July 24, 2023 Updated: July 25, 2023 (SFChronicle.com)
The San Francisco Board of Supervisors appears set to slash affordable housing requirements and lower or delay a slew of associated fees in an effort to resuscitate a residential development industry that has sunk into a deep torpor as the city scratches and claws its way out of post-pandemic economic doldrums.
Against the backdrop of 1,100 out-of-work building trades members — and a skyline bereft of tower cranes — the Board of Supervisors Land Use and Transportation Committee Monday recommended that the percentage of affordable rental apartments developers are forced to include in their projects be cut from the current 21.5% to between 12% and 16% percent, depending on neighborhood and product type.
Condo builders would see their inclusionary requirements drop from 23.5% to between 12% and 16%. About 20 other fees — including those that fund public transportation and parks — would be reduced by 33% for the next three years. Some fees would be delayed from the start of construction to project completion.
The legislation was recommended by a Technical Advisory Committee that included both market rate and affordable housing developers, as well as advocates across the city’s political spectrum. Board of Supervisor President Aaron Peskin worked with staff from Mayor London Breed’s office to fashion a compromise based on the TAC’s recommendations.
Whether or not slashing fees and requirements will be enough to prompt developers and their lenders to jump back into the San Francisco market remains to be seen. An economic analysis completed for the TAC suggested that right now it wouldn’t be enough, although should other factors shift — interest rates or the cost of construction — suddenly the reduced fees could allow some dormant projects to stir to life.
TAC member and developer Jesse Blout said the changes could be a significant help. Blout’s company, Strada Investment Group, has 1,800 units in its pipeline. “This will make a huge difference as to our ability to move forward with those projects,” he said.
In addition to Peskin, the legislation was endorsed by committee member Supervisor Myrna Melgar, while Supervisor Dean Preston was the sole “no” vote on the three-member body.
But Preston questioned the premise behind lowering the requirements and fees, calling it “drastic policy changes without clear justification.” He argued, “You are not going to see new apartments as a result of these changes,” but that the value of land will rise, making it more expensive for the city to snap up parcels for subsidized low-income housing.
“How many dollars are we taking out of Muni?” he said. “I’m at a loss — we are looking at reducing these kinds of fees and yet we have no projections from the city economists about what we are giving up?”
Charlie Sciammas, co-director of the Council of Community Housing Organization, said the legislation should be on hold until the city comes up with a plan to fund the 46,000 affordable units required to be built in the next eight years, under state mandates.
“We urge the board to move forward only when there is greater certainty,” Sciammas said.
But Peskin, who in 2016 drafted the current inclusionary housing legislation with former Supervisor Jane Kim — after a compromise with the moderate faction of the board led by Supervisor Ahsha Safai — said the current rules require the TAC to convene every three years to reevaluate the requirements. Those meetings, which began last October, have been open to the public and offered plenty of time for concerns to be raised.
Peskin said that “nobody is happy about reducing our current inclusionary number” but that the policy change would be complemented by both a $300 million affordable housing bond — likely to be on the ballot in March — and other efforts to build housing for low-income families.
“This has been a long time coming and part of a pretty predictable process,” Peskin said. “This should happen like clockwork every three years.”
Rudy Gonzalez, who heads up the city’s Building Trades Council, said the legislation would help unblock a roster of fully approved developments that “can’t bear the weight” of the city’s famously high fees in an environment where interest rates are high and the city’s rents are 10% to 20% lower than what they were pre-pandemic.
“We have to unlock the projects that were feasible in a different economy,” he said
Reach J.K. Dineen: jdineen@sfchronicle.com
Written By J.K. Dineen
J.K. Dineen covers housing and real estate development. He joined The Chronicle in 2014 covering San Francisco land use politics for the City Hall team. He has since expanded his focus to explore housing and development issues throughout Northern California. He is the author of two books: “Here Tomorrow” (Heyday, 2013) and “High Spirits” (Heyday, 2015).
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