SOUTH SAN FRANCISCO
AFFORDABLE HOUSING FINANCING
PLAN (AHFP)
FY2025-2026 Through FY2027-2028
February 2025 DRAFT
Table of Contents
I. Introduction .............................................................................................................3 III. Current State of Housing .........................................................................................3 A. Current Programs and Services..........................................................................3
1. Emergency Rental Assistance ........................................................................3
2. Housing Nonprofits .......................................................................................3
3. Inclusionary Housing Ordinance ....................................................................4
4. Commercial Linkage Fee................................................................................4
5. Program Administration .................................................................................4 B. Funding Needs Assessment ..............................................................................5 IV. Fund Performance ..................................................................................................6 A. Funds and Eligible Uses ....................................................................................6 B. Encumbrances .................................................................................................8 C. Fund 823 Anticipated Revenue ..........................................................................9 D. Other Funding Sources.................................................................................... 10 V. Funding Plan ......................................................................................................... 11 A. Overview........................................................................................................... 11
1. Production.................................................................................................. 11
2. Preservation................................................................................................ 12
3. Protection................................................................................................... 12 VI. Monitoring and Reporting ...................................................................................... 13 VIII. Risk Assessment and Mitigation........................................................................... 13 A. Limited Financing Pathway ................................................................................. 14 B. Surplus Financing Pathway ................................................................................. 14 I. Introduction
The Affordable Housing Financing Plan (AHFP) outlines the City’s biannual housing funding priorities in relation to existing housing goals, policies, programs, and funding availability. Most of these goals, policies, and programs are governed by the City’s General Plan, Housing Element, or municipal code and generally have the following objectives:
• Prevent displacement and homelessness
• Preserve affordable housing units
• Promote housing production at all income levels
• Source and utilize federal, state, and regional housing resources.
Additionally, State and Federal grant programs that the City participates in, such as the Community Development Block Grant (CDBG), have policy objectives set by their own guidelines and governing documents. These programs often narrowly stipulate how funds may be spent. Consequently, the intent of the AHFP is not to set new policy or budget.
Rather, the AHFP outlines spending priorities that would most effectively further existing housing goals and policies in the City given funding availability and parameters.
The AHFP is produced biannually by the Housing Division of the Economic and Community Development Department (ECD), with annual reviews to ensure funding availabilities and targets are updated appropriately.
III. Current State of Housing
A. Current Programs and Services
The City has adopted numerous policies and programs to advance the abovementioned housing goals, including the following:
1. Emergency Rental Assistance
One of the most effective tools the City has in preventing homelessness and displacement is its rental assistance program. The YMCA Community Resource Center located on Huntington Avenue in South San Francisco administers the program, which provides rental assistance to low-income South San Francisco residents experiencing an immediate financial hardship. The program was instrumental in providing to assistance to residents impacted by COVID-19 and the Shelter in Place Order. During the Fiscal Year (FY)24-25, Council appropriated $177,000 for this program.
2. Housing Nonprofits
Through its CDBG and housing funds, the City supports several nonprofit community organizations that provide critical housing resources, including shelters, home repairs, legal assistance, and referral services. While CDBG funding to local jurisdictions has been steadily declining over the past two decades, the City received a total allocation of $443,482 during FY24-25. Furthermore, not all CDBG funds go directly to housing nonprofits; the City typically allocates a portion of its allocation towards economic development activities and administration.
3. Inclusionary Housing Ordinance
For years, the City has had an inclusionary housing ordinance requiring developers of market rate, for-sale housing to include a set-aside of below market rate units. In 2018, following State legislation allowing it, the City Council voted to expand the inclusionary housing ordinance to market rate, rental housing developments.
These inclusionary housing policies ensure that a percentage of all housing units constructed since 2018 in South San Francisco are set aside for households earning under 120% of the area median income. Eligible applicants can view listings apply for these below market rate units using the regional portal Doorway.
4. Commercial Linkage Fee
Prior to 2012, the City, through the South San Francisco Redevelopment Agency, had a direct and steady source for funding for affordable housing. After the State dissolved redevelopment agencies in 2012, the City was left without this important source of funding to support housing organizations and fund new affordable housing development. To help begin to make up this shortfall, in 2018, the City Council adopted a commercial linkage fee. This fee is charged on any post 2018 commercial development to help offset the impact it has on the need for affordable housing.
