Jake McGoldrick last fall introduced legislation to apply the program to buildings of five or more units (it now applies to buildings of 10 units and more), and his ordinance is now being considered along with the Daly-Maxwell legislation.
"This is about housing for everyday people in San Francisco," Daly said at the July 12 hearing, which was attended by the three supervisors, city staff and consultants, top developers, and a large crowd of housing activists wearing "Housing Justice Now" stickers.
That volatile mix produced a surprising amount of unanimity and compromise (although the Land Use Committee ultimately decided to push the matter back a week to work out some details). Just a few days earlier, when the consultants' numbers first came in, the measures had seemed headed for an ugly showdown between the progressives and downtown.
The report by Keyser Marston Associates analyzed how much the city can ask for before developers just say no. It was a wake-up call in many respects, showing that San Francisco developers and their financers expect at least 18 percent profit margins for small projects and more than 28 percent for big ones.
For starters, that means that no private developer will build new rental housing in San Francisco, because the profits aren't high enough. The report also says that developers will avoid putting affordable units in their luxury condo towers; it makes more economic sense to build them off-site or to pay into the city fund instead.
Doug Shoemaker of the Mayor's Office of Housing (MOH) said his office has learned a lot from the study, particularly about how the in-lieu fee could be adjusted to make BMR housing construction a more attractive option for developers.
"It's created a bias for developers to just pay the fee," Shoemaker said, noting that his office increased the in-lieu fee by 15 percent on July 1 and indicating that further increases could be on the way. In fact, one requirement of the ordinance is for the MOH to regularly update fees to reflect evolving market realities.
Yet there was also a potential kiss of death in the report, which ran the numbers and found that developers wouldn't pursue projects that met the 20 to 25 percent inclusionary housing standard that Daly was seeking.
Daly and his housing activist constituents understood that the report — which was issued just five days before the hearing — would likely translate into a mayoral veto of the legislation, allowing Mayor Gavin Newsom to claim it would hurt the city's economy and housing needs.
"What we were confronted with last Friday was political death," Welch said.
So Daly lowered his requirement to 15 and 20 percent respectively and agreed to compromises that grandfather in projects now in the pipeline and ease up the standards on projects that work within their current zoning.
"We do support the compromise," Matt Franklin of the MOH told the Guardian.
But for Daly the legislation is about more than percentages. For example, it also creates standards for marketing the BMR units to prevent fraud, allows lower-income residents to qualify for them, and requires off-site BMR units to be within one mile of the project.
Daly, a tough former housing activist known for sometimes taking strong and unbending progressive stands, told the Guardian that this deal is consistent with his approach: "Yes, I'll push the envelope, but that doesn't mean I won't take a good deal."
The July 12 hearing demonstrated that this was a deal being grudgingly accepted by all of the usually polarized sides.
"We, by and large, support this legislation," Erickson — the Emerald Fund developer and San Francisco Planning and Urban Research Association board member who cochaired the committee — said at the hearing. He also added, "I think it's doable.
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