We’ve reached a major milestone in the evolution of The City’s “inclusionary housing” policy, which ensures that market-rate developers build mixed-income communities that include a percentage of permanently affordable units. After a year of advocacy — from the work so many housing advocates put into passing Proposition C last June 2016, which raised the bar and for the first time added a “middle-income” tier, to the hardy souls who sat through the Controller’s Technical Advisory Committee last fall, to all the folks who organized and demanded no loss to low-income housing, and through these last weeks of late-night negotiations — we now have final legislation before the Board of Supervisors. It just passed its first adoption hearing on Tuesday, and will have its second and final “reading” in two weeks.
None of this could have happened without the broad coalition of housing advocates from our Council of Community Housing Organizations to the Tenants Union and Homeownership SF, from Faith in Action to Glide Memorial, from the teachers’ union UESF to Jobs with Justice, from SF Rising, Market Street for the Masses, Affordable Divisadero, and Neighbors United to the Sierra Club. As with any negotiated process, both sides made concessions. But overall, the landmark inclusionary housing policy made great strides.
We fought for the things that mattered: maximizing affordability, preserving opportunities for low-income households and ensuring family housing.
One of the compromise points was to begin this year at an 18 percent inclusionary requirement for rentals and 20 percent for ownership projects. But persistent advocacy, as well as in-depth financial analysis, prevailed, ensuring a graduated increase to 20 percent for rentals and 22 percent for ownership projects within the first 18 months, including a return to 12 percent of the below-market units dedicated for our lower-income workforce. Then increasing by 0.5 percent per year after that, based on recapturing a portion of the unearned income from the astronomic rate of inflation of land prices.
But we also succeeded in addressing the moderate/”middle”-income earners who have been left behind by the for-profit housing market. Over the years, our affordable housing advocates have created new programs to serve this demographic, including the largest first-time homeowner down payment program in the state, an acquisition program for mixed-income apartment buildings, dedicated funds from the 2015 housing bond, and now we’ve expanded the inclusionary policy to further serve that middle-class. Importantly, we’ve done it without reducing housing opportunities for lower-income residents. And a cap on middle-income BMR pricing will ensure that “below-market” units are actually at least 20 percent below local market-rate pricing.
The updated policy also requires a minimum 10 percent three-bedroom units and 25 percent two-bedroom units. And stronger requirements have been established for protecting existing rent-controlled units. Finally, given the ongoing gentrification and displacement in the Mission and Tenderloin and the financial precedent set by several projects that have already agreed to over 25 percent inclusionary, those neighborhoods will retain higher standards for the foreseeable future.
We still have to deal with the financial incentive for developers to “fee out” rather than building the affordable units on-site and in real time. Both sides agreed to revisit the fee methodology over the next few months to ensure equivalency with the cost of providing onsite units, as was recommended by the Controller.
The big lift for all of us now is ensuring that Assemblymember Phil Ting’s bill, AB 915, passes in the state Legislature, so that this carefully worked out “deal” applies to state density bonus projects. Almost all sides, from market-rate developers to supervisors to the Mayor’s Office, have come together to support AB 915 so that all this hard work does not fall apart. Despite our local consensus, some ideologically motivated groups are still opposing, so the work is not over.
San Francisco’s inclusionary policy is by no means our only strategy for furthering affordability. But it has already produced more than 4,600 units, and is the one tool that ensures that developers create truly mixed-income communities, rather than furthering the economic and class divides of The City. The lesson learned here is that persistence, and a desire from both sides to go beyond ideological fault lines and rhetoric to create programs that actually build units for the breadth of The City’s residents, can work. The final vote on the inclusionary housing legislation is scheduled for the Board of Supervisors on July 11.
Peter Cohen and Fernando Marti are co-directors of San Francisco’s Council of Community Housing Organizations.