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Housing Shell Game: Supes’ Latest Actions Set to Slow New Housing as State Mandates Loom
Monday, May 16, 2022

Housing Shell Game: Supes’ Latest Actions Set to Slow New Housing as State Mandates Loom

With the clock ticking on a state mandate to allow the creation of 82,000 more housing units over the next decade in a city that desperately needs them, the San Francisco Board of Supervisors, rather than finding new ways to build housing, continues to make moves that discourage new construction.

The latest escapade involves a bill to allow fourplexes to be built on all residential lots, an effort prompted by a new state law that outlaws single-family zoning. The board’s Land Use and Transportation Committee will take up the bill again Monday after punting on the issue earlier this month, but there’s little hope that the end result will be more housing.

That’s because the debate has not centered on how to encourage people to build fourplexes, but rather on what kinds of affordability and rent-control requirements should apply if these units do indeed get built. Such mandates, included in competing fourplex proposals, are all but certain to make any such developments economically infeasible, developers and economists say.

“It’s absurd,” said Michael Harris, a local architect who is working with a family that is taking advantage of the new state law to build an in-law unit and expand a home on Seneca Avenue. Harris said that if his client had to comply with affordability requirements, the project would have been dead before it even began. “You know how much it costs to build in San Francisco? If the city wants affordable stuff, the city should pay for it.”

Supervisor Aaron Peskin is also working to pair any fourplex bill with legislation that would restrict the development of some cheaper, dorm-like group housing projects in parts of the city—restrictions that would be illegal under state law unless they are accompanied by the loosening of zoning restrictions elsewhere (such as allowing fourplexes). 

The end result, according to advocates of more construction, is likely to be few, if any, fourplexes, fewer group housing projects and zero progress on the housing crisis.

The board has also yet to grapple with the next phase of the state-mandated effort—led by the city’s own state legislator, Sen. Scott Wiener—to ease restrictive zoning and boost housing production: allowing taller buildings on major thoroughfares in the western part of the city and allowing more multi-family buildings near all transit corridors.

Progressive supervisors maintain that they are working as hard as they can to get affordable housing built, pointing out that it’s that segment of the market where the city is failing to meet state mandates. They say efforts to promote the construction of housing at all affordability levels might increase the housing supply for wealthier households but do little to chip away at high costs for the city’s lower wage earners.

Those were among the arguments that led the board earlier this year to vote down two large projects totaling over 800 units—nearly 140 of which would have been affordable—that were years in the making and had already been approved by the city’s Planning Commission. 

Debate rages over market-rate housing 

Housing advocates are livid over what they view as a pattern of smoke and mirrors where the board’s progressive wing shrouds anti-housing policy in language that looks and feels pro-housing or anti-gentrification but isn’t. 

“The Board of Supervisors is a clown car that wants to do everything they can to make it harder to build housing here,” said Corey Smith, deputy director of the Housing Action Coalition. “Saying that you think the only thing we should be building is 100% affordable housing sounds pro-housing to some people, but people who are educated on the issue know that that means you don’t want any housing.” 

Progressive supervisors argue that pro-housing advocates are simply advancing the gentrification agenda of developers and downtown business interests while the city lags on building affordable housing.

Supervisor Dean Preston, a former tenant-rights lawyer who is vilified by YIMBYs as a housing obstructionist, argues that the YIMBYs are simply carrying the flag for developers and that more market-rate housing will do nothing to solve the affordability crisis. 

“You’re effectively arguing for a trickle-down housing approach,” Preston said. “I think that’s a fairytale that makes sense for developer lobbyists to argue. But as a policymaker, that’s not a solution to affordability in San Francisco.”

Preston cites Proposition I, which he sponsored and which may raise as much as $176 million annually in revenue in its first three years, as an example of a sweeping policy that could actually make housing more affordable in the city. The tax, which was approved by voters in 2019, was sold as a pool of money to allow the city to buy housing units and manage them as part of a portfolio of affordable options. 

Preston accused Mayor London Breed’s office of refusing to commit to use the funds for that purpose. 

“I think the board has taken the lead on fighting for affordable housing in particular and approving all kinds of housing,” Preston said. “The critics will attack nonstop and the mayor will accuse the board of being obstructionist over one CEQA appeal on one thing and say nothing about the thousands of units of housing both market-rate and affordable that the board approves without fanfare.”

One of Preston’s own constituents, UC Berkeley political science professor David Broockman, says the math belies those claims. 

In a report titled “Dean Preston’s Housing Graveyard,” compiled by Broockman, Vitor Bacetti and Alex Taylor, the researchers found that the supervisor has approved fewer than one home in his district per day since he took office. (Broockman made clear the report was a personal project and not part of his work at UC Berkeley.)

Plummeting rents during the pandemic may be a signal 

A key tenet of progressive housing policy is that building more market-rate housing will have little or no impact on rents or prices, especially for the city’s lowest-income residents—and can result in gentrification that ultimately raises prices for everyone. 

