i will turn it over to you. >> on october 3 of this year -- before we get to the presentation by departmental staff -- i called for this hearing to talk about work force and middle class housing in our city. and the reason why i wanted to talk about that in particular and to talk about what the projected development was and the preservation was and what had been done over the last 10 years is because it's become extremely, glaringly obvious to this body and to the members of the public and to others around san francisco that our city is polarizing. many would argue that we've done a significant job of building enough market-rate housing, but statistics would say there's still a lot of demand out there for that housing. same with regard to low-income

housing. we still have a lot more work to do, but relative to many parts of california and probably most cities in california, we've done exceedingly well, but we still have a significant amount of work to do. in the area of households between 55% and 150% to 175% a.m.i., or so-called work force, middle class housing, we've done extremely, extremely poor. and one reasons why is that we, our market in san francisco, has always taken care of that housing stock in the housing sector on its own, the richmond, sunset, always been areas -- and many more -- of san francisco that took care of working and middle class families, but -- and this in many ways, this hearing is a continuation of the

c conovversations that we had to talk about the housing and the focus is what are we doing to expand and fill in the gaps where the so-called missing middle or middle and working class families and low income are being left out of the conovversatio conversation. when homes are going far north of $1 million, we know we're extremely in a crisis in this city, as well as evictions, low-income housing households having to compete. obviously, that's something that's very well documented. this part of the conversation, it's not so documented. it has not been in the fore front of the conversation. we'll hear from the planning department, office of economic work force, mayor's office of housing and community development and controller's office and our economist, ted

egan. just a few facts for the general public and this body. san francisco is the second most densely settled city in the united states, only after new york city. we're close to 18,000 people per square mile. and new york city is north of 23,000, 24,000. the only thing that confines us are our borders and the only room to grow is urban infill and density and height. in general, i believe -- and we'll hear from from the economist, average median one-bedroom was $3,700 a month. and people and families and housing costs are displacing our working and middle class families at an alarming rate. we're talking about janitors, nurses, teachers, firefighters, those that get up and make this great city work and are the

backbone of this city on a daily basis, but now being forced to commute on a farther and farther commute on a daily basis. we're going to hear -- you are going to hear things about the housing allocation arena. those are things we need to focus on. this is not just confined to san francisco, but is a bay area problem. i think we learned recently for the first time this year that not only is the missing middle being underserved, but a family of four making over $100,000 a year is defined as low-income and that's alarming. because of all the reasons and because of the idea of wanting to know what we've done and what we intend to do, i called for this hearing and i want to start to think about solutions. i want to think about what ideas

i might have and what need there is to be filled and how we can begin to serve working and middle class families better through our housing policies. thank you, mr. chair. the order of people wee call all up, sara dennis phillips, economic and work force development. ted egan, controller's office. and josh whitsky from planning. sara, if you can please come up and begin, if you have something to hand out, thank you. >> good afternoon, supervisors. i'm sara dennis phillips, work force development i'm joined by my colleagues from the office of economic analysis and the controller's office, planning department and mayor's office of housing and community development. we're here to give you an overview of the work force and

middle income problem, production and funding creation and preservation of the units over the past decade. to give you an overview what we'll be talking about today, we're going to go over income levels and who we're really talking about when we talk about work force and middle-income households. we'll good over economics and why those households need housing support. we'll good over production and look at how much we're building and we'll go over our programs to look at what tools we have to produce the middle-income housing. while the federal and state government has many terms to try to define households by income, work force housing, they're not one of those terms. as we try to define it, we're looking at a couple of facts. one, the majority of san francisco's existing affordable housing production and programs focuses on what we deem very low income households.

