San Francisco needs to build affordable housing. This is true in a broad sense. Like much of the country, the city has a housing shortage, and the housing it has is, on average, very expensive.
But the need for affordable housing – that is, subsidized and reserved for people at certain income levels – is now a legal issue. In early 2023, SF lawmakers voted to make mandates for it binding. Last month, the city quietly triggered one of the enforcement mechanisms written into those laws.
Will any consequences come of it? San Francisco is not on track to meet its affordable housing goals, and that failure is poised to become the next contentious chapter in the city’s housing fight. A City Hall committee is supposed to convene soon to hash out ideas to address the shortfall. Affordable advocates say they’re working on their own plan.
One neighborhood group even wants to revive plans to turn a Muni bus yard into one of the city’s biggest affordable complexes.
Everyone will be working under adverse circumstances. Affordable housing is not affordable to build. Labor, materials, and land remain market-rate. Even in good economic times, it’s also difficult to finance. These are not good times.
City and state budgets, a crucial funding source, are in deep deficit. SF faces a two-year shortfall of $936 million, and it could get worse thanks to the federal “big beautiful bill.”
There are some creative ideas floating about, but unexpected pots of public money are unlikely to become available soon. And “soon” is a key word here, because SF is under the microscope for its dismal housing record.
State regulators could penalize San Francisco by withholding housing or transit funds, or more drastically wrest away local control and invoke the so-called Builders Remedy.
Affordable trigger warning
Before this decade, California set targets for new local housing but didn’t enforce them. If cities didn’t hit their goals — and they rarely did — Sacramento couldn’t do much.
That changed with the latest eight-year cycle, which began in 2023. SF’s Housing Element, a 183-page blueprint for new housing plans, won unanimous board approval. Even skeptics like Sup. Aaron Peskin, who doubted it would produce 82,000 new homes, more than half of them affordable, voted yes because of the state’s new regulatory muscle.
To keep SF on track, the blueprint included time-sensitive triggers. One “circuit breaker” will force a rewrite of the housing plan — in essence, deeper deregulation — if the city fails to issue building permits for at least 29,049 new units by January 2027. Critics of market-rate housing have called this trigger a “dirty bomb” that will let developers have their way.
But in January, the city’s lack of production since 2023 brought it closer to an affordable housing circuit breaker. If a new City Hall committee drawn from the Planning Department and other agencies gives the city a failing grade on affordable housing production, it will activate new requirements.
The Housing Element spells out three remedies: Increase local funding, ask the state for more funding, and “increase the land banking strategy” — that is, buy more properties for future development.
Rachael Tanner, in charge of long-term planning at the planning department, says it’s too early to say what ideas the committee will consider.
Regulators at the California Department of Housing and Community Development (HCD) will decide if the city’s proposals are up to snuff. Spokesperson Alicia Murillo said that “HCD continues to monitor San Francisco’s progress” and will “work to ensure the programs’ objectives” once the city decides what it’s going to do.
One critic of the city’s housing plan and upzoning push is skeptical that the committee or state will hold SF to task. “We don’t expect either Planning or HCD to take affordable housing goals seriously,” says Joseph Smooke, spokesperson for the Race & Equity in All Planning Coalition (REP-SF). Smooke says REP-SF is drawing up its own recommendations to satisfy the Affordable Housing Breaker but isn’t ready to make them public.
Another affordable housing advocate has an idea for the committee that he calls a “low-cost step,” acknowledging the city’s budget pain. Council of Community Housing Organizations director Quintin Mecke wants affordable developers to convene and pitch plans to combat “rising construction costs, financing gaps, stalled projects,” and other major development obstacles.
Several community groups, most in and around the Mission, have a more specific idea. They want the city to bring back its once-audacious goals for the Potrero Yard project. The site’s owner, SFMTA, slashed plans from several hundred affordable homes atop a rebuilt bus maintenance yard down to only 100 homes.
In a letter to SF Planning, Sup. Chyanne Chen has asked for a “consistent affordable housing funding source” but made no specific suggestions. Chen was one of four supervisors to vote against the sweeping plan to upzone western and northern neighborhoods, which for decades didn’t allow midsize apartment buildings — the scale often needed to make affordable construction viable.
‘We have forever’
When the Housing Element passed in January 2023, the relief of getting the plan through the contentious Board of Supervisors superseded worry over future deadlines. “At the time it seemed like, ‘Oh, 2026, we have forever,’” says Habitat For Humanity SF CEO Maureen Sedonaen.
For the 2024-25 fiscal year, the Mayor’s Office of Housing and Community Development budgeted more than $310 million toward affordable housing grants and loans, and subsidies for permanent supportive housing.
According to a recent report from the city’s capital planners, that’s a sliver of what MOHCD needs to spend to fully fund SF’s goals: $2.2 billion in 2026 and $27 billion over the next decade.
We’re very unoptimistic.
YIMBY Law director Davey Kim
The City Hall group — officially the Interagency Housing Element Implementation Committee — will recommend a new funding figure, but the Board of Supervisors and mayor must appropriate the funds through legislation.
“We’re very unoptimistic,” says YIMBY Law director Davey Kim. “With this budget crisis, the appetite to apply funds to get housing at all income levels is not necessarily going to be there.”
Perhaps complicating the budget math, Mayor Lurie and Sup. Bilal Mahmood want to roll back a 2020 tax hike on property sales of at least $10 million. They hope to spur new construction by freeing up developer capital.
Critics say the transfer tax, one of the highest in the U.S., is supposed to help fund affordable housing, although City Hall can also put the money into the general fund. That allocation was an annual source of tension between London Breed and then-Sup. Dean Preston, the tax hike’s author.
Lurie and allies say they’ll look for other ways to make up the affordable housing funds.
If supervisors and the mayor say there’s no extra money to devote to affordable housing, it remains to be seen if HCD plays hardball. But there’s more local pressure that will come to bear. Opposing sides of the city’s housing wars have sued over the new upzoning plan. The plan’s opponents say it violates state environmental law, and YIMBYs say it doesn’t upzone enough to meet state housing mandates baked into the eight-year cycle that got everything started.
Upcoming elections, especially on the June ballot, will be a housing bellwether. Supervisors Alan Wong and Stephen Sherrill, both density-friendly mayoral allies, face challenges from density-skeptic rivals. Sherrill’s main opponent, Lori Brooke, cofounded one of the groups that filed the environmental suit.
San Francisco State political scientist Jason McDaniel points out that in those two races specifically, housing mandates could put incumbents in a tight spot. They’ll be “blamed [by their opponents] for any projects that do get built, while at the same time blamed by the more YIMBY side of things” for not building even more.
Affordable housing advocates sometimes ask the city for the implausible, but now the city’s own promises face a financial reckoning. The bill is coming due at the worst possible juncture. As San Franciscans of nearly every stripe struggle to meet housing costs, city government has to do the same.