New legislation seeks to encourage more below-market-rate housing in SF

San Francisco wants to make it easier for developers to build below-market-rate homes in its starved housing climate.

Amendments to The City’s Inclusionary Housing Ordinance are slated to be introduced to the Board of Supervisors on Tuesday that will strive to speed up the production of thousands of below-market-rate homes needed for San Francisco to meet its goal of providing more than 10,000 of such units by 2020.

The Inclusionary Housing Ordinance already requires developers of projects with at least 10 residential units to build 12 percent of below-market-rate housing either on the same site as the market-rate project, or 20 percent of such units at another location.

The area median income in San Francisco for one person is $71,350, and $101,900 for a family of four.

The package of amendments includes incentives for developers to build more below-market-rate homes within the same neighborhood as the market-rate project, and encouragement for developers to build such units specifically for moderate- and middle-income residents.

“This is the most comprehensive reform to our inclusionary housing program that we’ve done in years in San Francisco,” said Supervisor Mark Farrell, who is introducing the amendments along with Mayor Ed Lee.

“We need to do everything we can to incentivize the building of affordable housing on site as quickly as possible,” Farrell added.

Perhaps most significantly, the amendments include the creation of a “dial” that would allow a project sponsor – without spending more money – to build additional below-market-rate homes for residents who fall in the middle-income category.

Most units in the inclusionary housing program sell for 90 percent of the area median income, or rent for 55 percent. The amendment would allow developers charge up to 90 percent of the area median income for rental units, and 120 percent of the area median income for units that are sold, in exchange for providing more of such homes.

That change would help The City increase the number of units available to middle-income earners — residents who are traditionally difficult to house under the program because such units are exempt from most tax credits and bonds.

“This provides a way to maintain the cost obligation on the developer, but at the same time get more units,” said Sophie Hayward, director of policy and legislative affairs at the Mayor’s Office of Housing and Community Development.

Farrell noted the “dial” would serve as a first step in addressing the need for more middle-income homes in The City.

“What it means to be middle income in San Francisco versus any other city is very different,” Farrell said. “It’s challenging to build affordable housing at all levels, but in particular at the middle income level here in San Francisco.”

Another amendment would allow developers to build the offsite component of a project within a year of the market-rate development, instead of at the same time. Offsite projects that are in the works by a non-profit developer would have an additional two years.

The area in which an offsite project must be built – currently within a mile of the market-rate development – would also expand under the new legislation to an additional quarter mile, or in the same neighborhood.

The cost of offsite and onsite below-market-rate homes for sale would also become equal for all households that earn 90 percent of the area median income, per another amendment. Currently onsite homes are sold to households that earn 90 percent of the area median income, while offsite homes are available to households that earn 70 percent.

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