The Fillmore Center on Fillmore Street received city redevelopment financing in exchange for making 20 percent of the units available at below-market rates forabout 25 years. (Kevin N. Hume/S.F. Examiner)

Fillmore Center tenants gain new protections against looming rent increases on affordable units

Affordability restrictions on units at housing complex expired in 2017

San Francisco has reached an agreement to protect 103 senior and disabled tenants from ever seeing their rents soar to market rates at the Fillmore Center.

Another 105 tenants won’t see their rents increase to market rates until January 2025.

The deal was negotiated by the Mayor’s Office of Housing, which sent letters to impacted tenants last week.

The Fillmore Center is one of several housing developments to receive city redevelopment financing in exchange for making 20 percent of the units available at below-market rates for 20 to 30 years.

The tenants living in the 200 below-market rate units at the Fillmore Center have been uncertain about their future ever since affordability restrictions on their units expired on Dec. 1 2017.

Construction on the Fillmore Center began in 1986. The current owner is Prudential Real Estate Investors, which purchased the property in 2004.

Kate Hartley, Director of the Mayor’s Office of Housing, said they have been working with the Fillmore Center owner “for a couple of years” and “we’re really thrilled that the most vulnerable residents who this affected do not face a loss of housing.”

Under the agreement, those who were 62 years old or disabled at the time the below-market rate restriction expired in December 2017 will have lifetime leases at their current affordable rents, which are set for tenants at 80 percent of the area median income. That’s about 103 tenants.

The other 105 tenants will face market rent increases in January 2025.

“The City did push for a longer term,” Hartley said. “They felt that this was the best deal that they could put forward while still meeting their obligations to their shareholders.”

Supervisor Vallie Brown, who represents the Fillmore neighborhood on the Board of Supervisors, said, “If I had my wishes … we wouldn’t have to divide this, but they did the best they could.”

Brown said that she was aware of the expired rent requirements when she was appointed to the board and “I knew that I had to jump on it.”

To further help these 105 tenants, Brown has proposed legislation that would provide these tenants with a preference in The City’ affordable housing lotteries. The City uses lotteries to determine who can move into affordable housing units. There are existing preferences for displaced tenants, such as those who were evicted through the Ellis Act or an owner move-in, or who lost their home due to a fire.

Since late 2015, there have been more than 1,000 tenant applications for the displaced tenant preference, including 462 for Ellis Act evictions, 365 for owner move-in evictions and 78 for those displaced by fires.

Heading into the board’s Rules Committee hearing Monday there was an outstanding question about when tenants could start to use the preference in the lottery. Brown said she wants the preference to kick in as soon as the legislation is approved so tenants will have a better chance to secure lifelong affordable housing units in the lotteries before their rents go up in 2025.

But existing policies apparently prevented tenants from using the preference in lotteries until after the landlord notifies them of the market rate rent hikes, which wouldn’t happen until possibly nine to 12 months before Jan. 2025. At that point, the Mayor’s Office of Housing would review their paperwork and determine if they are eligible.

With the support of the Mayor’s Office of Housing, Brown amended the legislation Monday to ensure tenants could use the preference as soon as the legislation is adopted. With the amendment, the committee will have to vote to send the proposal to the full board next Monday.

Maria Benjamin, the deputy director of homeownership and below market rate programs in the Mayor’s Office of Housing, said, “We can qualify them now based on their current income and based on what the market rate units are going for in the building.”

Brown said the change will give tenants a better chance to remain in the neighborhood. Tenants will also have the ability to use the neighborhood preference in lotteries. “I just want to make sure that we give people time because I know a lot of people want to stay in the neighborhood,” Brown said.

Hartley said that tenants will have access services to help them examine their options.

“We want to make sure that all of those residents who don’t have lifetime leases do find good housing that works for them,” Hartley said. She added, “We expect to bring thousands of new affordable units online in the next five years. There will be many opportunities.”

Technically, the amended legislation creates a new preference for displaced tenants living in multi-family residential property that “will be no longer restricted to ensure affordability based on income under any regulatory agreement (including a regulatory agreement based on the issuance of housing mortgage revenue bonds) or other affordable housing agreement and/or recorded instrument, and the landlord of such property has leased unrestricted residential rental units in the same building at a market rent that is more than 40 percent of the tenant’s total annual gross household income.”

The Mayor’s Office of Housing has negotiated agreements with owners at the other sites where affordability requirements have expired and each one is different, with some requiring city subsidies. The Fillmore Center agreement does not include any city funding.

The other sites include South Beach Marina, Bayside Village and 737 Post St. Tenants living at 737 Post will see their rents increase to market rate by the end in 2028 under that agreement. Tenants displaced at 737 Post St. could use the new lottery preference as well.

Benjamin said The City is facing a number of similar expirations in the coming years.

“In [US Department of Housing and Urban Development] funded or state funded projects, there are 15 buildings currently at risk of losing their affordability restrictions, which total over 1,500 units that will lose affordability between 2021 and 2029,” Benjamin said. “In inclusionary projects, there are 45 buildings, totaling about 500 units that will expire between 2028 and 2064.”

This story has been updated with additional information.

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