The overall estimated renewal needs for preserving existing affordable housing is approximately $1.67 billion over the next 10 years, including acquisition and rehabilitation of existing at-risk rent stabilized housing. The sources identified at the beginning of this chapter, including recently passed bonds, will go toward addressing this need.

The preservation of affordable housing includes maintenance and capital improvements to existing affordable units (both MOHCD and/or HUD funded projects) and preventing the loss of existing affordable rent stabilized units through acquisition and conversion from market-rate to permanently affordable units.

MOHCD-Subsidized Housing

MOHCD-financed housing is 100% affordable housing that is owned and managed by private, usually nonprofit developers and monitored by MOHCD. These buildings are deed-restricted to ensure permanent, long-term affordability, and need reinvestment for systems and unit upgrades approximately every 20 years. Many older buildings would also benefit from seismic retrofits. About 15,500 units in MOHCD’s portfolio do not have any project-based rental or building operating subsidies to leverage additional debt, so the City will need to provide a capital subsidy to recapitalize. The total estimated need is $1.54 billion over the next 10 years, excluding seismic retrofits.

HUD-Subsidized Housing

HUD-subsidized housing is affordable housing that is owned and managed by nonprofit or for-profit developers and monitored by HUD. Some HUD-subsidized buildings also have a MOHCD capital subsidy, but the affordability restrictions of exclusively HUD-subsidized units expire when the HUD contract expires, and rents may be converted to market rate rents. Projects that have opted out of HUD contracts, or have year-to-year or soon-to-expire contracts, are at high risk for loss of affordability. About 1,400 units of HUD subsidized housing fall into this high-risk category over the next 10 years. The City would need an estimated $133 million to engage private owners in preservation deals to ensure permanent or long-term affordability for existing HUD-subsidized housing.

MOHCD's planned preservation efforts also include acquisition and rehabilitation of at-risk housing for households between 0-120% AMI through the Small Sites Program, which protects small to mid-size multifamily rental buildings through acquisition which prevents the displacement of existing residents and loss of affordability from Ellis Act and owner move-in evictions. Funding sources that can be used for the Small Sites Program include 10% of Inclusionary and Jobs/Housing Linkage Fees, 25% of condominium conversion fees, 40% of excess Educational Revenue Augmentation Fund (ERAF) allocated to MOHCD, the voter-approved 2019 and 2024 General obligation bonds, and the Housing Trust Fund. Additionally, the City makes below-market loans available for eligible projects through the Preservation and Seismic Safety (PASS) Program. This program was appropriated with up to $260 million when voters approved the modification of the 1990s-era Seismic Safety Loan Program in November 2016.

SFHA – San Francisco Housing Authority

The most recent needs assessment of the SFHA portfolio was conducted in 2009 and determined a need of $269 million. This includes sites already converted and those slated for conversion. The needs of the post-conversion portfolio are likely to exceed the $3 million annual pot expected to be available through HUD. Funding for maintenance, including annual federal operating subsidies, have been and are expected to continue to be inadequate, making deterioration of these units a continual challenge.

San Francisco is fortunate to count on several capital sources of funding to provide as subsidy to support the production of affordable housing.

General Fund

The Housing Trust Fund: Established in 2012 through the passage of Proposition C, the Housing Trust Fund is an annual set-aside in the General Fund. The Housing Trust Fund is a 30- year fund capped at $50 million per year, representing a total of $1.2 billion in funding for housing subsidies over the life of the fund.

Local Operating Support Program (LOSP): These subsidies provide ongoing operating support to permanent supportive housing through 15-year contracts with affordable housing owners. LOSP subsidies cover the difference between tenant-paid rent (very low for formerly homeless households) and the operating cost of the units.

One-Time General Fund Appropriations: When San Francisco receives one-time sources, one-time capital uses such as affordable housing are the preferred
use. San Francisco has committed one half of excess property tax revenues received through the Education Revenue Augmentation Fund (ERAF) to affordable housing.

Fees

Inclusionary and Jobs/Housing Linkage Fees: Jobs Housing Linkage Fees apply to development projects that increase the amount of commercial uses by 25,000 or more gross square feet. The 2019 Jobs Housing Linkage Fee for office development was set at $19.96 per square foot and will increase to $69.60 per square foot, and the Inclusionary Housing Program Fees are $199.50 per applicable square foot according to the most recently available local fee schedule.

