What it does
This ordinance, placed on the ballot by the Board of Supervisors, seeks voter approval of a $200 million general obligation bond, to finance:
- Development of supportive housing (affordable housing that includes medical and social services) for people who are homeless or at risk of becoming homeless earning up to 30 percent of the area median income ($90 million)
- Acquisition, construction, and/or rehabilitation of affordable rental housing for qualifying low and very low?income individuals and families earning up to 60 percent of the area median income ($60 million)
- Construction of homes affordable for purchase by qualifying low- and moderate-income individuals and families earning 60?90 percent of the area median income ($25 million)
- Down payment assistance in the form of loans to prospective qualifying homebuyers earning 80?100 percent of the area median income ($25 million)
Landlords are permitted to pass through 50 percent of any additional property tax burden associated with this bond measure to tenants. This measure requires a two-thirds vote in support to pass.
The Mayor's Office of Housing has estimated that a total of 3,350 housing units will be produced by the bond. The San Francisco Controller's Office estimates that the bond will cost an additional $52.62 per year in property taxes to the owner of a home valued at $300,000.
Why it is on the ballot
In 1996, San Francisco voters approved Proposition A, a $100 million affordable housing bond. In the years since, that bond has been a major source of funding for affordable housing development in the city. According to a recent study by the Local Initiatives Support Corporation, that bond was responsible for the construction of 2,125 units of affordable housing and beds in emergency or transitional housing, and 249 down-payment-loan-assistance subsidies to homebuyers.1 But the funds from that bond have now all been used or committed. In 2002, another affordable housing bond, Proposition B, went before the voters and received a 57 percent ?yes? vote, but failed to gain the two-thirds threshold necessary for passage. The City is out of money for additional affordable housing unless the voters approve a new funding source.
Those who support Proposition A state:
- San Francisco has a housing crisis that cannot be addressed without significant public investments to bring down the costs. Because of the high costs of housing and because of the inequality of wealth in our society, there are many working people who will never be able to afford a decent, modest life in San Francisco without the assistance of affordable housing. While subsidized housing is not the whole solution to the housing crisis, it is a critical part.
- While $200 million is not enough to meet the city's need for affordable housing, it is a big step in the right direction and is politically manageable at this time.
- The only way to make a dent in the city's homeless problem is to invest in supportive housing, so we can get people off the streets and give them the ability to stay off. This bond helps redeem the promise of the Care Not Cash initiative that SPUR and the voters supported.
- This bond package does a fair job at trying to balance the competing ideas about the best way to allocate affordable housing money. The three-way split between traditional affordable rental housing, supportive housing, and subsidized ownership housing is a good compromise that will help several different segments of the population.
- Funding for affordable housing from the federal government has declined dramatically over recent decades. As a result, the burden of producing affordable housing increasingly falls to local governments. Issuing bonds is an effective and practical way for San Francisco to fulfill this responsibility.
Those who oppose Proposition A state:
- General obligation bonds in support of affordable housing focus too great a cost burden on San Francisco property owners.
- We should be using public funds to test out new approaches instead of issuing another bond, from providing vouchers to needy families to having the city ?buy down? the cost of market-rate units in specific developments.
- The income limits for participation in the homeownership portion of the program are too low. By not offering moderate-income housing options or down-payment assistance up to 120% of median income, most truly eligible buyers would remain frozen out of the market, earning too little to afford a market-rate mortgage and too much to get any help from the city.
In 2002, SPUR conducted an independent analysis of the 1996 affordable housing bond. The purpose of that analysis was to determine how the bond money had been used, how many units and loans it was responsible for, and to what degree it was used to leverage other sources of revenue. Our analysis concluded that the funds had been used effectively. The bond had an enormous effect in terms of increasing the number of affordable housing units produced during the period that the funds were spent. In addition, it found that the money was used to effectively leverage other sources, and provided deep subsidies to create housing for very-low-income households.
Prop. A bonds administered by the Mayor's Office of Housing after the 1996 measure, plus tax-increment bonds issued by the San Francisco Redevelopment Agency (SFRA), have been funding about 700 affordable rental units per year since 2002 and an average 268 annually during the previous five years.
Prop. A proved successful in producing 2,125 new and rehabilitated nonprofit rental housing units and beds in emergency and transitional facilities. The bond leveraged approximately $2.20 in outside funding per dollar during its lifecycle.
The biggest difference between this year's bond and the 1996 bond is the inclusion of a ?supportive housing? component. This grows out of a remarkable consensus in the city that the most viable long-term solution to homelessness is to get people off the streets and into housing that is accompanied by the array of services homeless people need to put their lives back together. These support services range from medical care to job training to psychological counseling. SPUR's 2002 study Homelessness in a Progressive City found that shifting money from crisis medical care and jail to supportive housing would be both more effective and less costly than current practices.
