Housing. We still have a lot more work to do, but relative to many parts of california and probably most cities in california, weve 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 socalled work force, middle class housing, weve 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 socalled 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 were extremely in a crisis in this city, as well as evictions, lowIncome Housing households having to compete. Obviously, thats something thats very well documented. This part of the conversation, its not so documented. It has not been in the fore front of the conversation. Well hear from the Planning Department, office of economic work force, Mayors Office of housing and Community Development and Controllers 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. Were 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 well hear from from the economist, average median onebedroom was 3,700 a month. And people and families and housing costs are displacing our working and middle class families at an alarming rate. Were 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. Were 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 lowincome and thats alarming. Because of all the reasons and because of the idea of wanting to know what weve 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, Controllers 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. Im sara dennis phillips, Work Force Development im joined by my colleagues from the office of Economic Analysis and the Controllers Office, Planning Department and Mayors Office of housing and Community Development. Were 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 well be talking about today, were going to go over income levels and who were really talking about when we talk about work force and middleincome households. Well good over economics and why those households need housing support. Well good over production and look at how much were building and well go over our programs to look at what tools we have to produce the middleIncome Housing. While the federal and State Government has many terms to try to define households by income, Work Force Housing, theyre not one of those terms. As we try to define it, were looking at a couple of facts. One, the majority of San Franciscos 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, well 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 entrylevel teacher up to a medical assistance or engineers. Some of the households have children. Some dont. 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 2bedroom apartment in San Francisco. What is interesting about that, as we reference the history, were not seeing much variation neighborhood to neighborhood. And thats something that happens again and again when were in a hot Housing Market. It really flattens out in a highdemand period, which we are right new. 4,200 comes from zillows rent index. Its 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. Thats 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 were looking at everybody from 160 of Median Income as being costburdened. 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, were in an even worse situation. Zillows 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 3person household to afford a home in todays market. As you heard from pedro last week, even as our population has increased, and as weve seen increases in very low and upperincome households, since 1996, weve lost households earning between 30 and 140 of Median Income. Were losing middle income households as a result of our high housing costs. With that, i turn it over to ted e egan. Im 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 theres 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 its at a time when theres been a change in the economy, where were seeing a slowdown or a decline in middle income industries. So its setting the stage of the problem that supervisors safai was alluding to. Its not a new thing. Its been several decades brewing. This is a chart that shows the working age participation rate. Ive circled that middleincome 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 theres an extremely High Percentage of working adults are in the work force. When you talk about lowincome groups, there are many people working in lowincome groups, but its 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, were talking about the work force when were talking about middleIncome Housing. At the same time, were talking about housing problems that other segments in the work force dont 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 lowincome households, its an extremely high number. For middleincome, its a high number and higher than it is for upperincome groups that are another part of the labor force. So really when were talking about middle income households in San Francisco, were talking about the group thats 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. Its the industries that the folks are concentrated on in San Francisco. And its 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. Ive been talking about the longterm trends related to middleIncome Housing, but i came across this report last week that its 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, weve 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 middleincome 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 middleincome folks in San Francisco and our region. The concern here is if we dont address this problem, the economic good news is that its 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 middleIncome 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, well 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 leastserved 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 socalled overproduced at the high end. What it doesnt do is reflect real, actual trends over the course of that period and its 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 lowerincome groups. This shows you where we sit in our current cycle. Its 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 hunters 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 its early for us to say how it will break brought in terms of incomes. Theres 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, im sorry. Amy chen from the Mayors Office of housing and Community Development as well. Good afternoon. Amy chan from the Mayors Office of community and housing development. I will present on what existing tools the city has in serving middleincome 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 rentcontrolled housing through our smallsites program and Home Ownership loan assistance to middleincome households and we oversee