Dear Supervisor Kim, A number of us in the real estate industry have recently had a chance to review your proposed “housing balance” legislation. While we are in strong support of your goal of promoting 30% affordable housing in San Francisco, we noted that the April draft of the ordinance presented rules that would have had a major negative impact on delivering badly needed housing to the citizens of San Francisco. Specifically, the general requirement to impose a conditional use (“CU”) permit on any market rate housing project when the ratio of affordable units to all San Francisco units built since 1993 drops below 30% struck us an additional obstacle to the provision of both affordable and market rate housing. Combining a CU with a proposed directive to Planning Commissioners that they issue a finding that a market rate project does not have any “direct or indirect impact on … displacing households of very low, low, or moderate income” makes the task of delivering housing far more difficult. Lack of objective criteria in making Commission findings could easily derail any market rate project. It is important to remember that an abandoned market rate development eliminates the possibility of providing 12% affordable units on site, 20% units off site, or an in lieu fee of 20% under the inclusionary ordinance (or more in the plan areas with increased requirements). While we understand and greatly appreciate that there have been significant positive developments in the drafting of the proposed legislation since April and are optimistic that a long-term positive solution can be reached, we would respectfully ask you to postpone your ballot proposition until the concepts have been reviewed in depth by both the Planning Department as well as appropriate citizen committees and the Board of Supervisors itself. In general, we feel that legislation dealing with issues of this complexity is better handled through the legislative process than the ballot initiative. If it turns out this ballot initiative has negative consequences, the effect on San Francisco could be extreme. If, for example, in 4 years’ time, should the affordable housing ratio fall below 30%, the Planning Commission might have great difficulty in approving market rate housing. Faced with uncertain approval possibilities based on unclear CU requirements, developers might be extremely reluctant to expend the huge sums needed to meet regulatory approvals for their projects. The current production of 5,000 units per year could easily drop to 1,000 or less with affordable production correspondingly being decimated. A dearth of new housing units could easily exacerbate the imbalance between the demand and supply for housing and lead to further spikes in rents and home prices and significant increased pressure on the existing housing stock. As active participants in the production of housing in San Francisco, we would urge caution in proceeding with this ballot measure. Since February, many committees have been reviewing how to create more affordable housing in the City. With ideas such as the “marriage” of affordable projects with market rate developments and the provision of additional on-site units through a “dial” program as well as changes that would make the off-site option under the inclusionary ordinance more viable nearly fleshed out, the City, with your active leadership in drafting the necessary legislation, could soon be in the position to achieve a significant growth in affordable housing. If, for example, by changing current laws so that a developer of a 400-unit market rate project could team up with an affordable housing provider to produce a 150-unit affordable project, that one project, at $500,000 per unit of value, would mean $75 million of affordable housing delivered to San Francisco. We also recognize that the chief impediment to producing additional affordable housing is the lack of financial resources, especially given the elimination of redevelopment. In order to produce the 10,000 units of affordable housing called for by Mayor Lee, a diverse set of stakeholders will need to come together to secure new affordable housing resources. As a group, we strongly supported the last successful effort to provide new resources for affordable housing, namely Prop C, in 2012. That effort was successful because it was a collaborative process that sought to produce housing at all income levels.

We fear that the "metering" ballot measure will undermine the coalition that so successfully secured the passage of Prop C. In closing, we remain very concerned that this ballot measure with the positive (and shared) goal of producing many units of affordable housing in San Francisco might have exactly the opposite effect. At a minimum, we would urge you to pursue a legislative process, allowing time to consider all possible ramifications of this legislation. You have been an important, valued leader in promoting sensible development and in pushing the passage of such important legislation as the enactment of the "Twitter zone" and the recent increase in the minimum wage. We would love to continue working with you in a collaborative manner to mutually arrive at effective solutions to the current affordable housing crisis. We believe that a “big tent” approach is critical to achieving this objective. Sincerely yours, Oz Erickson- Emerald Fund Eric Tao- AGI Avant John Stewart- John Stewart Michael Covarrubias- TMG Marc Babsin- Emerald Don MacKenzie- UDR Lydia Tan- Related Dan Safier- SKS Larry Nibbi- Nibbi Brothers Patrick Kennedy- Panoramic Tom Hart- Shorenstein Michael Cohen- Strada Andy Ball- Suffolk Craig Allison- Plant Arden Hearing- Trumark Dan Kingsley- SKS Jeff Heller- Heller Manus Meg Spriggs- Shorenstein Larry Pace- Cannon Jeff Hoopes- Swinerton Chris Pemberton- SCB Architects Carl Shannon- Tishman Speyer Jes Pedersen- Webcor John McNulty- MBH Architects Sean Jeffries- Millennium Partners Chris Meany- Wilson Meany Michael Yarne- Build Susan Smartt- MacFarlane Cynthia Parker- Bridge Housing Lou Vasquez- Build