H.L. Mencken once said: "For every complex problem, there is a simple answer ... and it is wrong." He must have had in mind Proposition F, which appears on San Francisco's June 3 ballot.
To achieve a laudable goal -- construction of more affordable housing -- Prop. F presumes that all we need to do is simply mandate it. It would double the minimum number of below-market units in Lennar's 10,000-unit, mixed-income, mixed-use development in Hunters Point, from 25 percent to 50 percent. A 2007 study of inclusionary housing statutes showed that 15-20 percent is standard for the 170 California jurisdictions that have them. Not one city approached 50 percent!
There were no hearings on this last-minute proposition. Hence, it will be decision by sound bite, with most voters scanning one sentence on the ballot. Had there been hearings, what would housing practitioners -- both for-profit and nonprofit -- have said?
They would have said there's a reason why below-market, workforce housing is incredibly difficult to develop. Actually, there are many: The federal department of Housing and Urban Development is basically out of business. The Hope VI Program, which helped fund affordable housing across the country, is history. Other federal housing-assistance programs and tax credits have been slashed as well. The State's Proposition 1C housing bond funds are oversubscribed 4:1.
And, importantly, the bedrock assumption on which inclusionary housing is based-- that developers will make enough profit on market-rate units to pay for affordable ones -- is threatened by the worst condominium market in 40 years.
Virtually every transaction in San Francisco with affordable housing requires multiple layers of subsidy; the additional 2,500 units of below-market rate housing at Hunters Point would not be self-supporting. Rentals typically require a public subsidy of approximately $100,000 per unit; below market for-sale homes require about $200,000 each. Hence, an additional 2,500 units is the Trojan horse of an unfunded mandate which will add at least another $400 million in costs to this already struggling transaction. Where does this money come from?
Lennar and the city say that this is a deal-killer. Others say, "Nah. Lennar's financial estimates are infinitely elastic, and besides, they are greedy."
But if this deal becomes financially infeasible, it simply won't happen. The Hunters Point community will lose a transformative project which will produce 1,750 affordable, new homebuyer units and 750 below-market rentals, local jobs and tax revenue for a budget-challenged city. This project is well into its entitlements based on an endorsing resolution from the city in May 2007 which called for 25 percent affordability -- not 50 percent.
Why would anyone want to do business with the city if 10 years' worth of work by the developer, community and city can be overturned through an unvetted, late-stage, quixotic initiative that seeks to enhance egg production by strangling the hen?
If Prop. F passes, we'll get 50 percent of nothing. Vote "No" on F and support affordable housing.
John Stewart is chairman of the John Stewart Co., which develops and manages affordable housing.