Exclusive: Mission moratorium won’t help affordable housing strife, city report finds

In a much-anticipated study, San Francisco’s chief economist found no evidence that a temporary moratorium on building pricey apartments and condominiums in the Mission would stem evictions or slow gentrification, a draft obtained by the San Francisco Business Times shows.

Egan’s official report is scheduled for release Thursday.

While moratorium advocates have called the November ballot measure a “pause” to help reserve more sites for affordable housing, the report authored by Ted Egan of San Francisco’s Office of Economic Analysis finds that it would also have some negative effects on the housing market.

“A temporary moratorium would lead to slightly higher housing prices across the city, have no appreciable effect on no-fault eviction pressures and have a limited impact on the city’s ability to produce affordable housing during the moratorium period,” the report reads.

The analysis concluded that a temporary moratorium would have no potential benefits, such as opening up land for affordable housing developers to buy instead of market rate builders. The San Francisco Planning Commission has delayed several votes to add scrutiny – known as interim controls – to market rate housing approvals until the report is complete, adding weight to its findings.

The 18-to-30-month market rate housing moratorium – known as Proposition I on the Nov. 3 ballot – is also one of the most controversial political and land-use issues in San Francisco this year. It’s become an ideological benchmark in a city with soaring real estate prices and reportedly has a majority of support citywide in early polls.

The moratorium would delay the construction of 752 to 807 units for an average of 10 to 17 months, the report finds. About 97 to 131 units restricted for low-income residents and tied to those market rate projects would also be delayed. The temporary stall of those new units would hurt new renters’ wallets slightly, to the tune of about $15 to $174 a year each, the report finds.

The report suggests “alternative approaches, such as increasing affordable housing subsidies, and liberalizing land-use controls in the Mission and elsewhere in the city.”

Data points

The report provides new data on some of the city’s most crucial housing issues. It finds evidence that new market rate housing slightly drives down home prices in the surrounding blocks – a question never studied in San Francisco before, Egan notes. The full draft report is embedded below.

Nobody argues that the neighborhood has changed immensely, especially since the last dot-com boom started in the late 1990s. Using U.S. Census data, Egan’s report finds that the neighborhood has gone from a low-income enclave to a neighborhood with almost as many high earners as the city at large.

In 1990, half of the neighborhood’s households made less than $50,000 and 5 percent made more than $150,000. Those numbers drew closer together to 37 percent and 22 percent, respectively, by 2012.

But that gentrification has happened without much market rate housing, Egan writes. The neighborhood saw a net loss in housing units between 1970 and 2000, but housing supply started to grow by 193 units a year between 2000 and 2010, growing by 1.3 percent annually. Between 2000 and 2013, about half the new units built were affordable.

Meanwhile, 5,000 new residents arrived in the neighborhood each year between 2009 and 2013. The report also finds that 97 percent of new upper-income people who move to San Francisco go into existing housing, not new housing.

“This fact alone could cast doubt on the idea that market-rate housing is largely responsible for the clear evidence of gentrification that the neighborhood has experienced,” the report notes.

In addition, “our analysis do not find statistical relationship between housing prices and evictions, in the Mission or in the city as a whole,” the report finds.

Politics of housing studies

Politically, the report helps bolster the cause of moratorium opponents. Some real estate developers have poured hundreds of thousands of dollars to beat the measure. Mayor Ed Lee has spoken out against the moratorium, but most of the progressive wing of the Board of Supervisors have backed it.

“The report pokes a hole in every single argument that the backers of this Mission moratorium have articulated,” said Supervisor Mark Farrell, who requested that the Office of Economic Analysis investigate the moratorium’s effects earlier this year. “They have been sold a bill of goods which cannot deliver on its promises.”

Moratorium supporters questioned its findings. As a response, Supervisor David Campos’s office requested that the city’s legislative analyst office research how displacement trends could affect the neighborhood’s demographic makeup in the future. It would also ask how much new housing needs to be built to lower prices in the Mission.

“Your report completely misses the mark on the purpose of a luxury development pause,” Campos wrote to Egan in an email obtained by the Business Times. “You make it sound like the end goal is to permanently stop all development when the pause simply creates breathing room – without the onus of looming development pressures – to allow the City and the Mission to create short- and long-term solutions that address the current displacement crisis and to identify opportunity sites that could be acquired for affordable housing.”

But the report says even that strategy has flaws, in part because affordable housing developers still have to pay land prices that exceed the income that owners currently get from the site’s uses, such as gas stations, parking lots and warehouses. “The owner of a developable parcel may well be better off after a moratorium, and even less inclined to sell to an affordable housing developer at a pre-moratorium price,” the report states.

The mayor’s office, in tandem with some Mission affordable housing advocacy groups, are working on alternative plans to bolster eviction protections – and possibly increasing some height allowances and affordable housing fees – in the neighborhood. The Mission Action Plan 2020 is due out next year.

In many ways, the Mission’s advocacy has already made great gains even if a moratorium doesn’t pass in November. Campos and other Mission advocates pushed Lee to add $50 million in November’s $310 million housing bond for site acquisition for fully affordable housing. Major market rate residential projects on Bryant Street and by the 16th Street BART station have also faced delays because of neighborhood advocacy for more affordable housing.

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