Budget and Finance Committee - Prop I Budget Supplemental

Thank you, Chair Haney, and Committee Members Mar and Safai. I am here today to ask for your support in carrying forth the will of the voters of San Francisco, and the intent of this Board, to allocate initial funding from Prop I revenue to the Rent Resolution and Relief Fund, and to the Housing Stability Fund.

In October 2020, the Board of Supervisors unanimously approved two ordinances - one established the Rent Resolution and Relief Fund, and the other established the Housing Stability Fund. In addition, this Board unanimously approved a resolution stating our intent to use funds from an increase in the transfer tax on high end real estate for these programs. San Francisco voters, by a considerable margin, then approved this increase in the transfer tax through Proposition I on the November ballot, with 58% of the vote. The budget supplemental before this committee today is the next step in this process.

In November 2020, the Controller’s office published a Three-Month Budget Status Report, in which it was estimated that Prop I would generate $14.4 million, or $11.4 million

after baseline allocations, in this fiscal year. The ordinance before us today reflects the 50/50 split of this revenue between the two funds, again as was the previously approved unanimous intent of the BOS.

On February 12, the Controller’s office issued a Six-Month Budget Status Report, in which the projection for Prop I revenue was increased to $26.1 million in the current fiscal year, or $20.1 million after baselines. I intend to move amendments to the ordinance before this committee to reflect the updated projections from the Controller.

Before making those amendments, I’d like to provide some more context of this supplemental request. I will start by recognizing that in some ways, the landscape has shifted since Prop. I passed. In others, it has remained the same.

First, rent relief.  When we first introduced this supplemental request, there was no plan -- none whatsoever -- for the public sector to address the monumental back rent that has accrued due to COVID. Yes, there were programs like Give2SF, which provided some limited private philanthropic relief, but nowhere near the scale to meet the need. Our Budget and Legislative Analyst Office estimated in an October 2020 report that up to $32million per month was owed by San Francisco tenants who experienced COVID hardship. Give2SF had allocated at the time approximately $6.5million to struggling households, but that accounted for nearly all the funds, according to the BLA. Our plan to use revenue from Prop I to fund rent relief was the only option put forward at the time to stave off a nightmare wave of evictions and mushrooming rent debt.

That, fortunately, has changed somewhat. In the intervening months, the federal government has committed resources to cities like San Francisco to address rent relief. And our state has passed SB91, creating a regime that looks more like a landlord bailout than relief for renters, but it is an attempt nonetheless to meet the dire need.

As it stands today, approximately $54 million is anticipated, which we understand will be allocated through a local program using federal dollars, as well as the SB91 program on the state level, to address rent relief in San Francisco. It is an objectively positive step that means more renters will have their debt forgiven, and more people will be able to stay in their homes.

But we should not delude ourselves into thinking this comes anywhere close to meeting the need. Between April and September 2020 alone, the BLA estimated that up to $196 million in back rent was owed by San Francisco renters. We are now five months further down the road, and that figure has no doubt increased significantly, perhaps as much as doubling.

What’s been proposed by our state and federal officials is orders of magnitude short of protecting all tenants. We need to take advantage of every possible source of funding to prevent COVID-related displacement and relieve rent debt, while also assisting small landlords facing hardship. There should be no question that Prop I revenue should be used for its intended purposes.

The fact is, this Board led the way in piloting what a rent relief program should look like. Our Rent Resolution and Relief Fund, passed unanimously by the Board this past October, proposes to make landlords whole by paying 50%--up to 65% in the case of hardship--of the back rent owed by a COVID-impacted tenant. With SB91, the state copied our template, but sweetened the deal for landlords, providing 80% of rent owed in exchange for 20% forgiven.

Questions remain about who is and who is not eligible for state and federal rent relief funds. In light of the shifting landscape on rent relief, we have been actively engaged with advocates and MOHCD as to how we can best make these various programs fit together well, and we look forward to continuing those discussions. But there can be no doubt that money meant for rent relief absolutely should go to rent relief. To do anything to the contrary is to turn our backs on the people we know have been hit hardest by this pandemic. I ask for your support today in fulfilling this obligation.

While the ground may have shifted significantly in recent weeks with respect to rent relief, what remains in place are the underlying conditions that got us here in the first place. The dynamics that, even before the pandemic, saw San Franciscans paying on average, by one 2018 estimate, nearly 40% of their income on rent. This is a broken system that exploits working people, and it is predicated on a dearth of options for anyone but the select few to have housing that is truly affordable.

This is not a new dynamic to anyone who has spent really any amount of time in this city. Year after year, the top issue among San Franciscans, as well as those elected to represent them, is how we make housing more affordable.

The narrative to date has been dominated by scarcity: We lack the public resources to produce affordable housing, so our best (and to some, only) option is to get out of the way of the private market, and rely on the inclusionary affordable crumbs. We also face a narrative in which land trusts, limited equity coops, land banking, and municipal housing strategies are deemed largely impossible because they had, until Prop. I, no funding source.

Proposition I was a shot across the bow to reject this framing. Tax the wealthiest real estate transactions to fund not only rent relief, but permanently affordable, social housing. I came into office being told that we don’t have enough to build more affordable housing. So we went to the ballot to find more money, and got it with Prop I. We now have a moral obligation to put it where we all promised to put it, and where the voters and the board intended.

That is the fundamental purpose of the Housing Stability Fund, which we seek to fund through the other 50% of the supplemental before you today. There are any number of strategies to realize and scale non-commodified, permanently affordable housing in San Francisco. We can pursue small sites acquisition. We can fund community land trusts. We can pilot a new era of municipal housing. The reality is, no dedicated funding stream exists for those strategies, which we know from the experience of other cities, can meaningfully tip the scales toward a truly affordable housing stock.

The Housing Stability Fund would be that dedicated source. The menu of affordable housing strategies will be guided by an Oversight Board, which will give recommendations to the Board of Supervisors and MOHCD during the budget process on how Prop I revenue should be allocated, in recognition that the best way to achieve social housing may vary over time. But the underlying premise being that, in order to create systemic change that will fundamentally alter how we housing the people of San Francisco, and to avoid the crisis of displacement that we currently face in the future, we need new ways to fund permanently affordable, social housing. We can take that first step today.

With that context, I would like to ask this committee to accept amendments that reflect the updated projections from the Controller. Given the increase in Prop I revenue, I move to amend the amounts allocated to both the Rent Resolution and Relief Fund, as well as the Housing Stability Fund, to be $10,050,000 each, as reflected in the ordinance distributed to the members of this committee.

In closing, I would like to thank Supervisor Mar and Chair Haney for their co-sponsorship, as well as Kyle Smeallie from my staff. In addition I want to thank Director Shaw and MOHCD staff for working with my office on this effort, as well as advocates from the Anti-Displacement Coalition, CCHO, CCDC, HRCSF, Causa Justa, SDA, the San Francisco Tenants Union, Jobs with Justice, and many, many individuals advocates and organizations. I would also like to thank the 235,884 San Francisco voters who cast their ballot in favor of Prop I, whose support and clear mandate has made this conversation possible. Colleagues, I ask that we do right by these voters and accept these amendments today.

I am happy to answer any questions as needed, and I appreciate your consideration.