San Francisco's housing crisis can be attributed to many things indirectly: a booming regional economy, great weather, good food, and a finite amount of developable land. But it's directly a product of not enough housing. In the last few years a new form of housing, known as lofts or live/work spaces has found its way into the San Francisco landscape. Artists, pioneering the live/work lifestyle, set the trend, while developers rushed to make a profit. At the time of the November 2000 election Mayor Brown, supporting loft development, and Sue Hestor, adamantly opposing it, placed Propositions K and L on the ballot. Both Propositions would have exacerbated San Francisco's affordable housing crisis. L would have stunted market rate housing construction, making all housing more expensive and forcing loft developers to compete with traditional housing developers, while K would have developed all of the city's remaining land, land that must incorporate affordable housing, with office space and/or 'unaffordable' housing.

Affordable housing is "priced to be affordable to specific segments of the population . . . who cannot afford market-created housing" (Fulton 1999, 351). Outside of San Francisco and the Bay Area, affordable housing is usually developed for people earning very low to low incomes, less than 80% of the median income for the area, but in San Francisco not even people making moderate incomes, 80 to 120% of the median income for the area, can afford market created housing. Federal guidelines suggest that people should spend no more than a third of their income on housing. By these standards in 1998 only 20% of San Franciscans could afford a median priced home, while 36% could afford the median rent for a vacant two-bedroom apartment. With housing prices increasing dramatically in the last few years, 25% alone in the year 2000, and vacancy rates well below a healthy 5%, the number of San Franciscans who can afford to live here is dwindling (SF Chronicle).

What's causing housing to be so unaffordable here? A decline in housing construction paired with an increase demand is the main culprit. In the 1970s on average 1,700 housing units were built every year. That number dropped to 1,000 housing units per year in the 1990's. The drop wasn't due to a decrease in demand. Between 1988 and 1995 the Association of Bay Area Governments (ABAG) projected a need for 23,405 new housing units, while San Francisco gained only 7,768 new housing units between 1988 and 1998. Rapid job growth in a growing regional economy has driven the demand. Since 1995, an estimated 11 new jobs have been created for every one housing unit (P-166). Even as the economy slows, ABAG forecasts the creation of 104,800 new jobs in San Francisco over the next 20 years.

Housing construction began declining in the late 1970s as traditional housing became harder and harder to build. Neighborhood opposition to new housing provided the impetus for the Board of Supervisors to pass a rezoning of residential districts in 1978. The rezoning or "down zoning" dramatically decreased the permitted density in residential districts. The supervisors who voted against the down zoning, including Quentin Kopp and Robert Gonazales, called it a 'disaster' that would result in 'pricing people out of the city.' The Board of Supervisors compromised by repealing the 1921 zoning ordinance prohibiting building residential units in industrial areas. Planners identified housing opportunity sites on vacant industrial land with enough room to build 223,000 new housing units (rbasf.com). Neighborhood opposition was only part of the mounting difficulty of building traditional housing. In 1978 California voters passed Proposition 13, cutting revenue generated from property taxes on all developments by more than half (ppic.org). The city began relying on developments that generated money in addition to property tax. Retail and office developments, generating both employment and sales tax, became favored over traditional residential development.

As traditional housing no longer paid for itself and was therefore becoming scarcer and more expensive, the city began extracting funds from office and other developments for affordable housing. Currently office developments are required to pay $10 per net additional square foot of office space to the affordable housing fund or donate the equivalent amount of land to an affordable housing developer. Market rate residential developers didn't entirely escape affordable housing contributions. Currently residential developments of ten units or more are suggested, but not required, to include 10% affordable housing for a period of 20 to 50 years. This policy should have created about 1,400 new affordable housing units since 1990. But in reality only 112 affordable condominiums and 27affordable apartments were created (Byre October 25, 2000: 33).

