Half of City’s Future Windfall Funds May Go to Affordable Housing

Supervisor Sandra Lee Fewer wants excess tax revenues for the city to produce, acquire, and permanently preserve affordable housing.

First came major legislation that gives nonprofits a priority when buildings are up for sale, and now — inevitably — comes the issue of funding.

Last week, supervisors unanimously co-sponsored and approved legislation that requires building owners to give approved housing nonprofits a right-of-first-refusal before making a sale. Advocates see the Community Opportunity to Purchase Act as a major way to protect rent-controlled and affordable housing from speculators, by giving nonprofits an advantage when buildings with tenants go on the market.

San Francisco’s Small Sites Program serves as a foundation by providing loans to housing nonprofits but cash buyers are tough to compete with. COPA will require owners of a residential building with three or more units to notify groups approved by the Mayor’s Office of Housing, hear their offer, and allow them to match a private buyer’s offer. Fewer called it a “win-win” for landlords seeking market-rate value for their property and for tenants who want to remain in their stable homes, all while providing permanently affordable housing.

But many housing nonprofits need financial assistance to buy the buildings in the first place, so they called for a funding stream. Supervisor Sandra Lee Fewer, who authored COPA, introduced additional legislation on Tuesday to generate revenue through the Affordable Housing Production and Preservation Fund.

In November 2018, San Francisco received some $415 million in property tax revenues through the Education Revenue Augmentation Fund (ERAF), and after meeting various charter-mandated obligations, the city could spend $181 million as it saw fit. Whether that windfall was the surprise people described it as was debatable, but more money is expected.

So Fewer has called for half of any future ERAF revenue to go toward a fund dedicated for the production of 100-percent affordable funding and the preservation of existing housing. Supervisors Vallie Brown, Shamann Walton, Rafael Mandelman, Aaron Peskin, Matt Haney, and Gordon Mar are already co-sponsors.

“If we are serious about meeting our housing balance goals and addressing our affordability crisis, we cannot merely rely on market rate developer fees to fund our affordable housing,” Fewer said. ”This is an opportunity to put our money where our mouth is.”

If ERAF discussions over the winter were any indication, it may take some convincing for others. The city debated how to spend the $181 million for months, and in the end, $40 million went toward small-site acquisitions.

More than 200 units in 28 buildings have been removed from the private market since 2014 and through the Small Sites Program. The new COPA mandate — alongside affordable housing production — could make a sizable dent in the rest.

Fewer noted that while San Francisco is on track to meet regional housing needs for market-rate development, the Planning Department’s latest housing balance report found that only a quarter of new units in the past decade have been affordable. Plus, for every two new units of affordable housing created, one is lost to evictions, demolitions and condo conversions.

“This data from the housing balance report illustrates why it is so critical that the city invest more in both the production and preservation of affordable housing, instead of taking two steps forward and one step back,” Fewer said.

The city has collected a yearly average of $7.5 million over the past decade from what’s called a jobs-housing linkage fee, according to an analysis from the Council of Community Housing Organizations but that method itself is under scrutiny. Affordable housing produced with fees collected from non-residential development is based on a 1997 study, which is expected to be updated in April.

Roughly $28 per square foot is forked over for affordable housing, but as offices have become denser, the same spaces hold more employees. This means a greater impact on housing than the 22-year-old study suggests. Last month, Haney directed the City Attorney to begin drafting legislation to hit the ground running once the new Nexus study is released, potentially boosting the fees leveraged from developers.

Still, the city should be looking at other sources of funding, says CCHO spokesperson Maya Chupkov.

“Setting aside funds from future ERAF surplus for the affordable housing and preservation fund is an opportunity to add another source of funding that isn’t strictly tied to the volatility of the market,” Chupkov said. “San Francisco cannot continue to only rely on the construction of market-rate housing to produce affordable housing.”

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