While the commercial linkage fee is a high performing funding source, its reliability is notably less than that of the former State redevelopment fund given fluctuating commercial market conditions. For example, while during FY20-21 the fee’s annual revenue generation increased from $4,957,461 to $5,375,874, it fell to just $3,077,684 in FY 21-22. By FY22-23, however, the amount more than doubled to $7,499,156 in FY22-23. Consequently, financial planning for the City’s affordable housing funds is necessary to ensure steady delivery of the City’s housing objectives.
5. Program Administration
Critical to the success of the City’s housing program is its administration. City staff monitor existing affordable housing units - reviewing annual rent increases for rental units and ensuring for-sale units are occupied according to their deed restrictions - and negotiate affordable housing agreements for new developments.
Central to the administration of the housing program is publishing publicly available guidelines such as the Procedures and Guidelines for Inclusionary Housing Units that assist property owners and residents alike in navigating the City’s housing programs and policies. City staff also undertake long-range planning efforts such as preparing the City’s Housing Element and Anti-Displacement Roadmap to ensure the City’s programs are aligned with State and Federal regulatory requirements and community needs.
B. Funding Needs Assessment
The most recent 6th Cycle Regional Housing Needs (RHNA) Assessment by the Association of Bay Area Governments (ABAG) states the City must produce 3,956 new housing units during the 2023-2031 RHNA cycle. Of this total, 720 must be affordable for moderate-income households and 502 for low-income, and 871 to extremely low-income households. While the City is pursuing a host of zoning and regulatory changes to accelerate housing production and preserve existing affordable housing as a part of its General Plan, public subsidy is also necessary to ensure the housing needs of low and extremely low-income households are met.
According to the City 6th Cycle Housing Element, it costs approximately $732,500 to build a multi-family housing unit and approximately $950/square feet to build a single-family home in San Mateo County. This high cost is due to rising hard and soft costs, including construction, labor, and high interest rates. Current market conditions thus make housing affordable to any income level a challenge to finance, but most especially for those affordable to low and extremely low-income households, given the greater gap between the project cost and rents charged. As a result, units affordable to these households are typically produced in either, or in combination of, the following ways:
• As a result of an inclusionary housing requirement: market rate developers off-set the cost of producing the affordable units with the scale of marketrate units produced as a part of the project • As a result of complex financing portfolio that includes rental income, Low Income Housing Tax Credits (LIHTC), and/or multiple grants from State, Federal, Local, and non-profit sources.
The second way is typically where City financing serves a critical role, especially as a gap funding source between what the housing developer has already secured and what is needed to make the project pencil financially. It is for this reason the City continuously applies for multiple State and Federal grant programs such as the Permanent Local Housing Allocation Program (PLHA) to help provide the gap funding necessary to produce affordable units. Notwithstanding, many grant programs require a local dollar match, demanding local housing funding sources such as the Commercial Linkage Fee to generate the funds necessary to bring affordable units online in alignment with the City’s 6th Cycle RHNA requirement.
According to the City’s most recent Annual Progress Report (2023), the City has constructed, permitted, or entitled 35% (176 units) of its low-income units and 13% (114 units) of its extremely low-income units required for its 2023-2031 RHNA.
IV. Fund Performance
A. Funds and Eligible Uses
Table 1: Balance and Annual Revenue of Affordable Housing Fund Sources1 1 Excludes non-housing specific sources that have been appropriated for housing use and grants with awards under $20,000.
2 Based on the average annual revenue from FY2019-20 through FY23-24, except for PLHA, whose grant award history only dates back three years. PLHA’s revenue calculation is based on the average of these three years.
3 The annual revenue indicated for CDBG is influenced by the exceptional funding boost received in FY20-21 during the COVID-19 pandemic. Excluding FY20-21 the average would be $475, 921. 4 While the City’s 2021 LHTF NOFA funds are technically committed to a project, the City is actively pursuing a reversion clause within the regulatory agreement to make these funds available again for more shovelready projects.
