San Francisco has pledged to make room for some 82,000 new homes by the end of 2031, and more than half must be affordable. Meeting that housing goal is unlikely, and will grow even more so if federal subsidies vanish – or if the federal agencies that supply key subsidies are cut to shreds.
The Trump administration’s DOGE chainsaw, wielded by Elon Musk, has closed in on the Department of Housing and Urban Development and the Internal Revenue Service in recent weeks, with staff and programs on the chopping block. These are the two agencies most in control of federal pursestrings for new housing. The money or tax breaks they offer help build new homes, maintain existing units, and help unhoused people find homes and pay the rent.
In this two-part story, we’ll examine what DOGE threats could mean for San Franciscans who rely on subsidized housing. In this first part, we look at the federal government’s funding mechanisms for building new homes or rehabbing old ones.
The heart of this funding is a tax tool that few San Franciscans, or Americans for that matter, have heard of: the low-income housing tax credit. But people who build low-income housing know it well.
The SF Planning Department calls the LIHTC the largest affordable housing subsidy in the country. Run by the IRS, the program issues credits to state governments, which in turn award them to developers and investors. They receive tax breaks for generating homes for low-income renters. The California agency that allocates the credits to cities, including SF, handles several billion dollars worth annually.
“The LIHTC has always been a bipartisan thing,” says Ray Pearl, executive director of the California Housing Consortium, an affordable housing advocacy group. Pearl calls the credit a “true public-private partnership.”
Republican lawmakers like the LIHTC because it’s a tax break for businesses, and Democrats appreciate that it generates low-income housing. As the SF Fed explains, it was designed to reward success; the developer only gets the tax break upon delivery of the housing.
It’s about as lovey-dovey as both sides of the aisle are likely to get over the tax code. But that might be changing. The American Enterprise Institute, a conservative think tank, recently wrote that the LIHTC was “rampant for fraud” and needed a DOGE audit. (Their source was a 2023 report which did not allege fraud but noted that federal oversight of the program “has been minimal.”) The Cato Institute, another influential policy shop, agitated against the LIHTC during Trump’s first term.
‘What MAGA has in store for us’
In the past, Trump has negatively characterized low-income housing. As DOGE has started cutting into the IRS, housing activists in some states are encouraging people to call lawmakers to support the LIHTC funding during budget negotiations.
For all that, there’s no specific indication that the LIHTC is in danger. San Francisco’s Scott Wiener, chair of the California Senate budget committee, has been sounding constant alarms about the Trump administration. But he told The Frisc last month he’s “pretty sure” LIHTC will not end up on the chopping block. (He did acknowledge, however, that “right now we really don’t know what they might try to go after.” Wiener and his staff have not responded to requests for more comment.)
Pearl of the California Housing Consortium also believes the tax credit will outlast the storm because of “the support we have in Congress” from both parties.
Not everyone is so sanguine. John Avalos, former SF supervisor and director of the Council of Community Housing Organizations, is girding for a worst-case scenario. “I worry that the city and most non-MAGA public officials around the country are both fatalistic and in denial about what MAGA has in store for us,” says Avalos. “If Social Security is impounded, and Medicaid is on the chopping block, then everything is on the chopping block, including the Low Income Housing Tax Credit.”
The city economist’s office declined to comment for this story. Several local affordable housing developers and the Planning Department deferred comment to the Mayor’s Office of Housing and Community Development (MOHCD), which runs San Francisco’s affordable housing programs.
“There’s very little clarity on what we can expect at this point,” MOHCD spokesperson Anne Stanley says via email.
Where credit is due
In 2021, San Francisco accounting firm Novogradac compiled an index of 192 housing projects built in the city with LIHTC financing since 1988, resulting in over 19,000 new or rehabbed homes, nearly all of them priced for low-income renters. These projects collected over $291 million in credits.
High-profile projects in the works like the Hunters Point Shipyard and Candlestick Point are relying on these funds as well. Sometimes credits can fund renovation instead of new construction, like the $13 million fix-up of the Ocean Beach Apartments more than 20 years ago.
A 2024 survey by Fannie Mae found that in expensive coastal markets, LIHTC buildings offered rents as cheap as half the citywide median. SF was not included in that survey, but in Oakland LIHTC buildings featured rents 52 percent of market prices.
At one point a few years ago, so many affordable developers were after these tax credits that they became quite scarce. Starting in 2020, California has boosted the credit with $500 million of its own annually, alleviating shortage risks for now.
Jenga pieces
The tax credit program is both massive and indirect. But the Department of Housing and Urban Development (HUD) also issues grants to directly finance new housing or renovations and maintenance – crucial in a city with some of the oldest housing stock in the country. San Francisco has received an average of $18 million a year for the past ten years.
The largest HUD program, Community Development Block Grants, has paid nearly $131 million to San Francisco since 2014, according to MOHCD. Housing rehab and construction is one target, but it has a broader remit to help people with incomes up to 80 percent of the county median, which in SF is nearly $84,000 for one person.
A few million dollars here or there can make or break a project, especially when private developers are reluctant to break ground.
The HUD HOME program has paid out more than $46 million to San Francisco since 2014 to directly fund construction and acquisition of housing.
These programs cover only a fraction of SF’s development costs, which can hit $1 million a unit, even for affordable homes. Credits, as well as state grants, development fees, housing bonds, and City Hall’s general fund among the many revenue streams that help build housing.
But MOHCD spokesperson Stanley notes that a few million dollars here or there can make or break a project, especially in lean times like these when private developers are reluctant to break ground.
In other words, each of these sources is like a block in a late-stage Jenga game. Pull one out, and your tower might survive. Then again, it might not.
Tax credits are not flashy policy measures, but they’re an example of the low-profile framework of subsidies underlying America’s industries and infrastructure. Taken for granted for decades, it’s easy to forget these load-bearing programs are there until someone starts digging at their base.
While there’s some optimism that housing tax credits might survive, there’s little confidence the DOGE purge will spare HUD subsidies that keep low-income San Franciscans housed, and those add up to many more dollars than what the department spends on construction. For more, see part two of this report.