YIMBY Action Stance on SF Inclusionary Housing Ordinances

April 10, 2017

Mayor Ed Lee                                    Room 200
Board of Supervisors                      Room 244
City Attorney                        Room 234
1 Dr. Carlton B. Goodlett Place,
San Francisco, CA 94102


Re:      File # 170208 Planning Code – Inclusionary Affordable Housing Fee and Dwelling Unit Mix Requirements (Safai, Breed, Tang)

File # 161351 Planning Code – Inclusionary Affordable Housing Fee and Requirements (Kim, Peskin)


Dear San Francisco Supervisors & Mayor Ed Lee,

We are writing to express our OPPOSITION to both of the above captioned proposed inclusionary housing ordinances.

  • Both proposed ordinances ignore the Technical Advisory Report.
  • Both proposed ordinances will result in fewer homes being built, at all income affordability levels, than could otherwise be possible. They will therefore increase displacement and median rents in San Francisco.
  • Both proposed ordinances are legally and theoretically justified by a Residential Nexus Analysis that is deeply flawed, rendering both proposed ordinances illegal under the Mitigation Fee Act.

WE PROPOSE the Board of Supervisors postpone consideration of the above captioned ordinances until

  1. A new Technical Advisory Report is completed that assumes the Board of Supervisors is able to hold housing prices steady at 2017 levels
  2. A report is completed indicating what policy changes are necessary in order to hold housing prices steady (or decreasing from) 2017 levels and
  3. A new Residential Nexus Analysis is completed that corrects the logical fallacies and factual inaccuracies of the existing Residential Nexus Analysis.

Setting the Inclusionary percentage is an important decision. There is nothing gained from rushing into an ill-conceived plan. A poorly structured inclusionary ordinance will make our housing shortage worse. Currently, instead of making a commitment to solve the twin problems of high rent and displacement, both of these ordinances assume neither problem will go away. Both ordinances rely, for their feasibility, on SF’s continued state of crisis.

Less than a year ago in June 2016, in a botched effort to stimulate the production of apartments affordable to lower income San Franciscans, Supervisor Peskin proposed, and SF voters passed, an increase to the City’s Inclusionary requirements for new housing. The percent of developer subsidized, Below Market Rate (BMR) units required in new housing developments doubled from 12% to 25%. As housing activists predicted, the change was a disaster. After June 6th (election day) the overall numbers of applications to build housing tanked.

In the previous year, before the new, higher BMR requirement, between June 2015 and the first week of September 2015, 3,000 housing units were proposed, including 350 BMR units. During the same time period in 2016 only 1,250 housing units were proposed – a drop of more than half from the prior year. The total number of BMR units dropped 20% to 289.

The subsidy for Below Market Rate apartments comes from rents of the Market Rate apartments. Although real rents in San Francisco are high, evidently, they are not high enough to support subsidizing a full quarter of apartments in most proposed projects. We see therefore the percent of required subsidized housing has to be chosen carefully. If it’s too high (like 25%) then the purpose of the Inclusionary program is defeated: the overall amount of housing drops, and so does the amount of lower cost housing.

The last 15 years has seen rent growth unprecedented in modern San Francisco history and unequalled anywhere else in the United States. Adjusted for inflation, median rents in SF have doubled since 2001. Accompanying these extravagant price increases has been an unprecedented displacement crisis. 250,000 San Franciscans moved away from SF from 2011 to 2016. That’s 29% of San Francisco, gone.

Because most of the people being forced out of San Francisco are lower- or middle- income, only higher income residents remain or can move in to replace those who are displaced, and the median income in San Francisco has been rising. Ordinarily, rising median incomes are a cause for a city to celebrate, for us, they reflect our high rate of displacement.

The SF city Controller, convened a Technical Advisory Committee to determine the maximum percentage of BMR units the city can require in new development, without causing the drop in applications we have seen since June 2016. Their recommendations say that in 2017 the percentage should be between 14% & 18%, and should rise by 0.5% every year, for 15 years, until the percentage reaches 25%. In modeling the SF economy, the Technical Advisory Committee assumed that the next 15 years will be like the last 15 years – they assumed that real rents will double again, and increases in median income (that is, displacement) will continue unabated.

Rent increases and displacement are bad. The Board of Supervisors should be planning to halt and reverse these bad trends. You should not be planning to fail to stop or reverse those trends. Therefore, we are asking for a new Technical Advisory Committee Report that assumes the Board of Supervisors is able to hold housing prices steady at 2017 levels.

The SF Board of Supervisors will not be able to halt the twin trends of displacement and rising housing costs without some guidance on what policies or programs would stabilize housing costs in San Francisco. Therefore, we are asking for a report from the Office of the Controller indicating what policy changes are necessary in order to hold housing prices steady at (or decreasing from) 2017 levels.

The Residential Nexus Analysis doesn’t show a nexus between new building and the increased need for affordable housing. In order for there to be a nexus between new building and a need for new affordable housing, the study would need to show that the need for new affordable housing would not occur without the new building.

Because the Nexus Analysis relies on the incomes of the residents of new housing (assumed to be high income) to provide the causal link between the new housing and the new need for cheaper housing, the nexus study has to show that the new high income residents wouldn’t have moved here, but for the new housing, and that the high income residents aren’t already spending money in San Francisco. But it does not. This renders the Residential Nexus Analysis invalid and will leave any Inclusionary Ordinance based on it vulnerable to legal challenge.

Berkeley’s Inclusionary Program is being challenged right now on the grounds that their Residential Nexus Analysis fails to show a connection between new market rate housing and a new need for below market rate housing. Here is a copy of the petition filed on February 24, 2017. Here is a longer explanation detailing the flaws of San Francisco’s Residential Nexus Analysis, step by step.

High housing costs and displacement are serious problems in San Francisco. Like any social problem, it is essential for us to have accurate information about the causes and mechanisms of the problem if we truly intend to solve it. There is no reason San Francisco should rely on a Residential Nexus Analysis that is inaccurate, contains flawed reasoning and exposes San Francisco to legal challenge. Therefore, we are asking for a new Residential Nexus Analysis to be completed that avoids the logical fallacies and factual inaccuracies of the existing Residential Nexus Analysis.

Please postpone consideration of any permanent Inclusionary Ordinance until new studies can be completed. The people of San Francisco, the rest of the Bay Area and the rest of the United States are relying on you, members of the Board of Supervisors, to take this problem seriously, make serious attempts to control housing costs, reduce displacement and increase access to our City of opportunity and acceptance.

The current inclusionary rate of 25% is already demonstrated to be catastrophic to the production of housing. While this needs to be changed, it proves how damaging getting this figure wrong can be. Please make an interim rule until a more objective process that does not endanger housing production can be established.


Sonja Trauss

Laura Clark

Brian Hanlon


Cc:      Todd David, San Francisco Housing Action Coalition

Sarah Dennis Phillips, OEWD

Sophie Hayward, MOHCD

Kearstin Dischinger, Planning Department


Learn more about the Residential Nexus Analysis