By Meghan Hall
San Francisco is often heralded as a beacon of economic prosperity and one of the nation’s most important economic and cultural centers. The City — and greater San Francisco Bay Area — has seen a stronger and more sustained period of economic prosperity than is historically typical, but the impact of that growth is not always positive. Despite an explosion of development, it has become difficult for the middle class to live within the city limits of San Francisco, and until recently, city and regional officials’ attempts to create a sustainable source of housing for middle-income earners had been largely thwarted by a variety of legal, economic and bureaucratic factors. However, the City of San Francisco and San Francisco Unified School District are making long-awaited progress on plans to redevelop the Francis Scott Key Annex into a 130-unit multi-family housing project for educators. The City and SFUSD are working with affordable housing developer MidPen, who is expected to submit a formal project application for the site in March.
“There has been a desire among policy makers in the City, including at SFUSD and City Hall, to create affordable educator housing for a very long time,” explained Kate Hartley, director at the Mayor’s Office of Housing and Community Development. “As a region and frankly as a country, we really struggle with income disparity so that in city centers you see very high wage growth, but among most people — working people — wage growth has not kept pace with the rise of housing costs.”
That income disparity is particularly apparent in the city of San Francisco. The median income in the city, according 2017 data from the U.S. Census Bureau — the most current available — is $96,265. However, according to SFUSD’s website, teachers earn less than that; for the 2019-2020 school year, educators are expected to make between $63,458 and $81,623. Meanwhile, the median home price at the end of 2018 was $1.3 million, according to Trulia. San Francisco is the second-most expensive metro in the country in which to purchase a home, according to an analysis conducted by HSH Associates, which tracks mortgage and home-buying markets around the country. Homebuyers in San Francisco would need to make around $199,000 annually to afford a home in the city with a 20 percent down payment. With a ten percent down payment, buyers would need to make $229,000 annually.
Median apartment rental rates have not fared much better; at the end of February 2019 neared $4,100 per month, requiring educators in some instances to allot much more than the 30 percent most savings analysts tout as the appropriate amount to spend on housing each month.
According to MidPen’s Director of Housing Development Alicia Gaylord, the development will be 100 percent affordable, and the rental rates will largely depend on the educators living there.
“We have several rental rate tiers,” she explained. “Depending on the size of the unit and how much they make, teachers could save between $400 to nearly $2,000 off of the market rental rate, so quite a bit.”
There are a myriad of reasons as to why housing development — especially for middle-wage earners — has failed to keep pace with demand. Job growth has significantly outpaced the creation of housing, but, said Hartley, a number of legal and bureaucratic influences has kept development for those such as educators at bay. Among them were limitations as to how the City could fund projects for those not classified as very low- or low-income wage earners. Prior to 2016, state policy did not allow municipalities to use tax credits to fund educator housing. In August 2016, bill SB1413, spearheaded by then-state Sen. Mark Leno, D-San Francisco, passed, allowing educator-only developments to qualify for state and federal grants.
“Typically, when you use tax credits, you have to make that resource available to the general public overall because it is an important public resource, and you cannot essentially discriminate in favor of one group over another, unless there is a compelling reason to do so.” said Hartley. “However, the state has recognized that educator housing is such a high priority, it is now considered compatible with low-income tax credits. We do build housing only for people who are homeless, only for people who are seniors, only for people who have disabilities; through Sen. Leno, educator housing fell into that special category, too. It really freed us up from a big obstacle that previously existed.”
Other barriers to development, although smaller, also had an impact. Discretionary review of housing developments and the use of extra environmental reviews to stall redevelopment have been tactics used by neighborhood communities to slow the pace of development.
“The Bay Area is pretty notorious for having a very high regulatory burden that often prevents housing developments from moving forward, even if the proposed housing is within existing zoning controls,” said Hartley. “There was actually an attempt years ago to bring educator housing to the City that neighbors actually opposed. Thankfully, we’re pretty far removed from the days where the neighborhood association would be opposed to affordable teacher housing.”
The 60,000 square foot site, located at 1351 42nd. Ave., is considered a surplus site by SFUSD. The five-story development will include a mix of studios, one-, two- and three-bedroom dwelling units. A 1,310 square foot community center and a 6,250 square foot publicly accessible open space are also included in the project plans. The City and SFUSD selected the site, according to Hartley, because it was perceived to be the best development opportunity. Currently, the site is developed with a vacant parking lot and few small recreational buildings, making redevelopment a bit easier. The site is also well located; at the heart of the Sunset District, it is just several blocks from both Ocean Beach and Golden Gate Park.
The project is the first educator-focused housing project in San Francisco, and according to Gaylord, will be funded through a variety of means. MidPen estimates the cost of the project will total around $98 million, including the value of ground lease, which comes in at about $20 million. Gaylord said the lease is not yet signed, but it is expected to be typical of other, City-based ground leases and is expected to expire after 99 years. Once MidPen submits a formal application, the approvals and entitlement process will take about a year, with construction beginning in late 2021 or early 2022. The project will be an example for other surplus SFUSD sites moving forward, said Hartley. SFUSD is currently looking at bringing on a development consultant to push forward the redevelopment of other sites in the City.
“We have every confidence that this is going to be a great project,” said Hartley. “MidPen is a really successful developer; they have a great team; they have community buy-in. These educators will be able to live affordably in San Francisco in a way they otherwise would not be able to.”
However, both Hartley and Gaylord emphasized that permanent educator housing is just one avenue officials should be pursuing to address the housing crisis.
“We think that this is one piece of the solution; I think we want to make sure its known that we advocate and support paying educators for the value of the work that they do,” said Gaylord.
“We want to make sure that having a sustainable salary that allows teachers to live in San Francisco is also a part of the full solution.”
Currently, the City has down payment assistance loans, eviction defense and housing counseling to help educators maintain residences in San Francisco, said Hartley.
“We’re trying to bring as many resources to this effort as we can, both on the supply side and the demand side,” she explained. “It is pretty complicated, and it is definitely a national, state and local effort to provide the housing necessary to house the workforce that makes our local economies strong.”