The 2000s TV show reboots and low-rise jeans aren’t the only things that made a comeback this year. So has key San Francisco affordable-housing policy.
Recently, multiple projects requesting last-minute changes in their affordable housing agreement spurred the Board of Supervisors to fix the city’s planning code. Front and center was the 2002 Inclusionary Affordable Housing Program, an ordinance that commanded market-rate developers to contribute to the city’s affordable-housing stock.
That ordinance, which has been revised several times since 2002, says developments with 10 units or more must provide affordable housing by including it on-site, paying a fee to an affordable housing fund, building units off-site, or dedicating land.
“To my mind, way too many folks avail themselves to the in-lieu and not on-site,” said District 3 Supervisor Aaron Peskin at an Oct. 25 Board of Supervisors commission meeting. “Maybe it’s time to say goodbye to in-lieu payments.”
Echoing him was District 5 Supervisor Dean Preston.
It’s an innocuous suggestion that may seem offhanded, but the debate over whether on-site or in-lieu housing benefits the city more is one that has deep roots in San Francisco’s affordable housing history. Changing the ordinance could affect the way affordable housing is built for years to come. And it would be a retroactive fix, going back to the original intent of the ordinance.
So, why keep affordable housing exclusively on-site? One main point Peskin posited, and one that the original designers of the ordinance argued, is that doing so physically integrates San Franciscans of differing income levels. That’s a central tenet of the 2002 ordinance. Paying fees, Peskin said, fails to meet “our fundamental policy goal of having diverse income strata on-site.”
Given these recent discussions, it’s worth having a refresher on why the inclusionary housing ordinance was created in the first place.
The North Star of housing policy
Few know that history better than Mark Leno, a former supe and state legislator, author of the 2002 ordinance and the runner-up in the 2018 special mayoral election. (He lost to Mayor London Breed by less than 3,000 votes.)
“We were in a housing crisis, not unlike today,” Leno said of the early-2000s housing boom that widened the city’s economic divide.
The boom maintained segregation and inequality, argued Peter Cohen, whose group, the Council of Community Housing Organizations, helped advise the 2002 legislation. “The traditional program had been all market-rate development and 100 percent affordable,” Cohen recalled. That left room for “very little mixing.”
Aware of the problems, Leno and others created legislation aimed to offset market-rate construction by requiring developers to also contribute to affordable housing construction. “Without any requirement, no one is going to do it,” Leno said.
The big idea at the time was that any project with at least 10 units must reserve roughly 10 percent of the building’s units at below-market prices in the same building, or on-site. That percentage has increased in recent years, to between 12 and 20 percent, depending on the size of the project.
But this novel program was risky. The city attorney expressed concern that, without other options, the city was vulnerable to legal challenges. (Presciently, so; a similar program in Southern California confronted some of those challenges, seven years later. More on that in a moment.)
One workaround was adding other options besides on-site affordable housing. So, Leno and other housing experts and advocates said developers could check off their affordable-housing requirements by constructing off-site units, or paying a fee earmarked for future affordable housing development. Boom! The 2002 Inclusionary Affordable Housing Program was born.
Still, Leno and his co-authors put those options there solely as legal protection, he said. He argued the first option, on-site housing, yielded affordable units faster, since they went up at the same time as market-rate units. That was needed in a housing shortage, and the 2002 legislation motivated developers to choose that option.
And, it addressed social harmony. “The intent of the legislation is ‘inclusionary,’” Leno said. “It’s beneficial to integrate people from different walks of life. There are social positives to that.”
He thus embedded an incentive for on-site development in the ordinance, hoping to encourage developers to choose that instead.
It worked. From fiscal years 2002 to 2009, 113 projects, nearly three-quarters of all projects in San Francisco, built the affordable units on-site. A quarter paid the fee.
Then came 2009 and a legal challenge from a developer against the city of Los Angeles; the court ruled that enforcing inclusionary housing policy violated the formidable state Costa-Hawkins Rental Housing Act. That decision threatened affordable on-site units until 2017, when Gov. Jerry Brown passed legislation restoring the right to mandate on-site housing.
But in 2009, before Brown’s legislation, a Planning Department planner recalled, the ordinance was revised to cover the city’s butt. From then on until today, the in-lieu fee option became the default option to fulfill inclusionary requirements. Options to build on-site or off-site still remained, but became the “alternatives.”