households earning 60% of median income or below. the majority of federal and state subsidy that we receive addresses that very low income range of households. and most housing organizations across the state and outside the state define work force housing as households earning less than 60% of median income. for purposes of this hearing, when we speak of work force and middle income, we'll talk about people making above the 60%. those are the households not making enough to afford a home in san francisco but locked out of our housing programs. who are those? it can be a receptionist to entry-level teacher up to a medical assistance or engineers. some of the households have children. some don't. all of them have trouble affording housing in san

francisco. last week pedro peterson from the planning department was before this committee giving information on housing costs. he used a ballpark average of $4,200 as the current asking rent for a 2-bedroom apartment in san francisco. what is interesting about that, as we reference the history, we're not seeing much variation neighborhood to neighborhood. and that's something that happens again and again when we're in a hot housing market. it really flattens out in a high-demand period, which we are right new. $4,200 comes from zillow's rent index. it's a date as of october, 2017. what does it mean in terms of households? you have probably heard you should not spend more than 30% of your income on rent.

that's ideal, but not really possible here in san francisco. landlords look to see that your income is 40 times the annual rate. if we use 40% of household income, one would need to earn 160% of median income. so we're looking at everybody from 160% of median income as being cost-burdened. >> can i ask a clarifying question. you said 40 times the annual -- you meant 40%? >> i did. math was not my strong suit. >> i just want to make sure. >> yes. that would be astronomical. >> it would be. >> for home prices, we're in an even worse situation. zillow's index listed home value in october as $1,249,000.

home affordability depends on more than just income. it includes things like mortgage rates, downpayment availability, etc., you can safely say that a household would need to earn 200% of median income with an annual salary of $225,000 with a 3-person household to afford a home in today's market. as you heard from pedro last week, even as our population has increased, and as we've seen increases in very low and upper-income households, since 1996, we've lost households earning between 30% and 140% of median income. we're losing middle income households as a result of our high housing costs. with that, i turn it over to ted e egan.

>> i'm going to emphasize some of the same points that sara made that supervisor safai opened up the hearing, to talk about the role that middle income plays and associating the housing costs particular to that group. sara talked about the trends. this is a chart that shows the trends in household income over the past 20 years or so in san francisco from 1990. what it really shows is that there's a widening in equality within san francisco. the percentage of households that are 50% or below has grown since 1990. percentage of household over 150% has grown. the group in the middle is stage nating or -- stagnating or declining. there are reasons, but it's at a time when there's been a change in the economy, where we're seeing a slowdown or a decline

in middle income industries. so it's setting the stage of the problem that supervisors safai was alluding to. it's not a new thing. it's been several decades brewing. this is a chart that shows the working age participation rate. i've circled that middle-income group that we were talking to in the 60% to 140% range. i should say, san francisco is one of those places where the labor force participation is extremely high. most of the groups, 80% of working adults, are working or looking for a job. national number is in the low 60s. the middle income group is the group is that is clearly part of the work force in the sense that there's an extremely high percentage of working adults are in the work force. when you talk about low-income

groups, there are many people working in low-income groups, but it's more heterogenous. middle income labor force participation rate is higher than it is for both the lower income group below 50%, but also to the extreme right of this chart, higher than it is for people over 250% of a.m.i. they also have a lower labor force participation rate. so, clearly, we're talking about the work force when we're talking about middle-income housing. at the same time, we're talking about housing problems that other segments in the work force don't share. this is a chart that shows the breakdown of households by income group, every 10%, look at a.m.i. this is the percenting of households that are spending more than 30% of their income on

rent. of course, for low-income households, it's an extremely high number. for middle-income, it's a high number and higher than it is for upper-income groups that are another part of the labor force. so really when we're talking about middle income households in san francisco, we're talking about the group that's both a part of the labor force and also experiencing in some places dramatic housing burdens. the recent price escalations are not helping, as the numbers that sara alluded to are highlighting. this is a chart that shows where san franciscans work. and it breaks them out by household income. the industries to the left of the chart have proportionally the most adults from middle income households. it's the industries that the folks are concentrated on in san

francisco. and it's a concentration primarily of industries that have been struggling for some time like some of the blue collar industries like warehousing, but also education, health services, public administration, as well as some sectors that tend to be resilient like the tourism industry and the construction industry. i wanted to just close with another highlight. i've been talking about the long-term trends related to middle-income housing, but i came across this report last week that it's a snapshot of where the skill shortages in our regional economy today, that really highlight the economic costs of the middle income housing problem. as everyone knows, we've gone three six or seven years of rapid technology group. that seems to have reached a pause. we have less tech jobs than we

