San Francisco would need an additional $1.3 billion in order to meet the state-mandated affordable housing production requirements set to kick in next year, according to a report from the Mayor’s Office of Housing and Community Development.

That’s just the start: The number swells each year, topping out at $2.4 billion by 2029.

While San Francisco is still working on its “housing element” — a housing production plan every California city is required to complete every eight years — city planners face a daunting task: how to create 82,000 new homes in the eight years from 2023 to 2030, including 32,000 that are affordable to very-low-income and low-income families. The housing requirements assigned to every city are known as Regional Housing Needs Allocation, or RHNA.

The looming affordable housing funding gap was the topic of a hearing Thursday at the Board of Supervisors Government Audit and Oversight Committee.

At the hearing, Committee Chairman Dean Preston questioned whether the city was doing enough to prioritize homes for working-class residents in a city where under 20% can afford market-rate rents — which reach into several thousand a month.

“What is clear is the existing strategies are not going to get us there,” he said. “In the best-case scenario, with traditional approaches, we chip away toward our goals but we certainly don’t get anywhere near them. New tools are needed.”

While San Francisco produces more affordable housing than any other city of comparable size — it currently has 11,000 units in its pipeline — its production of market-rate housing far outpaced its affordable-housing output in the current eight-year RHNA cycle. The city built 48% of its affordable goal and 151% of its market-rate goal.

The city is currently facing stern headwinds on both the creation of market-rate and low-income housing.

The Sister Lillian Murphy Community in San Francisco is an example of affordable housing coming online in San Francisco in 2022. The city says it does not have enough funding to push toward its affordable housing goals.

Samantha Laurey/The Chronicle

On the market-rate side, development applications have slowed to a trickle as for-profit builders have postponed or canceled projects because they don’t work financially. Market-rate projects generated $208 million for affordable-housing fees in the last five years.

On the subsidized side, soaring construction costs have added millions of dollars in costs to many projects, which puts San Francisco at a disadvantage when competing against other California cities for affordable-housing tax credits and bonds.

Lydia Ely, deputy director of the Mayor’s Office of Housing and Community Development, said that the city has little or no money beyond the projects that are already in the planning or construction phase.

She said that San Francisco is “disadvantaged” by a 2020 change in the way that California divides tax credits and affordable-housing bonds, the two programs that pay for most low-income housing construction. Before 2020, San Francisco could count on receiving the OK for all of its bond and tax credit applications. Under the new system, the city is losing out to cities that have far cheaper construction costs and land value.

She called the changes “the biggest threat to our production.”

“Those sources used to come as a right, over the counter,” said Ely. “Right now they are highly competitive and oversubscribed.

“Even though we are robustly pursuing all the local sources, we cannot expect those sources to grow significantly; it’s just too volatile, and the unknowns are too unknown,” she said. “Beyond the fact that we need more, we can’t anticipate what those sources will be.”

Ely said construction costs have risen 25% in the past two years, and every project that “is starting construction is needing a couple of million more” from the city.

Preston used the hearing to advocate that the city earmark all of the money generated by Proposition I for affordable housing. Prop. I, which Preston sponsored and which voters approved in 2020, increased transfer tax on properties over $10 million.

Preston said that voters “went and created $170 million of annual revenue general fund for affordable housing, yet we seem to be in a fight every year.”

Jeff Cretan, a spokesman for Mayor London Breed, said Prop. I is a general fund tax “not dedicated to any specific purpose by the voters.”

“The mayor and the board of supervisors make decisions how to allocate the general fund during the budget process, which kicks off in two weeks when the mayor introduces her proposed budget,” he said.

JK Dineen is a San Francisco Chronicle staff writer. Email: jdineen@sfchronicle.com Twitter: @sfjkdineen

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A heated community meeting—is there any other kind?—kicks off. A developer has bought a 1,200-square-foot single-family home in a transit-rich, highly desirable location and plans to turn it into a 19-unit building. Dozens of neighbors have banded together in opposition. The building would turn “day into night” with its shadows, they tell city officials, with one person worrying about the threat of seasonal affective disorder. It would “discriminate against families,” as the units are so small. They brand it a “dorm.” They ask why not four stories instead of six; why not six units instead of 19? “Please do not beach this enormous whale in our neighborhood,” one neighbor begs.

These kinds of municipal debates happen all the time in localities across the country and mostly go unnoticed. But in San Francisco, someone is watching how the city gets built, or not, and making sure people hear about it. He does so for his own edification. He is not getting paid. He is just a guy with a computer and a bit of spare time. For the past four years, Robert Fruchtman has monitored and live-tweeted dozens and dozens—and dozens and dozens—of community meetings, including this one, about a proposed development near Dolores Park. “People just have no idea what goes on with these hearings, most of the time,” he told me. “You don’t hear about it except for snippets that occasionally make the news.”

No wonder. Not everyone enjoys watching neighbors squabble over the positioning of a bike lane or bureaucrats ensure that a building has the right paperwork to add an annex. “No one’s ever going to have a land-use-and-transportation-committee-watching party the same way people have an Oscars-watching party,” Fruchtman said. But what happens at these sorts of meetings is important. San Francisco, like many cities in California, makes many property-development decisions subject to public debate. Builders, business owners, and homeowners tend not to have the right to do what they want with their properties; instead, they have to ask city officials and their neighbors to approve their plans. This policy ensures that residents of lovely, tree-lined blocks do not get surprised by single-family homes getting razed and 19-unit buildings going up. It also is how, brick by brick, block by block, San Francisco has constructed one of the worst housing crises on Earth: Such citizen actions lead to not just the so-called preservation of neighborhood character but also sky-high rents and mortgages, worker shortages, displacement, gentrification, and climate-wrecking suburbanization.

