The Facts

The Board of Supervisors voted 9-2 on July 14 to cut San Francisco's inclusionary housing requirement, the rule that requires homebuilders to sell or rent a share of new homes at below-market prices, from 15% to 5%, and exempted buildings with fewer than 24 homes entirely, reports Aaliyah Español-Rivas at Mission Local.

But the new rate will not apply everywhere. District 9 Supervisor Jackie Fielder won a 6-5 amendment keeping the Mission at 8%, the highest rate in the city, over the opposition of Supervisors Dorsey, Wong, Sherrill, Sauter, and Mandelman.

The Context

Nobody builds at a loss: a project only gets financed when expected rents cover the cost of construction (land, labor, and materials), and every required below-market home is an extra cost the building must absorb. When costs are too high, builders don't just build less, they don't build at all.

In April, the City Controller recommended a rate of zero, warning that "requirements significantly above 0% would further threaten feasibility and would not create additional housing".

The Mission's higher rate echoes a repeatedly disproven fear that building new homes actually causes displacement. If that line of thinking were true, then it would follow that demolishing homes would make a neighborhood more affordable."

The GrowSF Take

The Board continues to show an unwillingness to confront economic reality. When the City's top economist says that even 0% is infeasible and the Board reacts by setting the requirement at 5% and 8%, they show they care more about politics and virtue signaling than about actually building.

The even-higher rate in the Mission will further ensure that as the city's broader economy recovers, the Mission will increase in price faster due to the further restricted supply, causing the displacement that the Board claims to fear.

Supervisor Melgar was close to getting it, saying "5 percent of 100 is five, and it's more than zero." But, of course, with 5% being completely infeasible, it'll actually be 5 percent of nothing.

The way to get more affordable housing is to build more housing. Austin built, and rents fell.