A new City Hall report shows more than 300 below-market-rate housing units are sitting empty, thanks to red tape and a pandemic market where market-rate housing has gotten cheaper.
Due to the city's inclusionary housing laws, even the fanciest new condos and apartment complexes in San Francisco have a certain percentage of below-market-rate units. These are affordable housing "set-asides" created via a government program to ensure that people who make less than the average median income can still have places to live as new construction occurs. These units might not always be in the same building as luxury units, but city law requires developers to create somewhere between 15-21% of below-market-rate (BMR) units, and sometimes developers will have an even higher percentage to sweeten the deal to win approval.
Yet this may be a pointless exercise when these BMR units merely sit there unoccupied. The Chronicle reports via a new city report that 305 BMR units are inhabitable but empty in San Francisco, despite an applicant list of 21,000. Developers blame an excessively complicated application and review process with the Mayor’s Office of Housing and Community Development (MOHCD).
“Next to PG&E they are the most inefficient bureaucracy we have to deal with,” Residential Builders Association President Sean Keighran told the Chronicle. “The units sit empty and the process takes forever. It seems like the city doesn’t care.”
That may be the case to some degree, but the full report from the Budget and Legislative Analyst’s Office points to a few other factors. One of them is an issue we’ve been aware of throughout the pandemic — the below-market-rate units might actually be above-market-rate in this current rental market. Normal units are offering goodies like free rent and Peloton bikes and such, whereas a city-run program cannot offer that flexibility.
And while the above-quoted developer had a fabulous zinger about PG&E, it could be the owner of the development that “doesn’t care” about filling it.
According to the Budget and Legislative Analyst report, “MOHCD staff reported that oftentimes in new buildings, a developer or owner’s leasing agent will prioritize leasing market-rate units over BMR units, and if there is only one leasing agent, this means that it takes longer for the BMR units to get leased.”
Mission Economic Development Agency (MEDA) community planning manager Dairo Romero told Mission Local, “There is not an incentive for developers to rent these units. They are more worried about the market-rate units, the people who pay $4,000 for a studio.”
This is a far cry from years ago when people were renting their BMRs out illegally because the housing market was so tight. And as Mission Local points out, a lot of these empty units are SROs (i.e. shared bathrooms). That was not a palatable living situation for many people before the pandemic, and it is even less so now — still, what about the 21,000 applicants?
It turns out that when some of them make it through the process and get offered a unit, they don't want it.
Mission Housing Development Corporation executive director Sam Moss says qualified applicants are rejecting the SROs. “We’ve been asking potential tenants why. They say, ‘it’s a 90-square-foot room without my own bathroom and without my own kitchen.’”
The Budget and Legislative Analyst report makes a few recommendations to the board of supervisors, including quarterly reports on vacancies, further research, or an attempted legislative fix.
Image: Mayor's Office of Housing and Economic Development