did a year ago and what linkedin is saying, if you have tech skills, you are not being hired, basically. these skills are in abundance and all the top 10 least scarce skills in san francisco and the bay area are the kind of tech skills that were very much in demand three or four years ago. conversely, the skills that employers want to hire now when tech employment has stalled, are really the set of skills that are associated with middle-income households, education and teaching and sales and retail store operation and working in logistics and marketing event management. the challenge that these businesses have will be finding people to take these jobs, given the housing situation that faces middle-income folks in san francisco and our region. the concern here is if we don't address this problem, the

economic good news is that it's continuing for the city, turns into a situation in which the jobs cannot be filled here. and they grow in other places to the extent they can. and i just wanted to say that there are a lot of reasons to tackle the middle-income housing problem. i wanted to highlight the broader economic implications of it. thank you. >> joshua switsky, planning staff. i will take you through some statistics on housing production and targets we have set for us by the state. first, we'll talk a little about regional housing needs allocation. this series of bars shows you

how we fared in the last three cycles. the lighter bar is actual production, broken out by the four categories that the state sets for us. as you can -- you may or may not be able to discern, green bar, modern income, is the least served end terms of production in this period. in 1995, at the end of that period, we had 12% of the minimum target. in 2006, 13%. and in 2014, 19% of the moderate income needs, the green bar. and the notable, upward shift was the result of adopting inclusionary requirements just after the turn of the 21st century, which is why that green has slightly ticked up.

nonethele nonetheless, you can see the green and the red are the least-served income levels. and this aggregates the last three cycles. the moderate and low are definitely least served in terms of housing production. low, 30%. moderate, 15%. you can see that contrasts with the other two ends of the spectrum. this is also a good time to point out some of the flaws and shortcomings of rhna in and of itself. rhna is often misconstrued as goals or maximums. rhna is really minimum targets and each income is independent of each other. so looking at this chart, it looks like we so-called overproduced at the high end.

what it doesn't do is reflect real, actual trends over the course of that period and it's only accommodating for growth and, a, what it would take to bring down housing prices, or b, what actually happens during that period. according to rhna, we produced more than our minimum target. what happened during this period is that we grew by tens of millions of households more than market rate housing for and it was substantial pressure on housing stock and lower-income groups. this shows you where we sit in our current cycle. it's a little hard to gauge what the final outcome will be. you can still see from this chart that both the low and the moderate, work force housing targets, are suffering the least in terms of actual production. and so as ted showed you, the impact of all this, in terms of

households, what households are we losing? definitely the 50 to 120. the city has lost tens of thousands of households in these buckets over the last 25 years, while the lowest income households at 50 and less has been relatively stable and over 140 has grown as a share and overall. in terms of the building pipeline, we have an unprecedented housing pipeline of 60,000 units. of those, about 14,000 to 15,000 are in the state of being built or having permits issues. half of those, including hunter's point, shipyard, treasure island, and those, which will come over the course of multiple decades. and then we have over 17,000 units under review currently.

so it's early for us to say how it will break brought in terms of incomes. there's a minimum 10,500 units of affordable housing in this bucket, but there will be more depending on how things shake out between inclusionary and other agreements over time. with that, i will turn it over to amy. >> i forgot to mention, amy, i'm sorry. amy chen from the mayor's office of housing and community development as well. >> good afternoon. amy chan from the mayor's office of community and housing development. i will present on what existing tools the city has in serving middle-income households. this is a priority for our office and we share the urgency that commissioner safai has expressed. our office funds and oversees compliance of a number of programs that serve households at 60% of ami and above that

sara mentioned before. this includes funding new construction, affordable housing rental projects, preserving existing rent-controlled housing through our small-sites program and home ownership loan assistance to middle-income households and we oversee the city's inclusionary program. so before i go into the specifics of these programs, i want to give you an overview of what funding sources our office has in serving middle income household and constraints for expanding what we can do. so the primary forces of funding we rely on to serve households 60% above ami, housing trust fund and 2015 housing bond. the housing trust fund allows us to serve households up to 120%

