S.F. Affordable Housing Program Aims for Balance

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S.F. Affordable Housing Program Aims for Balance

There’s $64 million on the table to strengthen the Small Sites Program, but advocates say they need more flexibility from the mayor’s office to innovate.

The headquarters of Mission Economic Development Agency in San Francisco; the nonprofit acquires properties where tenants are in danger of eviction, and keeps them affordable in perpetuity. (Photo by Oscar Perry Abello)

Chloe Jackman received notice that her apartment building was being put up for sale in Fall 2018, the second time in as many years, and she and her husband were worried. The landlord was already disputing the rent control status of 369 Third Avenue in San Francisco’s Inner Richmond neighborhood, arguing it was built after the city’s ordinance passed in 1979. (Records show it was built in 1977.) She wasn’t sure she and other tenants had the resources to go to court over the dispute. Jackman, who was pregnant at the time, feared her rent would increase and her family would have no choice but to move.

“We were looking at getting evicted around the time we were looking at giving birth,” she says of she and her husband.

Then she received a postcard telling her about a nonprofit, Mission Economic Development Agency (MEDA), that was acquiring properties where tenants were in danger of eviction, and keeping them affordable in perpetuity through a city initiative called the Small Sites Program. While MEDA is based in the Mission District, they were acquiring buildings in other parts of the city where tenants were at risk. Jackman corresponded with MEDA, and the nonprofit bought the building in November 2019 for $6.5 million.

Jackman attended a press conference announcing the sale with her city supervisor and Mayor London Breed. Two years later, Jackman says the rent on her two-bedroom apartment has stayed the same. At $2,250 a month, she and her husband are paying 20% of their combined monthly income. The building also received a series of long overdue repairs to plumbing and other capital needs, and her neighbors were also able to remain.

“We have brand new windows, the plumbing’s updated, everything has been brought up to code,” she says. “It’s been nice.”

Launched in 2014, the Small Sites Program (SSP) helps nonprofits acquire and rehabilitate buildings with three to 25 units where tenants are at risk of eviction, keeping the units affordable and under nonprofit ownership. To date, the program has preserved 63 buildings around the city, home to 655 households, according to the San Francisco Housing Accelerator Fund, a CDFI which provides loans for nonprofits in the program.

SSP, which began with $3 million when it launched seven years ago, has seen its budget grow to $10 million. The program is now looking at a windfall of potential new funding and with it, a disagreement over whether it is an effective use of city money. In an 8-3 vote last November, the city’s Board of Supervisors set aside an additional $64 million toward housing acquisition, paid for with a new transfer tax increase on property sales.

According to Peter Cohen, co-director of Council of Community Housing Organizations (CCHO), which represents 21 community-based housing developers throughout the city, opponents mischaracterize the program as flawed. Cohen chalks up existing challenges to “the small intricate details of how a particular program needs to be refined and tested.”

There have been challenges with getting tenants on board with the program. Under SSP’s rules, every tenant has to agree to nonprofit ownership before a purchase can happen. Christopher Gil, communications director for MEDA, says tenants are often willing to agree — because the buildings being acquired are relatively small and many occupants know one another. (Editor’s Note: SSP advocates charge that the city’s restriction on how the program calculates rents is also hindering success. Next week’s Backyard column will address that aspect of the issue.)

“We see situations where a person in one unit became a caregiver for people in the building,” Gil says, illustrating the level of community in small buildings. “Getting the people together usually isn’t a problem. They want to stay in their homes.”

When a building is acquired, says Rebecca Foster, CEO of the San Francisco Housing Accelerator Fund, “it’s because all the residents have been organizing and really wanted their building to be under nonprofit ownership.”

But sometimes convincing tenants is difficult, according to Cohen and fellow CCHO Co-director Fernando Marti.

In some cases, there might be a small rent increase. That’s because per SSP, a building’s average rent must eventually equal an amount that is affordable to someone making 80 percent of area median income (AMI).

Additionally, an exodus from San Francisco during the pandemic led to rent drops. While this was good for remaining tenants in the city, it made the units less appealing as rent that’s affordable to 80 percent of AMI began to equal market rate rents.

Still, rent increases after an SSP acquisition are phased in slowly, and many tenants prefer this to the private market, where rents can be raised without restriction.

