the rental program is, like i said, it's growing. we have about 320 units now. so, we should have 300 more just in the last two years -- excuse me, in the next two years. because so many of the units are coming online now are rental. so, it's a really good time to set forth our rental program rules. almost every rule in here is coming directly from renters and building owners who are curious to know how the program works. so, we've structured a rental program. we're trying to strike a balance between becoming too involved in the rental units and setting out some parameters for the renters and the project owners. these are private buildings with restrictions on their units. we don't own the unit. and we make that clear, but at the same time we get asked lots of questions about how the program could and should run. so, here's what we've done. we've set out some allowable reasons for rejecting a renter in the first place.

stating explicitly that you -- a project sponsor or project owner can reject a renter if they can't pay rent, they don't meet the rent income standards, that they have bad credit, criminal history, or eviction history. we ask them to follow normal and customary standards in those areas. and then we've set out some allowable reasons to either evict a renter or not renew their lease. and those would be with the rent board. it is not a rent board program, i should make that clear. our rent adjustments are not based on the rent board, they're not under the rent board. we just met with them to pull from their expertise and get suggestions. they suggested putting in four of the just causes that are the most foundational. and those four would be that you didn't pay rent, that you were a nuisance, illegal use of your unit, breach of lease.

and then we also added in another one, which is a just cause, units that convert from rental to ownership because that can happen in our program. and we want people to be aware of that and what could happen to that representer in that situation. and then another allowance to not renew the lease for households that are in violation of the rules of our program. the primary rules would be that your income qualified, you're living in the unit as your primary residence, right household size, not one person living in a two-bedroom unit. and that you're in general compliance. those are the major pieces to that. and then we also are setting forth a recertification process for bmr renters and that requires -- it's going to require annual or biannual reporting, both from -- it will require biannual or annual reporting from the building itself, seeing who lives in the unit, what the rent level is, what their last income was when

they checked. it will require the tenants themselves to income certify before their lease is renewed every year. or i believe we're going to add an allowance. you can do it once a year, whatever is most convenient for the project owner in order for the lease to be renewed. that would be at least 120 days before their lease renewal date in the case of situations where you do it before the lease renewal. and the lease wouldn't be renewed. but at the same time we are allowing for their incomes to increase to some extent and we debated, much debated conversation about how much their income should increase. and, so, what we're asking is for an allowance of current renters in our bmr units for families to grow and change, assets to grow, but not beyond the maximum allowed in our program which is 120% of median income and not beyond 200% of the original income target. and by 200% i mean if they came in at -- if the unit is restricted at 55% of median

income, that they can make -- the household upon recertification can be no higher than $110 median income. and in no time with they be above 120% median income. * we think that's fair. we'd like to allow rental households the opportunity to get ahead a little without getting so far ahead that they're no longer really the right household for that unit. so, that would require an ordinance change as well allowing the renter's income to increase above the ami target. we clarified suspected ownership. we're updating asset exemption to >> technical difficulty; please stand by toshiba >> you've chose tone fulfill

your inclusionary obligation not by paying fees, but qualifying for the alternative to build units off-site of your principle project. that can be a whole building that you build or thai few units in another building. * so, we've done two things. we've clarified the timing of that off-site project. it is clear in the ordinance and code that you have to market and make available your off-site units at the same time as your principal project unit. we clarified it to say that your off-site project -- your principal project cannot get a first certificate of occupancy until your off-site gets a first certificate of occupancy to make that clear. we clarified the off-site review process to make sure no one is involved in t. the only thing that requires an ordinance change there is some language we added to the timing for certificate of occupancy. the second thing we're doing is we, in 2010, exempted projects

that were allowed to use some government subsidies. so, in general the program for a long time was you couldn't use any government subsidies to build your inclusionary unit. you can't use tax credits and you can't use, you know, hud loans or senior housing programs. but then we did allow explicitly in 2010 the projects could use cdlac which is the california debt allocation committee bond financing available with the state particularly coupled with 4% tax credit to build their inclusionary unit, as long as they built more units and at a deeper level of afford ability. the reason we allowed that funding is because it's less competitive than other funding. we felt there was plenty of it out there and also we're getting more units at deeper affordability. we went ahead in 2010 and exempted these projects from inclusionary housing program thinking that their monitoring procedures were too much in