None of these efforts generated enough housing to meet the demand. And even in industrial areas with enough vacant land to build 223,000 units, where there was little neighborhood opposition, and where higher densities were permitted, only a fraction of the units were built. After the Board of Supervisors changed the planning code in 1988 to allow live/work developments, the majority of housing that the private market has built on those industrial sites was 'live/work' units, rather than 'office space' or 'dwelling units.' These live/work developments were originally intended to provide affordable housing and workspace for the city's artists. 'Live/work' space typically consists of one large bedroom with loft and a separate bathroom. Artists made live/work units popular and accessible to the young, wealthy professional, and developers jumped on the opportunity. Since 1987, 1,918 live/work units have been built, 90% of them in the last three years (Welch July 13, 2000: A23).

Live/work developments were profitable to private developers because they were easier to develop outside of current regulations and lacked the objection normally raised from neighboring homeowners in established residential neighborhoods. 'Live/work units' weren't 'dwelling units' nor were they 'office space' (although they're frequently used for both) allowing them to bypass development fees and inclusionary affordable housing requirements. The original live/work law required residents to work in units and a least one person to live in each unit.

Opponents of live/work construction rightfully argue that their non-dwelling unit classification unfairly exempts them from including affordable housing without replacing it. Lofts now aren't affordable for most San Franciscans, as originally intended. Critics argue that the original requirement that residents work in units is not being enforced, nor are their regulations permitting loft space from being used entirely for offices. Live/work units aren't classified as office space even when the entire unit is used for offices, exempting them form the annual office cap. Critics also oppose the design standards, arguing that a higher density could be achieved with lower ceilings and neighborhood character could be preserved through total height limitations (Daly March 28, 2001: 2).

Proposition L

While Prop L was primarily intended to stop rampant displacement of local artists, community services and industry by reigning in office and live/work developments it did identify affordable housing as number three of eight priority policies stating "that the City's supply of affordable housing be preserved and increased." Sue Hestor, the long time activist and author of Prop L sums it up "Land use determines who lives in the city. Are ethnically diverse people, people who are politically active, going to be able to live here?" Although intending to keep ethnically diverse, politically active people in the city, Prop L would have forced high-income people to compete for the city's diminishing stock of affordable housing. Housing the high-income will not alone solve the affordable housing crisis, but without it, there would be nothing to keep high-income people from driving up rents in existing units that presently house lower-income people.

If regulation means a dramatic decrease in housing construction, it must be paired with incentives that reward private developers for building to San Francisco's needs. While live/work units don't serve the needs of families, people with disabilities, or those in very low, low and moderate-income brackets, they do serve people in high-income brackets, urban professionals, and artists. Not meeting the needs of this group will not help meet the needs of the rest of San Franciscans. On the contrary the fixes proposed in Prop L would only have exacerbated the problem. Less total housing means more competition. Prop L would have placed a moratorium on new live/work units, except for a few 'integrated with work space for artists and artisans'. People who can and will pay more for housing are left competing with middle-income people for middle-income housing. Making middle-income housing more expensive. Those people, being priced out of their original housing compete for a less expensive housing stock. Acknowledging the recent popularity of lofts, Prop L would have created a new category under residential uses called 'loft housing' 'that would be subject to the same requirements and fees as regular housing'' (legal text of Prop L). Making live/work units into dwelling units includes suggesting (not mandating) a 10% inclusion of affordable housing for developments of 10 units or more, requiring impact fees for transit and schools, and applying current residential design standards to lofts.

This reclassification of live/work units as residential loft housing would exacerbate the housing crisis in two ways. First, it would make loft and traditional housing developers compete for the same permits. Those developers with the most profitable developments dominate, decreasing the city's production of 2+ bedroom residential units. Second, it would take away almost all current incentives to build market rate housing.

The only remaining incentive for market rate developers to build loft housing would be lack of neighborhood opposition, because of their location in industrial zones. But even industrial zones have become problematic with the interim zoning controls that created an industrial protection zone where residential and live/work units needed conditional use permits from the planning department and a mixed-use zone that permits all of the above. (http://www.ci.sf.ca.us/planning/livework.htm). While the need for protecting industrial space is important people have quickly forgotten that the original intent in lifting the ban of building housing in industrial zones was to provide a source of new housing for the city. Sue Hestor herself has forgotten, commenting on loft developers, "they build in some of the strangest places--right up against a scrap metal farm, for instance" (Curtis July 15, 1999).

