Emergency funding for Small Sites Program approved amid pushback from Breed

Laura Waxmann-San Francisco Business Times

November 30th, 2021

The San Francisco Board of Supervisors voted 8-3 on Tuesday to allocate $64 million to an acquisition and rehabilitation loan program for small multifamily rental buildings that affordable housing providers say has been unable to respond to loan requests due to a funding shortage.

The funding, announced earlier this month by Supervisor Dean Preston, comes from revenue generated by Proposition I — a measure approved last November that increased the transfer tax for high-end real estate transactions and is projected to raise $128 million this fiscal year.

While a majority of the board supported the allocation in the spirit of preventing the immediate displacement of vulnerable San Francisco renters, not all city leaders — including Mayor London Breed — were on board with the cash infusion, arguing that it would not solve the program's existing problems.

An hour before the board vote, Breed announced reforms to the Small Sites Program over the coming months, including modernizing rules to ensure that it can be applied in neighborhoods that have largely been left out due to income limits.

Once the reforms are implemented, the city will make "program-specific investments" in the upcoming budget process, which begins in two weeks, the Mayor's Office said Tuesday.

The three supervisors who voted against Preston's proposal — Myrna Melgar, Catherine Stefani and Ahsha Safai — supported Breed's plan to allocate up to $10 million in additional funding to the program for acquisitions proposed before the end of June 2022. That's on top of the $10 million currently available to nonprofit housing providers working to acquire at-risk rental housing with between three and 25 units this fiscal year.

"It is like putting gas in a car that has two flat tires and is the shop getting fixed and promising people a ride," Melgar said about the program in its current state.

"Most of the acquisitions for this program have been made by an organization in the Mission District and the problem with this program is that it has put those organizations at financial risk," Melgar said. "I am not willing to continue putting people at risk with restrictive requirements that you can't just waive away as you know it's a process that we must go through in order to change any program requirements."

Melgar added that the city is just a "few weeks away from negotiating next year's budget."

"I would rather work with the administration to make sure we do this quickly and easily to get folks on good financial footing before we start investing," she said.

Restrictions surrounding the per-unit cost of buildings that are eligible for a loan under the program have prevented it from being used in westside neighborhoods such as Melgar's District 7, she said.

Safai agreed that the program is "broken currently," adding that there was just one small site acquisition that took place in his District 11 last year. Since the program's inception in 2014, the city has helped acquire 47 buildings with a combined 368 affordable units through the program.

"It's not just about buying the building, it's about being able to collect the rents ... it's about being to manage the property effectively," he said. "When you look at the amount of work it takes to acquire, manage, and operate successfully, I think we need to have a fully fledged, operating program, and thats what I think this reset is about. Looking parallel at our economy and where we are, I think we need to make a fully informed decision about where our economy is before we start using our reserves."

With 109 buildings currently on the market across San Francisco, the city does not have time to waste when it comes to keeping tenants at risk of displacement housed — which is is a pillar of the Small Sites Program — argued supporters of Preston's funding proposal.

"We have $64 million that we can put towards this purpose. Why would we not do that? Yes the Small Sites program needs fixing... We have been working on that for quite some time," said Supervisor Hillary Ronen. “We need to fix the program as we save families that are being pushed out of their homes into homelessness on the streets.

“We must save every one of those buildings that we can. It's so important that we pass this today, that the mayor spends the money and that we don't play stupid political games with people's lives," she added.

Despite the program's issues, affordable housing advocates deemed Tuesday's vote a victory.

"This action by our city legislators was not simply about an installment of $64 million to invest in affordable housing, but about listening to the voters who passed the Prop. I ballot measure overwhelmingly in November 2020 with the intention of funding a wide range of social housing programs — from preservation of small apartment buildings facing Ellis Act evictions to large residential hotels deteriorating in the hands of private owners, from land trusts to homeownership cooperatives,” said the Council of Community Housing Organizations — a coalition of affordable housing providers— in a statement on Tuesday.