Proposition U: Raising Income Limits for Access to Affordable Housing

This ordinance would double the income limits for applicants to some “affordable housing,” which would then be available to middle- and upper-income earners.

The initiative was placed on the ballot through verified petition signatures.

Why is this on the ballot?

As San Francisco real estate prices and rents soar, the city program to carve out below-market-rate space for people who could not afford to live here otherwise is under strain.

Proposition U’s proponents argue that it would give much-needed help to middle- and some upper-income earners by letting them access affordable housing. But the measure’s opponents argue that it would edge low-income renters out of existing and future affordable housing.

The measure would affect the Inclusionary Housing Program, which stipulates that when market-rate developers build projects containing at least 10 apartments or condominiums, they must help the city create affordable housing — homes priced below the market rate — either by building affordable housing or by paying the city a fee to build it. Developers must rent or sell at least 12 percent of new units on-site or 20 percent off-site at prices below the market rate so lower- or middle-income households can afford them.

When developers opt to build the affordable housing, the rental of those apartments must follow strict rules: the number of bedrooms determines their maximum monthly rents, and households may access them only if their total incomes fall under allowed thresholds.

The threshold for rental property is lower than that for ownership property — 55 percent of the median income for the region, and 110 percent, respectively. For example, the maximum monthly rent for a new one-bedroom apartment, with utilities, is $1,121. But to qualify, a single-person household must have an annual income that is, at most, $41,450; a two-person household may earn up to $47,400 and a three-person household may earn $53,300. (Older homes have slightly higher income and price ceilings.)

People earning up to 110 percent of the region’s median income may get this housing, but only if it is offered for sale. They may not rent.

These income caps have often been the targets of criticism, because they mean that the reduced-priced housing is unavailable to people who earn more — solidly in the middle class but who nonetheless struggle to afford living in the city.

For example, the first year’s pay for San Francisco public school teachers starts at $52,657, disqualifying them from below-market-rate housing.

In San Francisco, 39,577 housing units priced at fixed levels were available at the start of 2016, based on a city report characterizing all the types of affordable housing, including public housing. Of those, about 2,000 units had been built through the inclusionary program.

Forty-one percent of the inclusionary units were being rented to tenants earning up to, or very near, the current income cap. Fifty-nine percent were going to people earning more — up to 120 percent of the area’s median — though those units were presumably only for ownership.

Market-rate construction languished during the Great Recession. But it has picked up in recent years, adding to the bank of homes built through the inclusionary program. If the current rate of construction continues unabated, it is likely that 2,500 units will have been built through the program within the next year or two.

What would it do and at what cost?

If voters approve Proposition U, all existing and new inclusionary affordable housing would become available to households earning up to 110 percent of the median income for the region. That means the maximum monthly rent would be $2,241, for a single-person household with an annual income up to $82,950.

And in this type of affordable housing, Proposition U would make it illegal for a landlord to charge households more than 30 percent of their annual gross income.

Proposition U would have “minimal impact” on city coffers, the city controller says. In fact, this measure is projected to raise property tax revenue “to the extent that higher rental income raises the sales price and assessed value of rental property.” The owners would also pay higher taxes on the increased rental income, though the controller’s analysis offered no estimates of any future revenues.

Is there a catch?

Tenants are chosen by lottery, which prevents landlords from choosing only higher-earning applicants.

But with San Francisco’s limited number of affordable units in high demand, higher-income applicants entering a lottery would almost inevitably end up occupying units that otherwise would have gone to lower-income renters. As those renters are increasingly pushed out of the city, higher earners could come to dominate the pool of applicants.

To see the fierce competition that already exists for these below-market-rate apartments, look no further than a handful of recently finished buildings: 101 Polk St. offered 19 such units when it opened in March, but received 2,073 applicants by lottery; 1010 16th St. opened with 91 units, and received 2,546 applicants; 527 Stevenson St. opened with 9 units, and received 356 applicants; and the list goes on.

There are various types of affordable housing, created in different ways for different types of applicants. Right now, more than 90 percent of that housing is available to individuals and families earning up to 60 percent of the region’s median income.

Who officially proposed it?

The ballot measure was proposed by Thomas A. Hsieh, a member of the San Francisco Democratic County Central Committee.

Supervisor Mark Farrell wrote the official proponent argument. Supervisor Katy Tang also supports it.

Who officially opposes it?

The official opponent argument was written by the San Francisco Council of Community Housing Organizations.

Other opposition includes City College Board of Trustees President Rafael Mandelman; former Supervisor Bevan Dufty; former City Attorney Louise Renne, and state Sen. Mark Leno.

Vote needed to pass

Simple majority — 50 percent plus one

Effective date if passed

10 days after votes are counted.

Follow the money

One committee so far is spending money to support Proposition U: “Yes on U, Working Families Fighting to Stay in San Francisco with Funding by the California Association of Realtors Issues Mobilization PAC and the San Francisco Association of Realtors.”

Two committees are spending money to oppose the measure: “Housing Forward SF, Yes on C & M, No on P & U,” and “Stop the Developer Giveway, No on P & U.”

Follow the money at the San Francisco Ethics Commission: all Proposition U filings.

Endorsements: our methodology

The Public Press chose to count endorsements from organizations that backed multiple candidates or ballot measures, and that made those endorsements available online. We did not count endorsements from individuals.

If you think we missed an important organization, please tell us. We’d love to hear from you.

Tracked endorsements by organization

Written by: Noah Arroyo

Published: Sept. 30, 2016

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