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

2. 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

3. 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 19.44 – 43.31 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

4. 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

5. 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

6. 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%

7. 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

8. SAN FRANCISCO INCLUSIONARY HOUSING PROGRAM Total Units = 1518

9. Affordable Housing Fee – Fees Collected to Date SAN FRANCISCO INCLUSIONARY HOUSING PROGRAM Inclusionary Fees Collected by Fiscal Year: FY 2002-2003 - FY 2012-2013 2002-2003 $ 959,411 2003-2004 $ 134,875 2004-2005 $ 2,623,279 2005-2006 $ 22,894,994 2006-2007 $ 3,845,113 2007-2008 $ 37,617,828 2008-2009 $ (7,155,039) 2009-2010 $ (10,246,292) 2010-2011 $ (2,497,264) 2011-2012 $ 1,536,683 2012-2013 $ 9,130,671 Total $ 58,844,259

10. Affordable Housing Fee – Uses of Fees, FY 2007/08 – FY 2011/12 FYADDRESSJHLPInclusionaryTotal CostPercentDescription FY07-08275 10th Street- Bishop Swing - 5,041,107 26,631,52519%New construction, 134 units; Affordable Housing for Homeless FY07-08149 Mason Street 3,618,328 1,976,131 26,619,36521% New construction, 56 units; Affordable Housing for Homeless FY07-083575 Geary 2,184,179 4,947,089 42,024,76117%New construction, 150 units; Affordable Housing for Low-Income Seniors FY07-08601 Alabama - 4,794,743 6,786,05371%New construction, 34 units; Affordable Homeownership Housing FY08-091251 Turk Street- Rosa Parks - 5,000,000 5,512,00091%New construction, 100 units; Affordable Housing for Low-Income Seniors FY08-09Arendt House - 850 Broderick - 2,720,940 27,099,89710%New construction, 46 units; Affordable Housing for Homeless Seniors FY08-09 44 MacAllister Civic Center Residence 1,340,471 4,254,815 10,334,58354%Rehab., 212 units; Affordable Housing for Homeless FY08-091652 Sunnydale Ave. 1,012,000 - 4,411,98623%HOPE SF Site FY08-091095 Connecticut 1,000,000 - 2,962,80034%HOPE SF Site FY08-094466-4468 Mission 268,009 - 100%Acquisition Rehab., 3 units; Affordable Housing for Low-Income Families FY09-1029th Avenue Apartments - - 7,523,21825% New construction, 20 units; Affordable Housing for Homeless Adults FY09-10480 Ellis - The Arlington - - 5,421,36324% Rehab., 172 units; Affordable Housing for Low-Income and Homeless Individuals FY09-10909 Howard - - 4,729,78334%New construction, 150 units; Affordable Housing for Low-Income Families FY10-11Booker T. Washington - 800 Presidio - - 788,484100%Predevelopment of affordable housing for low-income family and youth FY10-11220 Golden Gate LP 3,581,613 - 20,400,00038%174 units for formerly homeless adults FY10-11CHP Scott Street - Edward II 1,000,000 - 4,416,50823%Predevelopment of 24 units of affordable housing for transition-age youth FY11-12NA $ 14,004,600 $ 28,734,825 $ 195,930,33543%

11. 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

12. 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:100 20.0 $5,520,310 *2014 Fee Schedule SAN FRANCISCO INCLUSIONARY HOUSING PROGRAM

13. 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

14. Inclusionary Construction Pipeline Data as of 2013 Q4 StatusRentalOwner Unknown TenureTotal Units Entitled/Building Permit Issued75014151942 First Construction Document Issued512680580 Totals1262209511522