Presentation By: OLSON LEE MAYOR’S OFFICE OF HOUSING AND COMMUNITY DEVELOPMENT April 10, 2014

Program governed by San Francisco Planning Code Section 415; Policy from 1992 – 2002 and citywide law since 2002; Developers pay a fee OR qualify to provide affordable units onsite, offsite or dedicate land in some areas. SAN FRANCISCO INCLUSIONARY HOUSING PROGRAM

US Supreme Court Cases Nollan (1987) and Dolan (1994) require (1) an “essential nexus” between the public interest and a permit condition and (2) an exaction to be roughly proportional to the impact. San Francisco’s 2006 Nexus Study demonstrates the nexus between the need for affordable housing and the production of market rate units in SF. For every 100 market rate units built, at least – lower income households are created; Our highest requirement, a fee based on 27% of units, is supported by the nexus. SAN FRANCISCO INCLUSIONARY HOUSING PROGRAM

In Palmer vs. City of Los Angeles (2009), the California Court of Appeal holds that inclusionary ordinances applied to rental housing violate the Costa Hawkins Act, the State law regulating rent control. Governments may not establish the rent levels of inclusionary units unless the project has received a benefit from government. San Francisco responds by: Moving away from an “on-site,” “off-site,” or “fee” program to a fee-first program that is defensible under impact fee law; Developers now must pay a fee to mitigate the impact of their market rate housing OR qualify for an alternative to the fee (on-site or off-site units); Rental units are only allowed when the project has received a financial contribution or other government benefit, as recorded in an agreement. SAN FRANCISCO INCLUSIONARY HOUSING PROGRAM

Pay Fee at 20% Off-site Units at 20% On-site Units at 12% Land Dedication in One Plan Area Rental at 55% of AMI Ownership at 90% of AMI Rental at 55% of AMI Ownership at 70% of AMI & within 1 mile Alternatives to Fee OR

Eastern Neighborhoods Area plan adopted in 2008 imposes higher requirements for upzoned “Urban Mixed Use (UMU)” zones: SAN FRANCISCO INCLUSIONARY HOUSING PROGRAM HOUSING REQUIREMENTS FOR THE UMU DISTRICT Tier On-Site Housing Requirement Off-Site/Fee Requirement Middle Income Alternative Land Dedication Alternative for sites that have less than 30,000 square feet of developable area (Also Mission NCT) Land Dedication Alternative for sites that have at least 30,000 square feet of developable area (Also Mission NCT) A14.40%23%30%35%30% B16%25%35%40%35% C17.60%27%40%45%40%

SAN FRANCISCO INCLUSIONARY HOUSING PROGRAM On-site projects: 155 Off-site projects: 6 Fee projects: 31 Total projects: 192 On-site units: 1195 Off-site units : 323 Fee units (proxy) : 217 Total units : 1735

SAN FRANCISCO INCLUSIONARY HOUSING PROGRAM Total Units = 1518

Affordable Housing Fee – Fees Collected to Date SAN FRANCISCO INCLUSIONARY HOUSING PROGRAM Inclusionary Fees Collected by Fiscal Year: FY FY $ 959, $ 134, $ 2,623, $ 22,894, $ 3,845, $ 37,617, $ (7,155,039) $ (10,246,292) $ (2,497,264) $ 1,536, $ 9,130,671 Total $ 58,844,259

Affordable Housing Fee – Uses of Fees, FY 2007/08 – FY 2011/12 FYADDRESSJHLPInclusionaryTotal CostPercentDescription FY th Street- Bishop Swing - 5,041,107 26,631,52519%New construction, 134 units; Affordable Housing for Homeless FY Mason Street 3,618,328 1,976,131 26,619,36521% New construction, 56 units; Affordable Housing for Homeless FY Geary 2,184,179 4,947,089 42,024,76117%New construction, 150 units; Affordable Housing for Low-Income Seniors FY Alabama - 4,794,743 6,786,05371%New construction, 34 units; Affordable Homeownership Housing FY Turk Street- Rosa Parks - 5,000,000 5,512,00091%New construction, 100 units; Affordable Housing for Low-Income Seniors FY08-09Arendt House Broderick - 2,720,940 27,099,89710%New construction, 46 units; Affordable Housing for Homeless Seniors FY MacAllister Civic Center Residence 1,340,471 4,254,815 10,334,58354%Rehab., 212 units; Affordable Housing for Homeless FY Sunnydale Ave. 1,012, ,411,98623%HOPE SF Site FY Connecticut 1,000, ,962,80034%HOPE SF Site FY Mission 268, %Acquisition Rehab., 3 units; Affordable Housing for Low-Income Families FY th Avenue Apartments - - 7,523,21825% New construction, 20 units; Affordable Housing for Homeless Adults FY Ellis - The Arlington - - 5,421,36324% Rehab., 172 units; Affordable Housing for Low-Income and Homeless Individuals FY Howard - - 4,729,78334%New construction, 150 units; Affordable Housing for Low-Income Families FY10-11Booker T. Washington Presidio ,484100%Predevelopment of affordable housing for low-income family and youth FY Golden Gate LP 3,581, ,400,00038%174 units for formerly homeless adults FY10-11CHP Scott Street - Edward II 1,000, ,416,50823%Predevelopment of 24 units of affordable housing for transition-age youth FY11-12NA $ 14,004,600 $ 28,734,825 $ 195,930,33543%

Affordable Housing Fee – How we establish the fee Based on affordability gap between cost to produce and maximum affordable sales price; Baseline cost is established every 5 years then indexed annually by the Engineering News Record (ENR) Consumer Cost Index (CCI); Incorporates current maximum sales price each year. SAN FRANCISCO INCLUSIONARY HOUSING PROGRAM 2014 Fee Schedule Calculations Unit Size 2013 Total Development Cost (up 5.23% from 2012) 2013 Maximum Sales Price2014 Fee Studio $ 418,292 $ 226,943 $ 191,349 One $ 522,963 $ 261,692 $ 261,271 Two $ 653,703 $ 296,669 $ 357,034 Three $ 739,308 $ 331,418 $ 407,890

Affordable Housing Fee – How a developer’s fee is calculated Amount due is based on project’s off-site requirement, typically 20%; Fee is determined by building’s overall unit mix; Example: Inclusionary Housing Program Affordable Housing Fee Determination Address: 1234 Smith Avenue Unit SizeMarket Rate Total 20% Off-site Requirement Off-Site Unit Requirement Fee By Unit Size* Fee Payable Studio2020%4.00 $ 191,349$765,396 1 bedroom5020%10.00 $ 261,271$2,612,710 2 bedroom3020%6.00 $ 357,034$2,142,204 3 bedroom020%0.00 $ 407,890$0 4 bedroom020%0.00 $ 407,890$0 Totals: $5,520,310 *2014 Fee Schedule SAN FRANCISCO INCLUSIONARY HOUSING PROGRAM

Units restricted through a recorded Notice of Special Restrictions placed on the building; Renters and owners restricted through Declaration of Restrictions and Lien (ownership) or lease addendum acknowledging they have read the program rules (rental); Program rules implemented through the City and County of San Francisco Inclusionary Affordable Housing Program Monitoring and Procedures Manual 2013 (called the “Procedures Manual”); Annual monitoring of owners, renters and rental building owners. SAN FRANCISCO INCLUSIONARY HOUSING PROGRAM

Inclusionary Construction Pipeline Data as of 2013 Q4 StatusRentalOwner Unknown TenureTotal Units Entitled/Building Permit Issued First Construction Document Issued Totals