"City Needs More Housing Money, but Voters May Stand in the Way"

SF Business Times, January 16, 2015

Politicians and affordable housing advocates will pin their hopes — and their budgets — this fall on winning voters' support for a $250 million bond to pay for new construction. But it won't be easy.

Mayor Ed Lee's announcement Thursday that voters would decide on a general obligation bond in November signals the city's need to scour for new funding sources to meet ambitious affordable housing goals. The affordable housing trust fund approved in 2012, set to pour $50 million annually into affordable housing, isn't enough to pay for middle-class housing construction, the small-sites program or public housing revitalization.

A bond, which Lee said won't raise property taxes, will test whether voters will be that generous again. The last time a housing bond passed in San Francisco was 1996. Efforts failed in 2002 and 2004. The bond needs two-thirds of the vote to pass – a tall order in an off-year election with a mayor's race that will likely be virtually uncontested.

"This is a tough-sell issue, and it's a tough year to do it," said David Latterman, a political consultant who founded the research firm Fall Line Analytics.

"Low turnout in San Francisco means a more conservative electorate that isn't amenable to a bond anyway. The only bonds that automatically pass in this city are school bonds, libraries. And transit has been doing pretty well," he added.

The need for the housing bond seems clear. The mayor's affordable housing work group, which included both market-rate and nonprofit developers, recommended in December that the city "examine the potential" for the city to have enough room within its debt limits to issue general obligation bonds.

Plus, "general obligation bonds have historically provided local agencies with the lowest borrowing costs" because investors like their high bond ratings, according to the California state treasurer.

The question is whether 2015 is the year to try it.

Even some of the most powerful affordable housing advocates, the Council of Community Housing Organizations, cautions that this might not be the year to put a housing bond on the ballot.

"If this is a good approach at all, it will only make sense in 2016, on a Presidential election year when the two-thirds majority needed to pass a housing bond is possible," the group wrote in its 2015 affordable housing plan.

Middle-class help

The city hasn't yet outlined specifics on which housing programs would benefit from the bond. But to win more voters over, the city will likely stress how the bond will help the middle class, not just the poor.

More conservative groups may have the appetite for that kind of approach, said Supervisor Jane Kim. The housing bond started to take shape as one of Lee's policy aims last summer when he and Kim forged a compromise over how to balance housing goals.

That housing balance is particularly out of whack for middle-income residents. The city has built and entitled only 30 percent of the housing it needs for the middle class (80 percent to 120 percent of area median income), compared to 55 percent for low-income residents and 202 percent for high-income residents.

"Even when I'm at (Building Owners and Managers Association) and Chamber of Commerce meetings, people tell me, 'My kids can't live here.' They can't afford to live in San Francisco, the city I raised them in," she said. "It sounds like there will be more concern about a broader base of voters on that issue."

The city could address middle-class housing with the bond through its small sites program, which enables the city to acquire 5-to-25-unit multifamily buildings to protect them from evictions and rising rents. The city invested $3 million in that program last summer.

Kate Hartley, deputy director at the Mayor's Office of Housing, said that program will assist people making up to 120 percent of area median income, or $104,900 a year for a family of three, which qualifies as middle class in San Francisco.

"$250 million, if that's the amount, is a substantial amount of new funds that would help us to attack the housing crisis," she said.

Affordable housing need

Hartley said the bond could also help accelerate the production of public housing sites that are part of the HOPE SF program, including large developments in Potrero Hill and Sunnydale.

On Thursday, Lee also announced new efforts to add $100 million over the next decade to the city's first-time-homebuyer program and to partner with donors to preserve affordable housing.

The city also has a long way to go to meet Lee's goal to build 30,000 housing units by 2020, with one-third of those being affordable. Federal and state funding for low-income housing has stalled, and the loss of local redevelopment dollars has hurt the nonprofits that build affordable housing.

The Mayor's Office of Housing projected that the $200 million bond proposed in 2004 would have helped build 3,350 new affordable housing units.

Donald Falk, executive director of the affordable housing builder Tenderloin Neighborhood Development Corporation, said "we have so much more capacity to build than funding."

"In my dream world, we'd have a permanent, on-going source, so that we could build a system around it, based on known annual appropriations," Falk said. "But a (one-time only) bond is the next best thing.