of ami for production and rehab of affordable housing. we do set aside 10% of those funds for small site preservation. we also fund downpayment home assistance for first-time homebuyers and a fund for first responders and educators. for first responders, the ami level goes up to 200% of ami. for the 2015 housing bond, this was a source that allowed us to focus on middle-income househ d househol households. we're serving 120% to 175% ami. $80 million was set aside for middle-income production and home ownership. the downpayment assistance program has a set-aside for

educators. we're expecting some state funds to assist us in our local funds, but they won't be coming until 2019. through this year's historic package legislation that was passed at the state level, we have a new recording fee that can be used for rental and home ownership opportunities serving middle income and work force househol households. and through the 2018 housing bond, there is also funds that are allowable to be used -- allowed to be used for home purchase assistance and a veterans home ownership assistance. so what does this mean in terms of creating more middle-income housing? we, the city, we're carrying most of this funding obligation without any existing state or federal funds to help us in creating middle or low income rental university ichlts --

units. it onliy allows us to serve households at 60% of ami. our city dollars cannot leverage federal tax credits for middle-income households. or 2015 bond, estimating that it will be extending the funds from that by 2020. so we have limited city funds and without state or federal assistance and without the use of federal tax credits, our gap for producing middle incommune its are about $100,000 higher than what we provide for low-incommune its. so these are the funding sources that we have and it's the funding constraints we're operating under. so what exactly are we doing with our sources of funds? there are two affordable housing rental projects that will serve

middle-income households that are in our pipeline. 88 broadway and educator housing. for 88 broadway, we'll have 15% of the units set aside to serve up to 100% to 120% median income. the middle-incommune its are funded with $9 million of prop a funds. and construction for this project is estimated to start next year. 60% of the units, or up to 80 units will serve up to 80% of ami. and funding that with prop a funds in the amount of $500,000. construction is estimated to start in 2019. we have a small-site preservation program that allows us to fund the aquisition and

rehab of rent-controlled units at risk of losing their affordability when owners are talking the units outside of rent control. and this program allows us to serve at an average of 80% ami up to 120% of ami. it's been a successful program. we've been able to preserve 25 buildings with 146 residential units and 9 commercial units. we have 11 additional small sites that are in our pipeline to bring us um to a total of 245 units and 19 commercial spaces. our home ownership assistance programs also allow us to provide a downpayment assistance program to first-time

homebuyers. this is a deferred loan program that we're providing to households up to 170% of ami. in the last fiscal year, we've closed on 35 loans for households between 80% to 120% ami levels. and loans between the 120 and 175%. we have a forgivable loan program specifically for educators. and that's called the teacher next door program and we've been able to close on six tnd loans for educators last fiscal year serving households at 200% of ami. last year we closed on 185 bmr ownership units for initial sale and resales serving between 80%

and 120% ami. in this fiscal year, we estimate we should be administering belobelow market rates and closing on another 26 downpayment-assisted loans. and other efforts to serve middle-income housing households thanks to the leadership of this board of supervisors now with inclusionary legislation passed at the rental units and ownership units, we'll see new projects that will have units that are serving households up to 110% ami average for the rental units and up to 130% for the ownership units. and other city efforts, again, thanks to the leadership of this board, to serve middle-income households through the private

market is incentivizing below-market units, as well as creating and legalizing dwelling units to serve our working households. as i mentioned, we do have limited resources, though we have notable achievements in terms of what we've been able to accomplish in terms of providing home ownership assistance, moving forward with the legislated project and continuing to serve households, retaining their housing through the small sites program. some of the next steps, what we need to focus on, expanding our sources of funding to serve the households, and two legislative proposals in terms of getting

additional funding include allowing the state and low-income tax credits to serve above the ami and to go up to 80% ami. this will allow us to get the first tax credits and state tax credits to also serve a higher income level. and also currently, our welfare tax exemption only applies for units up to 80% of ami. if we were to be extending this property tax exemption up to 120% ami, this would allow our projects to leverage more debt and city's gap funding. and so both of these legislated proposals will help and we need more assistance in terms of expanding our income sources to serve middle-income households. >> don't go away. i want to ask you a couple of of

