Progressives Have Had the Housing Answers All Along
Zoning doesn’t build housing – money does.
Recently, more single-issue development advocates have begun to walk back years of steadfast lobbying that deregulation policies and blanket upzoning are the key to building housing that will address an escalating affordability crisis.
A 2019 Chicago upzoning study by researcher Yonah Freemark delivered findings that surprised him then, but have new relevance in San Francisco’s debate about whether blanket upzoning will increase supply, let alone affordability. Spoiler: he found that the short-term, local-level impacts of blanket upzoning are higher property prices – but with no additional new housing construction. Progressive housing advocacy has long recognized that this is not the key to building the housing we need – especially in the Bay Area, where the economic divide is more than double the rest of the nation.
Senior Vox correspondant Eric Levitz recently posted an admission recognizing what most developers have long admitted in private: zoning is not the issue, financing is.
Eric Levitz, senior correspondent for Vox Media, agrees that zoning regulation is not a sufficient measure to address the nation’s housing shortage.
And the SF Standard recently published a piece asking the obvious question: with hundreds of deregulation and decontrol policies passed since 2017 in California, the Real Estate industry has gotten everything they’ve lobbied for – so where the heck is all the housing? The reporter laid out three ideas with a tagline recognizing that progressive policymakers and informed voters have already approved these strategies – but sadly, we have lacked executive leadership to implement and execute them.
SF Standard reporter Max Harrison-Caldwell wrote a piece laying out three progressive funding measures to address the housing crisis.
These ideas have been effective, and while led by progressives, were overwhelmingly adopted by electeds and voters of all stripes. It will take a lot more of this kind of creative collaboration to build the more than 46,000 units of affordable housing for everyone from the homeless to middle-income families, teachers and workers by 2031.
It Works If You Work It – Yes to Real Solutions in Our Backyard
The SF Standard highlighted just a few measures that we can and should be replicating in advance of the next tech boom, if the City is serious about creating affordable housing for a diversity of San Franciscans:
Revolving Loan Funds
“Governments can sell bonds to finance housing, then developers pay back those loans using rent revenue, and that money could finance more development. Meanwhile, bond investors get a payout.”
While the SF Standard cited the work of Progressive Caucus member, Assm. Alex Lee, to draft a bond that would generate almost $1B for social housing if passed next November, it failed to note that San Francisco progressives have already proven this approach successful.
In November 2016, voters overwhelmingly adopted former Supervisor Peskin’s Proposition C, a $260.7 million bond to address affordable housing acquisition and rehab - the historically underfunded “Preservation” goal of the “3P’s of Housing”.
It was the same concept – low-interest loans issued through the City’s PASS program, which offers cheap money in exchange for permanent affordability. Prop C was actually repurposed bond capacity from an underutilized Seismic Safety loan program from years earlier, and its creative reuse funded over 1,227 units of affordable housing across 48 projects.
Revolving loan funds are an effective model for not only acquiring and rehabbing at-risk buildings, but funding new construction.
Make Workforce Housing Tax-Exempt
In 2024, the Board of Supervisors unanimously adopted former Supervisor Peskin’s legislation to create the Workforce Housing and Middle-Income (WHAMI) Act.
Credit where credit is due: the idea came from a presentation affordable and market-rate developers pulled together for the SF Chronicle’s “SF Next” series. The WHAMI Act empowers the City to sell tax-exempt bonds in two tranches (government issued bonds and 501c3 bonds) and use the money to pay developers who benefit from lower interest than available through private debt.
In addition, WHAMI developments would be eligible for property tax exemptions on sites that are publicly-owned given the public good provided by essential workforce housing, like the first-of-its-kind Shirley Chisholm Educator Housing on SFUSD land, which was also pushed by progressive policy makers.
Former Supervisor Sandra Lee Fewer authored a streamlining measure in 2019, Proposition E, which loosened developer requirements in exchange for housing affordable to SFUSD and City College teachers at a variety of income levels. But the zoning alone was not the critical lynchpin – it was the funding commitment from former Supervisors Norman Yee and Aaron Peskin to dedicate $20 million of the 2020 Affordable Housing Bond specifically to educator housing.
It was the first time that the city had dedicated funding in the bond for specific workforce housing, and it was controversial given the Mayor’s Office of Housing and Community Development’s (MOHCD) desire to leave as much funding flexibility as possible in the bond.
In the end, the 135 affordable homes at Shirley Chisholm Apartments had a lengthy waitlist – proof not only that there is a great need for affordable housing solutions like this, but also that dedicating funds are necessary for long-term planning.
WHAMI serves a broad range of “missing middle” income levels, a demographic not easily served through low-income tax credit projects. This makes WHAMI an ideal financing model for land-banked public sites, where the City could save even more money from tax exemptions.
This is why the Alliance for Affordable Neighborhoods is pushing amendments to Mayor Lurie’s proposed upzoning legislation to ensure that the 20+ prime public sites targeted for private redevelopment plan are instead land-banked for truly affordable workforce housing.
