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More SF Builders Opting Not to Include Affordable Housing

 
In a city facing record housing prices, leaders are trying to develop new strategies

Housing Construction

Construction crews at the corner of 15th and Mission streets in San Francisco are transforming the site of a blighted printing factory into an upscale apartment complex. With 202 units, retail space and secured bicycle parking for each home, it will be one of the largest such projects in the Mission.

Most important, with the city facing record housing prices that have edged out all but the rich, 20 percent of the units will be reserved for lower-income renters.

“We always include affordable housing,” said Eric Tao, a manager at Avant Housing, the project’s developer, “to do what’s right for the city.”

Such a commitment to new affordable housing is increasingly rare, however, as ordinances that once encouraged “inclusionary housing” — projects like Avant’s that combine market-rate apartments with units reserved for people on lesser incomes — have become watered down.

The situation is emblematic of shifts sweeping the area, which is one of the nation’s most expensive housing markets, driven by a surging tech sector as well as changes in government policy. City leaders are in the midst of developing new strategies to address affordable housing needs.

But housing is one of the most contentious issues in a city that likes a good fight, and any ideas are sure to face pushback.

Since 2002, the city has offered incentives to commercial developers to include units for low-income residents in their projects. But in 2010, it changed its rules to create more leeway for developers to pay fees instead of including the units, and possibly profit more in the hot rental market.

Before that change, 75 percent of new construction projects included affordable units. Now the majority of projects receiving permits, 55 percent, opt out, according to a January report by the city’s budget and legislative analyst.

More developers have chosen to pay the fee, “rather than construct inclusionary affordable housing,” the report concluded.

While those fees do go toward building affordable housing elsewhere, many experts argue that the process is slower than private sector inclusionary projects. Further complicating matters are continuing cuts in federal and state financing to the city for affordable housing, which dropped to $56 million annually in 2011 from $104 million in 2007, a decrease of 46 percent.

With urgency mounting, Mayor Ed Lee has created the Housing Trust Fund Working Group, consisting of city officials, developers and community leaders, to find ways to develop affordable housing.

But there are many challenges:

— For-profit ventures alone are unlikely to succeed. Because of the recession and tightened lending rules — coupled with higher costs of building in the city (in part due to municipal fees) — private banks are likely to finance only luxury housing for the wealthy, experts said.

— Adding more housing of all types — rentals and private homes — could stabilize prices or drive them down. But a city analysis estimated that it would take 100,000 new units, and only about 2,700 are in development.

— And there is the city’s storied predisposition to oppose any change, or even discuss issues.

That view was apparent last month after I wrote a column about what some see as the unintended consequences of the city’s rent control laws: subsidies for the rich, inadequate protections for the poor, and thousands of rental units kept vacant by frustrated landlords.

An avalanche of vitriol followed, along with a record number of comments on the Bay Citizen website (some longer than the column), revealing long-simmering resentments by tenants weary of high rents and property owners who feel unfairly demonized.

Ken Cleaveland, director of government and public affairs for the Building Owners and Managers Association of San Francisco, a commercial real estate group, said the city must move past such divisions with “a combination of private and public means” to address affordable housing.

S. Osborn Erickson, chairman of Emerald Fund, a local developer, and a member of the mayor’s housing group, agreed. One example is his company’s project at 333 Harrison St. Financed partially by a state grant, there will be 326 units, 49 of them affordable housing with rents that could be as little as $600 a month for a one-bedroom apartment.

But with such inclusionary grants increasingly rare, Erickson said other ideas are needed — he is looking up, literally, to the sky.

He said taller buildings should be allowed in this notoriously low-rise city as a way to increase housing and influence affordability. In existing commercial stretches, “Why not 80 feet high?” he asked.

Tamper with the skyline? To some, that’s as verboten as debating rent control.

This article also appears in the Bay Area edition of The New York Times.

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