The City has a goal of creating 3,000 supportive housing units over six years, which is expected to save millions of dollars per year in housing and medical costs. The City's recently released 10-Year Plan to Abolish Chronic Homelessness found that there are approximately 15,000 homeless people in San Francisco . It estimates that some 3,000 of those people?one in five?are chronically homeless (meaning that they have been homeless for
over a year or have experienced four or more periods of homelessness over three years), and use 63 percent of total homeless services. According to that report, supportive housing that offers services costs approximately $16,000 a year per person. By contrast, incarceration costs $22,000 per person per year and, coupled with emergency hospitalization, can run as high as $61,000 per person per year.
San Francisco 's Direct Access to Housing (DAH) program already treats nearly 400 chronically homeless people in supportive housing. That program, established in 1998 by the San Francisco Department of Public Health, has been the City's primary effort to create supportive housing to date. DAH operates 360 units of supportive housing in five single-room-occupancy hotels and 33 units in a residential-care facility.
The $90 million commitment in bond funds for supportive housing in this bond measure, plus the completion of the 10-year Plan to End Chronic Homelessness , positions San Francisco to receive another $260 million in state and federal matching funds and grants needed to greatly expand its response to chronic homelessness. The investment in supportive housing would also save the City money on jail, medical, and other expenses that would otherwise be needed for those who will occupy the new housing.
ABAG forecasts a San Francisco population of 811,000 by 2020, with 111,200 net new jobs. It has estimated a need for creation of 2,700 units annually of all kinds within the city limits, and 13,000 net new low- and moderate-income units between 1999 and 2006, or almost 2,000 per year.
The number of rental units created by the proposed bond measure would depend in part on what income level the units serve. While the measure restricts the bond to be used for housing serving households earning up to 60 percent of the area median income, the funds could be used to build housing for lower-income groups. If housing is constructed to serve the city's poorest households, deeper subsidies would be required from the bond, and fewer units would be produced. Thus, the City would likely need to confront a tradeoff between creating more units at higher income levels, or fewer units serving lower income levels. In addition, the number of units produced will depend on other factors including the availability of other funds to leverage and inflation in the cost of construction. However, if the proposed bond were used to produce units at the same cost per unit and leverage ratios as the 1996 bond, it would be expected to produce approximately 2,250 new rental units, excluding supportive housing units.
The 1996 housing bond included $15 million for down payment assistance for first-time homebuyers. The City loaned money to first-time homebuyers with below-median income to use as part of a down payment on a home. When the home is sold, the money is repaid to the City, along with a portion of the home's appreciation in proportion to the City's participation in the down payment. Since 1996, 240 loans have been processed with a combined value of $14.2 million?an average of $59,200 each. That translates into a 9.1 percent down payment at today's median home price, and 11?12% for a market-rate condominium in San Francisco . The $25 million allocation for down-payment assistance in the current bond proposal would, at that amount, be initially extended to some 420 applicants. However, because of the structure of the program, once the loans are repaid to the City the funds can be used again for a loan to another homebuyer, meaning that over its lifespan the down payment program would continue to fund home purchases for many more individuals.
The purchase assistance program would be available to households earning between 60 and 100 percent of the area median income, or up to $65,000 for an individual and $95,000 per year for a family of four. Much of the political controversy that went into the development of the bond centered on this question: how high should the income limits be to participate in the subsidized ownership program?
Production of New Ownership Units
The second part of the proposed bond's home ownership component is new: $25 million for production of new ownership housing units. While the down payment assistance portion of the bond would be used to help people buy existing housing, this portion of the bond funds would be used to subsidize the development of new ownership housing that would be affordable to households earning between 60 and 90 percent of the area median income, or up to $59,850 per year for an individual and $85,500 for a family of four. Because there was no similar program in the 1996 housing bond, it is not clear exactly how the money would be used. Generally speaking, it would be used to help developers overcome financial hurdles, allowing them to build housing cheaply enough to sell to low- and moderate-income families. The details of how this program would work would be fully developed in the implementing ordinance required by the bond measure.
Criteria for Distribution of Funds
Loans or grants funded by bond proceeds must be by competitive bid. Projects that leverage bond proceeds to obtain non-City financing will receive priority. In addition, the measure directs the Mayor's Office of Housing to give preference to projects that use green-building techniques and encourages those seeking bond funds to offer direct employees and subcontractors living wages and family health benefits, and to respect employees' rights under law to form unions. The measure also would direct the Mayor's Office of Housing to give preference to projects that are found by the Landmarks Preservation Advisory Board to be in compliance with federal guidelines for preservation and rehabilitation of historic buildings.
This measure is the key to breaking the policy logjam on two key long-term issues facing San Francisco : chronic homelessness and access to affordable rental and homeownership housing. It reflects a refreshing consensus among typically polarized community interests. Analyses of the 1996 affordable housing bond show that it was successful, and that the money was well spent. In the long run, San Francisco must find ways to lower housing prices by correcting the imbalance between supply and demand for housing, which is the fundamental cause of our city's high housing prices. But while there is much more to do, this bond is a practical amount to invest at this time toward the critically important goal of increasing San Francisco 's supply of affordable housing.
SPUR recommends a "Yes" vote on Proposition A.