Proposition C, which will initially double the required percentage of below market rate (BMR) units for newly proposed developments in San Francisco with 25 units or more, has passed with 67 percent of voters supporting the measure.

The Proposition will require developers of proposed projects that haven’t yet completed an environmental review to either provide 25 percent of the building’s units at below market rates or pay an in-lieu fee equivalent to providing 33 percent of the units at below market rates. The city’s Inclusionary Housing Program currently requires 12 percent on-site or an equivalent 20 percent fee.

But Proposition C also raises 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, San Francisco’s Board of Supervisors have been granted the right to alter the required percentage of BMR units, up or down, without the need for voter approval going forward.

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Comments from “Plugged-In” Readers

  1. Posted by Serge

    Curious to see how this affects prices and future housing starts. This may be another rent control and we know how well that works.

    • Posted by Matt of Uptown

      The impact will be fewer housing units overall, higher housing costs overall, but just a few more “affordable” units overall. It’s brilliant. Ignorant voters think they’re getting a chance to vote themselves a free lunch when the major benefits actually go to the existing property owners in the form of increased property values and higher rents.

      • Posted by JR "Bob" Dobbs

        My read of the SF voters is that this is precisely the outcome they desire.

        • Posted by SFrentier

          Yes, and all the while feeling better about themselves for sticking up for the poor folks. Limousine liberalism at its finest. A peskin-perfect moment, if you will.

          Best part is that now the BOS can change the requirement at will. So next boom time they can react faster and kill new projects by making the affordable component, um unaffordable, to the developer. This will help insure heaven forbid we don’t over build during a boom. Cause when the cycle goes down we certainly don’t want excess inventory. I hate it when I can’t get top dollar for my rentals because too many new rental buildings hit the market just as we cycle downwards.

          This is great news for current rental property owners!

      • Posted by that_dude

        bang on.

    • Posted by Hunter

      I’m curious how it would work with Jerry Brown’s As-Of-Right proposal. Would that negate this legislation?

      [Editor’s Note: No.]

      • Posted by SFer

        Could you explain? I think this is a answer many of us would be curious to know why not. Thank you.

        • Posted by SocketSite

          As of right development would streamline the approval process for projects that meet all applicable Zoning and Planning Code laws, it doesn’t circumvent the laws nor obviate a developer’s need to meet the required conditions for approval.

          • Posted by Sam

            You sure about that? I don’t know a lot about the state proposal, but it would likely overrule any portion of the city code in conflict in any capacity with it.

    • Posted by SFCitizen

      The BMR program has an income qualification requirement that the rent ordinance does not. I’m not sure how the higher BMR unit requirement will affect building, but I do like having an income test for BMR applicants.

    • Posted by Robert Frances

      Rent control saves SF residents literally tens of millions of dollars each year. Most of the money from their reduced rent burden is spent in the local economy, which boosts local jobs and business profitability. Hard to complain about those outcomes. And rent control saves many thousands of residents from eviction if they were forced to pay current market rents. Hard to complain about that outcome either.

      If you like the benefits of Prop 13, you should like rent control too.

      • Posted by parklife

        But what about if you feel Prop 13 has far more negatives than benefits. Does that mean it’s okay to dislike rent control?

        The problem is that both Prop 13 and rent control have become third rail issues. Prop 13 for commercial property? Inheriting Prop 13 assessment values? Rent control increases at less than inflation? Rent control for millionaires? Even suggesting minor changes brings out the most vociferous opposition.

      • Posted by R

        The problem is that rent control helps push market rates higher than they would be otherwise. Same goes for prop 13. Fewer homes and apartments are on the market each year because of each of these policies.

        • Posted by Maestro

          Prop 13 has never had the effect of pushing market rates higher. It does not constrain supply of housing. It just means that your neighbor who just bought their house will pay substantially more in property taxes than you do.

          • Posted by folderpete

            If I had to pay taxes for the market value of my prop, I’d probably move. (thx P-13)

      • Posted by Serge

        Countless peer reviewed papers would argue against you on that. Rent control has unintended consequences. Prop 13 doesn’t help either.

