Sneak peek: Mayor Ed Lee has a housing solution Mayor calls for building 30,000 affordable homes

S.F. Mayor Ed Lee's state of the city address spotlights the need for low- and middle-income homes. S.F. Mayor Ed Lee's state of the city address spotlights the need for low- and middle-income homes. Photo: Michael Short, Special To The Chronicle Photo: Michael Short, Special To The Chronicle Image 1 of / 10 Caption Close Sneak peek: Mayor Ed Lee has a housing solution 1 / 10 Back to Gallery

Mayor Ed Lee thinks he has a solution to slow the accelerating problem of homeowners being priced out of San Francisco and the Bay Area - build new housing at perhaps the fastest rate in the city's history.

That's the centerpiece of Lee's annual state of the city address, to be delivered Friday. He will call for 30,000 homes to be built or rehabilitated over the next six years, with more than half being affordable to low- and middle-income residents making up to $145,650 for a family of four.

"It can't be fast enough for us," said Lee, who will deliver the speech at the construction site of 247 townhomes on land that once was the Hunters Point Naval Shipyard. The area is one of several planned neighborhoods to be built on parking lots and former industrial sites on the eastern side of the city.

It's an aggressive benchmark and comes amid what even Lee acknowledges is a "housing crisis."

San Francisco's economy is surging, and Lee gets much of the credit because of his pro-business policies, including overhauling the city's business tax and offering tax breaks that have benefited tech firms in particular. But he has also been getting some of the blame for a spike in evictions in a city where the rents are the highest in the country and the median home price has hit $1 million.

The affordability crisis has fueled a backlash against the tech sector that Lee helped grow. It has resulted in the displacement of some nonprofits, forced some longtime residents from their homes, and left many residents uncertain about their ability to afford housing in the future.

But the housing problem has tangled roots and isn't just the result of the tech boom. Also to blame: years of organized opposition to development, the economic collapse in 2008, and the quirk of geography that makes San Francisco so beautiful and confines it to just 49 square miles.

'Our own making'

"We are all responsible - this is a crisis of our own making," Lee said in a draft of his speech obtained by The Chronicle. "For too long in San Francisco, we've tried to have it both ways. We want more money for affordable housing, but too often we oppose or scale back the very projects that generate those funds."

Lee's address, which is also expected to include plans to revitalize Muni, a proposal to scale back the use of parking meters on Sundays and new attempts to improve the homeless situation, will contain a clear defense of his economic policies, aides said.

"I'm never going to let go about jobs, because I still think for anybody thinking about affordability in the city you've got to have jobs, good jobs," Lee said Thursday.

During his first three years in office, his policy focus has often been summarized as "jobs, jobs, jobs."

Now, add housing to the mix.

Lee will propose a seven-point plan that includes building housing over existing city facilities and doubling the amount of down-payment assistance that the city will provide to middle-income home buyers, up to $200,000. Lee wants 5,000 new homes built or rehabilitated each year over the next six years.

"That's a heck of a lot when you're looking at what we've done in past years," Lee said Thursday. In 2011, only 348 housing units were completed. In 2009, a banner year, the number was 3,500.

Construction speeding up

With the city's economy growing, construction is already speeding up. This year, more than 10,000 housing units are under construction or are holding building permits and are ready to be built, according to city figures. Another 12,000 units are in the permitting pipeline, with an additional 25,000 part of already adopted development plans, Lee's administration said.

"He's putting forward an agenda that's going to make a difference for every part of the housing continuum," said Gabriel Metcalf, executive director of SPUR, a smart-growth think tank. "It is a heavy lift, but if we're able to do everything in it, it would make a difference on housing prices."

Some of the new market-rate homes, like the townhomes being built at the Hunters Point Shipyard, or some of the 1,600 units planned for the former Schlage Lock site in Visitacion Valley, will be affordable to the middle class by virtue of their far-flung location, officials said.

A two-bedroom townhome at the shipyard, for example, will go on the market for less than $600,000, a city official said.

But building new homes isn't enough, Lee said, and the city needs to preserve its existing housing, particularly rent-controlled apartments, which are often occupied by long-term tenants.

A recent report by the city controller found the city has lost rent-controlled units at least three years in a row, including more than 1,000 units in the past two years. Those apartments have been converted for sale, taken off the rental market by an owner or replaced with new construction not subject to rent control. Metcalf and others say the number is higher.

Lee has blamed real estate speculators who buy apartment buildings, kick out the tenants and convert the units for sale. The practice is allowed under the state's Ellis Act law.

One aspect of his plan includes his announced effort to amend the Ellis Act and seek greater protections for tenants.

"We could lose as many (as we build) by not paying attention," Lee said.

Part of Lee's plan is a novel program to offer financial incentives such as no-interest loans to housing nonprofits like the Tenderloin Neighborhood Development Corp. or Chinatown Community Development Center. Those loans would be used to buy smaller buildings, with between five and 15 units, so that the tenants could remain in place.

Speculators 'attack'

Such nonprofits typically focus on building and operating larger buildings, but the smaller buildings are the ones speculators most frequently "attack," Lee said.

The theory is that the program would enable nonprofits to buy up buildings like the one that elderly renters Poon Heung Lee, his wife, Gum Gum Lee, and their mentally disabled daughter were evicted from in October. They'd lived there for 34 years.

The Lees became the public face of the housing problem.

"We have entered unprecedented terrain in terms of the affordability crisis," Metcalf said. "I think it is just the right thing to be proposing some ideas like that. Will it work? Time will tell."