On April 8, 2014, Supervisor Jane Kim introduced new affordable housing legislation creating the “Housing Balance Special Use District,” which new Special Use District (SUD) is co-terminus with her Supervisorial District (generally covering SoMa, the Tenderloin, and Treasure Island). While the provision of affordable housing is a public policy most of us can support, Supervisor Kim’s recent proposal unfortunately creates more problems than it solves. Moreover, this proposal comes at a time and in an area of the City where affordable housing numbers are robust, leading to the inevitable question, “If it ain’t broke, why fix it?”
In May 2011, the Western SoMa Citizens Planning Taskforce documented that in the Western SoMa neighborhood (which largely overlaps with the proposed SUD), 37.8% of new housing units built from 1993 through 2009 were affordable units. Supervisor Kim herself points out that in this area between 2006 and 2013, 71% of new housing consists of market rate housing, and 29% of new housing is available at below market rates.
These are strong affordable housing numbers, especially considering that 20% is the highest percentage of affordable units required by the City under existing law in market rate housing projects, and that number applies only when the developer chooses to provide units off-site or pay an in-lieu fee. The required percentages when the developer provides units on-site are even lower. Clearly, existing affordable housing requirements are working, and working particularly well in the proposed SUD.
Notwithstanding these realities, and the existing regulatory difficulties already facing developers of housing in the City, Supervisor Kim feels one more layer of regulation is needed. Here’s how it works. In any case where a “market rate housing project” is proposed and the overall existing ratio of affordable units to market rate units constructed or entitled since 1993 in the SUD at that time is less than 30%, that market rate housing project must obtain conditional use authorization from the Planning Commission. Removed affordable units and rent controlled units demolished, converted or removed from rent control will be subtracted from the ratio.
Among the criteria to be considered by the Planning Commission are whether allowing the project would substantially hamper the location or viability of affordable housing in the SUD, and the extent to which approval of the project would cause or exacerbate the displacement of very low, low, or moderate income households from the SUD. If the Planning Commission approves the market rate housing project, it must find that the project promotes the health, safety and welfare of the City and the SUD, in spite of any potential adverse impacts on affordable housing and potential displacement of lower income households in the SUD. In the event the Planning Commission disapproves the housing project, it must make findings to explain how the project as proposed would have specific adverse impacts upon the public health and safety of the City and the SUD.
Surprisingly, a market rate housing project is defined as any housing project that consists of less than 100% affordable units. Thus, the legislation actually will work to suppress the production of affordable housing by imposing a potential conditional use requirement on housing projects even where they might propose up to 90% affordable units. Imposing yet another entitlement requirement on proposed housing projects will make the projects less economically viable, particularly those projects with a high affordability component, which already have narrow profit margins, and ultimately suppress the production of both affordable and market rate units. Such suppression of housing production directly contradicts the recent aggressive push by City leaders to construct more housing and address the City’s serious supply crisis.
The legislation also flies in the face of the Western SoMa Plan, which was a community-developed plan that took over 10 years to accomplish. The Plan already establishes a delicate balance of new housing allowed, and provides for a single, streamlined entitlement application for project approval. Placing a conditional use authorization requirement on new developments will add $103,000 in additional application fees to such projects – even though these projects had to go to the Planning Commission already.
Another problem with the legislation is the burden it imposes on an already resource-strained Planning Department. The Department is tasked with calculating the number of affordable and market rate housing units constructed or entitled within the SUD. The Department also must calculate the number of rental units withdrawn from rent control, and subtract that number from the number of affordable units.
Not only does the legislation impose this heavy workload burden on the Planning Department, but it is easy to foresee the resulting complications. It is simply not possible for the Department to accurately count the number of affordable and market rate housing units constructed in the SUD on a quarterly basis. Estimates no doubt will result, and disputes will arise over those estimates. Even more difficult to calculate will be the number of rental units withdrawn from rent control.
Supervisor Kim no doubt had good policy intentions in proposing the Housing Balance SUD. Unfortunately, the legislation does not appear to serve its own intentions.
The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben, Junius & Rose LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.