      • Posted by Chris

        What does rent control have to do with this affordable housing measure? As an aside, I do not object to rent control or subsidized units for low-income individuals (and perhaps more limited subsidies for middle-class individuals), since I believe everyone should be adequately housed. That said, rent control should be means-tested. Upper-middle class and wealthy individuals do not need, nor should they get rent control because rent control also has the effect of limiting the supply of housing, and making units not subject to rent control more expensive than they would otherwise be.

      • Posted by Onslow

        Laughably poor analysis.

        Some get cheaper rent because they won some silly lottery, others get screwed and pay more as a result. As is always the case with “Progressive” social engineering schemes you’re simply pushing money around, robbing Peter to pay Paul. Residents squat for years in apartments they really can’t afford just because they don’t want to give up their free ride. These people do NOT spend lavishly and “boost local jobs and business profitability”. What about the property owner? You’re taking money out of their pocket, thereby reducing their ability to spend and “boost” the economy.

        Not to mention the pesky little issue of the fact that, in something even remotely resembling a free society a property owner should be able to charge whatever they want for their own property. What do you do for a living? Perhaps we should mandate your salary be cut 25%, the proceeds to go into a fund to subsidize rents for those who can’t afford to live here.

        • Posted by Serge

          Boom. That nailed it. I also like your analogy of reducing people’s salary, as I use that comparison myself when someone has the audacity to say landlords are thieves and “raking it in.”

  2. Posted by soccermom

    Predictable outcome.

    We won’t have a more affordable, more dense city for the foreseeable future. We will continue to have a bifurcated have/have-not situation with housing.

    This, the AirBnB enforcement proposal all point in the same direction. Keep looking farther afield (cough, Vallejo/Richmond/) for growth and affordability and that most feared political dynamic, gentrification.

    Newcomers not welcome in SF. We’re full here, thanks anyway…

    • Posted by folderpete

      Country Club SF. Even our bums are special.

    • Posted by two beers

      Density and affordability are mutually exclusive conditions (slums excepted).

    • Posted by Rillion

      Newcomers that want to pay me an exorbitant price for my condo are still welcome! (Full disclosure – I voted against the measure)

    • Posted by Some Guy

      Come on over to the flatlands of Oakland. Your gentrification services are still desperately needed here. Get in while you can..

  3. Posted by Jimmy The House Flipper

    Why stop at 33%? Why not simply appropriate all new housing as “Affordable”? That’ll solve the affordable housing shortage in a second. Just specify a maximum $/psf selling price or rental rate for any new housing added to the market and then let developers sort out what they will build and when. Forbid wealthy people from buying into any new buildings built after the law was passed. I don’t see any possible downside.

    • Posted by soccermom

      The moment distills from a San Francisco haze when a certain category of residents realize that Governor Moonbeam is their only hope for a common sense solution.

    • Posted by anon2

      How about we put a measure on the ballot that declares all housing in the city, both new and existing, to be “affordable”.

      We’ll call it the ‘Make All Housing Affordable’ measure, and it will pass in a landslide.
      Problem solved.

  4. Posted by Dave

    Does this obviate the up-zoning proposal for Hub2.0? The deal was to allow it in exchange for a higher percentage of BMR units. I am not sure what the higher percentage was for Hub 2.0 but, with the threshold for all projects now at 25%, is Hub 2.0 not needed?

    • Posted by cfb

      Lol

      You sure wish the hub project wasn’t needed, don’t you? Oh no, tall buildings!!

      • Posted by Dave

        I oppose Hub 2.0 yes, but its an honest question. What is the increased BMR percentage the City is asking in exchange for allowing a raising of the height limits?

    • Posted by donjuan

      Large projects like that typically have 40% affordable housing. I think the city agrees that the Hub 2.0 is needed. Might get delayed by anti-housing activists but it will ultimately happen just like the Central SoMa plan.

  5. Posted by folderpete

    This of course was not a serious housing proposal at all. It was simply an election ploy by the ever-engaging Jane Kim. It basically won’t have an effect for quite a while, as the grandfathered units come to market. Of course new proposals will dry up, but the ‘effect’ won’t be noticed for a while.

    Meanwhile, Ms Kim gets to be a rock star of “affordable housing” without doing anything other than grandfather and grandstand.

    Oh, and now the Supes are positioned to do their own ‘grandfathering’ for proposals that come down the pike. Sounds like a god-send for those DCCC war chests; screw the rest of us.

