with recreation and park. there is something they have done that is very effective. the emails to concertgoers and recommend alternative transportation and the different shuttles that you have used, really tremendous models that i think other festivals can take advantage of. i will say that this has been an eyeopening hearing. a lot of the issues were brought up to to 2.5 years ago. we will continue to work with the departments to look at the concerns and mitigating them but also in encouraging them to work with neighborhood groups, like you have done, but even improving on that as we move forward. thank you for being here. any wrap-up comments? colleagues? supervisor wiener? supervisor wiener: it seems that

people are in support, and it is just a manner of doing it and a certain way. we are as a city so grateful for his gifts to the city of hardly strictly, and i remember when i met with him early in my campaign, he only had one question. he said, "are you going to mess with my festival?" absolutely not. we all cherish it as a city, so thank you. supervisor mar: ok, colleagues, let's continue this to the call of the chair. madam clerk, mentioned earlier that we will take no. 5 before a number four, so please call item no. 5. clerk miller: item number five, a hearing on the moderate and

middle income housing project with the retention of jobs in san francisco. supervisor mar: we will give people a couple of minutes to walk out as quietly as you can. thank you, everyone, for exiting as quickly as you can so we can get started. and if we could have the door

closed, we could begin our next hearing. supervisor wiener? supervisor wiener: ok, now we are ready to go. thank you, mr. chairman. i called for this hearing with mind co-sponsor, supervisor carmen chu, though her

assistant, katy tang, is here. talking about the state of middle-income housing in san francisco, what we are doing to encourage housing that is affordable to our middle class, and what we should be doing in the future. there are some issues that come before us than have an easier or relatively easy and straightforward step. this is not one of them. this is without a doubt one of the hardest issues that we grapple with as a city, how to insure that we're able to have a thriving and growing middle class that can live here. having in middle-class society, this is one of the things that

has made united states says stable for many years. now, preserving the middle class. of course, to have a middle class in any city, you have to have housing that folks in the middle class are able to access, and once you have middle-class people living and being able to be housed in the city, the jobs will follow. when you do not have housing for your middle class, and your middle class is not living here and not able to live here, it is tough to create jobs, particularly middle-income jobs, because businesses may be hesitant to do business in an area where the work force is not able to be housed, so there is a strong link between housing and jobs. the middle class in san francisco is on the small side. about 28% of the population of our households in san francisco

burn between 80% and 150% of area median income, and that number is more than 10% lower than it was 20 years ago, so far middle class has shrunk in the last 20 years. we need to be pro-active in keeping our middle class and growing our middle class in san francisco. for too long, we just sort of sat back and hoped. we cannot do that. there are many factors that go into keeping middle-income people in the city, from schools to parks to playgrounds, to wall of the different amenities that people need to be able to thrive in the city. but one of the most important things that we can do is to provide that housing. i also want to be clear that middle-income housing and providing middle-income housing

and providing low-income housing are not mutually exclusive. too often, some folks picked the two against each other, that if you're actually creating housing for your middle class, somehow you must not be treating housing for lower income people. i support, and i know just about everyone supports -- maybe not just about everyone, but many people support, myself included, our continuing commitment to providing housing for low-income people. but both are important, and we need to focus on the middle- class, as well. mayor lee has a working group to look at a proposal and how we stabilize affordable housing, and i have been very clear that middle-income housing needs to be a part of that solution. of course, we know about

subsidies, but it is not just limited to financial subsidies from the government. it also has to do with the supply of housing. we have a constricted supply of housing in san francisco for a long time. we do not tended to meet our regional targets in terms of creating new housing, and that artificially increases prices and makes it more expensive. we do not always encourage developers to design house and in such a way as to create more moderately priced housing, and so sometimes housing is designed so that it can only be priced at luxury housing. the development phase in san francisco, and we impose a lot of very worthy fees for a lot of different things, from affordable housing to transit to infrastructure. housing fees, development fees,

go right into the cost, which goes right into the price of the unit, and at some point, you end up with a situation where the only thing that is penciled out is high and luxury housing, so you have those developers paying to create low-income housing, and you are not creating any market middle-income housing. i also wanted to stress that this is not just about home ownership. it is also about rentals. we do not produce a lot of new rentals, and rents in the city and very frequently are off of the charge -- charts, and it makes it very hard for people to stay here, so is a tough issue, and i know we are going to have some good presentations today. after i asked for comments from

supervisor chu's office and my colleagues, i would like to proceed by having comments from the mayor's office on housing and then to have several presentations, first from our city economist, ted, and then from office on the work force development, mr. yarney, and then the budget analyst. so, mr. olson, would you like to start with some introductory remarks? is the planning department going to be -- >> he was year earlier. supervisor wiener: a kick, when he comes, we will give him the opportunity. supervisor mar: update, before

we go, supervisor wiener, maybe we can ask if supervisor cohen has any comments. i appreciate the work that has gone into this. i had an interest in a statement about not putting the low-income housing against the immediate income housing. something shown to me shows that the highest rent burden still falls on the lower incomes, who have to pay a huge percentage of their income on rent, as much as 7%, and for me, housing for the lowest income residents also includes much lower living conditions and habitability, as well, so in some ways, the lack of heat or rodents and roaches to lots of other issues are really key, and sometimes when

we look at middle-income housing, it depends on how we define it, so i am looking forward to see the data today as we try to balance the needs of the lowest income residents against the middle-income residents. as we try to build housing for teachers and other middle-income aspects of the population, and i hope it does not come with pitting the lower income people against them. >> -- supervisor wiener: as i said at the beginning, this is not about pitting one against the other. i never said that. there are very few people who believe that. it is about making sure that we are talking about those and prioritizing the as and increasing both because they are both extremely important. ms. tang, on behalf of

supervisor chu? >> katy tang, on behalf of supervisor chu, who regrets not being able to be here today, and to export to attending hearings on this topic. since she could not attend today, i just wanted to share some of forethought. for some time, the city has directed its resources and a very limited way, between 80% and 150%, and the city has done little to encouraging the is. today, she is interested in hearing about the state of the housing supply in the city and to begin a conversation to promote housing for moderate income levels. her hope is that we go beyond offering downpayment assistance programs. we would like to hear from the mayor's office on housing to

encourage the moderate income range in the city and also some of what the best practices are in some of the other jurisdictions, so those are just some of the supervisors' slots, and, again, she looks forward to continued participation in this as it goes forward. supervisor wiener: . -- thank you. any other comments? mr. olson, why did you not make a brief introduction, and then we will go to the presentation? >> good afternoon. i am the director of the mayor's office on housing, and we thank you for the opportunity to present the materials that you will see this afternoon. based upon the hearing requested that was found, the committee started to look at the inclusionary review process and increasing moderate-income

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. forward. there is so much to absorb.