conflict and learned after that there is no reason to exempt them, we can handle it. and their procedures can be synchronized. but more importantly, we don't want to lose the long-term affordability of these units. this is 4% tax credit unit are not restricted for a longer period as the inclusionary units. the inclusionary units are now restricted for the life of the project. so until the building crumbles and the others are not. we want to bring it back: the next is the conversion of rental to ownership units. we clarified the process and update it had. the renter gets the right of first refusal. they have the first chance to buy the unit. it has always been a little less clear at what sales price. should it be at the rental sales price or at the ownership sales price. so, we have looked deeply into the ordinance and into the

procedures that we have set forth over the years and come to the conclusion that the ordinance is not clear enough. so, we're updating the ordinance and we'd like to update the ordinance to say that the units, if they are sold to the current tenant only, they will sell at the renter level to give them an opportunity to buy. otherwise you came in at 55% of median income renting. now it's selling at, say, 90. and that gap is pretty wide. so, it is unlikely you'd be able to buy the unit. so, they will sell at the rental level if the existing tenant buys. if the existing tenant decides not to buy, they have six months to leave the unit, they'll get a relocation allowance that is similar to what would be allowed under the rent ordinance, the rent board. and then the sponsor can sell the unit at the ownership level that was originally allowed in use restrictions. 100%, 90% for new units. we felt that was a good

compromise. not intended to punish the owners, but protects the current tenant. and then we set forth land dedication rules. so, in eastern neighborhoods 2008 on, there was a new allowance for dedicating land as part of your inclusionary housing obligation for certain areas, for umu zoned areas. and i think along mission street as well. and we were charged with clarifying what the process is for that land dedication. so, we have quite a bit of profit detail in the procedures manual right now that sets forth what documents you would need to submit to the mayor's office of housing. first of all, what you're doing with your planner, how the planner will confirm that you're dedicating the right amount of land. and if you owe some units on-site on top of the land what that would be and whatnot. and then the mayor's office of housing has a due diligence

process where we review density studies, cost studies, infrastructure studies, phase 1, phase ii environmental report. may require environmental remediation. the whole goal being that the city would like to accept land that is clean and ready to build deeply affordable housing. so, those are set forth in the manual. we, again, establish s-r-o pricing. that affects the developers as well, requiring an ordinance change. and then again there is that conditional use authorization for new units where they will price at 90% of median income, but they will sell at 100. that will help the developers i think greatly in terms of selling their units, as will other things we've implemented like the loan pre-approval requirement. and years ago we implemented first-time home buyer requirements. our applicants have to go to 6 to 8 hours of training before they can even apply. and i can those things go a long way of meeting concerns of developers who would like to sell their units in a more timely manner. we've also set out separate

from the changes, but it's in the manual but not highlighted as a significant one, but how long a buyer can -- has to hold onto their lottery rank. that was also a matter of concern for developers. we'd have people hanging on forever. so, it's clear now that once you're approved, you have 10 days to get into the contract and you basically have 60 days to close with a 45-day financing contingency. again, we changed our marketing period for ownership units and for rental units as i mentioned we have new monitoring requirements, new certification requirements and whatnot. the only thing new here for developers is there will be a nominal -- a minimal fee for recertification for our monitoring every year. it's probably $60 a unit is what we're thinking. this comes straight from board of supervisors analyst report done in san francisco and they requested i a couple things. they requested we move to a fee

and estimated we could get it in 18,000 a year. they also requested that we move to a lottery system for re-rentals. i didn't write here, but we're going to go ahead and do a lottery system for every single agreement. it seems worth it in terms of this, protecting the renters, i would say in terms of who they selected. better than first come first serve. so everything will be lottery in the program once that's enacted. and then again, reasons for rejecting or evicting or not renewing the lease of a renter, we've slightly updated the rental parking policy to clarify that the sponsors can charge a maximum -- the maximum rental rate then reduced price for parking. we changed that slightly from the last polecy. i think it will be a good one for renters and developers. and then we clarified that if a project sponsor fails to update the rents under our preach, in one year that they can't catch up. they can't bank it and catch up

