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:

  1. The City should impose different inclusionary housing requirements on rental and for-sale (condominium) properties.
  2. The City should set the initial onsite requirements from 14%-18% for rental projects and 17%-20% for ownership projects.
  3. 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.
  4. The City should commit to a 15-year schedule of increases to the inclusionary housing rate of 0.5% per year
  5. The City should impose additional affordability requirements for any 80/20 project financed through the City’s financing approval process.
  6. 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.
  7. 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.

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Comments from “Plugged-In” Readers

  1. Posted by Hunter

    8. For any project that meets these criteria, the city should double current height limits for the property.

  2. Posted by 4th Generation SF'er

    All BMR’s should go to homeless vets first, and SF should provide social services/care to them.

    • Posted by Fishchum

      Serious question – what do you mean by “veterans”? Are you referring to military personnel who have served in combat? Or does your definition include anyone who has served in the military? If it’s the latter, you’re crazy. I see no reason to laud a lifetime of benefits on someone just because they spent three years washing dishes at Fort Ord.

  3. Posted by sfdragonboy

    Wow, the level of building that will happen now will be tremendous….tremendously disappointing.

    • Posted by Hunter

      I was curious about that as well, but it seems from the 2 dissenting members that they think this is really not pushing the envelope and will allow developers to continue making big bucks. Have you seen other info on how this would affect profitability?

      [Editor’s Note: See the Controller’s Report, as linked above.]

  4. Posted by moto mayhem

    i dont think the BMR % or houshold income requirments should change for sales. For rentals, it makes sense. But i dont understand why we would require subsidizing sales. If you cant afford to buy, you should rent. This is what any reasonable per of means would do.

    • Posted by Sabbie

      And if you can’t afford to buy or rent in San Francisco, there are plenty of affordable cities that you can move to. In fact I’d say at least half my friends, all successful professionals, have already fled the high prices here. And I am following soon. Why should you, precious snowflake, be any different?

      • Posted by Sabbie

        Just to be clear, I wasn’t calling you a precious snowflake moto, it was aimed towards the crowd.

  5. Posted by anon

    This makes me sick. As a former custodian, factory worker, etc., I had to work my *** off to be successful. Why should people get handouts because they don’t want to make sacrifices?

  6. Posted by Justin

    How is this supposed to make housing more affordable?

    • Posted by macarthur

      It makes housing more affordable for 30% of households in new structures, and ensures the other 70% are filled with people who can afford San Francisco land + entitlements + soft costs + construction costs + developer profit + and effectively 30% tax. Win win.

      • Posted by Justin

        Aside from driving up the cost on the other 70%…. this approach is just so fail, proven over and over and over again.

      • Posted by SFRealist

        ….except if these requirements make it so expensive to build that the buildings don’t get built, in which case 0% gets anything.

      • Posted by Easwuud

        Win win for the few bmr lottery winners

  7. Posted by skflsndf

    I like how the BOS sets an arbitrary number and then is shocked when they are not correct. This debate will continue on for months and will create even more uncertainty in the development process leading to less development. AKA, the BOS getting exactly what they want.

  8. Posted by bachman_erlich_overdrive

    Great chart! Does this kind of legislation generally make housing prices higher or lower for the average buyer/renter?

  9. Posted by more housing please

    Housing populism at work.

  10. Posted by Foghornsf

    The Planning department/ board of supervisors are making housing more expense by limiting the supply. Why have rents gone down to 2014 levels? Because there is more inventory! Now prices are going to stay high as no project will be able to build with the affordability established… The supervisors are just puppets to their supporters and don’t really care for a real solution

  11. Posted by bachman_erlich_overdrive

    But we don’t have room to add more workers, do we? Are we building a lot of office space right now?

  12. Posted by dt

    Are the BMR units materially the same as the non-BMR units? Or are the BMR units significantly smaller with very cheap finishes and appliances? I realize most of the cost of construction is elsewhere, but is there any requirement that BMR units be similar to the rest of those in the building?

    • Posted by Hunter

      From my understanding, they don’t always have the same finishing / amenities, but as far as square footage they are similar to market rate condos. I don’t think the city wants to put families of 4 into a dorm room size space.

    • Posted by Gorkem

      so called ‘luxury units’ are as small as it gets so there is no practical way to make BMR units significantly smaller.

  13. Posted by unlivable city

    Very interesting KQED documentary about the section 8 tenants migrating to the east-east bay, and the mayhem that has ensued. And this is from famously tip-toeing around the elephant in the room KQED.

    • Posted by Alai

      I’d be interested in seeing that documentary; could you provide a link?

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