Annie Lowrey: NIMBYism has reached its apotheosis

Fruchtman has, for years, documented this process in real time, making it easier for community activists, politicians, and journalists to notice and get involved. Can the city move forward with affordable housing at 730 Stanyan Street (delayed, but yes) or permanent supportive housing at 1800 Sutter Street (no)? How about a tiny-home village at 33 Gough Street? (Finally opened last month.) Can a developer put homes at 1846 Grove Street? (Delayed for years.) Can a homeowner build an honest-to-goodness mansion at 376 Hill Street? (Yes.)

“I look for cases where San Francisco’s progressive ideals don’t match up,” Fruchtman, who is a software engineer and volunteers with the local YIMBY group, told me. One time, he called in to a planning commission meeting to hear a debate on proposed changes to an apartment building in his neighborhood. “I guess it was lucky I logged in a little early,” he said. An established ice-cream shop, Garden Creamery, was attempting to prevent a prospective soft-serve shop, Matcha n’ More, from moving onto the same block, using a provision of a state law designed to protect against environmental degradation.

Ensue public comment! The first caller asked why the question of whether two dessert shops could operate on the same block was an issue for the planning commission in the first place. The 64th caller was more blunt. “I support the new business,” the person said, per Fruchtman, whose tweet thread on the meeting went viral. “The whole process is dumb as shit.” Still, Jason Yu of Matcha n’ More ended up spending $200,000 navigating San Francisco’s bureaucratic processes. After two years of procedural wrangling, he gave up.

This kind of kudzu does not just prevent the construction of new homes or the opening of new businesses; it also has a profound effect on the size and shape of the city and on the carbon emissions of the state. Regulatory bottlenecks increase the cost of building and drag out project timelines. What would cost $250,000 to build in rural Texas might cost $750,000 in San Francisco; what would take weeks to get approval for in Idaho might take years here. Many reasonable projects never get built at all, driving up housing costs, pushing families into homelessness, sapping the city of new businesses, and squeezing Bay Area residents out to the far-flung suburbs.

In San Francisco, “Instead of bright-line rules, where a developer knows I’m allowed to build this here, everything is a negotiation and every project proceeds on an ad hoc basis,” Jenny Schuetz, a housing economist at the Brookings Institution , told me. Small-d democratic-citizen participation has led to profoundly regressive outcomes.

That small-d democratic participation is not very democratic, for one. The kinds of people with the time and energy to show up at community meetings are disproportionately white, disproportionately old, and disproportionately wealthy, as my colleague Jerusalem Demsas has noted. They also tend to be conservative, in the sense that they like things the way they are and do not want to see 19-unit buildings going up in their neighborhoods. “Even in highly diverse communities, development meetings are dominated by whites who oppose new housing, potentially distorting the housing supply to their benefit,” one study found.

Jerusalem Demsas: Community input is bad, actually

The meetings tend to be formal. But people’s participation tends to be, well, a little unmeasured, Fruchtman told me. “Hysteria,” he said. “There’s often a sense of hysteria at these meetings that is not reflected in what you read in the press.” He recalled the time that a person described his fight to prevent the construction of a navigation center for homeless services as a kind of personal “Little Bighorn.” Or the time another person objected to the conversion of a parking lot on the grounds that it would increase traffic. Such rhetoric is “intellectual malpractice,” Fruchtman added. And the intemperate rants of the people who show up matter, as city officials hear such impassioned claims mostly from a privileged class trying to keep things as they are.

The flip side of so few participating so much is that everyone else participates so little. Who can blame them? So Fruchtman shows up. Trying to rent here was what got him interested in YIMBY politics in the first place, he told me. “I had dropped out of graduate school and got a job offer out in Silicon Valley,” he said. “I was trying to line up an apartment before I got to the city. And I realized how bad it was. Besides the sticker shock, it was the fact that anytime I emailed anybody or called anybody about an apartment, every single time, they said it was taken. Trying to get an apartment a month out or even a week out was impossible.”

He did find a place, in time. And part of his motivation for going to or calling into or watching so many public meetings is that he came to San Francisco to find himself and his community—and it pains him that others might not be able to. “One reason I wanted to move to San Francisco specifically is, as a gay man, it really always stood out to me my whole life as a place where I could be accepted,” he told me.

The NIMBY tide is finally beginning to recede in the state and the city, thanks to activism and the rise of YIMBY elected officials. A flurry of bills have streamlined the permitting process and exempted more projects from discretionary review, as well as allowing property owners to build structures like casitas by right. Still, the state is short of millions of housing units, and the thirst for apartments and homes in San Francisco feels unquenchable.

A bunch of 19-unit buildings are what the city needs, if not what its residents want. At that meeting, after they made their complaints, the builder responded that their proposed changes would make the project financially infeasible. A city supervisor worried that the tall building would “blow through” the objections of the community. The board gave a kind of go ahead for the developer to build. Now the project is tied up in litigation. It may never break ground.

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