Now that San Francisco Supervisors have reached a deal on new inclusionary housing rules along with backing Katy Tang’s HOME SF proposal (details are still being worked out on the latter but the votes are there), who were the winners? And why does one portion of the agreement misunderstand the city’s housing crisis?
Let’s start with the outcome. The key term in the deal struck between Supervisors Safai, Breed and Tang on one side and Supervisors Kim and Peskin on the other (with other advocates in the negotiations) requires new rental projects to provide 18 percent on-site affordable units. This percentage then increases by .5% per year, though economic conditions can eventually halt this.
Instead of all of these units going to those earning 55% of area median (AMI)—a limit that excluded teachers— 4% each will go to those earning 80% and 110% of AMI. New condos must provide 20% affordable units with 10% of that amount going to those at 80% AMI.
This deal only applies to projects filing applications to build from this point forward. This means that we will not see a project housing anyone pursuant to this agreement until 2020 at the earliest. It also means that the 63,000 units currently in the city’s pipeline are not impacted.
Did Everybody Win?
Kim and Peskin’s side seemed happier with the outcome. This was true even though the numbers are closer to the Controller’s recommended 18% for inclusionary than the 24% the two supervisors sought. But that’s why parties start with high, often unrealistic positions; it gives them more negotiating room.
The developer side reflected weariness with the constant uncertainty over inclusionary percentages. Spokespersons sounded like they primarily agreed to the deal because they wanted the process to end. But once again, smart negotiators do not gloat over successes; they want their opponents to think they got the better deal.
I think San Francisco won. Not because of the specific inclusionary percentages, whose importance is exaggerated. Rather, because the path is now clear for Tang’s HOME SF to pass.
HOME SF finally opens the door for building homes in the western neighborhoods where housing is long overdue and desperately needed. Neither the Richmond nor Sunset has done their fair share to provide additional housing for the city’s growing population. Now they will at least begin to do so.
One year ago, a coalition of nonprofit and anti-housing advocates gleefully defeated a proposed Affordable Housing Density Bonus Program. Now Tang and Mayor Lee have assured passage of a rebranded Affordable Housing Density Bonus Program under the renamed HOME SF.
That to me is the big win coming out of this deal.
Misunderstanding the Crisis
The deal keeps the current 25% inclusionary requirement in place for the Tenderloin, Mission and Sixth Street. This percentage remains until a “study” is completed, though the chances any study will reduce the 25% is nil.
I was not consulted about this Tenderloin provision. If any other Tenderloin group was it is news to me. As I detail in my book, The Tenderloin: Sex, Crime and Resistance in the Heart of San Francisco, there is a long record of political “progressives” bypassing Tenderloin community input.
We saw that again in this deal.
Why apply the city’s highest inclusionary rate (25%) to the low-income Tenderloin or Sixth Street? These two neighborhoods have high concentrations of very low income renters. None of these residents can afford the proposed new inclusionary requirements. Recall that TNDC filed an appeal in 2016 against the Shorenstein project at 1066 Market claiming that even the rents in the affordable units were “too high” for Tenderloin residents.
So maintaining a 25% inclusionary rate does nothing to expand housing opportunities for very low-income residents in the Tenderloin or Sixth Street. This would instead required reducing eligible area median incomes in those neighborhoods to 30% or 40%, which the deal does not do.
Those pushing a 25% inclusionary rate for the Tenderloin misunderstand inclusionary housing.
Inclusionary housing was designed to get low-income, working and middle-class residents into neighborhoods they otherwise could not afford. These groups can currently afford to live in the Tenderloin or Sixth Street. Where they lack housing options is in places like San Francisco’s Noe Valley, Castro, North Beach and other upscale neighborhoods.
Middle-class newcomers can only live in Noe Valley through inclusionary housing. Otherwise, as I wrote in April, Noe Valley may as well have signs posted saying “No New Middle-Class Residents Allowed.”
So if negotiators wanted to keep the higher 25% figure for some neighborhoods, it should have applied to Noe Valley and other affluent areas. This is where the middle-class has been priced out. These are also the neighborhoods where housing prices are higher and builders can better weather a higher inclusionary rate.
Stopping Tenderloin Development
The Tenderloin is the neighborhood least able to make projects work with 25% inclusionary. Tenderloin builders pay the same labor and materials costs but generate less revenue due to lower market rents on new units.
No market rate project has broken ground in the Tenderloin for years. None has started since critics claimed in 2011 that Twitter’s arrival would “gentrify” the neighborhood. The Tenderloin has more entitled market rate projects at the 12% inclusionary figure that are stalled than it has those that will eventually get built.
That’s why this deal effectively kills all but future nonprofit housing development in the Tenderloin. I assume that was the goal.
Fortunately, it won’t matter. The Tenderloin has pretty much run out of buildable sites that are not already slated for development. The Tenderloin has so many units in the pipeline that it can survive this latest attack on its future by outsiders.
Now that the housing deal is done, it’s time to cheer on the Warriors to another title. I suspect that the housing negotiators were under pressure to reach agreement so as to not be distracted during games; if so, credit to Curry and company for helping address San Francisco’s housing crisis.
Randy Shaw is Editor of Beyond ChronFiled under: San Francisco News