housing. there is the production and the city's ability to attract and retain jobs and the production of moderate and middle-income housing, and we took the various departments which could be speaking, seeking to contribute to the discussion about this issue. this is an issue, as the supervisor has stated, an issue that affects a lot in san francisco. it is at times controversial, but what we thought we could do as that to the city is provide data on which the policymakers can guide staff and changing policies. if it is deemed necessary to do that. so on behalf of the various departments, we see this as the beginning of a discussion, a

discussion that is also working in parallel with the results of the house an audit, the housing and trust fund discussions, and the work on the inclusionary program. we see these working in parallel through this process. in terms of the departments, john could not make it here today, and the department of planning and billmeyer zappers -- office on housing are working very closely on this and all the other studies since it has obviously impacts on both the planning department ordnance programs as well as the board of supervisors ordinances. in addition, we will have michael from the mayor's office of work force and economic development talking about the implications of the high cost, and after that, we will have to read from the office of the

comptroller and the office of economic analysis top about his view of housing in san francisco and, again, to put some background on this particular issue, the relationship between affordable housing and jobs. from there, brian from the mayor's office on housing will go into some of the data crunching that we did to, again, look at the question of what is being produced, what is affordable, and who are the people that we seek to support in terms of the various income groups and how we have supported them through both housing production as well as through our regulatory efforts, and we will look at the question of leveraging, in terms of past production, and how we have sought as a city to leverage up the resources and producing affordable housing in san francisco. and at the end of the

presentation, all of the presenters, all of the staff that have worked on the presentations and i will be able to answer any questions that the supervisors may have. as i said earlier, this is part of a multiple parallel -- policies. we are reviewing this as required by ordinance every five years, and as a part of that, we sought to do a study of the state of the housing market and what effect any change in the inclusion ordinance might be a response to what the current market might be. we have that study already in place, and we are happy to provide an early presentation on that, and that study, which is

the background study for this presentation will inform us in the discussion has been in any possible changes in the inclusionary ordinance and also as we look at what our goals might be as part of the housing trust fund, and again, the mayor has stated repeatedly that he supports housing for the 100%, and part of his mission is to make sure that everybody in san francisco is served in some way. he sees a housing trust fund as a means to try to achieve that goal of providing a wealth of housing opportunities for all san francisco and, because as the economists will say, affordable housing is an important part of creating jobs in san francisco and keeping the economy of san francisco strong and therefore allowing us to than produce also are deeply affordable, 100% affordable

housing. i would like to give thanks to the staff of the planning department, and others, for their work on this presentation, and thank you to the supervisors, both the committee here and the supervisor for their comments on this particular presentation, so at this time, i would like to turn it over to michael. supervisor wiener: what do we not start with the city economists, and then we will go to michael and then go to mode -- me? >> ted egan, the comptroller's office. as they have been working on this issue, we have and try to contribute some analysis with regard to housing affects the economy in san francisco. in particular, however affects job creation. i just want to share some of the

analysis that i have done. thank you. supervisor cohen? do we have a powerpoint? supervisor wiener: 4 sfgtv? >> yes, we do. looking at this in san francisco, this is a chart. the blue line over the past 40 years in contrast with the area as a whole, the red line, and this has been a fairly slow growing jobs center. we have added about 30,000 jobs in the 40 years between 1969 and 2009, and the rest of the bay area during the time added about 1.5 million jobs. now, one of the main reasons for that is that there is population growth in the rest of the bay area, and employment in the retail trade and services was needed to serve that population,

but san francisco has also lost its share of an appointment in the bay area around a set of industries that are not tied to population and were part of the core economy, transportation and manufacturing and financial- services and insurance is and back offices and headquartered operations. the growth of these industries or this employment across the rest of the bay area is basically the outcome of businesses looking at a san francisco location versus other locations in the bay area and finding many of those other locations favorable in many circumstances, so what we have seen is the growth of perhaps 10 or 15 viable office and. centers across the bay area that are, in effect, competing with san francisco for the types of jobs that have been the core of the san francisco economy for the decades prior. the immediate question is why

