Title
Report regarding an ordinance establishing a local preference for deed restricted affordable housing units that gives preference to applicants who live, have lived, or work within the City of South San Francisco. (Pierce Abrahamson, Management Analyst II)
body
RECOMMENDATION
Staff recommends that the City Council consider introducing a Local Preference Ordinance that gives applicants for some deed restricted affordable housing units who live, have lived, or work within the City of South San Francisco a preference point during the applicant selection process. The intention of this policy is to prevent the displacement of existing residents and workers in the City while providing opportunities for prior displaced residents to return.
BACKGROUND
Local preference policies require landlords with deed restricted affordable housing units, such as those required in inclusionary housing or City-funded fully affordable developments, to prioritize local applicants during the applicant selection process. Local preference policies are just that - a preference. They do not establish a requirement to apply for affordable housing lotteries. Even with a local preference policy in place, any income-eligible person may still apply for deed restricted units. Local preferences are common in peer jurisdictions such as Redwood City and San Mateo County and are intended to reduce displacement and commute time for low- and moderate-income residents and workers within the community.
As part of the City’s Procedures and Guidelines for Inclusionary Housing Units (“Guidelines”), the City already applies a local preference that requires property owners to prioritize City residents or workers in the affordable housing lottery selection process for deed restricted affordable units. The City has been able to implement this policy through regulatory agreements of deed restricted units with individual property owners at individual for-sale below market rate housing units, market rate developments with inclusionary affordable housing units, and in fully affordable housing developments.
In the current Guidelines, qualifying applicants who either live or perform at least 20 hours of work weekly within the City receive a preference point during the lottery selection process. Documentation of meeting the live or work preference is established either through proof of residency or proof of workplace as a part of the housing application process. The Guidelines do not currently provide a preference point for prior residents of the City as proposed in the draft ordinance.
While the City’s local preference policy is already implemented through regulatory agreements, staff is bringing forward a recommendation for a codified ordinance that would both expand the preference point provision to prior residents and better align the City’s policy with the language of State and Federal law. Staff consider the legal language alignment the primary motivator for bringing forward this proposed ordinance. Whereas State Law (Government Code Section 7061) provides an allowance for local preference policies for tax-credit funded housing projects, it specifically mentions this allowance in the context of local adoption, either by ordinance or resolution. By adopting a local preference policy, the City’s policy would match the explicit language of State Law and likewise strengthen the City’s position to apply for State grant programs.
In addition to the prior resident eligibility provision, the proposed Local Preference Ordinance also expands the work preference eligibility to include applicants who have accepted a job offer within the City. Both these additions are informed by the City’s ongoing anti-displacement roadmap, peer jurisdiction research, and fair housing law considerations.
Local Preference and Fair Housing Law
When imposing a preference that prioritizes a portion of the population, compliance issues with fair housing law may arise. The City retained the law firm Goldfarb Lipman, which specializes in fair housing law and has worked on local preference ordinances for neighboring jurisdictions, such as Redwood City, to assist staff in drafting an ordinance that minimizes issues of compliance with fair housing law. The Goldfarb Lipman attorneys produced a memorandum for the City that outlines the potential risks and their mitigating factors when adopting a local preference policy. The memorandum highlights that fair housing law violations typically arise if the policy creates an illegal disparate impact on protected classes (race, religion, sex, gender, etc.) or will predictably cause a discriminatory effect towards a protected class. However, there are affirmative defenses available to the City, as disparate impact claims must go through the following three legal tests to successfully challenge the policy:
1. The complainant must show that the challenged policy caused or predictably will cause a discriminatory effect.
2. The responding governmental entity must demonstrate that the policy is justifiable regardless of the discriminatory effect and there is no feasible alternative policy that is equally effective and less discriminatory.
a. The practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory purposes and the practice effectively carries out the purpose.
b. The purpose is sufficiently compelling to override the discriminatory effect.
3. There is no feasible alternative practice that would equally or better accomplish the purpose with a less discriminatory effect.
Based on the Goldfarb Lipman memorandum and consultation with the City Attorney’s Office, staff do not anticipate fair housing law violations given the policy justifiably serves a legitimate and substantial non-discriminatory purpose that overrides any discriminatory effect. Specifically, the local preference policy is founded on a legitimate need to prevent resident displacement and expand housing opportunities to commuters. The City’s Housing Element documents both the increased displacement pressures and the imbalanced jobs to household ratio. Furthermore, as described by the memo, “any effective anti-displacement policy will disproportionately benefit the target population, which may disproportionately affect a protected class; thus, there is not a feasible alternative that would be equally effective and less discriminatory.” Consequently, staff have reason to believe the City has affirmative defenses based on the second and third factors listed above reasons.
