SF controller’s affordable-housing compromise gets mixed response

San Francisco City Controller Ben Rosenfield San Francisco City Controller Ben Rosenfield Photo: Erin Allday, The Chronicle Photo: Erin Allday, The Chronicle Image 1 of / 1 Caption Close SF controller’s affordable-housing compromise gets mixed response 1 / 1 Back to Gallery

It was intended to help San Francisco come up with a plan for alleviating its housing crisis.

But the analysis by San Francisco City Controller Ben Rosenfield, finalized Wednesday, has generated nearly as much debate around City Hall as consensus, an indication of the political fights to come and just how challenging the problem is.

The question before city officials is how much affordable housing developers should have to rent or sell in new market-rate buildings. That’s a huge issue in places like the Mission, where the construction of luxury apartment buildings has dwarfed the creation of housing for low- and middle-income residents.

Rosenfield’s analysis concluded that developers can afford to rent up to 18 percent of new apartments and sell up to 20 percent of new condominiums at below-market prices without jeopardizing overall housing production. That’s less than the current requirement of 25 percent to get approval for new construction, but more than the 12 percent mandated by the city for most of the past several years.

Supervisors Jane Kim and Aaron Peskin announced legislation Wednesday that would require developers to rent 24 percent of new units and sell 27 percent of new condominiums at below-market prices. Kim described it as “pro-housing legislation” that would encourage developers to build bigger, denser buildings.

The proposal generated a harsh response from Mayor Ed Lee. “We have got a city that is emotionally making decisions and putting out numbers there that have no relevance to what we economically can accomplish,” Lee said Thursday.

He supports legislation that sets the affordability requirement at between 16 and 18 percent for rentals, and between 18 and 20 percent for condominiums.

The problem is what to do about a state law that allows developers to make their buildings 35 percent more dense — including adding more floors than zoning allows — if they provide a certain number of affordable housing units. The factors are complicated, but theoretically a 100-unit rental building could grow to 135 units if it meets certain requirements.

Rosenfield said that if developers take advantage of that law to get what’s known as a density bonus, they could afford to rent up to 24 percent of units and sell up to 27 percent of condominium units at below-market prices.

That’s how Kim and Peskin get to the numbers in their legislation. Of the affordable units, 60 percent would be designated for low-income residents, those earning up to $59,250 per year for a family of four. The other 40 percent would be for middle-income residents, those earning up to $107,700 for a family of four.

“We think this will encourage developers to take advantage of the density bonus,” Kim said. “We’re arguing that density is a good thing. We all need to build a little more.”

But critics point out that if developers don’t take advantage of the density bonus law, they may not be able to afford to rent or sell so many units at below-market prices. So far, just one San Francisco developer has taken advantage of the law, although more are expected to do so.

“There are certain neighborhoods in the city like mine — the outer neighborhoods — where if you set the inclusionary percentage too high, you run the risk of killing projects altogether,” said Supervisor Ahsha Safai, who represents the Excelsior.

Safai, Kim and representatives from the mayor’s office all say that their preference would be to simply set higher affordability requirements for developers who take advantage of the density bonus program. But that’s against the density bonus law. To get around that barrier, Rosenfield recommends that developers who take the density bonus option pay an extra fee that would go into a city fund that pays for the construction of low-income housing.

“I think it’s a really elegant solution. On-site units are good. Fees are good, too,” said Dan Adams, direction of real estate development for Bridge Housing, a nonprofit developer. He was part of a group of outside consultants and nonprofit and private developers who helped Rosenfield conduct the analysis.

But John Elberling, executive director of nonprofit developer Todco, criticized the recommendation, saying it would result in a “windfall” for developers because the fees are too low. He also said allowing developers to “fee out” will mean residents have to wait longer for the construction of new, affordable units.

“We don’t get more units and the developers get a big windfall,” Elberling said.

Emily Green is a San Francisco Chronicle staff writer. Email: egreen@sfchronicle.com Twitter: @emilytgreen