in the years that come up. they'll have to wait until the unit is vacant. for instance, if you could be charging $1400 rent, but you haven't raised it in years and you're only charging 800, you're not to charge $600 extra this year. that's a lot to absorb for a bmr renter. >> okay. does that conclude your report? >> yes. >> all right. i'll open it up to public comment at this time. i have a few questions [speaker not understood]. is there a 1200 units, is that right, and 850 are owned? >> about. i thought that was a strong ratio. do you know if there is a long line in terms of to get into

those 1200 units? >> i don't know if we can really have dialogue. i had a few questions. one is how long the line s. the second one is what is the medium of connection with the public. if i'm looking for low-income housing, where do i go and how could i find it? and then is this all inclusionary, does that mean that we're only looking at low-income housing that encompasses all affordable housing or do we have any other demographic that also fall into this? such as veterans or disabled. >> all good questions. maybe throughout this process you might get some answers. if not, you're welcome to meet with staff after to clarify. yeah, thank you. >> any additional public comment? on this item? okay, seeing none, public

comment portion is closed. and commissioners. commissioner borden. >> i have some -- this is a lot of information to absorb. i have a few questions for staff. and, i'm sorry [speaker not understood]. i get the policy changes that you made [speaker not understood]. maybe you could just talk about the three big -- when you were talking about the renters and buyers, like the three biggest challenges that you had faced that you were trying to tackle with this update, just like in bigger picture overview, i think i kind of got various things, but i wanted to make sure the general public understood why we're updating it other than the fact that it's time. >> okay. i don't know if [inaudible]. primarily there is a need for more transparency in the program. this program has grown so much ore over the last five to six years. it's gone from small programs that one person managed to a

program that is managed by up to four people now. and, so, the primary reason we're updating it is to our buyers and renters can have more information on how to get into the program. it deserved that response. * it deserves more information. also, if you imagine buying a rental unit, i think you deserve to know what your restrictions are and what will happen to you. it's frustrating to hear people's confusion about the program and not understand how great it is. i think that it scares off a lot of people. i think when you leave out less information it's frightening. at my child's school, i almost did that program but then i learned a little more and someone told me something and i didn't want it any more. that's frustrating. if you could read our manual and it sounded like something solid, you might want to buy it, a bmr unit or rent one. but in general i would say the significant change, the reason for changing the ownership program rules beyond the

transparency is to sell the units in a more timely manner. >> what is the average length, would you say, that it takes to sell a unit now? >> it really depends. just like the regular market, if it's a very desirable part of town, they might sell very quickly. but even with that, when we didn't require a loan pre-approval or housing counseling, it would definitely take longer. technically it will take 10 days from the letter -- from the approval letter 60 days to sell a unit because that's what we're allowing. it can take a little longer than that. it's just when they add up together. so, one buyer him or herself, one household shouldn't take more than 70 days. then we're done and move on the lottery list. we tend to do, you know, two buyers at a time or look at people simultaneously so we can move on to the developer. i always think of the ownership program to sell the units in a timely manner, to make the rules clear so that people know

if they're qualified or not. and to give people that pricing conditional use authorization so they can come into the unit. >> so, what's the difference -- so, is the lottery primarily for rental or -- >> they all have a lottery. >> so, people come up in lottery and they say, i'm not interested in that unit and you move on to the next person? it sounds like there's a lot of people that's interested. i'm confused why they want to sell the units if there is a lottery. >> today it's that people want the unit and they can't get the loan. for the ownership, or they can't pass the credit for the rental. >> and then i guess -- so, for the credit, it has to be perfect creditor pretty close to perfect? >> they show some leniency. it's the building rules. we don't set out the credit rules, we review them. they have to tell us in advance, and we have to tell the public what the rules will be. people are having a hard time with credit. i think it would be beneficial if there were more opportunities for them to get rental assistance in advance where they go to a workshop and