  6. Posted by SFRealist

    As a condo owner in San Francisco, this is great news.

    As a resident of San Francisco who would like to see our city improve, this is terrible news

    (Jane Kim is rich, so it doesn’t matter to her either way)

    • Posted by SFer

      Is it better to get Jane Kim to the Senate where she’ll have no power, than to send Weiner who has common sense and a great work ethic so that Kim doesn’t destroy the City further? (This was the same problem w/ Chiu & Campos last yr).
      She operates by passing taxes & burdens onto the middle class to get votes, and the reason so many unit are not available for rent.

      • Posted by david m.

        this is a great question. additionally, if jane kim loses the state senate race, will she make the run for mayor in 2018 that we’re expecting out of chiu?

        • Posted by SFRealist

          Kim, Weiner, and Chui will all run for Mayor

          • Posted by Robert Frances

            Maybe, but Mark Leno probably beats them all. Doesn’t whoever win the State Senate seat get 3 terms (12 years) under the revised term limit rules? If so, the SS winner may just sit back and wait for 2027. All three of the names you’ve listed are young enough to wait until then.

          • Posted by folderpete

            And Leno runs for Weiner’s seat at the BOS

          • Posted by moto mayhem

            what about Farrell? Hes certainly 10x better than Jane kim

  7. Posted by Sabbie

    RIP SF middle class. Do most of the work, get least of the rewards.

  8. Posted by SF_Landlord

    This is certainly an interesting way to get developers to try and build more of the housing we need. Oh well….we’ll continue our current SF paradigm of the rich and the destitute.

    • Posted by two beers

      Who’s “we?” The “we” you refer to certainly can’t be wage earners. Developers are building the housing the banking/landlord/realtor/speculator sectors “need.” They don’t build “affordable” housing because it is nowhere near as profitable to build as housing for the high-end/capital flight/speculator markets. The only way to get affordable housing built is through carrot and stick measures. If this means lower total number of units built (and it doesn’t necessarily mean that, it only means that builders will have lower-than-maximum profit margins), that means even less upward pressure on prices that increased density always brings.

  9. Posted by DM

    I’m glad I left 18 months ago. No regrets whatsoever.

  10. Posted by Dave

    First off, developers are not building more of the housing we need. They are building housing most can’t afford. Required to have a small 12% BMR component. Without that virtually no affordable housing would be being built.

    This lopsided vote makes total sense when one realizes SF affordability is near the worst it has ever been. Middle class folks are priced out of the market. Parents who were fortunate to buy here 20 plus years ago now have college graduate students who can’t afford to buy here. Many are living at home into their late 20s to avoid exorbitant rents. Or they move away. Many high paid young tech workers are renting rooms here because they don’t have the cash down payment to afford a home.

    The condo towers downtown or the small infill projects in my area have not lowered prices.

    No one knows how this will impact residential construction. Personally I don’t think it will hurt it. SF is desirable and builders will continue to build here IMO. The Giants are building to a 40% BMR component and the Gang tower developer is trying to get 100 extra feet of height for raising that projects BMR component beyond the 12%. It can be done.

    Hub 2.0 is significantly raising its BMR component in exchange for added height. I believe the Hub 2.0 component is near the 25% of proposition C. Again, it can be done.

    The only issue is we are probably heading into a down cycle when housing production will fall off and some will try to blame that on this new law.

    Even is this slows residential construction, it will not really impact the middle class person in SF who can’t afford a house now and still would not be able to do so in that scenario.

    If housing production in SF slows, but is compensated for by an increase in Oakland/inner East Bay projects and North Peninsula projects that would actually be for the good. Shifting population growth out of SF to less dense surrounding areas. Taking pressure of an already over-taxed transportation infrastructure in SF.

    Does anyone know the affordability requirements in other high priced markets like NYC?

    In the May 27 article here about a non-binding initiative to encourage 10K units/year of housing production in SF, someone said HK is producing 20K units/year and half are affordable. HK is semi-autonomous from China and private developers are putting up lots of towers, but I am not sure how the affordability component works there.

    Affordability has worsened in SF despite the spurt of building over the last several years.

    The downside to this is that is coming about at the likely start of a downcycle, so home building will fall off if that happens and some developers will blame it on this new law.