For tenants who are in rent-regulated units, the calculus gets more complicated. All the buildings acquired through SSP are exempted from the city’s rent control ordinance and their affordability is instead set by a deed restriction for the life of the project. In one big way, this is better: The city’s rent control ordinance has a loophole allowing landlords to raise rents to market rate when current tenants leave. SSP has no such loophole, and the building remains affordable regardless of who moves in or out. This can be a huge relief to a rent-controlled tenant concerned about having repairs withheld or facing intimidation from a landlord who wants to get them to vacate the unit.

But rent control, which is pegged to inflation, works differently than SSP’s rent formula, which is pegged to AMI. Under the city’s rent control ordinance, rents on units can only be raised annually by 60 percent of the increase in the consumer price index, the federal government’s measure of inflation. This ensures rents are about the same across time. But AMI can be a more troubling tool for low-income renters, as it does not correct for wealth inequality. The city’s average median income could rise due to an influx of high-income residents, and for lower-income tenants that means they will be stuck with higher rents.

The discrepancy can make it hard to get buy-in from rent-controlled tenants, Marti and Cohen say. “They’re kind of like, why would I take that?” Cohen says of some rent-controlled tenants. “It’s a lot harder to convince people of the net positive gain.”

“It’s a very difficult conversation. Our housing providers are struggling with that,” Marti says. They’ve asked the mayor’s office for flexibility on this point, mentioning that tenants want parity with rent control, but say they received staunch opposition. The mayor’s office did not respond to a request for comment.

In some ways, the city has strengthened partnerships to strengthen the program. Nonprofits initially had trouble quickly purchasing buildings before private equity or corporate landlords, who had far more cash on hand, swooped in. In 2019, the Community Opportunity to Purchase Act (COPA) was implemented. COPA allows nonprofits with affordable housing missions first right of refusal to purchase properties. (That’s how MEDA came to buy Jackman’s building.) Even with COPA, though, nonprofits were still unable to put bids together quickly enough for sellers because they don’t have the size or track record to secure financing. So the city announced a partnership with the San Francisco Housing Accelerator Fund, the CDFI that provides loans to nonprofits quickly and in excess of what private banks would offer.

Foster, the CEO of the accelerator fund, says while the program is still trying to find the right balance to be financially sustainable, it is a success overall. “I think in a lot of ways the program has been a national model for anti-displacement,” Foster says.

Marti and Cohen with CCHO also characterize the program as successful and believe

opponents have concentrated on making the program’s issues seem unfixable.

The most immediate challenge is making sure the $64 million allotted in November gets spent. San Francisco has a “strong mayor” system, and Breed can unilaterally decide when to spend the money or if to spend it at all during her tenure.

Dean Preston, the city supervisor who introduced the vote for new SSP funding, says most of the concerns raised by the mayor were framed as intractable in order to sway the Board of Supervisors against the vote. “I think the issues that were raised were more an effort to convince supervisors not to allocate the money to this program,” he says. “These are not huge issues.”

Jackman and her husband, who have lived at 369 Third Ave. for 11 years, are looking to purchase their own property somewhere in San Francisco, hoping to find someplace with a yard. She says she’s grateful that the building will still be affordable after she leaves, which would not have been the case without the Small Sites Program. While she realizes there have been bumps along the way, she wants the city to work on expanding the program.

“This is a program that needs to be happening in big cities all over the country,” she says. “The city needs to be invested in protecting this.”

Editor’s Note: Check in with Backyard next week to read part two, “Will S.F.’s Mayor Spend $64M Slated for Affordable Housing?”

Disclosure: Eric Shaw, board chair of Next City, is Director of the Mayor’s Office of Housing and Community Development for the City and County of San Francisco. Board members retain no influence over editorial decisions. For a complete list of Next City board members, visit the About section.

This article is part of Backyard, a newsletter exploring scalable solutions to make housing fairer, more affordable and more environmentally sustainable. Subscribe to our weekly Backyard newsletter.

Roshan Abraham is Next City's housing correspondent and a former Equitable Cities fellow. He is based in Queens. Follow him on Twitter at @roshantone.

Tags: affordable housingsan franciscomayorsevictions

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