When Simon and Amy Jansuk won the San Francisco housing lottery for a Below Market Rate unit in 2018, it well and truly felt like winning the lottery.
The couple and their two children were able to move from a (literally) toxic rental situation into a home of their own on Valencia Street. They landed the unit for $460,000 and, just like that, gained an elusive foothold in San Francisco real estate.
A decade earlier, Neil Patel felt much the same way. He beat out hundreds of lottery applicants to win the right to buy a one-bedroom unit at Mint Plaza for around $213,000.
“It started out wonderful. It was wonderful,” recalls Patel via a Zoom call from Dublin, Ireland, where he has lived for the past couple of years while he continues to pay the mortgage, property taxes, HOA fees and other expenses on his empty unit. “In the beginning, it worked.”
But that was then and this is now. Both the Jansuks, Patel, and other owners of BMR units contacted by Mission Local said they were broadsided when they learned of a 2019 policy change enacted by the Mayor’s Office of Housing and Community Development. They are now being encouraged to price and sell their units at a loss — in some cases, a staggering loss.
“If Kafka were alive,” sums up one longtime San Francisco real-estate power player, “he’d be writing about the Mayor’s Office of Housing.”
For the Jansuks, Patel and others, their Gregor Samsa of a home has certainly metamorphosed into a giant cockroach.
Simon Jansuk is a gardener with the Recreation and Parks Department. He applied for, and received, asylum after immigrating from war-torn South Sudan. Amy Jansuk is an occupational therapist who works with children suffering from developmental delays. It would be very difficult to conceive of a San Francisco family better epitomizing the inclusivity goals of the Below Market-Rate program. Surely these are the people San Francisco should be helping to stay and raise their children in our parodically unaffordable, family-unfriendly city.
But cohabiting with a 10-year-old and a 7-year-old in an 833-square-foot unit was no longer tenable. The Jansuks hoped to sell their home and use the tightly capped equity they’d built up to move on, while granting an entree into San Francisco home-ownership to another modest-earning city family.
But that’s not necessarily in the cards. Prior to 2019, BMR units simply had a Mayor’s Office of Housing-set price, based on that tightly capped equity owners had amassed through the years; sellers could price the units for less if offers were slow coming in, but not for more. But that system has changed: The Mayor’s Office of Housing now calculates both a “maximum” price based on the owner’s limited equity and an “affordable” price, which disregards the owner and simply focuses on what a buyer of limited means could afford to pay.
This lower number is marketed to would-be buyers, even if the seller has no intention of letting go of the home at that amount — and, crucially, a buyer who pays anything more than the rock-bottom “affordable” price is no longer eligible for city loan assistance.
Now, that’s a big deal: The Below Market-Rate Down Payment Assistance Loan Program (DALP) is a loan of up to 20 percent of the unit’s selling price. Which is now verboten for anyone paying over the bare minimum.
It’s all a big, fat incentive for a buyer to not pay more than the “affordable” price. And that’d be a problem for any seller, but it’s an especially vexing one for the Jansuks. Their “affordable price” allotted to them by the Mayor’s Office of Housing is $386,263 — some $74,000 less than they paid for their home just four years prior. It’s a gaping $152,000 less than the maximum allowable price at which they could sell using the housing office’s own pricing calculator.
The “affordable” price of $386,263 is, in fact, $25,000 less than the principal on the Jansuk’s loan. If we’re going to acknowledge that the BMR program exists in large part to assist people like the Jansuks and keep them in the city, it’s hard to explain why we could then justify a program that subsequently undercuts and impoverishes them — and severely disincentivizes owners from selling an unwanted unit during a raging housing crisis.
“It’s a visceral response. It’s crushing,” says Amy Jansuk. “The fact they’re asking us to start at that price and then negotiate with people is exhausting. It feels like everything we worked for is starting to deteriorate.”
This situation is not a one-off. After 14 years of paying down his unit, Patel says the “affordable” price he was assigned was only around $30,000 more than he paid for the unit — all the way back in 2008.
Another BMR owner contacted by Mission Local calculated that her “affordable” price would put her in the hole more than $21,000 after factoring in closing costs, mandatory inspections and sellers’ fees, and that’s before taking into account years of property taxes, mortgage payments and paying all of the above during a selling process that routinely stretches past six months.
Why would the Mayor’s Office of Housing do this? As is the case with so much of what ails San Francisco, everyone appeared to have the best of intentions.
In a nutshell: In recent years, there was an increasing divergence between the amounts BMR owners amassing limited equity were entitled to sell for and the amount the limited-income buyers they were entitled to sell to could potentially pay.
BMR owners were able to price their homes at rates which “exceeded the affordability of a household within the qualifying income range,” explains Mayor’s Office of Housing spokeswoman Anne Stanley.
So, that was a problem. Publicizing both a set “affordable” price and set “maximum” price, Stanley continues, “ensures that new buyers know that they can negotiate with the seller to get an affordable purchase price.”