Area Plan Fees: Area Plan Fees are development impact fees in the areas of San Francisco’s most concentrated growth: Eastern Neighborhoods, Market & Octavia, Visitaction Valley, Balboa Park, Rincon Hill, Transit Center, and most recently, Central SoMa. These fees are paid by developers for infrastructure needs to meet growth-driven demand, including affordable housing.

Debt

G.O. Bonds: In 2015, 2019, 2020, and 2024 San Francisco voters approved $1.357 billion in G.O. bonds to support affordable housing. 

Certificates of Participation (COPs): COPs are a General Fund debt instrument used to support public infrastructure needs and new construction at HOPE SF sites. As a part of the FY2023 budget, the Board of Supervisors approved $112 million in General Fund debt to finance five different housing and community development programs: site acquisition ($40 million), community facilities ($30 million), elevator upgrades ($10 million), educator housing ($12 million), and repairs to public housing cooperatives ($20 million). The MOHCD, the Controller’s Office of Public Finance, and the Department of Homelessness and Supportive Housing are coordinating procurement, award, and timelines for these five programs in preparation for several bond issuances starting in 2023.

PASS Program: MOHCD manages one amortizing debt product called Preservation and Seismic Safety (PASS) Program that provides below-market rate debt to acquisition/preservation projects, thereby reducing the need for direct capital subsidy.

Tax Increment Financing: Tax Increment Financing (TIF) was historically the largest source of local financing for the San Francisco Redevelopment Agency. When California dissolved redevelopment agencies in 2012, this source of funding was discontinued for local governments except to fund existing obligations (projects). As the successor agency to the Redevelopment Agency, OCII can still make use of this source to meet its affordable housing production obligations. In 2023, Senate Bill No. 593 was approved which authorizes OCII to use a limited form of tax increment financing, which consists of residual tax increment only available to the City, to fund and develop the 5,842 units that the former San Francisco Redevelopment Agency demolished and never replaced. This effort is referred to as the Replacement Housing Obligation. This source of funding, using limited tax increment and limited tax increment bonds to pay for the housing construction, will occur over many years.

Federal Funds: Federal funds come to San Francisco through formula grant programs, including HOME Investment Partnerships Program (HOME) funds (for new production) and Community Development Block Grant (CDBG) (for acquisition and preservation). Although the availability of federal funding has decreased over the years, HOME and CDBG continue to play a role in San Francisco’s housing production and preservation.

Leveraged Funds: For every dollar of City funding that is provided to produce affordable housing, additional funding from the project sponsor makes the project whole. These complementary funds may include federal or state tax credits, competitive state funding, or federal rent subsidies (Section 8, Section 202/811).

Market Rate Production: Although market-rate residential production is often pitted against affordable housing, whether due to competition for land or concerns over gentrification, market rate production plays an important role in the City’s overall affordability. Market rate production reduces the competition for existing housing units by higher- income households who can afford new construction. Providing housing at market-rate satisfies some of the housing need, which reduces demand on existing housing. More directly, market-rate production generates affordable units through inclusionary requirements and fees. Market-rate residential developers must provide a portion of the units as below market rate (BMR) units, or they may opt to (a) pay an “in lieu” fee to be used by MOHCD to fund new production; (b) build affordable units on a separate site; or (c) dedicate land to the City for production of new affordable housing.

San Francisco has longstanding funding principles to prioritize our capital projects (see Introduction). The principles for affordable housing preservation and production are different but no less important for strategic planning and quick project delivery.

Whereas the standard capital planning funding principles are tiered, the principles for affordable housing prioritize feasibility, balanced across the many categories of need within the affordable housing sector.

To maximize the number of units delivered, and to deliver units across as broad a geography and as broad a spectrum of need as possible, San Francisco is both opportunistic and balanced in its approach to housing production. The City, acting primarily through MOHCD, must respond to opportunities as they arise and support projects that are as cost efficient as possible. Project feasibility depends on the availability of City and non-City funds, the cost and availability of development sites, and the cost of construction. Without eligible funds in hand, a project cannot proceed. Affordable housing developers must compete on the open market for sites, or sites may come to the City through land dedication. Construction costs have increased dramatically in recent years, and a project’s mix of uses and funds must be able to support those costs. 

