Dollars or sense? - Page 3

Few San Franciscans can afford the market-rate homes developers plan to build — so why doesn't the city have a plan to house its workers and low-income residents?


What this adds up to is a full 61 percent of new residential development in San Francisco ought to be dedicated to some form of affordable housing. The calculation reveals a lot about the condition San Francisco is in, but it might as well be chalked up as a hollow academic exercise. Indeed, the report deems this goal "unrealistic." The reality of the market and chronic government deficits ensures that there will not even be an attempt to meet it.



The trouble with affordable housing is that developers won't build it unless there is a financial incentive. "The only way it works is not in the marketplace," Welch said. "There's no such thing as affordable land, affordable sheetrock, affordable architects, or affordable engineers. The profound condition ... is that the market cannot produce affordable housing." As long as developers can make higher profits building market-rate, they will.

That's why government steps in to subsidize or mandate new affordable housing construction or preserve existing stock. Under the Inclusionary Housing Ordinance, if developers decide not to build the required 15 percent of affordable units, they must pay an in-lieu fee that gets funneled into an affordable housing fund.

In a good year, MOH Executive Director Douglas Shoemaker told the Guardian, the city receives $10 to $15 million from these fees, which is used in partnership with developers to build affordable projects. That system hasn't worked so well lately. Last year funds for affordable housing were depleted instead of bolstered. Developers who paid their fees in anticipation of building new projects requested refunds after their projects were stalled, Shoemaker told the Guardian, so MOH gave back up to $12 million to developers instead of using that money to build new affordable housing.

This year, Mayor Gavin Newsom introduced what he called an "economic stimulus" program that allowed developers to defer payment of in-lieu fees. This guarantees that it will be a long, long time before new affordable housing can be built using those funds. So as it stands, the inclusionary housing law isn't so effective at producing new affordable housing.

Projects done in conjunction with the San Francisco Redevelopment Agency, meanwhile, do include higher portions of affordable housing. With all of the planned Redevelopment projects combined — Treasure Island, the Hunter's Point shipyard, and others — the city can expect to see perhaps 7,000 new affordable housing units in coming years, a portion of which will be condos meant for people in the "moderate" income range. It may well be better than other cities have offered, but it doesn't begin to address the true need for more than 19,000 units outlined in the General Plan.

Shoemaker noted that San Francisco is a cut above the rest when it comes to affordable-housing requirements. "I just don't think you could find a city that has more aggressive goals," he said, noting that in major redevelopment areas, "We're getting like 30 percent of homes to be affordable on some level." Yet Shoemaker acknowledged, "the need is intense," and "there's more people we would like to serve."

Olson Lee, deputy executive director of the San Francisco Redevelopment Agency, also described San Francisco as taking a very aggressive stance on affordable housing. Redevelopment devotes 50 percent of its tax-increment financing to affordable housing, where the state requires just 20 percent, Lee said. And some Redevelopment project areas include twice as much affordable housing as is required by state law, he added. "The city has done a tremendous amount of affordable housing," he said. However, "the fact of the matter is, there's a greater demand for affordable housing than the number of units."