Measure for Measure: San Francisco Proposition E

Voting is an essential part of civic engagement, but it can be confusing, especially in local elections. There are some hyper-local issues that we’re deciding on in the upcoming primary election on March 3rd. That’s why we’re doing this round-up of the measures, to provide some insight into the March 2020 ballot.

Check out our round-up page for more articles on the other measures.

What is Proposition E?

Measure E ties the amount of new office space that can be approved to the amount of affordable housing built in San Francisco. Currently, San Francisco limits large office space development to 875,000 square feet each year. If San Francisco falls short of meeting its affordable housing needs for very-low, low, and moderate-income residents, the measure would reduce that office development cap. The measure exempts some office projects that have already been approved as part of the Central SOMA Plan (a set of projects slated to add 16 million square feet of office space) and accelerates the approval process for some of those projects. Other new office projects can receive an exemption if they include affordable housing.

San Francisco’s office space cap dates back to 1986 when voters concerned about the “Manhattanization” of San Francisco passed Proposition M. It capped total new office space construction at 950,000 square feet and total “Large Allocation projects” (projects bigger than 50,000 square feet) at 875,000 square feet. If the approved projects in a given year come in under the cap, the unused cap space rolls over to subsequent years. Going forward, if Measure E passes and San Francisco fails to build the total amount of very-low, low, and moderate-income housing units (as specified by the Regional Housing Needs Allocation, which sets local targets for housing production), that cap will shrink by the same percentage as the shortage in affordable housing. Over the last three years, San Francisco missed its RHNA goals for those income limits by 32%, so had Proposition E been in effect, the office cap would have been 280,000 square feet lower.

Proposition E exempts some projects that are part of the Central SOMA Plan from its provisions, meaning that regardless of the cap level those projects may move forward. The Central SOMA Plan is a collection of projects between 2nd and 6th streets that will add 16 million square feet of office space and 8,800 housing units, with 33% reserved as affordable housing. The measure would exempt 5.3 million square feet of office space in previously approved projects and would accelerate projects building 1.3 million square feet of new office space. Other new office projects can receive an exemption if they include affordable housing (809 units are required per 1 million square feet of office space) and that affordable housing is built on-site or in an “economically disadvantaged community.”

Why does it matter?

San Francisco is in a housing crisis. Between 2010 and 2018, there were 8.5 new jobs in San Francisco for every one new housing unit. Supporters of Proposition E aim to reduce that imbalance by limiting new office space, and with it the number of new jobs unless the city builds enough affordable housing. Under this view, by restraining the number of new jobs demand for housing should fall which will ease housing prices.

Prices for office space in San Francisco reached a record high in 2019 and the office vacancy rate dropped to levels not seen since the dot-com era. Analysts cite the office space price increases as a factor pushing small and mid-sized businesses as well as nonprofits out of the city. In another effort to match the number of new jobs with the amount new housing, the Board of Supervisors more than doubled the impact fee for new office space. Real estate analysts fear that fee increase could further raise office space prices and exacerbate the movement of nonprofits and small and mid-size businesses out of the city.

What are the arguments for Proposition E? Who’s funding the measure?

Supporters of Proposition E argue that it will ease the city’s housing crisis in two ways. First, it will give office developers an incentive to lobby the city to build affordable housing. By tying the amount of office space to the amount of affordable housing, office developers will want to make sure sufficient affordable housing is built so they can, in turn, produce office space. Additionally, allowing exemptions from the cap for projects that include affordable housing, the measure will incentivize office developers to directly contribute to producing affordable housing in San Francisco.

Second, they argue that even if the city continues to underproduce affordable housing, slowing office growth will ease demand for housing in the city and lower prices. By restricting the amount of new office space, supporters argue that job growth will slow in the city, which will lead to fewer people seeking housing in San Francisco and bring down the cost of housing.

Proposition E is supported by Board of Supervisor President Norman Yee,

Supervisor Sandy Lee Fewer, Supervisor Aaron Peskin, Supervisor Dean Preston, Supervisor Matt Haney, Supervisor Rafael Mandelman, Supervisor Hillary Ronen, San Francisco Bay Guardian, Council of Community Housing Organizations, and San Francisco Democratic Party

Affordable housing developer TODCO is leading the campaign in support of the measure. Major funding in support of Proposition E comes from TODCO. See more funding details here.

What are the arguments against Proposition E? Who’s funding the opposition?

Opponents of Proposition E make three arguments against the measure. First, they argue that the measure does nothing to directly increase the amount of affordable housing in San Francisco. The measure does not include affordable housing funding and does not streamline the approval process for affordable housing. Both lack of funding and a complicated approval process are frequently cited as main contributors to the underproduction of affordable housing in San Francisco. Because impact fees are a major source of affordable housing subsidies, opponents also argue that by reducing office development (which would shrink the pool of impact fees), San Francisco will have less funding for affordable housing.

Second, opponents argue that the measure is not well suited to actually affect office development in the near term. Due to the exemptions for the Central SOMA Plan projects, opponents claim the lower cap will not affect decisions about office production for up to 15 years. They argue that the exempted projects will take up most of the city’s capacity for office construction over that time period making the lower cap moot. Opponents have also expressed concern that most of the projects exempted from the measure negotiated directly with the measure’s sponsor TODCO.

Third, opponents argue that if the measure does succeed in slowing office growth in San Francisco, those offices will just be built in other Bay Area cities and office rents in San Francisco will increase. They claim the increased cost of office space will continue to exacerbate the exodus of nonprofits small and mid-size businesses from San Francisco, and the relocation of jobs will not ease the region’s housing crisis. Furthermore, because San Francisco is the most transit-rich job center in the Bay Area any job growth that occurs outside of the city is likely to lead to increased car commuting. Those extra cars on the road will emit more greenhouse gases interfering with California’s efforts to fight climate change.

Proposition E is opposed by Supervisor Catherine Stefani, San Francisco Chronicle, San Francisco Housing Action Coalition, SPUR, and SF YIMBY.

Major funding in opposition to Proposition E comes from the California Apartment Association, developer Oz Erickson, and the Building Owners and Management Association of San Francisco. See more funding details here.

What is TechEquity’s position on Proposition E?

The measure promotes a false choice between jobs or affordable housing. We can have BOTH job creation and affordable housing production.

This measure is unlikely to facilitate more affordable housing because it doesn’t directly address the main obstacles to building in San Francisco. We don’t have strong evidence that office development is a serious barrier to affordable housing development. Construction costs and the city’s lengthy approval process are cited as the main challenges holding back affordable housing and this measure does nothing to ease them.

If the measure does reduce office construction, the cost of office space in the city will rise, making it harder for small businesses and nonprofits to remain in San Francisco. Shifting work locations would hinder the state’s efforts to combat climate change because San Francisco is the most transit-rich city in the Bay Area. Increased employment in any other area will likely create more carbon emissions and traffic from additional car commuters.

We say vote no on Proposition E!

Check our round-up page for more measure articles as we publish them!

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