While focusing on cost efficiency and feasibility, the City prioritizes balancing the distribution of resources to address the range of need for affordable housing in San Francisco. The portfolio is inclusive of projects across neighborhoods, populations, and income levels. It must support renters and buyers through preservation and production strategies. With so many needs on so many fronts, public affordability supports multiple targets in consideration of the whole of San Francisco’s affordable housing needs.

Affordable housing is essential for San Francisco’s resilience and livability, but it is also distinct from the other facilities and infrastructure in the public portfolio. Unlike the City’s horizontal and vertical assets such as pipes, streets, and buildings, when it comes to affordable housing, the asset the City “owns” is the affordability itself. Affordability is ensured both through restrictions placed on title or through ownership of the land underlying affordable units. With only one exception, the City does not own the affordable housing asset itself. Affordable housing buildings are typically owned by partnerships where the managing general partner is a mission-driven non-profit organization. Property management is provided either by the same ownership entity, or through contracts with third- party property management entities that specialize in affordable housing. Likewise, service provision for residents is typically provided through third party contracts between the owner and qualified service providers.

Financial support of affordable housing production and preservation is generally provided by MOHCD through loans to affordable housing developers. As such, the affordable housing projects supported by the City are not considered public works. Qualified development teams are selected through Notices of Funding Availability (NOFAs) or Requests for Proposals or Qualifications (RFPs or RFQs). Those teams then carry out preservation and new construction projects. This financing approach allows projects to leverage sources of funding at the state and federal level to such a degree that local resources are needed to pay only a portion of the total cost of development.

Key Terms

Affordability

The term “affordable housing” refers to a broad range of levels of affordability that are typically divided into the categories below. The categories themselves are based on Area Median Income (AMI) which describes the level of income a household has relative to the region’s median income.

• Moderate Income: 80%-120% AMI

• Low Income: 50%-80% AMI

• Very Low Income: 30%-50% AMI

• Extremely Low Income: below 30% AMI

In 2024, San Francisco’s median income is $104,900 for an individual, $149,850 for a family of four. San Francisco publishes its own AMI levels that are different than those published by the U.S. Department of Housing and Urban Development (HUD) and by the California Tax Credit Allocation Committee (TCAC) for the San Francisco region. MOHCD uses an “unadjusted” AMI, which is lower than HUD’s published AMI that includes an upward high cost adjuster (which TCAC then follows). MOHCD also places limits on year-over-year increases to AMI levels. As a result, real incomes that correspond to MOHCD’s AMI levels are lower than those for the same AMI levels as published by HUD and TCAC.

Permanent Supportive Housing

Permanent supportive housing (PSH), also known as supportive housing, refers to affordable housing that is designed for households (adults with or without dependent children, seniors, veterans and transitional age youth) exiting homelessness and offers voluntary on-site supportive services. In San Francisco, these services are provided by the Department of Homelessness and Supportive Housing, and future capital investments in PSH are discussed in the Health and Human Services Chapter.

Preservation and Production

Broadly speaking, affordable housing investments can be divided into two categories: preservation of existing affordability and production of new affordable homes. The City’s role in maintaining public housing resources is a combination of preservation and production efforts.

Preservation can be broken out into five categories: (1) preservation of MOHCD subsidized housing for continued affordability and habitability; (2) preservation of deed-restricted housing that is not subsidized and has affordability restrictions that will expire; (3) preservation of HUD subsidized housing that is not regulated by MOHCD for continued affordability and habitability; (4) the acquisition, rehabilitation, and preservation of rent-restricted or rent- controlled housing, vulnerable to Ellis Act and owner move-in evictions, and vacancy de-control; and (5) preservation of public housing.

New production of permanently affordable homes occurs primarily through one of a few mechanisms: units produced through San Francisco’s inclusionary zoning requirements, MOHCD’s multifamily lending program, and OCII-supported new multifamily production.