    • Posted by Chris

      I do not see this new measure increasing affordable housing. Most developments already in the pipeline are exempted, but this will definitely discourage future medium and large scale developments (the ones with the potential to put significant units on the market).

      Housing is already super-expensive to build in SF, and a big reason is all the mandates the city puts on developers. These mandates are taxes on housing, and when you tax anything, you get less of it. Just like we place high taxes on cigarettes to discourage smoking. Developers will pass the costs they can on to buyers/renters (i.e. you and me), which makes housing more expensive, and to the extent they cannot pass the costs on, they simply will not build anything. (And, on top of the mandates, you already have all the other factors that make SF expensive to build in, including expensive land and high labor and materials costs).

      Some developers will focus their efforts on smaller developements (25 units and under) that are not subject to the higher affordable percentage (still subject to the 12%). A few mega-developments which need special zoning changes and where developers were already willing and able to offer more affordable units than the 12% required (in the 33-40%) range may potentially get approved. But, overall this measure will discourage the construction of future large developments, which is what I suspect this measure was really about (otherwise, why not subject smaller developments to the same increased affordability requirements?).

      What this measure really is about is pushing through a back-door down-zoning of the city.

      If you want more of the housing the city “needs,” then simply assess a general tax on EVERYONE, and pay for it like we do all other public necessities/amenities. The city should build affordable housing with tax revenue it collects not coerce private developers into doing it.

      • Posted by Serge

        Exactly. Especially since even right now people are hoping new developments are taller and bigger to add more units. Now there will be even fewer units going up to the height limit if it means going above the threshold for adding BMR units in the mix.

    • Posted by Mark F.

      Expecting developers to build new housing for the poor is like expecting car companies to build new cars the poor can afford–they can’t generally do it and make a profit. Therefore poor people generally have to buy used cars and live in older apartments (both of which were once new). BMR requirements benefit a lucky few and push up prices for everyone else.

      Yes, there has been a spurt of new construction, but nowhere near enough to outpace demand.

      • Posted by Dave

        Its not even about building housing for the poor, its about building it for the middle/upper middle class in SF. The housing being built is aimed at maximum profit and directed/affordable to the well off. It has done nothing for the Joe and Jane middle class San Franciscan.

        • Posted by Chris

          It is subsidized housing, whether for the poor or middle-class. What key is that this measure will not have the intended effect. Generally, it will simply increase the cost of market-rate housing and also reduce the overall amount of housing that would otherwise get built. 10 years from now, housing costs in SF will be higher than they are now, and there will be even a greater shortage of low-income and middle-class housing.

          If you want affordable housing, then raise taxes and have the city use the funds to build it. But, even that will only go so far. San Francisco will never be an affordable place to live in.

          • Posted by two beers

            ALL housing is subsidized, but the methods and beneficiaries vary depending on the market sector.

          • Posted by Dave

            Agree SF will never be all that affordable. Right now it is near historic unaffordability levels so it is worse than ever..

            If this reduces large projects in SF they will be built in Oakland and other nearby areas. With lower overall costs and better transportation situations. That would be a good thing as it’d eventually lead to more jobs in those areas with a workforce close by. Less housing/jobs pressure on SF, the bridge, the BART tube.

            Drive down El Camino from Colma to Burlingame. 3 lanes in each direction mostly with a wide median strip. Near 101, 280 and BART stations. Not to mention all the Samtrans buses.

            Look at the surrounding buildings. Mostly 1 and 2 stories . Some quite old. Rather than build the next 10K housing units in SF (the Hub) why not build 7/8 story condo apartment complexes down this stretch of El Camino. There are a few, very few, that have been built but more can and should be. Lots more.

            SF can’t absorb all these new residents/residential units given existing infrastructure and near gridlock during extended rush hours in the downtown and SOMA areas.

  11. Posted by katdip

    Voted against this, and I’m a strong advocate for affordable housing.

    The Office of Economic Analysis review of this measure (see namelink) does not deem it a disaster as some claim here, but does estimate it will raise the cost of market rate housing, AND increase supply of affordable housing for some groups. My gut tells me it will dry up projects, but the higher income requirements and the gross profits being made in the current bubble (see earlier threads) might still make projects attractive to developers.

