San Francisco is taking steps to prevent the owners of city-subsidized units from taking a bath upon the sale of those units. This comes after Mission Local reporting that showed owners of below-market-rate units were being compelled by the city to sell at a loss.
Currently, the program, which is meant to help San Fransicans with limited incomes afford starter homes, is “turning what should have been an economic opportunity for low-income families into a nightmare,” said Supervisor Myrna Melgar, when introducing the agenda item at a hearing Monday afternoon.
The hearing, held at the Land Use and Transportation Committee of the Board of Supervisors, was the first step toward amending the city’s planning code and housing regulations.
Though no concrete changes were proposed, Melgar said she is “firmly committed to supporting the office of housing to figure out anything we can do to make the program more flexible.”
“We want to make sure that we bear some of the risk as a city,” she said.
The city manages 2,524 below-market-rate units, largely created as part of the city’s inclusionary housing requirements in new market-rate developments, with some from a condo conversion program and others from old public housing stock.
Amy and Simon Jansuk, whose plight was recounted in Mission Local, shared their perfect nightmare during public comment: The unit they purchased five years ago is now too small for their four-person family, and they need to move, to be closer to Amy’s aging parents. Plus, they will need to recoup the costs invested into their home to help pay for brain surgery for Simon’s mother in Uganda.
Their unit, which they put on the market in September 2022, is listed for $100,000 less than the sales price they expected, and $60,000 less than they originally paid for it.
When the Jansuks purchased their unit in 2018, below-market-rate units had a single price set by the Mayor’s Office of Housing and Community Development. Now, the housing office calculates two prices: a “maximum” price, based upon the limited home equity amassed by the seller, and an “affordable” price, which has nothing to do with the owner. The latter is based on what a buyer of limited means can afford to pay.
The “affordable” price is what the city markets to potential buyers, telling them they may not get their money back if they pay more than this price. Crucially, buyers who offer more than the “affordable” rate are not eligible for down payment assistance from the city, a loan of up to 20 percent of the unit’s selling price.
Simon Jansuk said that if they sell for the “affordable” price, they will be $25,000 in debt. This is the price the city markets to buyers and mandates for any buyer hoping to receive loan assistance.
Sheila Nickolopoulos, from the housing office, acknowledged this pricing discrepancy in a presentation she gave at the hearing.
“The maximum resale price of some older BMR units exceeds the affordable price, because the resale pricing formula does not factor in the housing costs of the proposed buyer,” she said.
Since 2019, there have been 64 units with different “maximum” and “affordable” prices, 46 of which have sold for an average net gain of $124,000. Of these units, 28 sold for the “maximum” price, nine sold for the “affordable” price, and seven sold for an amount in-between. Two of the units sold below the affordable price, one of those at a loss.
Of the 18 units still on the market today, four are in contract, four have potential buyers, and 10 have no would-be buyers. Below-market-rate units had an average of 26 potential buyers per unit in 2019, but by last year that number had dropped to just five.
The comparative trends in area median income, which measures the average income across San Francisco, and the market-rate cost of housing, are also unfavorable to below-market-rate owners seeking to sell their units.
“AMI remains stubbornly high, for many reasons,” Preston explained. “But housing costs have stabilized or dropped.”
That means market-rate units are getting cheaper, and the price gap between them and below-market rate units — calculated using area median income — is closing. Potential buyers may opt to pay a little more for a new, market-rate unit without the restrictions of the below-market-rate program.
“BMR owners have a lot of risk, same as normal homeowners, without the protection of being able to rent the unit when times are bad,” said Jennifer Rosdail, the realtor who has been working with the Jansuks for almost a year to help sell their unit.
At the close of the meeting, Melgar said that she will be working with the office of housing and the deputy city attorney to figure out ways to make the program more flexible.
It seems that the unifying goal of SF as pertains to housing is to empower the nonprofit and for profit developers and administrators while throwing as many San Franciscans as they can under water, market and affordable, into economic ruin.
One of the big problems with BMR condos is high monthly HOA dues-this increaaes the monthly cost to above what you would pay for a rental. If, in addition, you can’t build any equity, it is just a ball and chain.
This is what happens when government meddles with the free market. Housing cycles come and go. That is the risk that someone takes when buying or selling. Now the city wants taxpayers to help absorb the loss for properties that we already have subsidized.
We saw this in 2008, and we’re going to see more of it now. Someone who cannot afford the market terms or the risk should not buy or should buy elsewhere. And the city should stay out of it.
IF the free market had its way it would force every lower income person out of San Francisco. SF is mainly renters, and if rents were not controlled you would have no one to work in the retail and service jobs that we need. Not everyone can earn high salaries and San Francisco needs people with diverse incomes and skills. This needs to be fixed, not nixed.
Free market? Sorry, I don’t believe in fairy tales.
This is all very confusing to me. I guess the big question for me would be, at the price that they can sell at, do they end up worse off than if they had rented on the open market? And if so, how much worse (since they were still insulated from potential rent increases)?
What’s a vow from the city worth? I’ve heard a lot of lip service on how they’re going to work to make [Insert any city problem] better, but I’ve yet to see a single lasting step in towards making this city better since, uh……hm.