The Affordability Gap

San Francisco has increasingly become unaffordable to wider sections of the population in the past two decades and is one of the most expensive housing markets in the country. According to the Planning Department’s San Francisco Housing Needs and Trends report, this trend has intensified in the past five years due to the high-wage job growth in the region. Low- and moderate-income households are being replaced by higher income households and many of our existing households are at risk of losing their housing at current rates of affordable housing availability. The result is that many households are cost burdened. HUD considers any household paying more than 30% of their gross income on rent to be cost burdened, and households that pay more than 50% of their gross income on rent to be severely cost burdened.

The affordability gap in San Francisco can be seen in four ways: (1) too little housing production to meet population growth, (2) increasing numbers of vulnerable households that are cost burdened or otherwise not sufficiently housed, (3) the loss of units affordable to low-income households, and (4) a significant homeless population.

The Association of Bay Area Governments estimates the housing need based on population growth through the Regional Housing Needs Allocation process. Local jurisdictions must show that they have the capacity to accommodate this growth. The 2023-2031 Regional Housing Needs Assessment (RHNA) targets increased significantly; San Francisco’s share increased from 25,000 units (2014 – 2022) to 82,000 units (2023 – 2031), including 46,0000 units of housing affordable at very low, low, and moderate incomes.

 

San Francisco’s unaffordability is wide-reaching. Housing costs have increased far faster than inflation since the late 1990s and have risen to the 2nd highest in the nation since the 2011 boom. High costs and low supply bring personal hardship, accelerate displacement, undermine balanced economic growth, and cause environmental damage as workers suffer longer daily commutes. To become a truly resilient city, San Francisco must tackle the challenges of unaffordability for residents today and proactively build for the future.

Affordable housing is critical to the City’s economic and social well-being. Without housing that is affordable to a range of incomes, essential workers and families cannot afford to remain in the City. If that occurs, San Francisco risks losing vital components of its unique and diverse culture in combination with the associated negative economic impacts.

Housing affordability is also crucial to the City’s efforts to advance racial equity. Not only have historic housing policies like urban renewal and redlining furthered systems of structural and institutional racism, these policies continue to impact Black, Indigenous, and people of color today as they disproportionately experience homelessness, rent burden, substandard housing and overcrowding. 

Overview

City leaders and voters have repeatedly demonstrated their support for policies and investments that address the housing needs of San Francisco’s workforce and vulnerable residents. Since 2012, San Francisco has passed numerous key initiatives to increase resources for affordable housing production, including:

• 2012: Housing Trust Fund as a set-aside within the City’s General Fund

• 2015: $310 million Affordable Housing G.O. Bond

• 2016: Significant increase to the inclusionary obligations on market rate housing

• 2018: Gross receipts tax to fund housing and services for people experiencing homelessness

• 2019: $600 million Affordable Housing G.O. Bond

• 2020: Health and Recovery G.O. Bond included $147M for permanent supportive housing

• 2022: Recovery Stimulus and Critical Repairs Certificates of Participation allocated $112M to affordable housing efforts

• 2024: $300 million Affordable Housing G.O. Bond

Moving forward, San Francisco will continue to prioritize and enhance programs and projects that produce and secure affordable homes. This longstanding commitment includes additional investments in permanent supportive housing (see the Health and Human Services chapter) and housing affordability at low and moderate incomes, as well as increasing capacity through zoning to allow more housing and affordable housing to be built equitably throughout the City.

Capital investment for acquiring and building affordable housing is the most permanent and secure approach for the City to create deed-restricted affordable housing. The content here defines the key terms of publicly supported affordable housing production and preservation; documents funding and feasibility principles for those efforts; describes planned, phased, and emerging projects that support greater affordability in San Francisco; and presents a comprehensive view of San Francisco’s projected investment in affordable housing.

Mayor’s Office of Housing and Community Development

MOHCD supports San Franciscans with affordable housing opportunities and essential services to nurture strong communities. The department works to create affordable housing, preserve existing affordability, protect vulnerable residents, and empower communities, neighborhoods, and people seeking housing. MOHCD’s programs to create and preserve affordable housing  include 100% affordable multifamily housing development, HOPE SF (described in Economic and Neighborhood Development), down payment assistance loan, Small Sites, Preservation and Seismic Safety, and monitoring inclusionary mixed income housing development.