To provide an affirmative defense for the first factor, the City contracted with Economic and Planning Systems (EPS) to conduct a disparate impact analysis of the proposed policy to determine if the policy will predictably cause a discriminatory effect. In their analysis, EPS utilized the fair housing law best practice advised by Goldfarb Lipman: the “four-fifths” rule. The four-fifths rule, in summary, assumes that if members of a protected class are selected at a rate of four-fifths (eighty percent) or less, evidence of disparate impact could be reasonably assumed. In applying this rule to race and ethnicity groups in the City, EPS found no race or ethnicity to be selected at a rate of eighty percent or less as a result of a local live or work preference. The results are indicated in the “weighted average selection rate” rows in figure 1 below:
Figure 1: EPS Disparate Impact Analysis Table
As shown in figure 1 above, no race or ethnicity would be selected at a rate below eighty percent with a hypothetical live or work preference. While some statistical variations exist between groups, none rise to the level of disparate impact under the four-fifths standard. Additionally, whereas the analysis assumes a preference policy eligible only to existing residents and workers in the City, the proposed ordinance includes preference eligibility for prior residents and applicants with an accepted job offer within the City. As noted in the EPS Memorandum included as Attachment 1, expanding preference eligibility to prior residents is likely to further equalize selection rates, based on patterns observed in peer cities.
General Plan and Housing Element Policies
The City adopted a comprehensive update to the General Plan (GP) in 2022 and received State certification for its 2023-2031 Housing Element. As stated in the General Plan, the City’s housing priorities include new housing production while preserving affordable housing and protecting vulnerable residents from housing instability and displacement. The proposed Local Preference Ordinance furthers the goals outlined in the Housing Element and General Plan. Specifically, the proposed ordinance contributes to the following policy goals identified in implementing the Fair Housing Plan in the City’s certified Housing Element:
• Policy EQ-3: Support residents who are at risk of being displaced. Reduce the rate of evictions and support low-income residents who are at risk of being displaced. (GP)
• Policy EQ-8: Protect existing residents from displacement in areas of lower or moderate opportunity and concentrated poverty and preserve housing choices and affordability. (FHAP)
• Program PRSV-5.2 Assist Tenants at risk of displacement: The City shall assist tenants displaced by the conversion of at-risk units by providing information about tenants’ rights, providing referrals to relevant social service providers, endeavoring to establish a funding source to assist nonprofit organizations that support tenants, and facilitating other support as appropriate.
While the intention of the Local Preference Ordinance is not to prevent new low-income residents from relocating to the City, this sort of policy can be viewed as an anti-displacement effort that also assists prior displaced residents who wish to return to South San Francisco. The goal is to lessen the financial, emotional, and familial impact of displacement from one’s community or the necessity of extended commutes for existing low-income workers. In this way, the proposed policy is an anti-displacement measure, aimed at addressing the causes and impacts of residential displacement and an imbalanced job to housing ratio.
Relationship to Anti-Displacement Roadmap
While the City continues to pursue its Commercial and Residential Anti-Displacement Roadmap, City Council has directed staff to bring forward more urgent policies and not to wait for the conclusion of the multi-year Roadmap preparation if the policies are warranted in the immediate term. Given that a version of a local preference policy implemented through regulatory agreements pre-dates the Roadmap, the City is well positioned to push forward a codified ordinance ahead of the roadmap conclusion to ensure the City is achieving the maximum regulatory and financial incentives of such a policy. Likewise, the proposed ordinance would address community feedback regarding the hardship experienced by displaced residents by providing an immediate benefit to prior residents who wish to return to the City.
According to research conducted by HR&A as a part of the Anti-Displacement Roadmap, there has been a significant decrease in Hispanic/Latino and Black households earning below $150,000 in the City between 2012 and 2022. Specifically, there has been a 36% decrease in Hispanic/Latino populations across the City and a 38% decrease in the Old Town area during this time period. The shifting demographics can be attributed to a lack of affordable housing for the existing workforce, especially for those making under $75,000 annually. Often the only affordable housing available to these households is a limited supply of older, naturally occurring affordable units in the downtown area that are prone to health and safety hazards. During the December 2, 2024, Anti-Displacement Community Advisory Committee (CAC) meeting, the most cited reasons for why people move out of the City were the high cost of housing, unhealthy conditions of naturally occurring affordable housing, and the lack of resources to assist residents in obtaining better options.
While the Anti-Displacement Roadmap is an effort to develop a web of policy interventions to address and redress the multifaceted causes of displacement, many of these interventions will take time to develop in partnership with community organizations. However, given that displacement has and is being experienced by members of the community in the past and present tense, staff recommends the City Council to consider the introduction of the proposed ordinance that would expand eligibility of the City’s local preference policy to previous residents. This will provide prior displaced residents priority consideration for safe and affordable deed restricted units in the City.
Benchmarking Research
While the City already has pre-existing policy guidelines and regulatory agreements that have effectively implemented a version of this policy in practice, staff conducted additional research on existing policies in the region. In developing policies to address displacement and extended commute times of low-income residents and workers in South San Francisco, staff consulted with jurisdictions and experts in the field who have implemented similar measures. These discussions were instrumental in comparing the City’s existing policies with best practices in the region.
