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Preserving Rental Housing in San Francisco

by · September 19, 2016

San Francisco’s housing affordability crisis has been painful for renters. Two-thirds of San Francisco households rent, and a small percentage of renters live in permanently affordable housing. Many renters feel heightened insecurity about getting displaced from housing they can afford, and all but the most affluent feel squeezed by rising housing costs. The goal of decent and affordable housing for all seems remote.

However every crisis is an opportunity for fresh thinking and new ways forward. In the past few years, San Francisco has made some smart moves towards preserving the City’s rental housing – protecting housing from earthquakes and other disasters, discouraging demolition, conversion, and merger of affordable units, and supporting acquisition and rehabilitation of housing.

San Francisco needs to add new housing, especially affordable units. Preservation and new construction complement each other. The Urban Institute’s recent report emphasized the importance of preserving affordable housing as part of an overall housing affordability strategy:

While new construction is part of the puzzle, the complex and costly process of development means these efforts have not kept up with demand. Preserving existing affordable housing is an important supplement to new developments, and it prevents displacement, is generally cheaper than building new housing, and conforms to existing land-use patterns

San Francisco still has room to add housing without losing any existing housing. The City’s General Plan Housing Element estimated that there’s room for nearly 70,000 new housing units on vacant land, underutilized sites, and in three large development areas (Mission Bay, Treasure Island, and Hunters Point-Candlestick Point). Modest zoning changes  could create room for even more housing on available land, and legalizing accessory units can add more units in existing buildings.

San Francisco had 382,551 housing units at end of 2015. About 172,000 are rent-stabilized, while 6,300 are public affordable housing and 16,000 are permanently affordable, mostly in nonprofit ownership.

In 2015, San Francisco started tracking its housing balance – the number of permanently affordable units built, acquired, or rehabilitated, against the number of rent-stabilized and affordable units lost to demolition, conversion, merger, and long-term removal from the rental market. In the decade 2005-2014, 5,759 units were added, while 4,104 lost their protected status. These figures highlight our need to do more to protect affordable rental housing even as we redouble our efforts to create new housing.

Earthquake safety

In 2013, the city required that soft-story buildings – multi-unit wood frame buildings built over a structurally weak basement, parking, or storefront level – must undergo mandatory earthquake safety retrofit work. The Mandatory Soft Story Retrofit Program includes about 5000 buildings citywide. Retrofit work must be completed between 2017 and 2020, depending on the specific building type. Retrofit costs may be passed through to tenants.

In 2015, Livable City worked with the Board of Supervisors to permit buildings to add units as they undergo safety retrofit. New units can strengthen vulnerable buildings by adding interior walls, and can help owners defray the cost of retrofit work by providing an additional source of rental income. The program was enacted in April 2015, and there were 72 applications for 130 units as of June this year.

The City offers a low-interest Public Financing Option for mandatory and voluntary earthquake retrofit work, including adding units. The City is currently exploring whether to require retrofits for other vulnerable building types, including certain concrete and steel buildings.

Preventing demolition, conversion, and merger

In 2008, the city strengthened its provisions for the demolition, conversion, and merger of units, to discourage the loss of units, and encourage their in-kind replacement when units are lost. In recent years, the city closed two loopholes in the law to protect more units. Prior to 2014, the Planning Code forbade building owners from improving or expanding dwelling units which exceed current density limits, and the Code’s merger criteria encouraged the removal of these units. Density limits were imposed citywide from the 1950s through the 1970s, and are often arbitrary and a poor fit with the diversity of buildings in established neighborhoods. Over 50,000 units, mostly older and rent-controlled, are lawfully existing but exceed current density limits, and were vulnerable to loss under the old law. Livable City helped draft changes to the law to permit the improvement and enlargement of nonconforming units, and to discourage demolition, conversion, or merger regardless of current density limits.

San Francisco has an estimated 20,000-30,000 unauthorized rental units. Most of these units are in rent-stabilized buildings. In 2014 the city created a path to legalization for these units. However building owners could still remove unauthorized units at will. 2015 saw a fourfold increase in the removal of unauthorized units, and unauthorized units account for most of the units lost since 2014. Livable City worked with Supervisor Avalos to close this loophole, and in April of this year the City amended the law to require that all unit removals, whether unauthorized or not, be reviewed and approved by the Planning Commission.

Supporting acquisition and rehabilitation

San Francisco hasn’t always been thoughtful about the loss of affordable housing. Prior to 1976, 14,207 units of low- and moderate-income housing were demolished by the San Francisco Redevelopment Agency. which were replaced with only 7,498 units, a net loss of 6,709 units. Much of the housing lost was in residential hotels.

During the 1970s, the Redevelopment Agency reversed course, and began to fund more acquisition and rehabilitation of rental housing, along with new affordable housing. After the 1989 Loma Prieta Earthquake, redevelopment funds were used to preserve, rehabilitate, and replace affordable housing in South of Market and elsewhere. In 1990 the City adopted the Residential Hotel Unit Conversion and Demolition Ordinance.

In 2011 the state dissolved redevelopment agencies, and redevelopment funds are no longer available for acquisition and rehabilitation outside the three remaining redevelopment project areas. However the city has made other funds available, including through the new Small Sites Acquisition Program. Last year the San Francisco Community Land Trust used Small Sites and other funds to acquire and protect the Pigeon Palace on Folsom Street, where long-term tenants were facing displacement.

The City’s efforts to preserve and rehabilitate residential hotels has been a success. The number of nonprofit residential hotel rooms grew from 3,314 units in 61 buildings in 2000 to 5,479 rooms in 87 buildings in 2013.  In 2013 there were still 13,903 for-profit residential hotel rooms in 414 buildings. About 2500 units are master leased by nonprofits. Many of the for-profit residential hotels are in poor repair, and residents also face high rents and threats of displacement.

To expand acquisition and rehabilitation of affordable rental housing, Livable City supports Proposition C on the November ballot. Prop C would make up to $250 million in bond funding available as loans for the acquisition, improvement and rehabilitation of “at-risk” multi-unit residential properties. Funds could be used to convert properties to permanent affordable housing, and to finance the cost of needed seismic, fire, health and safety upgrades, and other rehabiltation needs.

Adding accessory units existing buildings

Accessory units are new units located within existing buildings. In 2014, the City adopted legislation to permit unauthorized accessory units – units built without permits – to be legalized, by providing for exceptions from the Planning Code’s density limits, parking requirements, and other requirements. This month, the City permitted new accessory units in existing buildings citywide.

Unauthorized units or new units in rent-stabilized buildings are also rent-stabilized, and legalizing accessory units will increase the city’s rent-stabilized housing supply after decades of declines.

Livable City is advocating for low-cost financing, similar to the city’s earthquake safety retrofit financing programs, to add accessory units, bring units up to current code, or improve comfort, environmental performance, and accessibility.

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