Anyone hoping the November election would offer a way out of San Francisco’s affordable housing crisis got a slap in the face instead.
One ominous sign came early. A $20 billion affordable housing bond for the Bay Area was supposed to go before the region’s voters, but its sponsors killed it in August because it was polling around 55 percent — well under the two-thirds margin needed to pass.
Prop 5, a state measure to lower the vote threshold for housing bonds to (conveniently) 55 percent, was supposed to help resurrect that massive bond down the line. But Prop 5 failed. While SF and Alameda Counties supported it, every other Bay Area county rejected it.
A third blow to affordable housing hopes came at the national level. There’s long been talk among advocates that SF would need a return of federal intervention to meet ambitious affordable housing goals. Earlier this year, Vice President Kamala Harris began drafting pro-housing language into her stump speeches and policy outlines, raising hopes.
Now it seems very unlikely that President-elect Donald Trump will offer much federal aid for subsidized homes. In 2020, Trump referred to low-income housing as an invasion and a scheme to “abolish the suburbs.”
Asked for thoughts on how to rebound, John Goodwin, spokesperson for the Association of Bay Area Governments, which had a hand in the scrapped $20 billion bond, says he queried ABAG members but got no comment. “I’ve got nothing brilliant for you,” Goodwin says.
A long way to 46,000
San Francisco was hardly in a strong position on affordable housing before the election. Under the city’s eight-year housing plan (known as the Housing Element) and the state mandate it’s meant to satisfy, SF must make way for more than 46,000 affordable homes by 2031.
That averages to 5,750 affordable homes every year, an improbable goal in light of recent production. In the past decade, the city has averaged fewer than 1,000 a year. In 2023, SF added only 971 affordable homes to its housing stock, none in the “extremely low-income” category.
It’s difficult to calculate how much it will cost to build tens of thousands of homes stretched out over a decade. The price of labor and materials is constantly on the rise. Another major cost factor is the time to get permits approved and issued, which the London Breed administration has said it would address. (Mayor-elect Daniel Lurie also made reduction of red tape a central plank in his election pitch.)
Some projects have run nearly $1 million per home, and SF often ranks as the world’s most expensive place to build, according to some market analyses.
Lurie also cited his own experience as an affordable housing developer on the campaign trail. That experience was limited to a single 145-unit SoMa project that cost just $377,000 per unit to build.
However, those results will be hard to reproduce at a larger scale — the project was privately funded and its modular construction raised the ire of influential labor unions.
In baseball terms, SF needed this election to be a home run. Instead the pitch hit the star hitter in the head and perhaps knocked him out for the rest of the season.
“If it weren’t for Prop A and Prop G, we’d be at ground zero,” says John Avalos, CEO of CCHO, a collective of neighborhood groups and affordable housing developers.
Prop A is a $600 million affordable housing bond that SF voters approved in 2019; with Prop G last month, voters approved an affordable housing fund for low-income seniors. “As it is, we are still only slightly above ground zero,” Avalos adds.
Recently released US census data show 49 percent of San Franciscans are “cost-burdened” by housing — that is, paying more than 30 percent of their monthly income for a roof over their heads. The same data show 25 percent are “severely cost-burdened,” meaning they’re paying more than half toward housing.
That 49 percent is actually a few points behind the national average. Still, Igor Popov, an economist with SF-based apartment listing site Apartment List, says this simply means more poor and working people have been squeezed out of San Francisco. If the need for affordable housing isn’t going away, what can the city do about it?
‘Get out of the way of the market’
About a third of SF’s affordable housing is the product of market-rate development, thanks to the city’s highly unusual inclusionary system. Designed in the early 1990s to counter racist 20th century policies, the system requires developers to include a small number of affordable units within market-rate projects – or to pay into a fund if they don’t want the units on site.
At the height of the pre-COVID boom, the Mayor’s Office of Housing and Community Development estimated developers were paying in about $20 million a year. But with post-pandemic development in the doldrums, SF lawmakers recently cut the minimum affordable requirement for new projects from at least 21.5 percent to at least 12 percent.
The city controller reevaluates that rate every three years, and lawmakers are likely to raise it when building takes off again. One glimmer of economic hope is that interest rates are declining, which makes financing easier. Not wanting to get caught short, city planners are laying groundwork for a future building boom.
