Plugged-in people saw it coming over a year ago, and on San Francisco’s Land Use and Economic Development Committee agenda this afternoon: An ordinance amending San Francisco’s Residential Inclusionary Affordable Housing Program including a name change to the “Affordable Inclusionary Affordable Housing Program;” the elimination of a provision requiring developments within the Van Ness Market Special Use District to meet at least half of their affordable housing requirement through the construction of housing versus an in-lieu fee; and the easing of restrictions on the resale of Below Market Rate units.

The downturn in the economy has resulted in areas in the City where the restricted, or Below Market Rate (“BMR”), price is close to or, in some instances, below the unrestricted market price of units in the same area. This has led to hardship for some BMR owners who have been unable to resell.

Certain requirements of the Inclusionary Housing Program and the Procedures Manual ensure that the BMR units offer affordable, high-quality housing and not investment opportunities. In particular, BMR units must be purchased by first-time homebuyers; owner-occupied at all times with a limited allowance for renting; BMR households [must have] at least as many people as bedrooms in the unit; a BMR household must meet an asset test in addition to an earned income test; and the unit must resell to a household whose income is no higher than the income level designated for the unit.

However, these rules sometimes prevent interested buyers from being qualified to purchase BMR resale units because they are unable to sell. During economic downturns, especially, this narrowing of the pool of potential buyers can harm households who may need to sell their units in a timely manner in order to avoid default or foreclosure.

The proposed amendments would give the Mayor’s Office of Housing the discretion to waive the first-time homebuyer requirement, to waive the household size requirement, to waive the owner occupancy requirement, to modify the asset test limitation, and to increase the qualifying income level by 20%.
And yes, waivers would apply to developer sales of BMR units in new developments as well.
Land Use and Economic Development Committee Agenda: 11/22/10 [
Amending San Francisco’s Inclusionary Housing Ordinance [sfbos.org]
Buy A BMR For $10K $25K More Than Bank-Owned At Candlestick Point [SocketSite]
Buy A BMR…For $10K More Than Bank-Owned At Candlestick Point [SocketSite]

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Comments from “Plugged-In” Readers

  1. Posted by lol

    1 – PTB’s break the market with Prop 13 and rent control
    2 – PTB’s try and fix it with BMRs and social housing
    3 – Market is still unaffordable to non-entitled middle class who leave in droves. Fools who got into the “good deals” get stuck in a catch-22.
    4 – PTB’s expand BMR’s over and over again, attracting more flies with “sweet” deals. flies learn and stay away.
    Without all this meddling, we would have a much more sane market.

  2. Posted by MarinaRenter

    Agreed. What ever happened to the open market?

  3. Posted by condoshopper

    i think the asset test is really unfair. my income on most years is low enough to qualify for the BMR but because i’ve been saving diligently these years my assets disqualify me. so if i had blown my money every year and living large, i would now be qualified for a BMR.

  4. Posted by huh

    wtf are ptb’s?

  5. Posted by Rillion

    Powers That Be? Only thing I could think that sort of fits, of course sometimes in the context mentioned above they would be voters (Prop 13 & Rent Control) and sometimes politicans (adjustments to BMR requirements).

  6. Posted by Average Joe

    I don’t like the asset test either, specifically because it declares anyone ineligible who has enough money in the bank to adequately handle major home repairs/upgrades. I think it creates a dangerous situation where — without price inflation — owners cannot afford to care for the property (which results in weird rule manipulations like we’re seeing in this post). But, like any blunt instrument, it is easily out-maneuvered if you really want to (hiding cash is elementary stuff for sophisticated financial planners), except that those who could do so aren’t interested due to the other restrictions on BMR units. In that sense it works kind of like “The Club” — it’s really not an effective measure by itself, but it creates just enough added dis-incentive to make people who aren’t serious look elsewhere.

  7. Posted by Pica1986

    Why does this remind me of that scene in Vegas Vacation when Clark Griswold is trying to fix the leaks he caused in the Hoover Dam with bubble gum?

  8. Posted by condoshopper

    In the first paragraph of the exerpt, shouldn’t it read “above” instead of “below”?