fix their credit kind of like consumer counseling credit services in san francisco. we do refer people there just to look at what's on their record. i think they're caught by surprise sometimes. >> do we have demographic data overall income levels of people in the units, the job types, ethnicities, disability, things like that, and then like also even tenancy in san francisco, do those people -- i know when we were looking at the policy related to -- i for get what we were working on, but we said you had to live in san francisco for a certain amount of time. cpmc, amount of time you had to live in san francisco prior to qualifying. is that a requirement for this program? * >> it's a lottery preference for this program. so, it's not a requirement. we have so many applicants for the rental unit that it ends up we only lotto the people who live or work in san francisco or hold a certificate of preference which is our highest preference. >> right. >> those are households or individuals displaced during

urban renewal. >> also one of the challenges that we also hear -- we know there is a lack of affordable housing. for people who are actually living here, there are people from other parts of the bay area or maybe somewhere all together that take up an inclusionary unit to only exasperate the problem you have with people who have been here who can't afford the unit and whatever we can do. you didn't mention strengthening or the need to strengthen those requirements. do you have any thoughts about that? >> i would say the preference that you have in place, that the -- i believe they came from the board in 2006, actually, but they would have been approved by the planning commission after that. they're strong. so, for rental you're really not going to get a rental unit unless you live or work here or you're a certificate of preference holder. we've been getting 1400 applicants for 14 units, for instance, in the rental program. you can imagine with how high rents are now. the ownership is lower because we have loan pre-approval. people are having a hard time

getting loan pre-approval to be the perfect person for the pricing. >> right. >> we'll have four units and maybe 12 people will make it all the way to the lottery. and then we'll go to first come first serve if they don't sell. often it is selling because of the loan buyer pre-approval process. [speaker not understood]. we'd rather have fewer that are ready than more that are not. but yeah, i think the preferences work. >> and i guess -- i mean, it would be -- obviously you don't have it with you today, but it would be interesting if we could see the data based upon the people who are habiting those units. >> i can tell you a little. the rental [speaker not understood] is much more reflective of san francisco. white, asian, latino and african-american. i would say not in exact equal proportions, but closer than the ownership program. which has about 320 units, is the rental programs. ownership program has more units tend to be mostly white

and asian and we're concerned about that. and that's one of the reasons why we have tried to beef up our program in terms of requiring for some home buyer education, creating -- now we'd like to have the conditional use authorization and the pricing and we'd like to bring in down payment assistance. we have money from the state that will soon be gone. we always try to layer. we work closely with our lenders. we only work with approved lenders that come to our office for training. we give them a list of every single financial layering they should look into from their buyer, everything from the state, everything from the city, everything. if you're a teacher you should get this, if you're a police officer you should get this. we're doing the best we can to reach out. there is more we can do more than we're doing because it is not as diverse. the income levels tend to be not at the top. they're 10% below whatever the maximum is for the unit.

people are able to bring in down payment assistance and still qualify for our program. that's usually when we more down payment assistance available. so, we're always hoping we can have more or a dedicated source. i think that makes a big difference. our pricing mechanism assumes someone is bringing in 10% down, which is typical in the regular market, but bringing in $35,000 from someone who is making, you know, $82,000 a year, the household is three, for instance, something like that, that's a lot of money to save over time. the more we can assist them in bringing that money partially -- they do have to make a 5% down payment of their own funds. >> careers, do we know what the professions ashe >> oh, yeah. i don't know exactly, we haven't really broken that down. i know from looking at all the occupations because it's so interesting that we have a lot of hotel workers. we have a good number of teachers. but, yeah, the hotel worker