But that’s not really a solution. It takes into account that buyers of limited means can make offers, but doesn’t take into account whether sellers have any interest in accepting them, or can even afford to accept them. It leans hard on sellers to potentially make economically devastating decisions, when protecting their fragile economic state was why they were given a chance to get into this housing program in the first place.
The city pits BMR buyers and sellers against each other, and conveniently backs into the hedges: It creates a simulacrum of market conditions without ever acknowledging its own invisible hand shaping this market.
“There’s no question about it: This screws the sellers,” sums up Supervisor Myrna Melgar, herself an alumna of the Mayor’s Office of Housing. “What they are doing is ensuring these units are affordable — but instead of doing it on the public dime, they are doing it at the expense of the family who is selling.
“I would go further,” she continues, “and say this creates mistrust in the program. Who is going to want to participate in a program like this? And have your family on the hook for a debt?”
“Kafkaesque,” it turns out, is not an attractive descriptor for family housing.
In April, 2020, real estate agent Robert Belli held a housing lottery for a downtown unit. Sixty-seven people applied. In December, 2021, he held another lottery for a functionally identical unit with a similar price and located in the same building. And there were only five applicants.
Quite simply, the demand for BMR units has hit rock bottom, and started to dig. And that’s counter-intuitive: The city is in the depths of an affordable housing crisis. But hardly anyone seems to want to buy the affordable homes that we have.
Many of the reasons behind this are beyond the control of the Mayor’s Office of Housing: a deteriorating and dodgy downtown; young professionals working remotely and feeling no need to tether themselves to the city; interest rates conjuring up mental imagery of Jimmy Carter wearing a custard-colored cardigan.
Other factors, however, do fall on the city and mayor’s housing office. For years, the process of putting people into the BMR units extracted from market-rate developers has been Byzantine in its complexity and Soviet in its efficiency. Half a dozen real-estate agents told us that six to eight months is a normal turnaround to sell and repopulate a unit — and that’s if all goes well.
As of last week, 62 San Francisco BMR ownership units and 287 BMR rentals had been sitting vacant for 30 days or more.
So, times were already tough with buyers few and far between, and now sellers are saddled with a system that they complain is coercive. In correspondences with anguished BMR residents, the Mayor’s Office of Housing insists that its new pricing mechanism isn’t forcing owners to sell at a loss. But that’s a bit cute: The Mayor’s office of Housing also admits that more recent BMR units are advertised only under the affordable price, even if the seller has made it clear that he or she can’t or won’t sell at that price.
Naturally, this poisons the relationship between the would-be buyer and the seller; any buyer coming in with expectations of paying $386,000 for a unit will understandably be apprehensive when informed that, actually, the price is $150,000 north of that.
When the buyers and sellers can’t agree, it accentuates the legendarily molasses-like nature of the Mayor’s Office of Housing; additional buyers, if there are any, must be vetted. This adds weeks and weeks to a process that was already stretching to months and months, and adds to the seller’s carrying costs.
But limiting the DALP loan to only would-be homeowners who pay the bare minimum does more than just alter a buyer’s mindset: It takes money out of their pocket. People in the market to buy BMR units don’t tend to have tens of thousands of extra dollars socked away, and this deprives them of a potential five- or six-digit city loan.
Literature from the Mayor’s Office of Housing sternly warns would-be buyers that “If you pay more than the affordable price now, you might not be able to sell for more than the affordable price as calculated when you sell.”
All of this, to put it mildly, is a hell of a disincentive for anyone to shell out more than the minimum.
Neil Patel’s story is, in many ways, a dark mirror of both his former neighborhood’s and his former city’s. When he bought his downtown BMR unit in 2008, he was in the hospitality field; he worked in conference sales for San Francisco hotels.
Needless to say, that profession evaporated during the pandemic, and so did Patel’s career. He relocated to Ireland to earn an MBA and is now a sales manager in the tech field.
His San Francisco home has become an albatross around his neck. He began the process of selling it in August of last year, and put it on the market in November, 2021. He has had hardly a bite, and the few inquiries he’s received were from people hopeful of paying the bare minimum.
The only advice he says he’s gotten from the Mayor’s Office of Housing is to keep lowering the price, but he notes that his unit is already the lowest-priced one-bedroom home in the city’s BMR market. “It’s not the price,” he sums up. “It’s the restrictions. I am absolutely stuck. I cannot get out of the program.”
Patel says he simply can’t afford to sell the home at the city’s “affordable” price; he is exploring the possibilities of foreclosure and bankruptcy.
This, for the Jansuks, is a cautionary tale. BMR dwellers in San Francisco are subject to many of the vagaries and negative consequences of owning real estate. But the positive elements are, by design, constrained.
“Simon and I are working so hard,” Amy Jansuk says. “He is working a lot of extra hours. I am filling every gap in my schedule. I feel like we are getting pretty depleted. We don’t have family here [to help with the kids]. And now there’s the potential for us to be in debt and owe the bank more?”
The Jansuks have priced their unit at $485,000. Any less, they say, and they’re losing money on the deal.
San Francisco is committed to ensuring that the right people can afford its Below Market-Rate units. But that demands we ask the question: Then what?