A Menu of Solutions for Housing Affordability

Housing affordability has been in San Francisco’s headlines since the economy began to recover. To explore the controversy surrounding the issue, ULI San Francisco along with Eric Tao of AGI Capital put together a carefully balanced panel last Tuesday that explored the topic to discuss solutions to our local housing crisis.

Oz Erickson of Emerald Fund moderated the panel, which included Peter Cohen of the Council of Community Housing Organization (CCHO), Sarah Dennis-Phillips of the Office of Economic and Workforce Development (OEWD) and the SFHAC’s own Tim Colen.

Kicking off the panel, Adam Koval of SocketSite set the stage for the discussion. He stated that over the past four years, the City has created 63,000 new jobs and wages have grown by 40 percent. Adam suggested we are a victim of our own success, with a red-hot economy that continues to draw more people to the city than our market can supply. His question to the panel – how can we work together to address affordability so that it benefits people of all income levels?

In discussing the issue of market supply, Mr. Cohen said we need to consider who gets the housing. He noted that our housing production has met the needs for people who could afford market-rate homes, but failed to address lower-income needs. We need to hold ourselves accountable, he said.

Mr. Colen agreed we have not met the needs of lower- to middle-income folks, but our programs that subsidize housing actually achieve better results than most other cities, in particular, our inclusionary housing program. What has hampered our efforts is our unusually intense regulations and the politicalization of land use that makes the necessary changes to the built environment extremely difficult to achieve, he noted.

Oz Erickson chimed in to add that the average affordable unit currently costs ~$600,000 to build.

Ms. Dennis-Phillips acknowledged that reaching the amount of subsidy needed to build a sufficient supply of affordable housing is unrealistic. Our chronic under-supply has had a long, steady negative impact. But she offered an overview of solutions the City is exploring, several of which are part of SFHAC’s 2014 Housing Action Plan:
– Reform the off-site inclusionary option (Read more here);
– Get San Francisco into compliance with the state density bonus law;
– Create a neighborhood stabilization program to protect rent-controlled properties;
– Use publicly-owned land to provide affordable housing;
– Implement the Inclusionary “Dial” so this program addresses a greater AMI range;
– Create private-sector “patient” capital to fund housing affordability.

Cohen stated CCHO’s position on the need for new funding sources and getting more money from the private sector to subsidize housing. This includes new local financing tools as well as a replacement for the state’s tax increment finance tools.

SFHAC’s Colen agreed that, while more funding is needed, it’s unclear where it would come from – though there may be a Housing Bond on the ballot in 2015. He reiterated the need to pursue creative solutions, whether smaller square footage homes, modular construction, or other approaches. In particular, he urged creation of policy incentives that encourages construction of cheaper, lower-cost housing in neighborhoods farther away from the City’s urban core.

The effectiveness of area plans and the challenges to using the City’s many public sites for affordable housing were also addressed. A member of the audience asked about solutions at the state level. Aside from new cap-and-trade revenue, San Francisco needs much more support there.

Despite some dissent among the panelists, there were a couple of points that earned the panelists’ agreement:
– San Francisco is not the only city facing a housing crisis. Other economically successful cities are struggling with the same issue –  ours just happens to be the most prominent.
– Solving our lack of housing will require a “menu of options,” there’s no one silver bullet.

Cohen concluded his remarks with an eloquent plea: As our world continues to urbanize and US cities attract wealthier residents, it’s important to create economic opportunities so that existing working-class and poor residents are not displaced. Social equity demands that we manage the consequences of this growth.