would that be. what is it about san francisco? it is part of the same economic region. many people who live in san francisco war and other places or work and other places and live in san francisco. why would there be employers trying to grow jobs outside of the city? when i looked at this issue, one of the most important is the price of labor in san francisco. if you compare the average wage that an employer pays in san francisco with an employee in the east bay, and you adjusted for the fact that the industries in the east bay are slightly different, san francisco wages are about 20% higher than the east bay, and they are set to begin in lower than that in the north bay. only in santa clara county are wages higher than san francisco, and that is an unusual county that has added a lot of jobs as well as having high wages. san francisco has had high wages

compared to other places in the region and has had slower employment growth, so the question is, why might that be? we're talking on an industry basis. in one city, you have to pay higher wages than another. one of the reasons is that much of the labor that is available in san francisco, the workers in san francisco, lived in the city and pay san francisco housing prices. san francisco housing prices are very high by the regional standard. in fact, san francisco as of last year had the highest in the county in the bay area, and it has not always been this way. if you looked back, folks in san mateo county and marin county have higher ones. this is existing housing. a household's biggest expenditure is there housing prices.

-- is the housing price. how much they spent, somewhere between 25% and 50% is not uncommon. there is no other consumer item that matches what they spend on housing, so if you are in an area where housing is more expensive, workers will have to make more money in order to get by in that area, so what that means is that high housing prices work their way into high wages, and employers see it as less of an economic advantage, and that is the way i think housing most fundamentally affects the san francisco economy. it works itself into the higher wage that workers get in san francisco. it does not necessarily make the workers better off that goes to paying for housing, but it is compared to other parts of the area, and that is part of the

reason why job growth has been slower in san francisco than in other parts of the region. as i say, that is looking back 40 years, and in many ways, we have adjusted for that state of the world. we know that san francisco has concentrated on the high-wage, high skilled activities that can afford to pay people the high wages that it takes to mid year, but the recent 10 years in the housing market has changed the original equation in a way that i think people have not fully anticipated yet. this is a chart that is showing housing affordability in different counties within the bay area. it is the complicated, so i am going to walk you through it. basically, it is selling to take an four-person household that makes 100% of the median income, and last year, that was 100% of the median income, how much

house can that household afford? looking at different areas within the bay area, solano county among the areas i am looking at, is among the most affordable. but looking back to the late 1990's, a household in san francisco that was 100% of ami could afford quite a lot of house in solano county, more than three times, and to a lesser extent, they could afford more house and the other suburbs, as well. they could afford about 150% of the house in alameda county, about 120% of a house in santa clara county, and just about 100% of the house in san francisco in 1996, which is a good year to start looking because that was the start -- let's just say the increase in housing prices that turned into

a bubble, and what happened is despite the fact that the region build a great deal of housing, housing became less affordable everywhere, so that 10 years later, 2006, 2007, and 100% ami household could only afford half of the average house in san francisco county, and that was at the absolute peak of a housing bubble in 2007. we all know housing has come down, and if you look at san francisco, that number of how much cash you can afford has gone up about half to about 7 5% of the house, and that is good news for someone who wants to buy a house in san francisco. prices are low, and it may be a good time to buy, but what i want to draw your attention to is that the rest of the bay area has gotten so much cheaper. now, in solano county, a 100%

ami can afford 300%. it collapsed really in a way that has depressed housing prices and will continue to keep housing prices depressed, particularly in the east bay. san francisco build a lot of housing by our standards, but we did not build as much as other jurisdictions in other parts of the bay area, and while it has come down, it has not come down as much as in other parts of the bay area. there is cheaper housing in the bay, or we certainly have our economic nietzsche in san francisco. i am concerned that this will disrupt where san francisco sits in the regional economy going forward because the housing is going to be some much more affordable in the bay area going forward. there is so much to absorb. and while the amazing you do not