thing seems to be larger than you would imagine. >> it's reassuring. >> i feel like there are modest households in our units that are really, you know, that are finding a place to live for their kids and themselves. it's working. >> and i guess the other question i have, i know there is a limited appreciation, right? >> yes. >> i'd like to understand a little bit about what that is and, number two, what happens usually to these families or people who inhabit these units, if they decide to turn them over, do they usually move into market rate units, do they still live in san francisco? i know you may not have that date a but it would be interesting to know. >> it is interesting to know. so, in terms of profit on the units, people who buy below market rate ownership units aren't guaranteed any profit. that said, long-term owners tend to see appreciation on their units. but we try to make it really clear from the day this new

theme started years ag we didn't want anyone to be misled and thinking they would be getting profits. it's in our literature. i'm sure it turns people off. we don't guarantee you'll make anything off your unit. we will let you sell it for what you bought it for. if it reprices below what you brought it for, which won't happen under our current mechanism. some people are able to secure a 20% profit and whatnot, which is fairly healthy, particularly sometimes for the time they've been in the unit. our current pricing mechanism is sound. so, people aren't walking away with more than they should or less than they should. and then in terms of where they go, you know, we don't do a good job so far of following up with people, but we want to. it's on our list. we talk to people and i talk to people just from living here, my partner is a high school teacher. i asked about three people who owned the bmr units. and just in his school, among them, you know, two moved on to

market rate unit in the excelsior ingleside area which is probably second or third most affordable areas in the city. and one is renting now and getting ready to buy again. but will not be buying a below market rate unit. my sense from people is they're moving up. >> finally, i guess, what percentage of the units would you say turn over in a given year? are they pretty stable? >> 10 to 20. >> okay. >> that's a lot. >> thank you. i just wanted -- kind of a snapshot. when you give us a lot of information -- [multiple voices] >> we're not familiar with all the challenges. so, thank you. >> commissioner antonini. >> thank you for a very interesting report. i have a few questions. i would assume you talked about striving for ethnic balance, but, of course, you have to follow fair housing laws as far as equal application for anybody who comes in. then the other thing you mentioned, it's okay if you work here, but you're a resident somewhere else, you would qualify for this program.

and the converse would be true, if someone lives here presently, but they work somewhere else? >> anyone can qualify for the program, but there is a lottery preference for people who live or work in san francisco and that's equal, live or work. the highest one is if you're a certificate of preference holder and you were displaced in urban renewal. which really does not crowd out the units. [speaker not understood] why would i apply because if there's a group of people who have the highest preference. but just like every other buyer or renter they have to qualify for the unit or whatnot, and they don't like the unit. the second preference is living or working in san francisco. yes, they're equal, and you're correct. >> i knew this policy of certificate of preference from urban renewal, seems like that was a long time ago. seems like most of the people would have already relocated. it may not be a very large percentage that takes advantage of this claim. >> i understand there are about 700 active certificate of preference holders who are getting mailings every time we

announce a new housing opportunity. >> but i'm not sure that many of them actually activate that. >> they very well may own, you know, their own home. >> because it's a considerable period of time and you probably have the statistics. it's nice if that offer goes out and euro belieed to do it i think it's a good policy. i'm certainly someone who is now lives elsewhere and work in san francisco. [speaker not understood]. the other is fine, too. then i have questions and this is kind of basic -- you probably answered this during the early part of your presentation. i should know this already. but if you're looking at an ownership unit, you can earn up to 120th percentile. i'm not sure what the line is. * >> it's 90% of median income for our units right now. we have units that are reselling at 120% of median income, but the current program for new units is 90% of median

income on average. and i can explain why it's 90 if that sounds like -- >> yeah, i remember when we went through these discussions over the last 10 years. it was always the 60th percentile for renters, the 100th percentile for homeownership. i heard recently they were trying to move it up to the 120th percentile, with the idea there being a range. so, not all of them were at the 120th percentile but you had to have a balance between 80, 90, 100. so, i'm not sure why it's at the 90. >> so, the reason why it's 90, in 2006 the board of supervisors changed the income table that we use and wanted to move toward a san francisco-only table. they felt that -- so, the income table we used for most housing programs is based on marin, san mateo and san francisco. they felt like marin and san mateo were bringing incomes up. so, they wanted to see what san franciscans were making, they