    What I don’t like about it is the numbers are just pulled out of thin air.

    Maybe the best outcome is that the Supes will be able to change this without going back to the ballot, assuming we get rational supes (though looks like Weiner is going to Sacto and we’re stuck with Kim).

    • Posted by folderpete

      Having the Supes decide on a number (25%, 32%, 15% …), instead of being frozen in the Charter, retains only the possibility of rationality – with significant lag time. (It also contains the possiblity of ‘pay-to-play’ being extended to another City bureau).

      So, when the down-cycle comes, how swift will be changes (decreases) to encourage more production? Against a latent political climate of lack-of-affordablility, I don’t expect the current crop, or even another group, acting with any imperative.

  12. Posted by Jeff

    I suspect that the density bonus program (whether state or the City’s yet-to-exist plan) where most projects add up to two additional floors is the next shoe to drop for the uninformed public. Sit tight for those fireworks.

  13. Posted by Chad

    By voting yes on Prop C, San Francisco just voted for LESS affordable housing. Way to go, SF!

  14. Posted by Kraus

    It’s not “affordable housing” — it’s more accurately described as “subsidized housing” — and, remember, the subsidy has to come from somewhere if projects are going to pencil out.

    This currently arbitrary (i.e., politically) determined figure of 25% will likely result in less overall housing being built and, therefore less subsidized housing being created.

    Accordingly, the housing crisis will continue unabated as SF continues to under-produce the necessary amounts of housing relative to demand.

    • Posted by two beers

      Good point, Kraus- let’s get rid of all the housing subsidies. Let’s start by getting rid of Prop 13, the mortgage interest deduction, historically-low capital gains taxes, and ZIRP. Then maybe we would have real price discovery, and find out which market sectors have been functioning as a casino for holders of high-value assets.

      • Posted by anona

        Agreed on all points, except for your bizarre gold-buggery.

    • Posted by anon2

      Most of the voting public genuinely doesn’t comprehend the concept that projects need to “pencil out” in order to happen.

      They imagine all private development is done by billionaires such as Donald Trump or Mr Burns, financed using piles of cash pulled from a treasure vault in their mansion, and that any concessions required by the city will simply reduce their presumably ridiculous profit margins, without unintended consequences for the overall supply or affordability of housing.

      Seriously, that is how people think.

  15. Posted by FONTINE KING

    I’m currently looking for affordable low income housing.

  16. Posted by Bobby Mucho

    Voters are naturally going associate with the “good deed” outcomes—very much to their eventual and long-term detriment. Too bad, really.

    This also doesn’t do much to fix the convoluted process of approvals or planning issues. Totally a look-left-fire-right scenario.

  17. Posted by Bobby Mucho

    I’d prefer that we focused on incentivized BMR percentage with an expedited approval process.

  18. Posted by BTinSF

    This does nothing to make housing more affordable. It just shifts the cost, creating less expensive units for the fortunate few who can get one and more expensive housing for the rest. It exacerbates the driving of the middle class from the city, leaving the low middle and upper working class fortunate enough to get a subsidized unit and the wealthy who can afford the ever higher costs of market rate housing which is paying for the subsidies..

  19. Posted by BayviewSF

    This should help market rate housing price to continue to appreciate, or lessen the risk of housing price fall.

    It’s a win for existing homeowners and low income residents who will be lucky to win BMR lottery. It’s a loss for middle class buyers who might need to move to Oakland now.

  20. Posted by voltairesmistress

    To the displeasure of most of the commenters here, I voted for Measure C. Why? Because it seemed to me that current BMR requirements were not producing enough new, affordable housing.

    I am willing to try out a higher mandatory percentage of BMR In larger developments to see if that helps. I liked that the legislation addressed median income people’s needs, and that the Board of Supervisors could amend it, if the new BMR requirements were proving deleterious to new housing starts.

    Am I confident this new legislation will help, not harm housing creation? No. Was the old set of requirements creating affordability? Definitely not. So it seemed time to tinker and experiment with something stronger.

    • Posted by soccermom

      Like the baby wasn’t getting clean in the bathtub, so we should hold it underwater for a while and see what happens?

      • Posted by voltairesmistress

        That’s a misleading analogy and does nothing to further public discussion and learning from one another.

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