want to move out of your house in san francisco to solano county, you may move to oakland, and the person in oakland may move from oakland to solano county, and we are all one housing market with in the bay area, and we're all affected by these trends. so this pattern of san francisco having high housing prices and really accelerating housing prices within the regional average over the past 20 years has had implications of the housing burden. what percentage goes towards housing in the city, and this is breaking it down by five income groups, household income groups, that you will be hearing a lot of during today's presentation. what i am calling extremely low population is households that make less than 50% of a median income, which for four people is less than $50,000 per year. that group expanded very high percentage of its grip on housing in san francisco,

approaching 60% on average, and for the low grid, which is households in the 50% to 80% son, that number is in the 30's, and it has increased during the past 20 years. what i am calling the moderate group from 80% to 100%, they have also seen an increase. and even the upper-income at 150% plus has seen an increase in their housing board, though not nearly as much of an increase as the middle and moderate income groups. these patterns of housing prices and the increasing burden has said implications for the city demographics. another trend that you will hear again today, and supervisor wiener already alluded to it,

san francisco has a small middle class if you think of the moderate or upper moderate, and that has been shrinking over the past 20 years. the groups that have been growing is the extremely low group, despite the house in britain, and i will say more about that in a moment, and also the upper-income group, were particularly the children's population in the upper income group is growing, and they are growing as that average income in the upper-income group has increased over the past 20 years, so it really has been an increase in the top and the bottom and a decrease in the middle-income groups. the fastest-growing income group in san francisco over the past 20 years has been extremely low- income population. it has not been children and the population. the number of children in that group is declining. actually, it is workers, both u.s. border and immigrant workers that have been growing faster than any other.

the reason i make this distinction between u.s.-born and emigrant is because the extremely high housing burden is very atypic;l compared with other cities -- atypical with other cities. maybe it does not seem so bad to an immigrant who is coming from a position where their work prospects were not as strong, and it looks attractive to the emigrant, even though to a u.s. resident or 28 u.s.-born resident to may have some more work opportunities. that does not appear to be what is going on. the number of young in this group is not growing and is actually declining slightly. the fastest-growing group in our extremely varied low-income group is the immigrant workers over the age of 35. overall, san francisco had a big

wave of immigration and the 1980's 90's, and we may see some aging in place in san francisco and not being replaced by immigrants working, at least not in that income category. the other group that seems to be growing, and this is also fairly interesting, is u.s.-born workers below the age of 35, another fast-growing group within the low-income population. i do not have an answer as to why this group would be growing so fast, particularly the working population in this group, given the very high housing bordens that they face. supervisor mar: could they be the children of the immigrant of the 1980's and 1990's? >> it could be if the elected to stay in san francisco and their work prospects did not improve

vis a vis their parents. i suspect, though i do not have the evidence of that, the children have a greater educational attainment and may not be working in the same cohort. i would just like to conclude with having raised the point that the san francisco high housing prices contributed to the high wages that employers face in the senate and are relatively slow relative to the rest of the bay area. i would like to just comment upon what would be involved and perhaps making housing more affordable in san francisco on a grand scale, and reinforce the challenge that is involved to, would just a little bit of and exercise. i looked at the mls listings last year for a 3-bedroom house, thinking that a low-income, four-person household at 80% of ami, what were they facing in

the housing market we have in san francisco today, and when i looked at the mls, assuming they could qualify for a mortgage, they can afford about a $488,000 house, and that would cover a large percentage of the housing on the market, and that is the 80% center awards. and then we looked at different types of ways of making housing more affordable, one of which was a downpayment assistance, and if you give that household $75 thousand, that allows them to buy a bigger house, and that means they can afford about 25% of the three-bedrooms on the market. at weber, we have thousands of households in that category, so the cost of making housing affordable to everyone in that group is an extremely high. it would cost in excess of $4 billion to provide that level of subsidy to every low-income household.

