February 19, 2025

Housing Finance Development

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European-style ‘social housing’ feasible in S.F., city report says

European-style ‘social housing’ feasible in S.F., city report says

Building and operating European-style social-housing projects in San Francisco “could be financially sustainable,” concluded a city report published on Monday — a win for progressives who have long prioritized targeted affordable housing to fight the city’s housing crisis.

But its construction would be difficult, if not impossible, without low-interest loans provided to the city, the report found, because bank interest rates are too high. A San Francisco “public bank,” owned and operated by the city, could issue low-interest loans, but its establishment is likely years away.

Social housing, as defined in the city’s administrative code, is any housing project owned by the city, a nonprofit, or the residents themselves, with agreements in place aimed at “ensuring permanent affordability.” The projects would house tenants with a range of incomes that would average no more than 80 percent of the surrounding area’s median income.

In San Francisco, that’s $83,900 for a single-person household, or $119,900 for a family of four.

Social housing would be distinct from the city’s current stock of affordable housing, which is almost entirely nonprofit-run. Nonprofit affordable-housing projects also have a mix of incomes, but tend to be built for low- and very-low-income tenants.

Social housing, by contrast, would have a wider range of incomes, and could be owned by the city itself, with rents paying for upkeep.

Such housing could “fill gaps” in San Francisco’s current affordable-housing portfolio by creating more middle-income and family units, the report found, which are hard for nonprofits to finance, given state and federal funding restrictions. Such housing could also avoid “segregating low-income households in separate buildings or separate neighborhoods,” the report found.

Written by the nonpartisan San Francisco Budget and Legislative Analyst and commissioned by outgoing Supervisor Dean Preston, the “Financial Feasibility of Social Housing in San Francisco” report comes as San Francisco is woefully behind in its state mandate to approve 82,000 units by 2031. Of those, 46,000 must be affordable to moderate- and low-income residents.

Preston, for his part, noted that social housing could play a role in meeting those goals, particularly “at a time when the private market has largely stalled, and federal and state funding for affordable housing is severely limited.” Private housing construction is, currently, unable to meet the goal: Construction has declined every year since the pandemic as investors seek higher returns elsewhere.

The economic downturn, Preston added in a statement, “has also created significant opportunities for site acquisitions at lower prices.”

The report included important caveats: It found that “mixed-income social housing developments” are feasible, provided the “the right combination of financing, construction and operating costs, rental income, and investments, or subsidies.”

Namely, that means low interest rates: The city would need to obtain loans with interest rates far below those offered by banks for social housing developments to make financial sense. 

The report studied six different scenarios, changing tenants’ income levels, per-unit development costs, city subsidies, and other parameters to find the winning mix. In each scenario, tenants paid 25 percent of their incomes towards rent. Those rents would cover operating costs for the buildings. 

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