Should affordable housing units be included within each new development, or should developers pay a fee to help finance affordable housing construction elsewhere? That’s the question the Planning Commission will consider today when it decides whether to allow the developer of a site at 19th and Valencia streets to pay a $1 million fee once the project is finished instead of making three of the planned 17 units affordable.
Attention has focused on the issue because of neighborhood opposition to the fee option, and because a recently released city audit concluded that a 2010 change to the option has led to fewer affordable units being built within new projects.
Six neighbors have filed letters with the Planning Department opposing the fee option.
“These property owners have, no doubt, worked very hard to own the property they own, and I know it takes years to put a project of this scope together,” Heidi-Jane Schwabe wrote to the Planning Commission. “Bluntly put, I don’t think having money should enable one to buy his or her way out of social responsibility toward the community he or she moves into.”
Currently, a city ordinance requires developers of new buildings to dedicate 15 percent of their projects to inclusionary housing or pay a 20 percent fee that, once the project is completed, will go toward financing affordable housing elsewhere.
The 19th and Valencia project’s developer, 3900-19th Street LLC, is not the only one to request the fee option. A performance audit of San Francisco’s affordable housing policies, released last month by the city’s budget analyst, found that developers are increasingly choosing to pay the fee. That trend takes away the benefits of having mixed-income units in new developments, could slow down the construction of new affordable housing, and may reduce the amount of interest the city receives, the audit found.
Neighbors who wrote to the Planning Commission said the affordable units at 19th and Valencia are important to maintaining the Mission’s diversity.
“Affordable housing enables diversity that makes the Mission one of the most soulful and bohemian neighborhoods in the world,” wrote nearby neighbor Jefferson McCarley. “Please help us in this small way.”
The city enacted the inclusionary housing program in 2002 to create affordable housing in new developments and allow low-income residents to remain in the city.
The city gave developers a choice to either build below-market-rate units within the development or pay a fee up front for those units to be built elsewhere. At first most developers chose to build the units within the project. That changed in 2010, when the city allowed developers to pay the fee later instead of up front, according to the audit, which was conducted at the request of the Board of Supervisors.
The audit found that 75 percent, or 113 of the projects approved by the city from 2002/2003 to 2009/2010, built inclusionary units; 25 percent — 27 projects — chose to pay the housing fee.
Of the 18 projects approved by the city after the law was amended in 2010, 55 percent paid the fee and 27 percent built affordable housing within the project. Three of those projects — about 17 percent — did a combination of the two.
Supervisor David Campos said he was surprised that the Planning Department does not keep track of progress toward affordable housing goals.
“If you look at the Planning Department, they are so focused on dealing with individual projects, there is no tracking on how we are doing on overall affordable housing goals,” he said. “What you see is a situation in which the department is voting based on the merits” of the individual project. “It’s not keeping track of [what] the specific project means in terms of where we are with affordable housing.”
The audit found that it is too soon to say conclusively say that the 2010 change has resulted in a trend of developers opting to pay the fees. It also found that the affordable housing that is built with the fees targets lower-income residents and specific populations.
In contrast, units that are included within the projects are more evenly distributed, because they follow the general development of market-rate housing. They also tend to be owner-occupied.
The problem of low-and middle income flight is one that is front and center on Mayor Lee’s agenda. The San Francisco Chronicle writes today “Lee wants to tackle two housing problems at once: boosting the number of middle incomes homes while also sustaining efforts to create low-income housing…”
For their part, developers — including the one building the Valencia Street project — say that it is very difficult to secure financing with the mandate to build affordable housing within the projects.
The 2010 amendment to defer the fee until the project is completed was aimed at stimulating development at a time when projects were struggling to get off the ground.
The audit found that the deferment “could delay the City’s use of affordable housing fee revenues to finance affordable housing projects by an estimated 18 to 24 months.”
The audit also called into question the Planning Commission’s approval process for such projects.
The city should examine the impacts of the deferment option, the audit concluded, to decide whether it should be allowed to sunset in 2014, as it is currently scheduled to do.
Correction: an earlier version of this article stated that the developer had a choice to pay either $1 million fee or develop two affordable housing units within the site. It would actually be three affordable housing units. We regret the error.