Every Building Trades worker knows that numbers have consequences; work must fit within numerical tolerances. Exceeding them can turn a project from profitable to money-loser, as damage ripples out into costly adjustments.
Exceeding tolerances in structural work can be literally disastrous.
Supervisor Jane Kim has introduced an “inclusionary housing” ballot measure that may not just damage us and the City, but be disastrous.
In 2002, then-Supervisor Mark Leno successfully carried legislation requiring market-rate residential projects to include below-market-rate units. These units had to constitute 12% of project totals, if onsite, or 17% if offsite. If for sale, they had to be affordable to buyers earning 90% of “area median income,” or “AMI”, less than most Trades workers earn in a good year; if for rent, affordable to tenants earning 55% of AMI. Even if this “inclusionary housing” requirement did not benefit Trades members directly, it promised that many working-class San Franciscans would find homes.
2012’s Proposition C set the 12% requirement in the City Charter, where the Board of Supervisors could not change it. The Prop C bargain struck between the City and developers of both market-rate and affordable housing also permitted the City to repurpose the bonding capacity of the recently-dissolved Redevelopment Agency to borrow money for building or preserving low-income affordable housing.
Inclusionary housing can never by itself address our housing needs. A report this month from the California Legislative Analyst asserts that in the long term housing costs are best restrained and working class displacement reduced simply by building more housing in coastal communities such as San Francisco, even at market rates that few of us can afford; the report notes that if new housing continues to become available, older housing becomes less desirable to enough upper-income residents to make it more affordable to the rest of us. Again, this is a long- and not short-term solution, and maybe not even the best solution. Elsewhere I have seen and heard discussed radical (though not truly revolutionary) changes in the economics and law governing housing that could help even more; these are, alas, far even from entering the national dialogue, let alone from being put into effect.
While the Legislative Analyst’s report concludes that increasing market-rate housing construction does more to reduce costs and displacement, it does include a graph that seems to show inclusionary housing may help slightly. In our immediate crisis, San Francisco can use any slight help it can get.
For housing developers, all costs remaining equal, each inclusionary housing unit means less income to apply against costs. In our capitalist system, too, no private-sector project is funded without an expected return on investment. Union pension funds have frequently invested in San Francisco housing, and so not just the rich have benefited from such returns.
It is possible, then, for inclusionary housing requirements to exceed tolerances. Too high, and we build less – and not just less market-rate housing, but less inclusionary housing. Too high, and an inclusionary housing requirement contradicts itself, and means fewer homes for working-class San Franciscans.
Supervisor Kim’s ballot measure increases the requirement to 25%, with 15% for low-income residents and 10% for middle-income residents such as ourselves. As with Prop C, the 25% requirement is fixed in the Charter. The Board of Supervisors could revise it, but only upward.
Does her requirement exceed tolerances?
Oz Erickson of the Emerald Fund, which has built or renovated more than 3000 San Francisco housing units with union pension investment, presented the 21 January meeting of Building Trades Delegates a detailed breakdown of costs and income for a hypothetical project. His numbers showed that Supervisor Kim’s requirements would halt much housing construction.
We are free to question his numbers, even though Mr. Erickson has a reputation throughout the industry and especially among unions as trustworthy.
I sent Supervisor Kim, then, a formal public records request for any calculations or feasibility studies she had used in figuring her requirement. The request was not intended to be confrontational. If we were to contradict Mr. Erickson, we would need to be able to assert that Supervisor Kim had not held back any information in support of his position or against hers.
The only document in the packet her office then provided that spoke directly to her requirement’s feasibility was an email from John Elberling, an affordable housing developer, that included information not nearly as thorough as Mr. Erickson’s. And it did not so much say that Supervisor Kim’s numbers were within tolerances as that they were no less feasible than numbers in an unrelated proposal from the Mayor on affordable housing “density bonuses.”
If the Mayor’s proposal is infeasible, it does not stop housing construction. The Council has taken no stand on it.
An email with back-of-the-envelope calculations cannot justify fixing in the Charter a requirement that could slow or stop housing construction. To do so courts disaster.
We have invited Supervisor Kim to speak to the Council and demonstrate that her requirements are within tolerances. We have assured her our minds are open.
Pending changes of mind, however, our Board of Business Representatives has voted to oppose her measure.