Sups. Jane Kim and Aaron Peskin have cut a deal on affordable housing, creating a “consensus” measure that lowers current inclusionary levels from a voter-approved 25 percent to 18 percent — but gradually increases the rate to 22 percent by 2019.
That avoids a showdown that Peskin and Kim probably would have lost; Sups. Ahsha Safai and London Breed likely had six votes for setting the rate permanently at 18 percent.
Sup. Jeff Sheehy, who is facing a challenge for his D8 seat next spring, would have had to vote on the measure and I’m pretty sure would have been the sixth vote for the lower levels, possibly giving challenger Rafael Mandelman a campaign issue.
At any rate, all the parties say they are happy (more or less) about the compromise, which will formally be introduced at the Land Use and Transportation Committee Monday/22 and forwarded to the full Board Tuesday/23.
And that same day, the supes will be handed another housing measure that could undermine the deal and exempt thousands of new units from the inclusionary rules.
It’s stunning: After a ballot measure, months of debate, and finally a compromise setting the levels of affordability and the requirements for developers, another measure has come along more quietly that, in its current form, could much of that work moot.
That’s unless Sup. Katy Tang agrees to what housing advocates are demanding, which she refused to do last week. Sup. Aaron Peskin told me Sunday that Tang is prepared to back down on one element of her proposal – but it will still be presented as an alternative to, not an addition to, the inclusionary deal.
The Tang measure is called HOME-SF. It would give developers a “density bonus” – that is, the right to build extra stories and fill up more of a lot with additional units – if they agree to build additional affordable housing.
The problem is that the affordable levels for HOME-SF are much higher than what Kim, Breed, Peskin, and Safai have agreed on.
In the name of building “middle-class housing,” Breed and Safai wanted to reduce the number of low-income affordable units and increase the amount of housing earmarked for families earning as much as $150,000 a year.
The compromise keeps ten percent of new units at levels that can be afforded by people with family incomes of about $85,000 (a credentialed starting teacher as SFUSD makes about $52,000 a year). The remainder would be priced for families earning between about $90,000 and $120,000 a year.
The Tang bill puts the starting affordability levels at $90,000 and two thirds of the units would be priced for families earning $120,000 to $150,000.
That means the developers get a double bonus: They get to cram more housing onto every lot, making their projects more lucrative. Then they get to count as “affordable” units that will sell for not a whole lot less than market rate.
Remember the calculus, which we did here: The higher the prices that developers can count as “affordable,” the less they have to pay in subsidies and the more money they make. The original Breed-Safai plan was a $60 million developer giveaway.
The original version of Tang’s law linked the affordability levels to the city’s existing inclusionary policy – which will be the policy that the compromise deal sets. Last week, without any warning, Tang pulled that part of the bill – meaning that her new, higher levels would trump whatever the Board does on the Peskin-Kim-Safai-Breed compromise.
The city predicts that as much as half of the new housing built in the next ten years will take advantage of the HOME-SF density bonus. That figure may be low: Why would you build housing the requires smaller projects and higher subsidies when you can choose to take the density bonus route and make more money?
Peter Cohen, co-director of the Council of Community Housing Organizations, noted in a memo that “the HomeSF co-sponsors have created a loophole to the city’s Inclusionary Housing policy.”
Sup. Hillary Ronen raised the question at last week’s board meeting, when she noted that HOME-SF had been amended to “provide an alternate method to our inclusionary policies, which was not the original way in which this law was drafted. I have great concerns around that.” She noted that the supes were working hard to create a compromise housing standard while Tang “was creating a loophole to that standard.”
Tang said she wanted to “make HOME-SF more attractive than state law” and had to make sure it was “feasible” to developers. Let’s remember that, while developers complain that higher affordability isn’t “feasible,” several major project sponsors have settled on much higher levels.
Safai said he could “guarantee 100 percent” that the HOME-SF plan would offer more affordability. He also talked about “feasibility,” which translates into higher profits for developers, who have shown repeatedly that they will subsidize higher levels of low-income housing if they are told it’s the only way they get to build what are always very profitable projects. “This is in no way a loophole.”
Not one developer in San Francisco has ever abandoned a condo or rental project because they couldn’t work with higher affordable housing levels.
Peskin quipped: “One hundred percent guarantee or I get my money back?”
The supes then agreed to put off debate on that issue until this week, when activists will be at the Land Use Committee hearing on the inclusionary deal to point out that all the work that went into it will be undermined if Tang’s bill also passes.
Now: If Tang is willing to adopt the inclusionary rules that her four colleagues have agreed on, it will solve a lot of the problem. There’s still a couple of other factors, though. The Tang bill skews upward; two-thirds of the affordable housing would be priced for people who make more than $90,000 a year. The compromise the four supes agreed on sets aside about two-thirds of the affordable housing for people making less than that.
And there’s another tricky element in the Tang bill. Almost every new housing development in the city these days gets approved as a condo complex. But not all the condos are sold to owners. Some are sold to people who never move in, and some are rented out.
If a developer rents out a below-market-rate condo under the current inclusionary law, it has to remain a rental unit. Under the Tang provision, that unit could be rented for a year or two – then the tenant could be evicted and the unit could be sold as a condo. And since the income level for “affordable” condos is higher than for rental units, the tenant might not be able to buy the place.
Housing advocates have asked Tang to include a provision that any BMR unit that is rented – even in a building that includes condos – has to remain a rental for 30 years. So far, no news on how she will respond.
So we really don’t have a consensus compromise on affordable housing going to the supes Tuesday. We have a pair of possibly competing measures, one of which could undermine the other. Expect a rash of amendments and some very high-stakes votes.