With last-minute tweaks, SF approves new below-market-rate housing mandates for developers

San Francisco continued to hash out details Tuesday of a proposed law requiring developers to build affordable housing even as the Board of Supervisors has celebrated on more than one occasion — including Tuesday — that a deal was reached.

A vote on the law was postponed for hours as amendments were hammered out behind the scenes, but ultimately the board unanimously approved the new inclusionary housing requirements.

Board members and labor leaders who helped negotiate the deal for months held a rally on Civic Center Plaza prior to the meeting, celebrating the deal. They called on those who were displaced from San Francisco to apply for these yet-to-be-built affordable homes.

“This policy is expected to generate between 800 and 2,000 affordable units over the next three years, along with many more market-rate units,” reads a statement issued by the office of Supervisor Ahsha Safai, who introduced legislation in February to set new affordable housing requirements.

“This law helps ensure that San Francisco’s ‘missing middle,’ those who make too much to qualify for housing subsidies but not enough to afford market-rate prices, can find housing they can afford,” the statement reads.

The debate was initially heated as there were concerns about how high to set the percentage and how much of the total percentage would get divided among different income earners.

Even though the board had unanimously approved the affordable housing requirement changes two weeks ago (the board had no meeting last week), the board said that more changes would come Tuesday.

Safai amended the proposal to require that developments with 10 or more units must provide at least 25 percent of the units at two and three bedrooms with a minimum of 10 percent three bedrooms, with a few exceptions. The requirement does not apply to developments in certain special land use areas like the eastern neighborhoods or who get a density bonus under Home-SF, which must hit 40 percent.

“A project could go for a special permit for hardship request. In most cases we believe that would not happen,” Safai said. Supervisor Norman Yee, a strong proponent of family-sized units, said, “I’m a little disappointed with the percentage. I just want to express that.” Yee opposed the amendment but supported the overall proposal.

Other tweaks imposed minimum occupancy requirements of below-market-rate units for eligible higher income earners.

“We know that at the highest level of ownership that at 130 percent [AMI], that often studios become very close to market rate prices for sale,” Supervisor Jane Kim said. “We want to ensure that at minimum two individuals would be applying for that unit just to ensure that they are truly below-market-rate units.”

A debate over affordable housing requirements began last year when voters approved Proposition C, put on the ballot by supervisors Aaron Peskin and Kim, that for the first time added a middle-income below-market-rate requirement to the affordable housing laws and set the total percent required at 25 percent — 15 percent for low-income earners and 10 percent for middle-income earners. Previously only low-income units were required.

The changes approved Tuesday amend the Prop. C requirements to create three eligible income tiers and sets new percentage requirements. The total percentage of units required for below-market-rate units was set at 18 percent for rental projects of 25 units or more, with 10 percent for low-income earners, 4 percent for moderate-income households and 4 percent for middle-income households.

Middle-income renters, for example, are defined as those who earn from 90 percent to 130 percent of the area median income, which for a family of four is between $103,750 to $155,650.

Another amendment is expected at a later date to exempt the former Transbay redevelopment area, which provides below-market-rate units for those up to 60 percent of the area median income.