questions. just so we're clear, a couple of the proposals, so support income averaging for tax credits. is that something that needs to happen at the state level? >> state and federal. if we wanted to apply both state and federal income tax credits to go beyond the 60%, we would need tax and federal legislation. >> and lastly in terms of property tax exemption, is that state and federal? >> it's at the state level. >> that's a state-level thing? >> correct. >> is that legislation drawn or something in discussion? >> this is something that we're looking at and we are proposing. >> okay. a couple of clarifying questions. how much of the prop fee goes to

middle-income housing? i didn't see that in our presentation. >> the housing prop fund allows us to produce new housing and/or rehabilitate existing housing for units up to 120% ami. so we apply that to both or low-income production and for middle-income production, no more than 120% ami. the only specific allocation is we're setting aside 10% of the funds for small sites preservation. >> out of the housing trust fund right now, the only thing being done now is small site accusation about 10%? >> yes. >> and how much is that annually? >> um, i can get the numbers for you. >> okay. and then the rest of it is going to rehabilitation? >> new production and rehabilitation. >> so 10% of the total number, which at some point will grow to about $100 million a year? >> yes. >> and you set $80 million for

prop a dedicated toward middle income. >> correct. >> and you listed out about $37 million that was spoken for. where is the other $43 million? >> so for the $80 million, it includes production for the rental side as well as home ownership assistance. so that includes the dolp and tntd program. >> so what about the project -- you mentioned the project out in the sunset, teacher housing. is that the one for $28 million? >> yes, correct. >> okay. so the $43 million, the delta cannot be going just to downpayment loan assistance so, there are probably other projects in the pipeline. >> we've done one issuance for the prop a funds. and we've allocated the funds for both the teacher housing

project and 88 broadway and then on top of that, we have allocated funds for downpayment assistance and teacher next door program. we'll have two other issuances for the bond. so we haven't expended the $80 million. >> so more money could be issued? >> yes. we're at about $30 million. >> we'll take public comment in a minute, but i want to get planning back up. in the production slide, you said, what's going to be produced, but how many in that pipeline is actually for middle income? it doesn't really say, unless i'm missing it. >> you are not missing it, supervisor. >> hard to tell? >> it's too early to tell. we know of the units that are currently under construction or subject to development agreements what that is, but we haven't had a chance to break it down the entire pipeline of the

whole 60,000. some of those we don't know because many thousands of those are in the process and haven't had to declare yet or haven't determined if it's onsite, offsite. >> what would be good as a follow-up to have any idea. i will forget names, but i will remember numbers. once you have something, if you can give me a number, what we're expecting over the next number of years in the pipeline, that would be helpful. >> we can do that for you. >> and then there was another slide on arena targets, but it is hard to pull from that. what is the number that would be an appropriate number to fill the need? i guess it's a question for both you and ted in terms of that missing middle. what is a number that we should be projecting toward in terms of how far -- to meet some of the shortfall? >> well, if you are going strictly according to arena targets, if you combine 50 to 80

and 80 to 120 -- >> 4102 and 4971 -- >> 9,000 units. >> so we're 9,000 units. >> for the current cycle. >> and up to 2022? >> correct. >> i don't have any additional questions. if it's okay with the chair, we can open up for public comment. >> the we'll open up item 5 to public comment. anyone wish to speak on this item? please come forward. >> san francisco building and trades council. in a way, i'm going to be unhelpful, because i'm going to reiterate the problem. for a generation now, we've remarked on the outflow of our members from san francisco. we have a consistent pipeline

and have had a consistent pipeline, now fairly formalized from city build from other communities into our trades and we watch those workers as they come to a certain point in their careers, complete apprenticeships, and look for better living situations for them and their families and not find them here. i think, if anything, it's anecdota anecdotal, if anything, the fact that we're hearing that same sort of concern from oth other occupations now shows that the problem is spreading. apart from the fact that you want to be able to call a plumber or electrician if you need one, i will remind you that