But a research review out of the UCLA Lewis Center for Regional Policy Studies on this very question found that adding more market-rate housing does in fact drive down prices. Not only that, new market-rate housing has a healthy “filtering” effect as new residents move in and vacate their more affordable homes, said researcher Shane Phillips, a co-author of the review.

He compares the housing market to the used car market—where prices skyrocketed due to temporary supply constraints during the pandemic—to illustrate just how big an effect even small changes in supply can have on prices. 

The pandemic also provided what scientists call a “natural experiment” on the impact of changes in demand on housing rents. San Francisco lost 6.7% of its population during the first 15 months of the pandemic, according to census data. During that time, asking rents in San Francisco plunged by as much as 25%.  

That’s not to say that building more affordable housing isn’t needed, Phillips said, or that the history of racist zoning in San Francisco and across the country shouldn’t be a factor in development. But it isn’t a zero-sum game. 

“The reality is there is a ton of land we could be building housing on, and the idea that blocking market housing from being produced is somehow benefiting affordable housing is just wrong,” Phillips said. 

To Supervisor Rafael Mandelman, it’s not an either-or. He wants to see the board approve more market-rate housing and the city get better at executing on affordable housing initiatives. He says it’s his job as a supervisor to figure out how to increase density in the city while preserving neighborhood character. 

“We’re not going to meet our RHNA goals relying entirely on public subsidies,” Mandelman said, referring to the Regional Housing Needs Assessment, the housing goal passed down from the state.

Market-rate developments in San Francisco have to offer somewhere between 15% and 25% affordable units, or provide offsetting funding for affordable housing; thus, many involved in the field say that building more affordable housing actually requires building more market-rate housing, too.

Harris, who has been working as an architect for 40 years, said slapping affordability requirements on small-scale projects ensures they won’t pencil out. 

“There’s no economy of scale for (affordability minimums on) a two-unit building,” Harris said. “There’s no way you’re going to make up on one what you’re going to lose on the other.”

Showdown looms over state mandates

The board’s inaction on housing comes as big deadlines loom. Due in May 2023 is an updated “housing element” to the city’s general plan, which is required by the state. Crafted by the city’s planning department, it’s supposed to lay out how the city will manage its zoning and planning policies over the next eight years to assure sufficient housing.

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In a new draft published March 25, the planning department recommends rezoning moves like removing density limits and increasing building height allowances in west side neighborhoods along key transit arteries—plus an effective fourplex bill—to get it done. The board now has little over a year to sign off on it.

And the state has raised the stakes by a lot. 

At the time of the last general plan in 2014, the state required the city to enable the construction of 28,869 units by the end of this year. Next year, that number shoots up to 82,000 by 2031. 

The state has also raised the penalties for not meeting those targets.

If San Francisco fails to allow the legally required housing, the state could cut funding for critical housing programs, freeze the city’s ability to issue permits and dole out financial penalties to the tune of up to $100,000 per month. The board’s recent action in rejecting a 495-unit apartment complex proposed for an empty lot on Stevenson Street is already under scrutiny by the state.

But even though the city has just a year to pass a long-term housing plan that will satisfy the state, the board appears to be moving in the other direction, as illustrated by the pairing of bills put forth earlier this year. 

The first would create a “special use district” in Chinatown and the Tenderloin to prohibit some types of housing where common spaces and kitchens are shared among residents, proposed by Peskin. He says the two areas lack diverse housing options, and that the city’s west side should take on more of a responsibility for building dense housing. 

Peskin’s office declined multiple requests for comment for this story. 

But under a state law passed in 2019, the bill could be considered a “downzone,” and under state law could be illegal if it’s not balanced by an equal and opposite “upzone.” 

So to avoid any lawsuits, the city attorney’s office recommended Peskin pair it with a different piece of legislation also in the works. 

That’s Mandelman’s fourplex bill, which is coming back in front of the committee on Monday. It would allow up to four units on any lot currently zoned for single-family homes and up to six units on corner lots and is a way of creating a specialized local version of the new state law on limiting single-family zoning.  

Most pro-housing groups, and even Breed, are lining up behind Mandelman’s fourplex proposal because it doesn’t have any affordability requirements, unlike the alternative fourplex bills proposed by Supervisors Gordon Mar and Ahsha Safaí. But even supporters are skeptical that much new housing will result.

“I would like us to send out the most robust version of fourplex,” Mandelman said after the committee hearing in early March. “And I am a little concerned based on the conversation here that there is going to be tinkering. The question is, is there going to be watering down?”

If the board’s recent history is a guide, the answer is likely to be yes.

Disclosure: Michael Moritz, a venture capitalist who provided the financial backing to launch The Standard, donated $40,000 to YIMBY Action in 2020. Moritz is not involved in The Standard’s editorial decisions.

Sarah Wright can be reached at [email protected].

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