Developers may be forced to subsidize home purchases 

The City’s requirement that new housing developments add to the stock of below-market-rate units may end up applying to the smallest projects as well.

So-called inclusionary housing requirements placed on larger building projects have long been intended to ensure housing remains affordable to the lower-income segments of San Francisco by forcing developers to subsidize some of the costs. Supervisor Jake McGoldrick said it’s now time for smaller developments — those of two, three or four units — to start paying their share. Others, however, worry the smaller developments will not be able to absorb the additional cost.

Last year, the Board of Supervisors approved legislation that increased the required percentages of below-market-rate housing. Now, 15 percent of the proposed units in a new building must be offered at below market rate, or 20 percent if those affordable units are built off-site.

Whereas in the past the inclusionary housing requirements applied to only developments of 10 or more units, the legislation covered those developments of five units or more. Developments can also pay a fee, known as an in-lieu fee, instead of providing the units. The City uses the in-lieu fee money to fund affordable housing projects.

McGoldrick said he drafted legislation to hold smaller projects to the inclusionary housing requirements because "we need more affordable housing citywide and also in the interest of being more fair across the board."

A unit is considered below market rate if the home buyer can afford the unit while making the median income or less. The income values change depending on the size of the household. For a three-person household, a qualifying income is no more than $82,100.

Sarah Karlinksy, a policy director with the public policy think tank San Francisco Planning and Urban Research Association, said it’s too early to judge the legislation since "we really don’t know that much about that segment of the market."

Ted Loewenberg, a member of the group Small Property Owners of San Francisco, called the new legislative proposal "disastrous."

"It’s going to kill small-property development in San Francisco," Loewenberg said.

Doug Shoemaker, deputy director of the Mayor’s Office of Housing, said the recently adopted inclusionary requirements, which apply to projects of five or more units, are expected to net 200 to 250 below-market-rate units in developments per year. The recently adopted requirements are not hurting the housing market, according to Shoemaker. "They’re continuing to build," he said, adding that the percentage requirements were "carefully calibrated."

The legislation will come before the Planning Commission for discussion and then go to a Board of Supervisors committee for public hearings.

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