Redwood City
A noteworthy example of a local preference policy is Redwood City’s, which arose as a part of their anti-displacement roadmap that reached similar findings to our own: a jobs/housing imbalance, displacement pressures for lower income households, and extended commute times that increase greenhouse gas emissions. While originally intended to only provide a preference to current residents, the City modified the policy proposal to include a work preference to reduce disparate impacts in accordance with the DOJ’s disparate impact formula. Their policy is structured similarly to the one being proposed: The live and work preferences are equally weighted, have no minimum residency requirement or expiration of residency for the live preference, and the work preference requires a 20-hour weekly average work schedule within Redwood City to qualify. The strengths of this policy are that it reduces paperwork burden for applicants and staff alike, likely increasing policy uptake and reducing the overall time it takes for an applicant to get housed. Because their policy was only adopted in 2021, meaningful data on policy performance is limited given most projects with the preference have yet to be constructed. However, their staff have expressed optimism regarding the policy’s capacity to open a resource for prior displaced residents to return to the City without requiring extensive documentation that may be burdensome for low income/resource households to supply. The documentation required for prior presidents to apply for the preference are the same as that for current residents.
City of Berkeley
Staff also reviewed the City of Berkeley’s Affordable Housing Preference Policy. This policy prioritizes households who are or have experienced displacement as a response to community input provided during the Adeline Corridor Specific Plan and BART Redevelopment planning processes. The City of Berkeley’s policy is unique for two reasons. Firstly, rather than using a points-based preference system that prioritizes preference eligible waiting list for all units, their policy sets aside 25% of affordable units for non-preference eligible residents. Thus, the preference system is only in effect for 75% of affordable units. Secondly, their policy establishes seven targeted preference categories tailored to population subsets. Preference points are awarded namely to applicants that have either historically experienced or have been identified as uniquely vulnerable to displacement. The seven preference categories are:
• Displaced due to BART construction
• Displaced due to eviction
• Displaced due to foreclosure
• Applicant ties to redlined neighborhoods
• Applicant generational ties to redlined neighborhoods
• Homeless or at-risk of homelessness
• Families with children
The strength of this policy is that the preferences are uniquely tied to groups identified as vulnerable during the City’s community engagement and planning processes. However, the documentation required as a part of the housing lottery application is more extensive than that of Redwood City’s. For example, if an applicant would like to apply for the BART or foreclosure displacement preferences, they are required to have a certificate verifying their eligibility for such a displacement. This certificate must be obtained from a separate application process managed by the City, of which the City currently advises applicants to obtain prior to filling out an affordable housing lottery application. While performance data of the City of Berkeley’s policy is not yet attainable due to the policy taking effect in 2024, City staff advises against this approach as a more complicated and time-consuming application process may discourage or delay application completion from the most at-risk and low resourced households.
DISCUSSION
At this time, staff recommends adopting the proposed Local Preference Ordinance amending the City’s Health and Welfare Ordinance, Chapter 8 of the South San Francisco Municipal Code. The proposed ordinance is intended to codify the City’s local preference policy that is currently enforced through regulatory agreements while expanding preference point eligibility to prior residents and workers with an accepted job offer with a city-based employer. In summary, the ordinance was drafted to:
1. Be compatible with existing Guidelines and regulatory agreements with property owners
2. Apply to any affordable units provided as a part of:
• Inclusionary housing requirements
• Density bonus
• Developments acquired, constructed, or rehabilitated with City financing
3. Provide a preference point for applicants who live, recently lived, or work (or soon to work) in the City while still allowing other income eligible applicants to apply.
The ordinance further defines eligible applicants for preference points as follows:
1. At least one member of the applicant household performs at least 20 hours of work weekly for an employer within the City; or
2. At least one member of the applicant household currently resides or resided in the City; or
3. At least one member of the applicant household has accepted a job offer of employment within the City.
The necessary documentation to establish live or work preference eligibility will be specified in the City’s Procedures and Guidelines for Inclusionary Housing Units, which serves as a public-facing resource to applicants and developers alike for deed restricted affordable housing in the City.
Staff ultimately recommends codifying and expanding upon an existing preference policy into a Local Preference Ordinance that would better align the City’s policy to community needs and with the language of State and Federal law and grant programs.
FISCAL IMPACT
The proposed Local Preference Ordinance should have a minimal fiscal impact. The ordinance does not affect the financing of deed restricted affordable units. The ordinance simply overlays a preference policy onto a pre-established affordable housing lottery system for when eligible applicants apply for these units. Furthermore, much of the administrative groundwork such as establishing guidelines and implementing a preference point system on Doorway has already been made due to the pre-existing administrative policy.
CONCLUSION
Staff recommends that the City Council introduce the proposed Local Preference Ordinance for deed restricted affordable units that gives preference to applicants who live, have lived, or work within the City of South San Francisco. The intention of this policy is to prevent the displacement of existing residents and workers in the City while providing identical provisions to assist prior displaced residents who wish to return.
Attachments:
1. EPS Demographic Analysis Memorandum