Proposition K

Prop K, the alternative initiative, placed on the ballot by Mayor Brown would have developed all of San Francisco's remaining land unaffordably. Brown revealed his intent to develop all of San Francisco's remaining land at the ground breaking of One Embarcadero when he announced, "Mayors are known for what they build and not anything else, and I intend to cover every inch of ground that isn't open space" (Holden February 2001: 53).

Brown purposely ignored critics' opposition to live/work housing in Prop K allowing live/work developers to continue with business as usual. In ignoring live/work development, developers would have continued to build live/work units without including affordable housing. New live/work developments would have been permitted to demolish affordable housing without being required to replace it. An indefinite amount of live/work units would have been allowed to convert entirely to office space without counting against the annual office space cap. Allowing live/work units to be created without being regulated would ease the housing market for people who earn high income, 120% or more of median income, taking the pressure off existing affordable housing; but that alone won't do enough to solve the affordable housing crisis. Even if those live/work units are constructed under Brown's proposition all of them could be converted to office space.

A delicate balance must be struck between maintaining and even enhancing the private market's incentive to develop live/work units on the one hand and meeting the needs of San Franciscans who earn less than 120% of the median income on the other hand. Neither Prop K nor L struck that balance: L flipped entirely to one side killing live/work developments with a moratorium, while K flipped to the other side ignoring the problems live/work units cause entirely.

A more effective solution might be to regulate live/work units independently of residential units, rather than reclassify live/work units as purely residential. Reclassifying live/work units as residential will leave no incentives for developers to build housing. Live/work units should be mandated to include a percentage of permanently affordable live/work units. If this is deters developers from building live/work units, then that leaves space for non-profits and local government to build affordable housing but if it does get built it includes permanently affordable housing. Either way affordable housing gets constructed.

If inclusionary affordable housing is only suggested and not mandated, as is the current state of affairs, it won't help if live/work units are held to the same ineffectual standards as regular dwelling units. Instead of reclassifying 'live/work' as residential, why not require all affordable housing units to be replaced (or pay equivalent fee) no matter what development replaces them. Above all the opportunity for dense housing in San Francisco's industrial areas must be further explored. Since neither Prop L nor K passed, the city will now have to look for solutions that do not exacerbate the affordable housing crisis. That solution will have to recognize that live/work units, properly regulated, could keep the higher income people from driving up rents in lower income neighborhoods, and could thereby help alleviate the affordable housing crisis in San Francisco.

References

Association of Bay Area Governments [WWW document]. URL http:// http://www.abag.ca.gov/abag/ove rview/pub/p2000/summary.html. March 2, 2001.

Bay Area Council [WWW document]. URL http://www.bayareacouncil.org/ppi/hlu/hlu_jhf1.html

Byrne, Peter. (October 25, 2000). "The Affordable Housing Diaster." San Francisco Weekly.

Curtis, Mary. (July 15, 1999). "San Francisco's Mission District Fights Yuppie Invasion." Los Angeles Times.

DeLeone, Richard. (1992). Left Coast City: Progressive Politics in San Francisco, 1975 - 1991. Kansas: University Press of Kansas.

Fulton, William. (1999). Guide to California Planning. Point Arena, California: Solano Press.

Holden, Martin. (February 2001). "SoMa Rising." San Francisco Magazine.

Media Alliance [WWW document]. URL http://www.media-alliance.org/housing/propmfiled.html. March 12, 2001.

Public Policy Institute of California [WWW document].URL http://www.ppic.org/publications/occasional/chapman.html. March 15, 2001.

Residential Builders Association [WWW document]. URL http://www.rbasf.com/View-2a.html. "It Wasn't Broken. But They Fixed It, Anyway." November 8, 2000.

San Francisco Voter's Guide (November 2000).

San Francisco Planning Department [WWW document]. URL http://www.ci.sf.ca.us/planning/livework.htm. March 1, 2001.

San Francisco Planning Code [WWW document]. URL http://www.amlegal.com/sanfranplanning/lpext.dll?f=template s&fn=altmain-nf-contents.htm&cp=Infobase&2.0. March 1, 2001.

Welch, Calvin. (July 13, 2000). "Lofty Ideal Isn't Really What It's Cracked Up to Be." San Francisco Chronicle. A-23.