Planning Department

The San Francisco Planning Department works with decision-makers to increase the City’s livability through adoption of the City’s vision for the future, embodied by the General Plan. This comprehensive policy document guides public and private action concerning land use and zoning policy, community stabilization, urban design, public realm enhancements, and environmental planning. The City has adopted plans and programs to channel new development and to provide a framework for adding housing and jobs, this includes Area Plans such as Balboa Park, Eastern Neighborhoods, Market Octavia, SoMa, Rincon Hill, and Transit Center.

In addition, the City has adopted new programs such as HOME SF and policies to encourage the addition of Accessory Dwelling Units (ADUs). Together these plans and programs guide development growth, and the community benefits provided to the neighborhoods where growth occurs. The Planning Department updated its eight-year housing element in early 2023, the City's housing plan that determines housing needs and how to address them, defines priorities for decision making and resource allocation for housing programs, developments, and services.

Office of Community Investment and Infrastructure

OCII is the successor agency to the San Francisco Redevelopment Agency, which was dissolved in 2012 by order of the California Supreme Court. OCII is authorized to continue to implement the Major Approved Development Projects in the following Project Areas: Mission Bay North and South, Hunters Point Shipyard, Zone 1 of the Bayview Hunters Point (Shipyard/Candlestick Point), and Transbay. The greater development and infrastructure needs for those developments are described in the Economic and Neighborhood Development chapter. The affordable housing components of the OCII Project Areas are represented in this chapter.

Treasure Island Development Authority

Treasure Island and Yerba Buena Island, located in San Francisco Bay, contain approximately 404 and 150 acres, respectively. In early 2003, the Treasure Island Development Authority and the Treasure Island Community Development, LLC (TICD) entered into an Exclusive Negotiating Agreement and began work on a Development Plan for the islands.

As of September 2024, 648 new residential housing units, 10 acres of new parks and open space, and the first stage of infrastructure on Yerba Buena Island and Treasure Island have been completed. At full build-out, the Treasure Island/Yerba Buena Island Development Project will consist of a new neighborhood composed of up to 8,000 new residential housing units, new open space, retail and commercial space, and transportation amenities. The greater development and infrastructure needs for the project are described in the Economic and Neighborhood Development chapter and the affordable housing components are represented in this chapter.

Housing Authority of the City and County of San Francisco

The Housing Authority of the City and County of San Francisco (SFHA) has converted the majority of its public housing units to permanently affordable sites owned by non-profit management firms to enable the use of tax credits as a funding source for those properties. SFHA will continue to ensure compliance with eligibility and other programmatic requirements at these sites, but the management of the facilities is no longer SFHA’s responsibility.

Some funding for capital projects is derived from specific sources and designated for specific purposes. In the first year of the Capital Plan, such funds are expected to provide $12.1 million, as shown in Table 5.6. These figures are pulled from Year 2 of the most recently completed budget cycle.

Table 5.6

Finally, it’s important to note local and state ballot measures that will have varying impacts on San Francisco’s infrastructure. This largely depends on how the funds can be used and their availability. Note that municipal G.O. bonds are described in the Introduction rather than this section. 

City revenue measures passed in the past two years include the following:

Proposition M (November 2024)

This measure reformed the City's business tax structure by delaying previously scheduled tax increases and restructuring tax rates. It aimed to provide immediate tax relief to small businesses and certain sectors, with planned rate increases in 2027 and 2028 to offset initial revenue reductions. The measure is projected to generate approximately $50 million in additional annual revenue after fiscal year 2029–2030. 

Proposition C (March 2024)

This measure provided a transfer tax exemption for the first-time conversion of commercial properties into residential use. It was part of broader efforts to address housing shortages by incentivizing the transformation of underutilized commercial spaces into housing units. 

Proposition I (November 2020)

This measure doubled the transfer tax rate for property sales of at least $10 million, with the highest tier now at 6%. The revenue was intended for rent relief and affordable housing initiatives. Between January 2021 and March 2024, it raised $324 million, with over $203 million allocated to new affordable housing projects and emergency rent relief.