That proposal will be voted on by the Board of Supervisors as soon as early October.
More Public Investment, Buying Cheap and Using Voter Funds as Intended
The SF Standard elevates the final point that streamlining market-rate development has been a popular political approach because (to paraphrase) deregulation is easier than doing the hard work of creating funding solutions.
In November of 2018, more than 61% of San Francisco voters approved Prop C’s progressive tax on the richest companies in the city to fund a data-driven plan to address homelessness through services, prevention and housing. As reported in the press, Mayor Lurie and Governor Newsom have both chosen to defund critical housing investments at a time when we need them most.
Thankfully some creative negotiating has been able to unstick projects. In 2020, SF voters overwhelmingly passed former Supervisor Dean Preston’s Proposition I, a transfer tax that doubled taxes on sales of properties valued at more than $10 million – it raised about $400 million within a few years in support of affordable housing production, preservation and protection of tenants with rent relief.
Although former Mayor London Breed was unwilling to use the tax increment for these purposes, she did consent to a budget deal with Supervisors Preston and Chan, where $40 million out of the Prop I funds were set aside for housing acquisitions.
These funds helped the city to acquire 650 Divisadero for affordable housing, as well as other sites including 1234 Great Highway, 250 Laguna Honda Boulevard, 3300 Mission Street, and 249 Pennsylvania Avenue. Thanks to progressive advocacy, MOHCD was compelled to strike while the market opportunities were hot during the pandemic.
Seizing on cheaper land values is what the City should be doing. Acquiring and land-banking sites for affordable housing requires aggressive opportunism and strategic planning that city agencies are often unwilling to coordinate.
San Francisco cannot meet its affordable housing mandates without significant subsidy, including on the operating side. As construction costs continue to rise amid economic uncertainty, interest rates remain stagnant, and another influx of high-income earners continue to drive up area median incomes and home prices, we can’t afford to sit on public housing funds.
And we can’t afford not to make bold investments in the face of an ever-worsening crisis.
Create a Joint Housing Financing Agency
In 2016, after years of frustration with MOHCD’s conservative fiscal policies and struggles with affordability in major development projects, housing advocates attempted to pass a Charter Amendment, Proposition M, at the ballot.
It would have created an independent commission to provide oversight and drive development policy of the wholly-Mayor controlled MOHCD and Office of Economic and Workforce Development (OEWD). While it fell narrowly short of the two-thirds vote threshold to pass, Prop M highlighted a growing desire by voters and affordable housing developers to push the City to have better oversight of affordable housing investments, negotiate aggressively for affordability in private development, and implement voter-adopted housing strategies in a timely manner.
California itself has five different agencies that dole out affordable housing money to municipal projects, with different requirements for how and what gets funded. Those agencies report to different elected officials, with no centralized oversight of the overall operations of these separate but connected agencies, making it onerous and costly for affordable housing developers to navigate the bureaucracy.
While the recent decision to roll several state-level bodies (TCAC, CDLC and HCD) into one new housing-specific agency is promising in terms of coordination, we know that costs only come down when streamlining is matched with significant investment. The reality is that the biggest challenge for affordable housing funding is not the bureaucracy of navigating the funding process – it’s the paucity of the funding in the first place. The small amount of public investment makes the funding process more onerous, slow and costly because staff spend so much time and energy splitting hairs to decide how to spend every dollar. In short: there are so many good affordable housing agencies chasing so little money.
As more developers and industry experts publicly agree that financing is the chief obstacle to housing development, it is worth examining how the City can consolidate key development functions into a Joint Housing Agency.
The agency would include MOHCD, OEWD, the Office of Community Investment and Infrastructure (OCII), the Department of Homelessness and Supportive Housing (HSH), and the SF Housing Authority (SFHA). In particular, SFHA’s legal authority could help with implementing programs like WHAMI by creating a municipal housing finance agency. And maybe by reorganizing our own house, creating more flexibility and committing our own local funding through innovative programs, we can attract even more matching investments from public, philanthropic and private sources.
We can increase oversight and efficiency, while decreasing affordable housing costs with better coordination, thoughtful restructuring AND significant and consistent long-term investment. It’s a progressive model that works!
In short: there are so many good affordable housing agencies chasing so little money
As more developers and industry experts publicly agree that financing is the chief obstacle to housing development, it is worth examining how the City can consolidate key development functions at MOHCD, OEWD, the Office of Community Investment and Infrastructure (OCII), the Department of Homelessness and Supportive Housing (HSH), and the SF Housing Authority (SFHA).
In particular, SFHA’s legal authority could help with implementing programs like WHAMI by creating a municipal housing finance agency. And maybe by reorganizing our own house, creating more flexibility and committing our own local funding through innovative programs, we can attract even more matching investments from public, philanthropic and private sources.
We can increase oversight and efficiency, while decreasing affordable housing costs with better coordination, thoughtful restructuring AND significant and consistent long-term investment.
It’s a progressive model that works!