Good Changes Ahead for Inclusionary Housing

by Fernando Martí and Peter Cohen, Council of Community Housing Organizations on February 11, 2016

A big and exciting change is coming down the pike for the City’s inclusionary housing requirement. This June, a measure proposed by Supervisors Kim and Peskin will be on the ballot to take the inclusionary housing policy back out from the City charter and initially double the affordability requirement from 12% to 25% of units in a development project.

In his recent piece for BeyondChron (“What Is Best Way To Build More Affordable Housing “),Tim Colen of the HAC paints a doom-and-gloom picture of the proposed charter amendment, arguing that we are in grave danger of placing too large a burden on market-rate housing, and descending into a spiral of decreased market-rate development, leading to less affordable housing, fewer jobs, and general economic decline for San Francisco.

Though it’s easy to get caught in such a politically-charged fear spiral, the underpinnings of Colen’s argument don’t hold. In fact, this charter amendment is a necessary and timely opportunity to increase affordability in San Francisco.

Colen’s argument relies heavily on the deceptively straightforward supply-and-demand argument that the displacement and affordability crisis simply comes down to not having enough new market-rate housing. Displacement and the affordability crisis have many root causes, including drastic income inequality, unfettered speculation on housing, and the huge imbalance between market-rate and affordable housing constructed in San Francisco (read our previous piece on “Unpacking the ‘Affordable Housing Balance’” here).  To improve affordability, we need to improve that affordable housing balance, and increasing inclusionary housing requirements on private development is one effective means to start doing just that.

Also wrong is the idea that any obligation placed on market-rate housing will threaten affordable housing production. In actuality, affordable housing construction in San Francisco is not so dependent on market-rate housing (read the reasons here in our piece “Don’t Believe the Hype”). Modest inclusionary requirements, as are being proposed here, are costs to development, just like construction costs, developer fees, and interest rates, and, just like other costs, get factored into the cost of land. In fact, the proposal simply restores the inclusionary requirement for low-income units back to 15% as developers were building until 2012, and then adds a new middle-income category for 10% of the units, which is much less expensive for developers to provide.    Our current inclusionary housing requirements were reduced by 20% in 2012, and locked in the City’s Charter.  According to the City’s Residential Nexus Analysis, the current inclusionary requirements do not even mitigate the need for new affordable housing that is created by market-rate development (meaning that, at the current level, we can never begin to catch up to the affordable housing need new development is creating, let alone fulfill the pre-existing need).  Whether or not our current inclusionary requirements were appropriate for 2012, they are not appropriate for 2016, when San Francisco’s housing market and affordability crisis look very different.

Market-rate developments should be expected to contribute significantly more affordable housing to San Francisco. And recent measures (like 2014’s Proposition K, calling for a minimum of 33% of new development to be affordable) show voters are on board with this.  It’s beyond time to set a higher bar for private development and ensure that projects are contributing their fair share to housing our City’s resident workforce.

Finally, Colen’s argument distracts from the two huge and necessary changes that this amendment makes: 1) a “good government” provision removing the inclusionary requirement from the Charter, allowing for future legislative amendments when appropriate; and 2) creating affordable housing for a wider range of the City’s working residents, including moderate/middle-income San Franciscans. Inclusionary housing is one of the best tools we have to build housing for moderate/middle-income San Franciscans, as there are no public subsidies available for those income levels.  Instead of pitting low-income and middle-income housing needs against each other, this measure addresses BOTH needs, adding a second tier to the City’s inclusionary housing requirement in the form of 10% of on-site units for middle-income households.  This means rental housing for households making up to 100% Area Median Income (for example, a teacher making $70,000/year, or a postal worker and a restaurant worker with a child making $90,000/year) or first-time homeownership opportunities for households making up to 120% AMI (for example, an electrician making $85,000/year, or a family of four with two teachers together making $120,000/year).

So, there’s no reason to create fear here. Only reason for excitement that we finally have some of the changes to inclusionary housing that San Francisco has long needed.


Peter Cohen and Fernando Martí are co-directors of San Francisco’s Council of Community Housing Organizations.

Filed under: San Francisco News

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