commission implemented years ago and how it applies to the below market rate units. we have a policy in place. we haven't touched it for ownership unit. [speaker not understood]. i'd like to talk to you while i'm here as part of doing our informational hearing now because i've been the one primarily working on this over the last few years about the significant changes that you'll see in the procedures manual for owners -- for the ownership program, the rental program and the ones that affect developers most and i can answer question about the program in general as well. we have about 1200, to set some framework, we have about 1200 units that have been produced through the program. that's since '92, 1992 because it was actually a policy for 10 years. we didn't produce any units during those years. primarily from the time it became city-wide law in 2002. we have about 1200 ownership and rental units mostly ownership. we've had a very small rental

program to this day. and that's why we've made a lot of changes to our rental program in the procedures manual. potentially we'll have to make a few more with our next updates. we've collected about $50 million in affordable housing fees through the program to build deeply affordable housing. and we're about to potentially acquire our first two parcels of land through the land dedication option on which we will build deeply affordable housing in partnership with a nonprofit developer who will build it. we'll work with them, put out a request for application and whatnot. so, it's exciting. so, ask me any questions throughout that you'd like. i'll start with the ownership program. so, our ownership program has about 850 units that are currently owned and we're probably producing about just i'd say maybe 50 to 60 units a year right now. last year we didn't, just like the rest of the city and the economy, i think we had two buildings that closed that have

inclusionary requirements and it was not significant. we had a few ownership units, a few rental units and that's it. this year it looks like we'll have 12 buildings close, maybe 60 -- maybe more, about 40 ownership units and a lot of rental units. we have about 60. rental program is starting to outpace our ownership program which is in sync with what's happening in san francisco. many developer are choosing to receiptction -- rent for a period of time. that's addressed in the manual as well. what do we do for buyers, owners and developers who are building ownership units? first, we updated and clarified -- i'm just following along the memo that was provided with your packet. and if you need a copy, i have extras here. first we updated and clarified a lot of the -- many of our financing rules, including require choirtion a loan for your approval before someone applies for a unit. that's supposed to help make

sure that qualified buyers are buying but also developers can be reassured their units will sell in a timely manner. we clarified our down payment requirement, default and foreclosure rules which are more significant of course the last five years. big focus of our programming. but we've actually had very few foreclosures in this program. we've always required loans to be sound. so, compared to the regular market, we're doing remarkably well. i think we've had somewhere between 10 and 15 total in the entire [speaker not understood] of the program. and then we've clarified rules for units that are unable to pay financing because another thing that's changed recently is is it's become more serious when a building has too many rental units in it, the buyers -- people want to sell their units can't, the people who can't sell them to people who can get financing because fannie mae, for instance, won't buy those loans.

and then we've had a number, because of the age of our program, we have a handful of buildings that are having some legal issues with condominium legal issues so they also can get financing. we have some exceptions for that. it updates and clarifies the number of application rules including what happens when you change an application after you apply and requesting a reconsideration of an application. it updates just a few of our ownership restrictions. nothing serious, but it does update our occupancy requirements, our transfer procedures, inheritance which was in the ordinance and needed to be spelled out in the procedures manual. it happens when you remove owners from title, resell restrictions, capital improvements, not on the list are first-time home buyer rule. we changed it slightly. you still have to be -- have not owned a home in the last three years from the date of application. that's our rule. we think that's fair. it's not a lifetime restriction. it's just the last three years. we removed the other property.

you connell own another property. we tack it on to income, the other property. the documents we use to research our units, it updates and clarifies the lottery process, particularly our preferences. we had a lottery process since 2006. but it makes it clear how the preferences work. it's going to update our pricing mechanism for new units. i think this is interesting. we have a really tight pricing formula that makes it difficult sometimes for people to obtain loans because you have to be at the top of the maximum income for that unit and have down payment and be ready in every other way. so, what we'd like to do is add a conditional use authorization in so that the units are priced the same exact way so it's revenue neutral to the developer. nothing changes there. that would most likely be typically at 0% of median income, but we'll sell them at 100% of median income. we'll check some more buyers. probably not enough to crowd out the 90% ami buyers at all, but we'll give people a little

wiggle room so they can be more loan ready. not just with the developers who are excited to get their units sold in a timely manner, and also assist our buyers. we're going to update our pricing mechanism for s-r-o units. we didn't have s-r-o units selling in our program five years ago. now we do. we have luxury, i don't know if you call them luxury s-r-o units that have bathrooms and kitchens, but definitely a new phenomenon for our program. so, we have a new pricing that will be 75% of the studio price. it updates our income rules only slightly. we're just giving a larger exemption for asset test because most people do need to bring in somewhere between 40 and $60,000 for down payment occasionally. we're exempting that from an asset test we have. we're extending our marketing period from 28 to 45 days for new units, new ownership units. it remains at 28 for rental units which is a sufficient amount of time we think. we're actually going to update our resale period from 14 to 21 days as well.

so, we don't want the resale units to have to market as long as the new sale units because these are current owners, 90% median income. we need that to move along faster. we layout special allowances for people unable to resell their units in a timely manner including the rental allowance and allowance for the next buyer to go above the maximum income. for the unit. and then we allow project sponsors who are unable to find a buyer when units are new to do the same. and we're allowing children under 24 to remain off loan and title. and i just want to point out a few things require conforming ordinance amendments. so, the -- any increase in income beyond what's stated in the use restrictions such as the conditional use authorization for the new unit and the allowance for the project sponsors to raise the qualifying income level after six months of marketing or the exception for the current

owners to raise the qualifying income level after six months of marketing will require an ordinance change and allowance from the ordinance. but i just want to clarify the pricing never changes. this is sometimes confusing to people. the pricing stays the same. it's just you can broaden your net and bring in more people to the program. so, it's only the qualifying income level that would go up, not the price of the unit. and then we also need to update the ordinance to allow the pricing for the s-r-o units. so, that's the changes proposed for the ownership program. are there questions? okay. okay. 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 fe