S.F. eyes $125M annually for affordable housing, more than double current funding

Supervisor Myrna Melgar plans to introduce legislation Tuesday that would more than double San Francisco’s annual budget for affordable housing to some $125 million, part of a bargain she hammered out with Mayor Daniel Lurie.

Melgar said her proposal would vastly expand the city’s capacity to build affordable housing by allocating $125 million annually into the city’s Housing Trust Fund, up from the $52 million that goes into it today, while also extending the fund for another 30 years. That would be a total of at least $3.75 billion. 

The increase would be funded by “allocating a portion of future property tax growth every year” to the fund, according to a press release sent by Melgar and Lurie.

“I cut a deal with the mayor,” Melgar said, to use property taxes “coming from the increase in the value of all properties in San Francisco” as a result of last year’s upzoning.

The proposal would take the increase in future property taxes and “put it aside” into the low-income housing fund, Melgar said.

“Housing is not getting built at the pace we need, and the consequences are all around us,” Mayor Lurie said in a statement. “Today, we’re jumpstarting affordable housing in San Francisco.”

The two also announced an immediate $70 million bond, to be issued next year, that would go towards preserving and maintaining existing affordable housing. Much of that work has happened through the city’s Small Sites program, which buys smaller buildings and converts them to affordable housing, though the program has been fraught.

The city will maintain the current level of allocation to the fund during this budget crisis, but start increasing that in the 2029-30 fiscal year. It will take several years to get to the $125 million level.

The city will also be able to issue bonds against the fund, Melgar said, meaning the city could get hundreds of millions of additional dollars of private money for affordable housing in the coming decades.

The proposal is a charter amendment that would go before voters in November. Melgar’s measure has five co-sponsors on the Board of Supervisors — Shamann Walton, Danny Sauter, Stephen Sherrill, Matt Dorsey and Alan Wong.

Those are the six votes she needs to put a charter amendment on the ballot. The measure would then need a simple majority from the voters to pass.

Melgar said she has “been working on this for about a year,” since Lurie first committed to a citywide upzoning plan last spring. “I will support this, but I need a guarantee of affordable housing,” Melgar recalled telling the mayor’s team then. 

This is that guarantee. Plus, she said, Lurie is gaining peace on two other fronts: The nonprofit housing developers behind Melgar’s effort will drop their opposition to the city lowering the percentage of affordable units that must be included in most new city housing projects. 

The “inclusionary” rate is currently 15 percent, but a city committee unanimously recommended slashing it to 5 percent for at least three years to spur housing production. Past efforts to lower the rate have resulted in vicious, drawn-out fights, but Melgar says most of the city’s affordable housing developers won’t take up arms this time around.

“In return we’re getting this vastly increased fund for affordable housing for the next 30 years,” she said.

And, Melgar added, many of the groups behind another proposed ballot measure that would have earmarked another pot of affordable housing funds are abandoning that campaign — another measure of political peace.

Melgar said her legislation follows a “very socialist principle.” The city endowed tremendous values upon property owners by upzoning their land and making their parcels more desirable for developers. This new legislation absorbs some of that municipally bestowed value and directs it toward low-income housing.

“You confer value on the property and you capture some of that value,” she said. “That’s where the idea came from — to take the increase in the value for properties you have just upzoned.” 

The Housing Trust Fund was created in 2012 via the ballot in another grand bargain to reduce the inclusionary rates for new construction, and went back to the ballot in 2016 to fiddle with those rates.

Earmarking fund for affordable housing has an equally prickly history: Then-supervisor Dean Preston in 2020 introduced a measure to hike a real-estate tax that was passed by 58 percent of the voters as Proposition I. 

But the money was not specifically allocated to affordable housing. The city attorney’s advice at the time was that this would have required a two-thirds vote rather than a simple majority.

Other municipalities have, in the ensuing years, passed similar measures and locked in guaranteed money. But, in San Francisco, the funds were shunted to the general fund with no guarantees regarding how they would be spent.  

Mayor London Breed, in fact, refused to spend the money for its stated purpose, despite a board resolution asking her to. Melgar, for her part, said Preston’s experience convinced her to seek a charter amendment guaranteeing the money is used for affordable housing.

“Last time, my colleague from District 5 put something on the ballot, and the former mayor just refused to spend it,” Melgar said. “I did not want to be in that same situation.”

This piece was updated to note Alan Wong joined as a co-sponsor on Tuesday morning.