The incentive to choose fees grew after the city agreed developers could defer payments. Although the sample size is smaller, during the fiscal year 2010-11, the majority of projects paid the fee, or 55 percent of projects, according to a 2012 performance audit report. By comparison, 27 percent of projects built on-site affordable housing. Some 16 percent chose both.
That report found that the 2010 ordinance changes slowed down housing construction by at least a year. In some cases, since that report, delays have extended years longer. But what about segregation, another key tenet of the ordinance? How has the shift to off-site and 100-percent-affordable buildings potentially impacted the intent to use inclusionary housing as a way to encourage social and economic integration?
Let’s flash forward.
The modern age
San Francisco has been highly segregated since the 1980s, according to a study from the University of California, Berkeley, and remains so now. As study co-author Samir Gambhir notes, segregation could portend more inequalities in the future. Historically, segregation of racial minorities or low-income communities is linked to numerous inequalities, including redlining, lack of access to educational opportunities and gerrymandering. Priced-out residents also get displaced or move out.
Some of those decisions set marginalized groups back for generations, and they’re still behind now. Remember who got hit hardest in the pandemic? In the Mission, overwhelming case rates partially derived from overcrowding — a symptom of a lack of adequate and affordable housing.
Historically underserved areas, such as Treasure Island, still face disproportionate and numerous power outages today; Bayview Hunters Point residents confront health issues possibly caused by its proximity to a formerly toxic site.
Ideals like equalizing wealth-building for people of color and working class folks, for example, are tied to homeownership. This too, has been affected by exclusionary policies.
So how does development play a role?
The in-lieu fee did not cause segregation. Does it reinforce it, though, by allowing affordable housing to be built in places a mile away from the original market-rate development? On-site housing doesn’t necessarily fix the city’s segregated communities, either. But according to Cohen, its design to offer integration in the same building starts to undo that harm.
Leno agreed; by sharing the same facilities, “we have a concern for each other’s issues, and that your well-being translates to my well-being, and my hardship translates to your hardship,” Leno said.
John Elberling, head of housing developer TODCO, has lived rent-free in an affordable building for 25 years now which, as the Chronicle wrote, incited conversations between him and residents and “informed his political investments.”
Supporters of the in-lieu fee argue that integration can be achieved by spreading 100-percent-affordable housing throughout the city. But over the 20 years of the city’s inclusionary housing ordinance, that has hardly happened.
The vast majority of affordable rental housing projects completed between 2016 and 2018 (the last year available) are located in District 6 and 9, which encompass underserved areas like the Mission or SoMa. In recent years, eight fully affordable projects located in the Mission got approved.
Meanwhile, the Sunset nearly exploded at the thought of its first — yes, first — 100-percent-affordable housing development this year, in part because units would be saved for formerly homeless residents. Some even painted it as “a harbinger of drug-filled destruction for the neighborhood,” according to the Examiner. And the Sunset isn’t alone in this.
Affordable housing developers argue that the community spaces on the ground floors of fully affordable units encourages mixing more than merely slapping an affordable floor on a market-rate building. Maybe so, if it truly attracts a cross-section of society; I enjoyed Día de los Muertos at Asociación Mayab on the ground floor of Avanza 490 and met new people. It depends on the situation.
Still, time matters significantly. What, and who, will the city lose the longer we wait to make San Francisco equal and accessible? Already, thousands of Latinxs have been displaced from the Mission in the past decade.
Affordable housing plays a role in solving this. Undoubtedly, on-site does so faster.
“It’s expensive to build, and the more we can build up front” we should, said Peskin’s chief of staff Sunny Angulo.
“In-lieu fees are great, but often they just sit in a pot of money that just waits for a full and complete project to be proposed,” Angulo said. She highlighted 101 Hyde St., a plot of donated land for affordable housing that faced significant delays and struggles with financing.
On-site integration may also bridge differing ideas about how to address community issues and policies. It’s not yesteryear but today that our nation is staunchly divided. Part of that is because “we don’t know each other,” Leno said.
“Those on the higher rungs have fewer opportunities or circumstances to ever cross paths with someone who is at their social strata. And that makes all of us that much more insensitive to the humanity of those in our communities.”
Housekeeping: What you missed and what I’m reading
From us, to you, with love:
What I’m reading:
The supplementals for this included J.K. Dineen’s fabulous, even-handed profile of John Elberling, who was caught in the crosshairs over the 469 Stevenson St. project. And Noah Arroyo is always on it when it comes to well-researched tenant protection news; this time, stronger protections are in mind.