requirements without doing a study.
“It’s not a good idea to make up an inclusionary requirement out of thin air,” said Metcalf. “We have no way to judge what the right level would be right now. We should do an objective study to set the levels, not have one side re-set them to its liking whenever the political winds are blowing in its favor. Say what you will about the 2012 measure, but it had the involvement and concurrence of lots of different sides in the housing debate.”
Kim’s legislation broadly aligns with Mayor Ed Lee’s call to increase the affordable housing requirements, but he hasn’t proposed a specific requirement and had sought to work with developers to find a consensus.
But Kim called for immediate action. “With the ridiculously high cost of living in the Bay Area, our middle class residents are also vulnerable to losing their homes due to skyrocketing rents they can’t afford or by being pushed out of rent controlled buildings by the landlord. And most of them won’t be able to afford another place in the City,” Kim said in a statement. “This is an urgent step we can and should take now.”
Newly elected Supervisor Aaron Peskin is co-sponsoring the legislation and cites the 40 percent affordable housing numbers at Forest City’s 5M project and the San Francisco Giants’ Mission Rock as precedents for higher affordability requirements. “With Supervisor Kim’s recent successes negotiating unparalleled affordability requirements at Mission Rock and 5M, we know the market can bear it – and so do our constituents looking for relief,” said Peskin in statement.
However, those two projects aren’t indicative that the broader market can bear a higher affordable housing requirements, according to developers. 5M has 825,600 square feet of office space planned and Mission Rock has 1.3 million square feet of office space, which gives them additional revenue sources. The massive size of each project, with 5M’s 688 residential units and Mission Rock’s 1,500 residential units, also give them big enough scale to fund 40 percent affordable housing requirements. A small multifamily project would not necessarily be able to bear the cost of a quarter of its units, developers said, particularly if land prices didn’t fall in response to new requirements.
High affordability also hasn’t swayed opposition to 5M. Three neighborhood groups are now suing to block the project after it received city approval, alleging that the environmental impact study didn’t adequately measure the effects of the project.
Kim’s measure calls for new market-rate projects to provide 15 percent of units below-market-rate housing for renters making up to 55 percent of the area median income, or $39,250 for a single resident under the 2015 fiscal year definition. Rents would be no more than $981.25, or 30 percent, for such income levels. An additional 10 percent of units would be for those making 100 percent of the area median income, or $71,350 for a single resident, which would have rents up to $1,783.75 per month.
For-sale projects would have higher affordability thresholds, with 15 percent of units reserved to those making 80 percent of the area median income, and 10 percent reserved for those making 120 percent of the middle income.
Funding for affordable housing in the Bay Area has decreased due to the state’s 2012 elimination of Redevelopment Agencies and falling federal support. That lack of funding, in addition to an increase in housing demand and spiking prices, has pushed cities around the Bay Area to seek more concessions from market-rate developers. Oakland, San Jose, Berkeley and Emeryville have all moved to implement new fees or increase existing ones to fund affordable housing.
If the fee level is too low, as Supervisor Kim is arguing, the city is not maximizing its funding for affordable housing. But if fees are too high, there’s risk that market-rate development could slow and overall affordability could decrease as demand rises faster than supply, said Metcalf.
Supporters of the ballot measure include the nonprofit Tenants and Owners Development Corp., a prominent South of Market nonprofit, and the Council of Community Housing Organizations, which represents affordable housing developers and tenant advocates. They argue that the current requirement of 12 percent is outdated and that the city’s surge in market-rate construction can support more affordable housing.
“This is how public policy works. It changes and evolves to the circumstances of the time. The circumstances are totally different than 2011,” said Peter Cohen, co-director of CCHO.
Requiring 10 percent of units for residents making around 100 percent of the area median income would also provide much-needed supply for those who struggle to pay market-rate but make too much to qualify for most below-market-rate units, said Cohen. Kim’s proposal “ensures that market-rate projects will continue to provide a portion for middle-class households,” he said.
Link to article: SF to Double Affordable Housing Requirements?