Developer fees forced to change 

A court battle has forced The City to alter how it will make developers pay for affordable rental units in new buildings.

Under legislation introduced Tuesday, developers would no longer have the option of providing affordable-housing units in San Francisco’s residential rental projects. Instead, it would require developers to pay a fee to The City.

The legislation, introduced by Supervisor David Chiu, is in response to an appeals court ruling in Los Angeles. A developer had sued Los Angeles, claiming the low-rental requirement violated a state law that says landlords are allowed to set initial rental rates.

San Francisco and Los Angeles are among more than 100 cities in the state that have laws requiring new developments to include a certain number of below-market-rate units. The court decision has potentially jeopardized affordable-housing mandates in other state jurisdictions such as San Francisco, Chiu said. 

Developers could refer to the decision in the case — Palmer/Sixth Street Properties v. City of Los Angeles — when launching legal challenges against The City’s so-called Inclusionary Affordable Housing Program, said Tim Iglesias, a law professor at the University of San Francisco.

“The impact of the decision is that less affordable rental housing is going to be built in jurisdictions like San Francisco until that [state] law is amended or set aside,” said Dean Preston, executive director of Tenants Together.

The current law in San Francisco allows developers two options: provide below-market-rate rentals in the project or pay a fee to The City that goes toward subsidizing affordable housing projects.

Rather than require developers to include affordable-housing in developments, which could be subject to a lawsuit, Chiu’s legislation would impose an interim affordable-housing fee on most developers. Buildings receiving public funds or subsidies could still opt to provide public housing units.

Chiu said his legislation is a way “to protect and strengthen our affordable-housing programs, particularly during these very difficult economic times.”

“The legislation will not reduce or eliminate the affordable-housing requirement, nor will it increase the current affordable-housing fee,” Chiu said.

Many California municipalities may decide to make similar decisions as a way to protect their affordable-housing programs, Preston said.

“This is all happening because of the Palmer decision, which is a completely incorrect decision that the Legislature in Sacramento needs to overturn,” Preston said.


New rules

San Francisco inclusionary- housing program options:

Developers of projects that are at least five units in size must select one of the following options, or pay an in-lieu fee, to comply with requirements:

15 Percentage of total units constructed that must be affordable units located on-site.

20 Percentage of total units constructed that must be affordable units and located off-site within one mile of the principal development

$334,478 Developers’ in-lieu fee for a two bedroom unit in 2008

Source: Mayor’s Office of Housing

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