Is San Francisco Doing Enough For Affordable Housing Given Its Costs and Its Wealth?

The short answer is

Out of Context: Yes, San Francisco is doing a lot for affordable housing. On a raw dollars per-unit basis, it is spending more money than most other cities in the state on affordable housing development.

In Context: No, not compared to how much money other, less wealthy cities across the State are pouring into affordable housing given their worse budgetary limits and relative to their local building costs.

Here’s The Synopsis: 

When you look at San Francisco’s funding of it’s affordable housing units on a per unit basis, as a percentage of the cost per unit, San Francisco drops from being one of the best performing cities to being somewhere in the middle (but closer to the top) of the pack.  Basically, the per-unit gap in financing necessary to build an affordable unit in San Francisco is so astronomically high compared to the rest of the state that the city’s large raw dollar amounts… well they amount to nowhere near the kind of commitment other, less wealthy cities are putting in to their own affordable housing relative to their costs (and relative to the strength of their economies. San Francisco is doing much better than Bakersfield and Sacramento, yet the latter communities are arguably doing a lot for their affordable housing–read all the way through for more).

(and therefore SF residents should vote yes on the affordable housing bond!)

The Context

Figure One below shows the average per-unit gap financing required to build affordable housing in California.  These numbers are based on data taken from the California Tax Credit Allocation Committee (TCAC) for 4% tax credit projects funded from 2011 to 2015.  I used housing projects’ budgets during that period to calculate the average per-unit gap in financing needing to be filled after a project won its tax credits and identified how much revenue it could pull in directly from rents.  These gaps are what local jurisdictions, foundations, and others must fill to make an affordable project solvent.


Per-Unit Gap Financing Needs for Affordable Housing, Based on 4% Projects from 2011-2015
Per-Unit Gap Financing Needs for Affordable Housing, Based on 4% Projects from 2011-2015

Using this data, we can estimate the per-unit gap cost of funding affordable housing in San Francisco is at least $248,000 per unit (I say at least because in  2011 costs were probably still lower due to the recession, and this is pulling the estimate downward significantly).  This $248,000 per unit compares with a statewide average of $90,000 per unit…

Utilizing the same data, I’ve calculated that about 30.5% of this gap financing need for affordable housing across the state was paid for by local governments during this period (overall).  This compares to 35.7% of gap financing needs paid by local government in San Francisco during the same period.  During this time, San Francisco supported its own affordable housing development at rate 17% higher than the state overall.  So this is not too bad.  But ask yourself: is San Francisco only 17% wealthier than the state as a whole? Using median incomes, the answer is actually yes.  San Francisco’s median income is around $72,000, while for the state it is $61,000 (e.g. it is 18% higher in the City).  But these are medians, and medians can be quite deceptive. As the Chronicle reported, San Francisco’s top 5% are significantly richer than their peers across the country when the top 5% is measured as a ratio against the bottom 20% in the same city.  Putting all of this together: San Francisco’s commitment to funding its affordable housing is merely comparable to the state as a whole given it’s higher costs of construction and higher area incomes.  That said, the enormous new concentration of wealth at the top of San Francisco’s income distribution has not translated into the city providing a disproportionately higher rate of financing for affordable housing.

Simply put: The city is running in the middle of the pack in terms of its affordable housing commitments, maybe in the top third relative to the state overall. But the supposed boom of wealth pouring into town has not added any extra bonus to the city’s efforts (relative to what the rest of the state is doing).

This is easier to understand when mapped.  The map below shows, for each county, the percentage of affordable housing gap financing covered by local jurisdictions from the dataset I referenced above. Look at who is giving real commitment:

Share of Affordable Housing Gap Financing Needs Funded by Local Jurisdictions--Blue means no data
Percent of Affordable Housing Gap Financing Needs Funded by Local Jurisdictions–Blue means no data, 4% Projects 2011-2015

The counties where local governments are doing the most to support affordable housing are mostly in the Central Valley.  At the level of the city itself, the results are even more interesting.  Below are the top 20 cities ranked in terms of the percentage of their affordable housing gap financing need they paid for through various local sources.

Top 20 Cities Ranked by The Percentage of Their Gap Financing Needs Were Met Through Local Sources
Top 20 Cities Ranked by The Percentage of Their Gap Financing Needs Met Through Local Sources, 4% Projects 2011-2015

First off, San Francisco isn’t even on the list.  In fact, most major cities in California aren’t.  The only two of cities 10 most populous cities on the list are Sacramento and Bakersfield.  Here is the top ten most populous cities arranged in order of the percentage of affordable housing gap financing they managed to cover through local sources for 4% projects during this period:

  1.  Bakersfield (72%)
  2. Sacramento (67%)
  3. Oakland (48%)
  4. San Francisco (36%)
  5. Los Angeles (28%)
  6. San Diego (25%)
  7. Anaheim (17.7%)
  8. San Jose (13.3%)
  9. Long Beach (8.2%)
  10. Fresno (1%)

It is worth exploring why Sacramento and Bakersfield–which are significantly less wealthy than San Jose, San Francisco and others on this list–are doing so much more for affordable housing in their areas given relative to the costs they face.

Here’s the challenge for San Franciscans looking to improve the housing crisis in the state: Increasing affordable housing funding the city to levels comparable to Oakland, Sacramento or Bakersfield will certainly yield a lot more units, but it will be nowhere near enough.

The real challenge is: how do you get San Jose to increase its affordable housing financing commitments to comparable levels as well???

Published by mattdpalm

Doctoral Student UC Davis USDOT Graduate Eisenhower Fellow 2014-2015

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