State of California revenue measures include the following:

Proposition 1 (March 2024)

This measure authorized the issuance of $6.38 billion in bonds to fund housing for veterans and homeless individuals, as well as to provide additional behavioral health services. It also reallocated approximately $140 million annually from existing tax revenues for mental health and addiction care from counties to the state.

Proposition 2 (November 2024)

This proposition approved $10 billion in general obligation bonds to repair and upgrade facilities at K-12 public schools and community colleges, including charter schools. The funds are designated for new facilities, health and safety improvements, and classroom upgrades.

Proposition 4 (November 2024)

This measure authorized $10 billion in general obligation bonds for water infrastructure, wildfire prevention, and the protection of communities and natural lands from climate risks.

San Francisco has adopted numerous special financing districts to finance public infrastructure and affordable housing to benefit newly developing areas and for infill areas of the city. Projects that may be financed by these districts vary by law but can include streets, water and sewer systems, libraries, parks, public safety facilities, and affordable housing.

Authorized under the Mello-Roos Community Facilities Act of 1982 and/or the City’s Special Tax Financing Law, Community Facilities Districts and Special Tax Districts (collectively, CFDs) assess a special tax lien against taxable property within a district to fund capital projects and/or ongoing operations and maintenance costs. These districts are typically established either by a two-thirds vote of property owners or registered voters within the district and by approval of the Board of Supervisors. The following CFDs have been established: Treasure Island, Central SoMa, Pier 70 (Condo and Leased Properties), Mission Rock, Transbay (partnership with the Transbay Joint Powers Authority), Potrero Power Station, and CFDs at Hunters Point/Candlestick Point (OCII) and Mission Bay (OCII).

California State Government Code allows municipalities to fund improvements within a designated geographic boundary through the formation of infrastructure finance districts (IFDs), infrastructure revitalization and financing districts (IRFDs), and enhanced infrastructure financing districts (EIFDs) (collectively, IFDs). These districts capture future increases in property tax revenue stemming from growth in assessed value as a result of new development. In San Francisco, that incremental increase in property revenue from an IFD is typically shared between the City and the developer of the project. IFD proceeds are used to finance public capital facilities or other specified projects of communitywide significance that provide significant benefits to the district or the surrounding community.

Each district has as a unique plan of finance for the use of tax increment or special taxes, which is outlined in each district’s legislatively-approved Infrastructure Financing Plan for IFDs or Resolution of Formation for CFDs.  

Table 5.5 provides an overview of existing and proposed IFDs in San Francisco. One of the policy constraints approved by the Capital Planning Committee and ratified by the Board of Supervisors is that total IFD debt should not exceed 5% of the City’s total annual property tax revenue. The 5% threshold is being tracked by the Controller’s Office of Public Finance. For more information on San Francisco’s policies for the establishment and use of IFDs, including the relevant fiscal constraints, please see Appendix D.

Table 5.5

San Francisco must expand its infrastructure to manage the impacts of a growing population as more residents utilize transportation networks, streets, parks, utilities, and other public assets. Where new growth has been concentrated -- geographies including Eastern Neighborhoods, Market & Octavia, Visitacion Valley, Balboa Park, Rincon Hill, South of Market, and Transit Center -- the City established development impact fees, which are paid by developers, to fund the services that are required by new residents of these areas. 

Development impact fees for these high-growth areas are programmed by the City’s Interagency Plan Implementation Committee (IPIC), which is chaired by the Planning Department. Each year, IPIC develops an expenditure plan for projects to be funded by impact fees with input from each Plan Area’s respective Citizen Advisory Committee. Funding for the expenditure plan is appropriated through the capital budget process each year. While impact fees are collected by the Planning Department, funds are transferred to the departments implementing those projects, such as Public Works, Recreation and Parks, or SFMTA.

The City estimates it will raise approximately $383 million in Plan Area impact fees over the next 10 years. This amount is considerably smaller compared to previous plans. Table 5.4 shows that estimate by area.

Shifts in development patterns beginning in 2020 and new City legislation in 2023 significantly limited impact fee revenue potential. Impact fee revenue is projected to be insufficient to cover all the capital and public works projects needed in their intended areas. The City will continue to seek opportunities to leverage these impact fees and identify complementary funding.

Table 5.4