A crane hangs over an affordable housing construction project under way at 555 Larkin St. in the Tenderloin on Friday, Aug. 21, 2020. (Kevin N. Hume/S.F. Examiner)

A crane hangs over an affordable housing construction project under way at 555 Larkin St. in the Tenderloin on Friday, Aug. 21, 2020. (Kevin N. Hume/S.F. Examiner)

Affordable housing fees kept intact after SB 1085 amendments

Some affordable housing advocates are breathing a sigh of relief after a proposed state bill was amended, keeping intact a portion of San Francisco’s affordable housing revenue.

Senate Bill 1085, which tightens up the state’s density bonus program, would have eliminated the ability of cities like San Francisco and Berkeley to continue charging a fee on projects that take advantage of the program. Developers can build up to 35 percent more units if they also build more affordable housing units.

As of December 2019, San Francisco has 55 projects in the pipeline with a total of 6,113 units that use the state density program. That led affordable housing developer TODCO to warn that San Francisco could lose about $50 million, according to the nearly $200 fee per square foot of the project’s gross area, if SB 1085 was approved.

But after amendments were made on Thursday, San Francisco will remain free to charge the fee — for now.

“We feel very strongly about protecting that pipeline of funding because it’s so important to build for working class people,” said Bobbi Lopez of TODCO. “Now, we’re very happy to support the legislation moving forward.”

The potential loss in funding came at a time when San Francisco’s long-term investment was already expected to drop to an average of $200 million annually for the next decade due to flagging development rates. The City needs about $517 million annually to reach its goal of 1,670 affordable housing units each year, the Planning Department said in July.

The Board of Supervisors unanimously approved a resolution in June opposing SB 1085 unless it was amended. Now, Supervisor Aaron Peskin is expressing gratitude toward the bill’s author, state Sen. Nancy Skinner, who represents parts of the East Bay, for removing the fee language.

“I can’t tell you how pleased I am that we don’t have to reopen the inclusionary housing conversation in San Francisco,” said Peskin, who also co-authored an op-ed against the bill. “All’s well that ends well.”

Peskin said that San Francisco is due for another reassessment of its inclusionary housing fee system in the next year or two, but the changes to SB 1085 prevent an immediate crisis.

With or without the amendment, a question of legality hangs over the fee. In 2019, Attorney General Xavier Becerra filed an opinion stating that local public benefit fees imposed on projects using the state density program are invalid.

“Someone, I bet, will sue about it,” said Laura Foote, executive director of YIMBY Action. “I think that part’s going to shake out on its own.”

But Lopez said she would be surprised to see a legal challenge. She noted that Becerra said the fee was invalid if it was imposed “only” on density bonus projects, whereas San Francisco charges fees for most projects.

YIMBY Action and another affordable housing developer, BRIDGE Housing, supported the bill before the amendments. While YIMBY Action is still supportive of the bill, Foote noted this legislative session is coming to a disappointing end for housing in California.

“It’s just been really sad how every piece of housing legislation this year has been weakened or failed completely,” Foote said. “[SB 1085] cleaning up less than when it started.”

SB 1085 would originally have expanded the density bonus from 35 percent to 40 percent, but went back to 35 percent.

The bill still makes modest tweaks the program to incentive more developers to tap the underused density program, most notably around low-income student housing. It requires planning agencies to include the number of units in student housing developments for lower-income students that would help more of that specific housing get built, Lopez said.

TODCO is also grateful for a previous amendment, pushed by San Francisco’s Assemblymember David Chiu, that removed the ability for developers to invoke the state density program for moderate-income units. Without the change, Lopez said developers would opt less for low-income or very-low-income housing while still being able to build more units.

“Density bonus is one of our most powerful tools to increase our affordable housing stock,” Chiu said. “We should continue to look for ways to strengthen it and ensure it is not undermined.”

The California Assembly will vote on SB 1085 next week.

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