in situations such as san francisco will inevitably face, it will be helpful to have folks here that know how to use a cutting torch and handle heavy rigging and it will be great to have them living near the situations. i ask for your help addressing the problem. why have any solutions for you, but i reiterate the problem. thank you. >> next speaker, please. >> good afternoon, peter cohen, council of community housing organizations. amy covered everything. i could not think of anything else in the suite of middle-income programs we have. you must have stolen my notes, amy. that's what we've done. and i think it's pretty impressive, but the difficulty we've always had over the years is the limits of resources, to be able to spread thinner and thinner and also the limitations

of leveraging sources for missing middle incomes and supervisor safai, i think you know that. we talk about missing middle. it's a good narrative and i think we all believe in it. but it's a big difference wean it is 70% to 140%. and different programs work well for different parts of that range. i would impress upon you to show what programs work well. we have a lot of trial and error. for example, supervisors peskin and safai, we really nailed on the ownership side the right ami levels because, as our home ownership counseling organizations know, there's a great absorption of entry level ownership opportunities between 70% and 140%. it has not worked as well above

and below that. it's not to disparage, just a reality of how the programs work best. and to be thoughtful about the both/and versus either/or. it's problematic and political. resources should be additive. we've been fighting for that for years, adding to the stack and not being tempted to take from one and give to the other. i think we're all beyond that, but a friendly reminder. happy to work with you on more creative solutions including legislatively. >> thank you. next speaker. >> supervisors, corey smith, if i can get the overhead. this is how just for the record these numbers are reported. you can see the three different numbers there. and we're talking about different ami levels here, historically, that 80% to 100% level there 8 to 18 and we're at

5%. so just really puts hopefully a fire under our butts in figuring this out and trying to make sure that we are finding solutions, both in the short term and the long term. i completely agree with peter's comments here. we need to find additional funding sources, because we're drastically underproducing at all levels. i also want to say that while we do need to be aggressive in our short-term solutions, thinking long-term is not the worst thing in the world either. in that same spirit, we want to do both at the same time. i want to take a couple of quotes from the california legislative analyst reports with helping low-income californians. it states that housing is less desirable as it ages. "housing that was considered luxury when it was first built declined to the middle of the housing market within 25 years." i know a couple of you have

kids, 25 years from few, they may want to live here. in the effort to have short-term solutions, let's not forget to keep building. we know that new housing construction eases the pressure on low- and middle-income san franciscos. also the federal g.o.p. senate tax plan and funding sources for this stuff is under attack and highly encourage everybody to reach out through the california housing partnership and reach out to senate house members in the house of rep -- >> thank you. next speaker. >> hi. laura clark. i want to add a little more context to the rhna numbers. those were developed when our jobs projections were low because we were having our jobs recession. so it's important to realize that we should not necessarily

be pinning our goals to the rhna numbers. they should be four times that. we should think about, when is housing affordable, when people are spending 30% of their income on rent. our goals should be tied to the housing balance and the regional goals, that the entire region has fallen down and maybe that means we should do even more. we should not be stubborn and say, other people haven't done their part, so we won't either. we should double down and say, people are desperate. we should build as much housing as we can. are we going to subsidize all the way up to 150% of ami as our only solution for middle income? that does not seem reasonable to me. i would love to reveal prop 13 and spend all that money on middle income housing, but that's unlikely. if we as a city are saying the only way that middle-income people will be able to hold on in the city is by us subsidizing

middle income, we're looking at a failure of public policy. we need to be building a lot of housing. we need to flood the market with housing. and we need to realize, where is the missing middle? it's missing in the outlying neighborhoods. it's missing where we have constrained what we're allowed to do by creep eighting low-density neighborhoods. we used to convert single-family homes into apartments. and now we don't allow that to happen. the adu legislation is a great start, but we need to upzone our neighborhoods. neighborhoods need to build apartments. those are less expensive. thank you. >> next speaker. >> good afternoon. my name is georgia shootish. a couple of thoughts about how you could recapture housing. a vacancy tax. a luxury tax.