“We’ve taken aggressive steps, but we also need to see economic conditions improve,” Breed’s housing czar Judson True tells The Frisc.
There’s continued political will for more housing. Voters put Lurie in the mayor’s seat and tilted the Board of Supervisors toward what should be a more development-friendly majority.
For example, outgoing board president Aaron Peskin ran for mayor as a skeptic of housing density across the city and, in particular, a new zoning map. Peskin is termed out, and his replacement in District 3 is Danny Sauter, a critic of neighborhood protectionism. “Nowhere is our city’s dysfunction more evident than our painstakingly slow process to build new homes,” Sauter tells The Frisc. “We need to come together and pass real legislation to speed up construction.”
Sauter campaigned on promises of a new special district in the northeastern neighborhoods that will ease the construction of “affordable, senior, and family housing,” and to add thousands of new homes downtown through office conversions. (As The Frisc has reported, office-to-home conversions make good sound bites but will prove difficult at a large scale.)
We’re in a time of significant transition that will require us to deepen our collaboration with the state.
anne stanley of the sf mayor’s office of housing and community development
In District 5, Sup. Dean Preston was a fierce critic of market-rate development who pushed for publicly-funded “social housing” and a successful tax to finance it. Voters ousted Preston in favor of Bilal Mahmood, another outspoken critic of SF’s lengthy building process.
“Locally, I think we have an [incoming] board and mayor that will work together on housing in a way we haven’t seen before,” says Jane Natoli, director of YIMBY Action.
Natoli, whose group backed Breed for re-election, says the mayor did “a lot of great work” on housing that Lurie should benefit from. Like Breed, Lurie’s housing platform emphasizes market-friendly solutions to make it easier for developers to build in San Francisco.
“We wasted an era of easy finance fighting over whether housing is good or bad,” says Matthew Lewis, spokesperson for California YIMBY. To catch up on housing, “we have to do everything we can to get out of the way of the market. If we let builders draw capital, they will build,” he says.
Relying only on market-rate construction for a sidecar-like portion of affordable housing isn’t going to work. Under the present 12 percent inclusionary rate, it would take about 380,000 market-rate units to create 46,000 affordable units.
Many projects will contribute more than the minimum 12 percent, and the rate could rise again, but even a hike in a couple years would require a tremendous volume of construction.
With a White House hostile to California, state and regional voters hostile to bond spending, and local coffers stretched thin, where will the money for subsidized homes come from?
That’s billions with a B
For people skeptical that markets will fix the problem – and San Francisco, despite the tilt of the local election, still has plenty – California seems the best hope for now. “We’re in a time of significant transition that will require us to deepen our collaboration with the state,” Mayor’s Office of Housing and Community Development spokesperson Anne Stanley tells The Frisc. “San Francisco continues to remain competitive for state funds.”
For example, the city applied for important tax credits for six recent projects, and received funding for all six from a state board that finances affordable housing, industry, and waste facilities.
Stanley also points out that SF’s use of an Obama-era federal program to fund public housing is likely to continue, even with Trump in the White House. (Sup. Preston, who pushed for more aggressive use of the program, estimated it could produce 3,600 homes. The Breed administration has questioned that estimate.)
SF voters have never turned down a local housing bond, such as 2019’s Prop A, but those only provide hundreds of millions of dollars. The city cannot take on billions in debt on its own.
Earlier this year, the supervisors passed a bill from Aaron Peskin to generate new housing bonds at little to no cost to taxpayers. The homes would be for middle-income residents, not people on the lowest economic rungs. When the bill passed, Peskin’s office couldn’t say how many homes such tools might yield. Peskin and staff did not respond to requests for comment on this story.
At the state level, one pitch is for an even larger housing bond, although it’s a long shot after the failure of Prop 5.
State finances are squeezed as well but should keep producing a drip of funds such as tax credits, which makes each project a complicated and delicate puzzle.
Otherwise, the Newsom administration and pro-housing lawmakers led by SF’s state Sen. Scott Wiener will likely keep cutting red tape for private development and publicly subsidized projects that run the funding gauntlet.
SF’s density skeptics will remain, well, skeptical of such an approach, but for now it remains the main game in town.