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  • J.K. Dineen - SF Chronicle

S.F. has 305 affordable housing units sitting empty, despite more than 20,000 applications from pote

Hundreds of San Francisco apartments set aside for low- and moderate-income families are sitting vacant, the result of a sluggish bureaucracy and pandemic-era leasing market that has become less predictable, according to a report from the Board of Supervisors Budget & Legislative Analyst.

For 30 years San Francisco has required that housing developers include a percentage of “below market-rate” units in their projects, an effort to create affordable homes and mixed-income neighborhoods in a city that has steadily grown wealthier and less accessible to average families.

While San Francisco’s 1992 inclusionary housing requirement has long been held up as a model — most major U.S. cities now have some version of it — the new report shows that the program is marred by high vacancy rates. Of the 1,961 units created under the program, 305 of them — about 15% — are unoccupied, according to the report, which was requested by Supervisor Ahsha Safaí.

A combined 21,000 households applied to live in the 305 apartments, according to the report. Yet the units remain unoccupied.

“We have a housing crisis in the city, and yet we have a government bureaucracy that is standing in the way of getting people housed,” Safaí said. “It’s unconscionable for us to be sitting there with that level of vacancies.”

The current iteration of San Francisco’s below market-rate program — the units are known as BMRs — requires that 14.5% of homes in smaller projects of less than 25 units be made affordable while larger developments must set aside 21.5%. The income levels required to qualify is complicated: in smaller buildings households must earn just under 55% of area median income, about $58,600 for a two-person household; in larger buildings 60% of the below market-rate units are set aside for two-person families at the 55% area median income level, while 20% target moderate-income households earning $85,000 and another 20% go to families earning $117,000.

Of the 305 units currently sitting empty, five have been vacant since 2019, 55 have been vacant since 2020, and 245 have been vacant since last year, according to the report.

In addition to wasting badly needed homes, the number of empty units is a burden for builders who count on income from those units to pay back construction loans and cover operating costs, according to Residential Builders Association President Sean Keighran. In some cases they wait months or even years for the Mayor’s Office of Housing and Community Development, which oversees the program, to sign off on qualified applicants.

“Next to PG&E they are the most inefficient bureaucracy we have to deal with,” Keighran said. “The units sit empty and the process takes forever. It seems like the city doesn’t care.”

The process of qualifying for a BMR unit is more arduous and time-consuming than applying for a typical apartment, according to Caroline Caselli, CEO of Haven Connect, a technology company that created a platform to help match BMRs with tenants.

Applicants have to prove income and asset verification for every member of the household, as well as rental history, credit score and other documentation.

“It’s like doing your taxes but more invasive — just for a rental,” she said.

For low-income tenants in the below 55% AMI range, that sort of scrutiny may be familiar. But those in the 80% or 110% AMI range may have market-rate options, especially at a time when rents are down 12% from pre-pandemic highs and many new buildings are offering two or three free months and other perks.

Caselli said the higher-income units are toughest to fill. A former social worker with Catholic Charities in San Francisco’s Tenderloin, Caselli said most of her clients didn’t earn enough to qualify the higher BMR units. Those who do qualify often had easier options.

Keighran recalled one couple who “drew a winning ticket” for a BMR condo in one of his buildings. “They were celebrating, jumping up and down,” he said. “In their eyes they had won the lottery.”

The celebration didn’t last long, however: the couple lost the unit because their income was $100 a month too high. “The program is so stiff and rigid,” Keighran said.

Shifting priorities and uncertainties brought on by the pandemic have also made it harder to place qualified households in BMR homes, according to the report. Before the pandemic the Mayor’s Office of Housing and Community Development would review, on average, about five applications before filling a unit. That number has skyrocketed to 31 as many of the people on waiting lists have left the city, the Bay Area or the state. Others have found units in market rate buildings.

Eric Shaw, executive director of the mayor’s housing office, acknowledged that the pandemic has made it harder to fill BMRs. He said the bulk of the 305 vacant are “in about 10 buildings.” The city requires that developers hang banners advertising those units, promote them on social media and advertise in publications targeting a diverse range of communities. The city’s BMR website, called Dahlia, has up-to-date information on every available unit.

About 53% of the vacant units are on the small side — studios or one-bedrooms — which have become a harder sell since the start of the pandemic, according to the report. About 69% of the units are for lower-income families while 30% target moderate income households.

“We are all committed to leasing up units as quickly as possible,” Shaw said. “We understand that currently you have to go deeper into the lists because people are moving or changing their mind. Lives change, preferences change. Sometimes we lag behind those changes when we place people.”

In addition, the city can’t compete with the free rent some developers are offering as enticements. “Those guys put the balloons out,” he said. “Those are concessions we can’t make.”

Emerald Fund, which owns about 1,600 apartments in San Francisco, manages 227 BMRs. Emerald Fund CEO Oz Erickson said the lottery process takes about four months “from start to finish” to qualify a family and move them into the unit. The process — along with all the other fees and requirements the city places on housing — makes creating housing more expensive in San Francisco.

“The other units have to pay for that empty unit,” he said. “It’s very frustrating. Everything has been done with the best of intentions, but it is an unbelievable amount of money.”

J.K. Dineen is a San Francisco Chronicle staff writer. Email: Twitter: @sfjkdineen

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