  9. Posted by Homes R Us

    The capacity to raise the qualifying income by 20% is a very positive development. It would bump the qualifying income limit up for a household of one from $63k to $77k, and household of two from $72k to $88k, moving it that much closer to providing housing for San Francisco’s professional middle class (that is priced out of both market rate and BMR homes) such as teachers, nurses, and the folks that fix our cable cars (zing!). There really is a doughnut hole in terms of housing opportunities, with the wealthy obviously capable of purchasing homes by their own means, and the lower-income residents enjoying extremely strong political representation in this city, while the working middle class has ended up being neither wealthy enough, or politically active enough (a fault of their own? to busy working? too busy not enjoying the spoils of extreme wealth? apathetic?) to find an important and meaningful middle class housing option.
    I also think it’s interesting to consider that the BMR prices are based on X% of MEDIAN income, as opposed to mean. Which given SF’s limited housing inventory, does not account for the extreme wealth at the upper end of the spectrum that is able to price out the City’s non-protected residents. Ultimately, the 100% of median income limit loses a lot of its relevance when the reality is that one needs 200%-300% of median income to buy a market rate house.
    Is everyone entitled to purchase a home at below market rates? Of course not. I think the question is, of the limited inventory that is set aside, there’s is a reasonable argument to be made that a more diverse range of incomes could benefit San Francisco.

  10. Posted by EH

    How would eliminating the means test for BMR prevent trustfunders from soaking up all the inventory?

  11. Posted by Mikey

    Great! Spending more money the city doesn’t have on a boondoggle program that’s counterproductive and prone to abuse.
    sigh

  12. Posted by Jimmy (No Longer Bitter)

    Let’s be serious. The city has tons of money … if there was any real risk of running out they’d be cutting these hare-brained schemes left right and center and auctioning off condo conversion and building permits to the highest bidder to stop the (financial) bleeding.
    Until they get real and tap the market for permits and other similar revenue sources then I do not believe they are in any serious financial trouble. Same goes for our great state of California.

  13. Posted by Brahma (incensed renter)

    EH, I’m not a planning specialist or a lawyer, but it seems to me that you’d have to add a requirement that new BMR unit buyers be able to make the payments on the unit from their employment (W2-type) income, since trustfunders would be applying a lot of their 1099-type assets from the trust (I’m guessing on that last part) But I’m sure someone could find a way to “game” that.

  14. Posted by EH

    Brahma: Yeah well, good luck with all…that.

  15. Posted by lol

    Yes, PTB does mean “Powers that be”, meaning mostly coward politicians who are afraid of saying things as they are (“self-serving tax cuts are a dead end without the service cuts that you certainly don’t want to happen” would be a first one, or “prop13 takes money from younger folks who need it to grow”).
    Sure voters are responsible too, but when offered 2 plates: one of 3-eggs omelette and the next of organic unsweetened bran with non-fat soy milk, we all know what the choice will be. What politicians need to do is show us which option is more viable long term.
    Until then, they’ll keep filling the last hole by digging a bigger hole next to it pretending nothing is happening.
    BMRs are a bad idea. Let the markets function and the middle class will have the opportunity to purchase in SF at long last.

  16. Posted by MarinaRenter

    Why not just let the market price new homes?
    The market always fixes the prices and then you wouldn’t have to deal with these problems.
    You want a more affordable SF for the middle class, build more housing!!!! Increase supply decreases prices, econ 101. Where? How about near public transportation (SOMA, Tenderloin, MissionBay). Get rid of those SROs would be a great first start.
    If it wasn’t for the beautiful geography in and around SF, I don’t think as many people would live here, because of these stupid political policies

  17. Posted by sfrenegade

    It all depends on how far you want to go, but there are parts of the city that would be served well by more dense housing than the SFRs that are there now. For example, if they allowed merging lots to build condo/apartment buildings, we’d have a lot more affordable housing here. It’s not that we don’t have more usable land, but rather that we make poor use of what we have now. Besides, they have made more land here — by filling in the Bay.

  18. Posted by Mole Man

    The SF BMR program seems to be a mess at many levels, but one of the reasons for BMR programs is to encourage a mix of units to serve the low end of the market as well as the high end. The market itself is so strongly biased toward the high end that low end units can be completely crowded out even though they are useful to have in the mix. Market advocates have good points here, but still need to show some market oriented way to prevent high end units from completely crowding out the low end.

  19. Posted by Al Brown

    Government distorts the market. The market works around the distortion. Costs go up. Government introduces new distortions to counteract the earlier ones. Lather, rinse, repeat.
    How much things cost is an indication of what resources are required to create them. But layer distortion after distortion on the situation and the true costs of things is completely lost.
    People make investments that make no sense if you look at all the inputs. And government declares them stupid and figures out how to add new blinders that will somehow clarify things.

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