Voters in San Francisco passed Proposition C last year, a ballot measure which effectively doubled the percentage of below market rate (BMR or “affordable”) units that developers of larger market rate projects would be required to provide on-site or fund elsewhere in the city.
Prior to the vote, San Francisco’s Inclusionary Housing Program required developers of ten units or more to price 12 percent of the on-site units at below market rates or pay an equivalent 20 percent fee. Proposition C increased the inclusionary housing requirement for developments with 25 units or more to 25 percent and 33 percent, respectively.
That being said, Proposition C also raised the income threshold for the designated affordable units, allowing roughly half the required below market rate units to be priced as affordable to middle-income households making up to 100 percent of the Area Median Income (AMI) for rental units or 120 percent of the AMI for condos.
In addition, the Proposition granted the City the right to alter the required percentage of BMR units based on recommendations from San Francisco’s Controller. And this afternoon, the Office of the Controller released its final report and recommendations, which included a strongly worded letter of dissent from a quarter of the Technical Advisory Committee (TAC) members appointed by the Mayor and Board of Supervisors.
The Office of the Controller’s final recommendations and percentages:
- The City should impose different inclusionary housing requirements on rental and for-sale (condominium) properties.
- The City should set the initial onsite requirements from 14%-18% for rental projects and 17%-20% for ownership projects.
- The City should set the Fee Option at 18-23% for Rental, 25-28% for Ownership to maintain equivalence with previous on-site recommendations. These percentages are based on [Mayor’s Office of Housing and Community Development’s] 2016 Fee schedule, and should be modified accordingly if MOHCD adjusts its fee schedule in the future.
- The City should commit to a 15-year schedule of increases to the inclusionary housing rate of 0.5% per year
- The City should impose additional affordability requirements for any 80/20 project financed through the City’s financing approval process.
- Consistent with current practice for any project to which inclusionary requirements apply, the City should allow projects that are utilizing the State Density Bonus to combine provision of onsite units for the base portion of the project with payment of the fee for bonus portion of the project.
- The Controller and TAC should reconvene in 3 years to reconsider feasibility, density bonus, and other issues, and produce an updated report.
And from the summary of dissent from TAC members and local affordable housing developers, John Elberling (TODCO) and Whitney Jones (Chinatown Community Development Corporation), who advocated for higher percentages of affordable housing and challenged the report’s methodology and appropriateness:
“…it should come as no surprise that a TAC process composed of 5 for-profit housing developers/financiers, 1 mega-national nonprofit developer, and 2 San Francisco community affordable housing developers finally voted 6-2 to recommend the Alternative that…(1) maximizes windfall profits for developers/land owners from the new State Density Bonus Law, [and] (2) provides the least Affordable Inclusionary Housing for the people of our City.”
San Francisco’s Board of Supervisors will now be tasked with either adopting or challenging the Office of the Controller’s recommendations.