The struggle for housing money at City Hall

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It’s barely March, and the next election isn’t until June and that’s just primaries and the Democratic County Central Committee, but we just started getting political mail anyway. It’s a piece from the Board of Realtors, denouncing plans for an increase in the real-estate transfer tax “to provide subsidized housing to people who want to live in San Francisco but don’t have the means to do so.” Mayor Ed Lee, the flier says, is backing this “outrageous” plan.

What, exactly, is going on here?

Well, for starters, the mayor is distinctly NOT pushing for an increase in the transfer tax, not right now, anyway. What he is doing is meeting with housing advocates and legislators and trying to come up with a stable source of funding for affordable housing -- yes, for families and low-income people, many of them longtime residents who are being forced out by Ellis Act evictions, others of them people who work in the city and would rather live here than commute from Pinole, which everyone with any sense agrees is a good idea.

The problem: For years, San Francisco used Redevelopment Agency tax-increment money for affordable housing. Now that money’s gone, since the governor abolished redevelopment agencies. Actually, the money’s not gone, technically -- the increased tax revenue from redevelopment project areas still exists. It’s just that the state is now taking a bunch of it, and other taxing entities like BART and the school district get some of it, and now it’s impossible to send bonds and borrow money against it. So what was once tens of millions for affordable housing is now a few million.

“We might have $20 million a year in the general fund,” said housing activist Peter Cohen. “But that’s compared to the $40 million or $50 million we had in the past, and it still leaves housing short.”

Lee has promised repeatedly to fix that problem, to find a way to make sure that there’s enough money that the nonprofits who build housing can plan and develop for the long term. Right now, it’s being called a Housing Trust Fund, but nobody knows exactly how it will actually work.

Remember: The city’s own General Plan states that 60 percent of all new housing should be available at below market rate. All of the regional growth projections say that San Francisco needs to build more housing -- for its own workforce, not just for the rich. (And the local workforce, for all the tech jobs the mayor keeps hyping, is still mostly public-sector workers and service employees, most of whom can’t possibly afford the soaring rents and housing prices in this city.)

A lot of the existing affordable housing money comes from the city’s inclusionary housing law, which mandates that market-rate developers set aside a percentage of their new units (usually 20 percent) for lower-income people. Most developers eschew allowing poor people into their condo enclaves, so they pay a fee into a city fund instead.
But if we’re aiming for 60 percent, and we’re getting (at most) 20 percent, we’re a long ways off. Oh, and the developers are starting to argue that the 20 percent rule is too onerous and they can’t build enough condos for the rich if they have to throw scraps to the poor and middle-class, too.

And some supervisors are squawking about building more housing for the middle class, and right now in a zero-sum game, that means less for low-income people.
This all adds up to a mess for the mayor, and it’s no wonder some advocates are talking about raising the transfer tax -- which, after all, is paid by the seller of a residential or commercial building, and while there are absolutely some houses underwater in San Francisco (and there should probably be an exemption in the tax for that situation), overall home prices are rising again, and many, probably most home sales these days involve substantial profit. It’s not a perfect tax, but it’s a tax on a class that is (generally) better off to support a class that is typically not so well off.

Here’s the problem: If the mayor supports a transfer tax, and that’s part of the final package, the realtors and the commericial building owners will no doubt put huge amounts of money into defeating it. That would mean Lee would have to raise a bucket of money and campaign really hard to pass it. But Lee’s demonstrated that he’s not the fighting type; he wants something that nobody serious will oppose. Which is why my sources at City Hall say that he wants the transfer tax off the table.

That could mean that the Housing Trust Fund will be a basic set-aside, a budgetary mandate that a certain amount of money go into a reliable fund for housing. That’s one of the city’s most pressing needs (really, if this becomes a city of just the rich, even those of us who own houses or have rent-controlled apartments won’t want to live here any more. Mayor Larry Ellison? Eeew.) So I’m okay with that. I’m not a big fan of set-asides, but this is the whole future of San Francisco we’re talking about.

So the realtors can take a chill pill -- the mayor doesn’t want to get in a fight with you. Sigh.