that would give you money to produce more housing. a lot of people that own property don't like rent control, so they keep the property off the market. it's not right, but they do it. is there a way to recapture some of that? give a rebate for property tax, which everyone is downstairs paying now. how do you find if someone has left a unit or a house or several units vacant? you can look at the water bill to see what the -- how much water usage has been there. i think you would have access to that. those are some ideas. there are 5,000 rental units out there sitting empty. perhaps that would help the missing middle. that's it. >> any other members of the public wish to speak on item number 5? seeing none, public comment is

closed. supervisor safai? >> councillor safai: thank you, mr. chair. one of the things that i wanted to ask maybe the planning department, because i heard in a couple of different public comments an idea -- we have a certain amount of funds set aside for aquisition in small-sites program and land. it would be good to know based on census data where some of the households are that you can look at and map and i'm sure that you have already done that where the missing middle or middle-income housing is beguning to target. one of the slides showed where small-site is being utilized and it was center to eastern part of the city. and i know that that is not necessarily where all of the -- it's based on the design of the program. and we started conversations with the mayor's office of housing on that. we started that the other day about how we can tailor the

program. some of it is based on money, but i know the program's sweet spot is three, four units and above. thinking about knowing where the households are would be hopeful. the reason i asked about prop a and prop c were not to criticize those programs. they were hard fought, that said where the priorities were. but it's clear about 10% of prop c funds are targeted towards middle-income households and $80 million of prop a is toward middle-income households. based on the 9,000-unit number that you produced, there needs to be strong consideration for additional sources of revenue to add to some of the public speakers' points. it's in addition to, not taking away of. so we're not going to refight any of those battles. we're talking about how can we expand the pie to do that. i just wanted to ask the

economist to come back up and speak a little bit more and answer a couple of questions. ted, if you can, mr. egan. so one of the things that is talked about -- one of your slides says the need -- the one on, where we have an abundance of work force and shortage of work force based on your projections. but i guess one of the things that i wanted to ask you to comment on on that particular slide was, even if we do have an abundance in that particular arena, skill shortages, even if we do have an abundance and a shortage in some ways, speak a little bit more what it means in terms of the housing and the connection of the housing. even if we do have an abundance and there is that demand -- one of the things i'm hearing from the industry that's represented in this in terms of the abundance of skills is that they're starting to come across

a housing shortage making it harder to recruit in those are s areas. can you talk about that? >> i think that's true. given how quickly housing prices have risen in the last five years, companies' plans from recruiting to come to san francisco have to change very dramatically. and there are some types of companies that will not be able to pay the salary sufficient to attract people to move here to pay our housing prices or attract the talent they need locally. i think the point about the tech industry today, though is, yeah, it's growing slowly here and costs are a part of that, but it's slowly down across the country. it seems to have reached the end of one of its entrepeneur cycles. and who knows what the future holds in that. there's another piece of the

economy. the particular challenge is that virtually none of the jobs on the right-hand side of the slide pay the salaries that the ones do on the left. so they will have it much harder to recruit people to fill those jobs, if people are not here in middle income housing in san francisco already. in other words, trying to grow the middle income people here is a challenge because of the affordability problem we're talking about. >> councillor safai: i appreciate mike -- appreciate that. michael terio, i worked with, those in the service sector and trades, have seen their traditional neighbors where -- neighborhoods where housing was available to them, if they didn't purchase a home or weren't here 20 or 30 years ago,

the commute or housing available to them as shrunk or lengthened. so the commute has lengthened and housing available has shrunk. so that says a lot, serving in industries that are vital to san francisco. >> i think it absolutely does. for a long time one of the saving graces of being in san francisco is the ability to draw in labor from all over the bay area. to the extent we're seeing the same thing happening across the bay area. you are running out of neighborhoods around the bay where you are able to find, you know, housing that is vacant that's affordable for them in middle-income occupations. the phenomenon we started to see in san francisco in the erarly 1990s, now we're seeing more. yes, it's certainly true that one of the costs imposed on

