Six months into the Covid-19 pandemic, its effect on San Francisco’s housing crisis remains an open question.
While the shelter-in-place orders and the resulting economic impact have exacerbated housing challenges, they may also lead to new opportunities to advance affordable housing objectives.
“The pandemic has created even more housing instability for people with lower incomes, especially those who have lost restaurant and hospitality jobs, gig-economy workers and the like,” Bridge Housing CEO Cynthia Parker said. “This is a moment to push for housing of all kinds with an emphasis on affordability.”
That push could involve taking advantage of a slumping private real estate sector in which new market-rate development plans are on pause, rents are dropping and vacancies are rising. Other efforts to increase affordable housing are being pursued amid the pandemic.
“There’s opportunity to invest in a time of a down market,” said Peter Cohen, co-director for the Council of Community Housing Organizations. “It’s a good time to increase public investment because land is more available. You can buy sites and sometimes buy entitlements. There may be less expensive land or less competition for contractors.”
While the market is experiencing volatility, Cohen said, the affordable housing sector in San Francisco has benefited from steady public investment over the last four decades. The $600 million Proposition A approved by voters last year, for example, is the largest affordable housing bond in city history.
“San Franciscans historically have been very good about public investment in affordable housing,” he said. “That’s our primary flotation device to get through these volatile swings in the private investment cycle. San Francisco has about 30,000 units of permanent affordable housing. If we hardwired ourselves to private real estate, we would not be able to afford to have that many.”
But affordable housing could lose out on units required as part of would-be high-end developments.
In San Francisco, single and multifamily permitting is down during the pandemic. Permits for both single and multifamily projects dipped more than 20% the first half of this year compared with that of 2019, according to Robert Dietz, chief economist for the National Association of Home Builders.
At the same time, though, other markets around the country are experiencing an upswing in homebuilding. “There’s a shift in demand from high-density, rental markets like San Francisco to lower-density, more affordable markets like cities in the Midwest,” Dietz said.
According to the association, permits were 3.2% higher in the Midwest, 5.4% higher in the South, 6.2% lower in the Northeast and 1.6% lower in the West the first part of this year compared to the same period in 2019.
“Developers of market-rate condos may well draw back on projects not yet started because of the weakness of the condo market right now,” added Patrick Carlisle, Bay Area chief market analyst for Compass, “and that would also entail pulling back on building the affordable units required as part of their projects.”
Then again, Carlisle said, “I believe most of the affordable housing currently being built is by dedicated affordable-housing organizations, and I don’t see why they would slow their pace of construction.”
Bridge Housing, for instance, is involved in a recently city-approved housing development on public land at the Balboa Reservoir in which half of the 1,100 units will be affordable and another 150 will be for teachers and staff from City College of San Francisco.
Meanwhile, jurisdictions now face new targets set by the state to combat housing shortages.
Updated goals from the state Regional Housing Needs Allocation plan require the Bay Area to create 441,176 new units by 2031 with 41% of those needing to be designated as low or very low income, or 180,334. In contrast, the current allocation from 2015 through 2022 is 187,990 total units with 40% supposed to be low or very low income, or 75,620.
According to a state progress report, San Francisco is 63% through the current period, meeting 59% of its low-income goal and 40% of the very low income while exceeding the above market rate at 158%.
Part of the reason why the city has long struggled to keep up with the state’s affordable housing targets boils down to funding despite the strong public support, Cohen said. New sources of money such as what would come from the city measure Proposition I remain vital and can help “take advantage of these market conditions.”
Prop. I on the November ballot would double the city’s real estate transfer tax for residential and commercial properties selling for $10 million or more. The estimated additional revenue of $196 million per year on average would go to affordable housing and Covid-19 rent relief.
Another reason for the city’s affordable housing struggles is because it is gentrifying so rapidly, Cohen said. One strategy for that is to restrict speculative real estate such as condo conversions and flipping buildings – all of which drives up the price of housing.
State Sen. Scott Wiener, D-San Francisco, sought to tackle the housing crisis by proposing bills SB 50 and SB 902, which would have spurred dense development in single-family neighborhoods. Those bills did not pass this year, however.
Wiener plans to reintroduce SB 902 next year, but critics argue that such bills would destroy the character of single-family neighborhoods and erode local control.
But encouraging denser building than what might be currently allowed in certain places is a way to add entry-level housing like townhomes, Dietz said. Reducing permitting and impact fees could also help. Nationally, a third of the cost to build an apartment “is due to regulatory burdens,” he said.
Other strategies include streamlining the approval process and coordinating state subsidies so that affordable housing can be developed at an accelerated pace, Parker said. Turning to efficient building methods also helps, including using “off-site construction components ranging from panels to nearly complete modules.