Prop C and Prop E in November 2012
Everyone besides the people I know who are super involved in SPUR has been super quiet about these measures on the ballot, maybe because the election is still a few months away or maybe because everyone is just talking about the presidential election these days. It is, after all, much more entertaining. Prop C and Prop E are some of the most important city-wide items on the ballot this election. Funding for affordable housing has been decreasing over the last few years and is now in a state of actual crisis. I’ve been following this issue for a while, and here’s a brief history.
In an attempt to spur construction projects in the city in 2010, Gavin Newsom passed legislation that would allow developers to defer the fee required if they wanted opted out of including affordable housing in their plans. Before this legislation 25% of developers opted to pay the fee, but now 55% of developers opt to pay the fee rather than build affordable units into their plans. This should theoretically be fine because revenue generated from the fee is supposed to be used to build affordable housing elsewhere, but 1) there’s a lag of 5 years in actually getting the money because of the deferral and 2) it’s really hard to get affordable housing projects off the ground to begin with.
Back in December of 2011, the California Supreme Court ruled in favor of the state’s law to abolish redevelopment agencies, a win for Jerry Brown by reducing the budget gap and allowing those funds to go to schools and public safety. Redevelopment agencies (with about $5.7 billion in funding a year state-wide) became a popular shell agency to get more funds that revitalize blighted areas after a proposition in 1978 limited the state’s ability to raise new revenues. Though they are far from perfect, in fact pretty corrupt, half of redevelopment funds in SF went to supporting affordable housing ($50m per year). Without the agencies, funding for affordable housing looks like this.
Development of places like Mid-Market, Hunter’s Point, Mission Bay, and the many vacant lots you see in San Francisco were delayed because of this void in guaranteed funding sources. With rents rising to record highs, that’s not a pretty chart, so there obviously needs to be a a new solution to financing affordable housing in this city. People are moving out of San Francisco, causing the city to be less diverse and less livable for many people. Hell, we are even thinking about creating micro-apartments to make rent cheaper.
Prop C creates an Affordable Housing Trust Fund that essentially gets funding from a few sources: gains from property taxes that used to go to redevelopment agencies, an increase in the transfer tax on the sale of properties valued over $1m, and new revenues generated from Prop E (also on the ballot). It’s a 30-year fund that would get $20m in its first year, increasing year over year, capped at $50m per year. Basically a guaranteed $1.2billion for affordable housing over the next 30 years. The city hopes to build 9k new units of affordable housing over the next 30 years.
Prop E changes San Francisco’s business tax from a payroll based system to a gross receipts based system and will generate an additional $25.8m a year for the city. Right now companies paying more than $250k in payroll have to pay payroll taxes to the city. This issue was hotly debated when Twitter was considering moving out of the city because of it. With this new tax structure, labor intensive operations that don’t make that much money like restaurants and supermarkets will benefit, and firms that don’t employ as many people vs. revenue would have to pay more (like engineering or real estate firms). The tech community is for this because many internet companies don’t make a lot of money and employ expensive talent ^_^. Small businesses with less than $1m in revenue are exempt from this tax. This structure just makes sense in general, so very few people are against it.
In a perhaps desperate measure, Ed Lee allocated about half of the increased revenues from Prop E to fund the Affordable Housing Trust Fund created by Prop C, so the two are invariably linked. If Prop E doesn’t pass, he’ll have to veto Prop C. Some of the burden in building affordable housing is taken off of developers because the city will now purchase units at the market rate and reserve them for affordable housing. Nay say if you will, but developer interests will always lie with their pocketbooks, so we shouldn’t count on them to make decisions that are good for the city as a whole. Prop C is pretty much also the only choice we have right now in funding affordable housing.
You can also read this nice summary of SPUR’s stance on these ballot measures written by Corey, a really smart dude who I sit on a working group with at SPUR. TL;DR - vote for Prop C and Prop E :).