California Construction News staff writer
Building and operating European-style social-housing projects in San Francisco “could be financially sustainable,” according to a city report.
However, construction would be difficult without low-interest loans from the city.
Social housing includes publicly owned units with a mix of income levels. By definition, the report starts with the concept that at least half of the units will be priced at a level that people making less than 80 percent of the city’s median income can afford.
The city’s administrative code says social housing is any housing project owned by the city, a nonprofit, or the residents themselves, with agreements in place aimed at “ensuring permanent affordability.” Projects would house tenants with a range of incomes that would average no more than 80 percent of the surrounding area’s median income.
In San Francisco, that’s $83,900 for a single-person household, or $119,900 for a family of four.
Currently, the City and County of San Francisco manages 31,618 units of affordable housing targeted specifically at low-income tenants. However, a recent report highlights the potential for mixed-income social housing developments to be financially viable in San Francisco. The report emphasizes that the success of such projects depends on a delicate balance of financing, construction, operational costs, rental income, and public investments or subsidies.
In 2020, the San Francisco Board of Supervisors created a Housing Stability Fund to facilitate the acquisition, development, and operation of social housing projects. The Fund is designed to support projects with ownership shared between the city, nonprofit organizations, or resident associations to maintain long-term affordability. Furthermore, the Fund ensures that no more than 80% of the area’s median income is reached on average for the residents in these social housing developments.
A key source of funding for these social housing initiatives is Proposition I, which was passed by San Francisco voters in 2020. This proposition increased taxes on real estate transactions valued over $10 million and leases lasting 35 years or more. Although the funds from Proposition I are deposited into the city’s General Fund, the San Francisco Board of Supervisors has committed to using a portion of this revenue for rent relief and social housing projects. Projections for the 2023-2024 fiscal year suggested $85 million in revenue from Proposition I, though actual receipts were lower due to the pandemic’s impact on commercial property transfers. Future revenue, however, is expected to rise.
While mixed-income social housing has become more common in international cities such as Vienna and Singapore, it remains relatively rare in the United States. Notably, Montgomery County, Maryland, has launched a similar initiative through its Housing Opportunities Commission, which uses public funds to invest in privately constructed housing and provides rent subsidies to tenants across various income levels.
The study looked at six different scenarios for building social housing, and found that five of them made economic sense.
“Five of the six mixed-income social housing scenarios we modeled for this analysis were found to be financially sustainable in our model; one scenario was not. We assembled robust development and operations and maintenance cost data from 2021 to use for our cost basis for five of our six scenarios.
“Social housing could allow for the creation of more family units (two- or three-bedrooms) than are currently being produced – our financially sustainable mixed-income social housing scenarios presented in this report include more family units than are typical for current affordable housing developments.”
The report suggests that the program could be run through the Mayor’s Office of Housing and Community Development, not through the scandal-plagued Housing Authority, which has brought discredit on public housing for decades.