it tends to raise the price of housing because there is a flood of money going into housing. the winners they're not people looking for housing with the people selling housing. suddenly, the city could to increase the number of permanently affordable housing units by subsidizing the construction of those units. you will hear from my colleagues that is more expensive. there is the alternative of increasing market rate housing construction which does have an effect on housing prices. the sensitivity there is not extremely strong. the level of housing that you would have to build in order to see a significant increase in affordability for low-income housing is large. i estimate it would take the construction of 100,000 new housing units to make -- have the same effect of affordability

as giving everyone a $75,000 down payment. making a quarter of the market affordable to low-income houses. obviously that would have the advantage of not costing the city $4 billion. $100,000 -- 100,000 housing units is a lot. that is the housing that san francisco has built since the 1920's. we're talking about a significant change in the way we look at housing construction and regulate housing construction in order to have an appreciative effect on diminishing prices in san francisco. i will close reenforcing the challenge. housing is expensive in san francisco. it does have economic consequences. it is the consequences of decisions we have made over a long period of time and is challenging to make significant corrections to that now. either through the subsidy or increasing construction.

i will conclude my comments and i will be around to answer further questions. >> thank you. supervisor wiener: if you would like to make any comments at any point of fell free to do so. right after mr. yarney. >> it is a a pleasure to be here. i will follow-up on tad and my presentation is brief but builds on the information he just shared. i will begin with talking briefly about the effects of high housing costs on job growth. as all of you know the mayor. the priority is to attract jobs for highly skilled folks to do

not have for your degrees. the most immediately -- committee -- immediate effect is high housing costs raise salary and wages and this increases costs for employers. ultimately on some level, this leaves -- leads to a disincentive to hire for low and moderate income workers and it represents a competitive disadvantage for the city especially when we compare san francisco to other labor markets including the outer east bay we can see housing prices are much more affordable. in some cases we have seen of relocation of what was once called back office. large corporate campuses that or at one. located in san francisco with jobs that were middle income. we saw many of those offices move out in the 1980's and 1990's to the far east bay by pleasanton and other areas where considerable affordable

housing made the community -- commit shorter for where the middle class was living. this is a short -- and this is a problem. it is important to emphasize that san francisco's job shed or in housing shed is a regional problem. not everyone who works in san francisco needs to live in san francisco. not everyone who lives in san francisco works in an -- san francisco. i would like to emphasize that part of the solution to our structural housing affordability problem and economic competitiveness is high efficiency low-cost, regional and citywide transit access. this actually boosts the opportunity for businesses to hire middle income workers who may not be able to live in the city and vice versa. it improves the competitiveness of the city as a central

location where access is easy compared to the other suburban locations. i want to get back to the housing affordability issue. i chose the slide because he represents our long term structural problem. it is sisyphiean. this exacerbates the housing burden. this is the difference. i am sure if mr. egan can look back further into the 1980's in 1970's. what you will see is an ever- growing housing burden on the middle class. without expanding production, this burden will likely continue to grow. exacerbating the number of people who need subsidies. and so as it is we have a small subsidy by and we have primarily

the majority that is dedicated toward low-income -- low-income and very low income households. we hear a part -- a cry for that portion of the pie to be directed to middle income. just looking at subsidizing mortgages to increase the possibility of owning a home from 14% to 25% would cost the city of $4.20 billion. we obviously do not expect to see that kind of subsidy any time soon. it begs the question what other policy responses are there to this growing affordability problem? i would like to emphasize that it is not us versus them approach.

often individuals have categorized housing in san francisco as low incumbrances market rate or low-income vs middle income and that is factually incorrect and not politically constructive. there are ways to grow the subsidy by and expand market rate protection that are mutually supportive. consistent higher annual housing production will slow and in some cases reduce the affordability gap for some middle income residents. this will allow the city presumably to focus subsidies on those income levels that can afford market rate products. it is a yes and approach not either-or. what does that mean in terms of policy? it certainly means lowering regulatory barriers to producing housing. subsidized and market rate.