middle-income people is a long commute. now going into the central valley for a lot of people. but i think the more fundamental change is that we stop to see the jobs in the bay area at all because the costs are prohibitive. >> in certain sectors, there will always be a need for. hospitality, you have to have folks working in the hotels and the restaurants. so the idea is, where does that work force come from and where do they live? >> those businesses have to make it as businesses. the hotel rates in san francisco are quite high. people are willing to pay a lot of money to san francisco. and so that to some extent allows those businesses to support their workers. but there's a difference between -- i think it's important to keep in mind in this -- the people that have housing and the next generation. one of the reasons that the housing burden numbers that i

show are not as high as people might think is those are people that have been living in their house for a long time. if you have owned your house for a long time or in a rent-controlled house for a long time, your housing costs may be managable, particularly if your income is going up as well. trying to get someone to move to san francisco and pay $3,700 or if their family changes and they need a bigger home, will they be able to find a place in the city or even nearby? i think that's the real challenge. so to some extent, industries that are competitive in this city, and we have a strong to tourism, can pay the wages, but i would not minimize the challeng challenges for the next generation. >> councillor safai: so we still rank at the top in terms of 1, 2, 3, in terms of the price per rental unit or housing unit?

commute is factors in. when i think of this -- i brought up the point about san francisco being the second most densely settled, i relate it to new york, even though we're not on the scale of new york city, but one of the things that new york city did 30, 40, 50, 60 years ago, they made a tremendous amount and a significant investment in subsidisu subsidized housing and i agree that part of the solution is creating more, but there is that build -- built-in percentage of their housing stock that is government-owned. and that's a difference between san franciscan new york city. one of the ideas is, if you can expand the volume of subsidized housing or acquired housing, it can begin to change the course of the overall housing market.

>> i think if you can do that at scale, that's true. new york city did that in the post-war decades. they built a lot of housing and a lot of it was subsidized. they had the same debates we had now about, yes, there is a lot of new housing, how how much of it is affordable for our work force? the main thing is, they grew a lot. they built a lot of transportation and built a lot of housing. when you do things at scale and subsidize at scale, it has a big impact. new york city was a very comfortable, middle class city up until, say, 1970s to 1980s, before it gets the same inequality that we see now in san francisco. >> councillor safai: right. it's not unique to san francisco, by any means, there's been a massive reurbanization of the cities around the united states, at least on the two coastals -- >> there's a number of cities

with a similar pattern. the thing about san francisco is that our economy is so much hotter than other places it's probably worse here than any other place. >> councillor safai: and our constraints. that's why i brought up the 49, 47 square miles versus other places. so density and height has to be a part of this conversation. >> i agree with that and i would say it's probably more than 49 square miles. only 10% of the bay area lives in san francisco. there's no reason that 10% should see itself as 100% of the solution. >> councillor safai: right, but that's what we have control over. mr. chair, i appreciate you taking the time. i would close by saying that it seems very apparent to me based on the numbers is one of the strongest solutions is the and, in terms of adding funding for this source. to reiterate for the record, the low-income housing tax credit

goes up to the incomes up to 60% ami. prop c housing trust fund, 90% allocated to low-income households, as a way to fill the loss of redevelopment agencies that was a number of people in the room and others were involved in that campaign and that was a big push in this city. and then prop a, most recently, more was set aside for middle-income households and i know we'll have our first educator housing project, which is significant. so that's three or four different sources dedicated 80% to 90% for low-income. so there seems to be a significant need and based on this information to push ahead on a conversation about how we can create new sources. i appreciate the presentation about some additional ideas in terms of property tax and

averaging out state and federal help and happy to be involved in those conversations, particularly those that we have more control over, which is at the state level. who knows. maybe we'll be surprised at the federal level. it was ronald reagan that created the low-income housing program, but tip o'neal was in congress then and things were very different. who knows if it's a conversation to have. i know from being involved in a number of conversations, particularly one most recently, about the developer and the cost versus middle-income to low-income. the tax credits and tax exemptions given to low-income are allocated allow a private developer -- it gives them more of an incentive or ability to