Fund Source Current
Balance
Encumbered
Balance
Unencumbere
d Balance
Annual
Revenue2
Funds
Commercial
Linkage (823)
$13,384,082 $4,235,408 $9,148,674 $5,655,142
Affordable
Housing Trust
Fund (205)
$550,423 $441,693 $49,423 $208,552
LMI Housing
Asset Fund
(241)
$2,550,143 $1,179,113 $1,371,030 $ 463,127
Grants
CDBG $424,978 $424,252 $726 $531,4863
PLHA $338,000 $338,000 $0 $309,897
LHTF 2,400,000 $0 $2,400,0004 Competitive
Grant
IIG $28,817,500 28,817,500 $0 Competitive
Grant
Table 1 above denotes the balances and average annual revenue of each fund and grant source. All these sources generate revenue, with the caveat that the primary purpose of Funds 205 and 241 are to hold funds for revenue generated or passing through from other sources. These funds do generate rental and loan repayment revenue from the City’s property and loan portfolio, however, which are indicated in the annual revenue column for these funds.
Another important factor to consider with Table 1 is that nearly every funding source has use restrictions. State and Federal grants, such as CDBG and PLHA, tend to have the most restrictive eligible uses, and are typically accompanied by program guidelines that set the parameters of eligible uses of funds. Additionally, State and Federal grants typically function on a reimbursement basis, meaning the City must ensure fund accounts maintain adequate cash flow to pay for housing program operations until actual grant funds are received. This is especially true given that the reimbursement process for State grants can take up to six months. The Funding Plan in Section V incorporates these accounting considerations and conservatively caps the total housing project expenses to maintain sound cash flow.
City governed funding sources such as Commercial Linkage and the Affordable Housing Trust Fund generally have much more flexible eligible uses. Notwithstanding, they do carry some State law restrictions and policy considerations set by the City. Table 2 to follow outlines the use restrictions on affordable housing fund sources.
Table 2: Eligible Uses of Affordable Housing Fund Sources Fund
Source
Fund Type Fund
Originator
Eligible Uses
Commercia
l Linkage
(823)
Fee and Fund City Flexible. Must serve households
making less than 120% Area Median
Income (AMI)
Affordable
Housing
Trust Fund
(205)
Trust Fund City Flexible. Must serve households
making less than 120% AMI
LMI Housing
Asset Fund
(241)
Former
Redevelopmen
t Agency Fund
(RDA)
City Can fund construction,
rehabilitation, or preservation. Must
focus on ELI households and no
households above 80% AMI.
PIP $890,000 $0 $890,000 Competitive
Grant
Restrictions set by SB 341 and other
State laws
PLHA Formula Grant California
Department
of Housing
and
Community
Developmen
t (HCD)
Generally flexible. Can be used for
acquisition, rehabilitation, or
development of LMI (Low and
Moderate Income) housing
LHTF Competitive
Grant
HCD Local dollar match required. Can be
used for the creation, rehabilitation,
or preservation of affordable housing
and emergency shelters. Generally
flexible but strict affordability metrics
IIG Competitive
Grant
HCD Grant for qualifying infill projects with
a minimum of 15% affordable units.
Must be used for capital asset related
expenses such as construction,
rehabilitation, utility and street
improvements, etc.
CDBG Formula Grant Housing and
Urban
Developmen
t (HUD)
Wide variety of uses but nuanced
program requirements. Priorities set
in the City’s CDBG Consolidated Plan
PIP Competitive
Grant
HCD SRO Property Acquisition with local
dollar match required. Scope of work
can be proposed for modification at
the discretion of HCD
B. Encumbrances
As indicated in Table 1, a sizeable portion of the City’s affordable housing funds are encumbered, meaning they are already committed to a project or program. These encumbrances largely reflect the use restrictions of the funds and grants themselves per Table 2. For example, when the City receives a grant, the scope of work in the executed agreement is most often tied to either a specific project or project type. Thus, while the grant award contributes to the City’s housing balance, the funds typically arrive as entirely encumbered. Furthermore, if a grant such as PIP has a local dollar match requirement, the local match amount also must be incorporated into the encumbered balance of a City fund such as 823.
Encumbered balances also reflect Council directed projects and programs such as the Emergency Rental Assistance program as well as administrative costs such as staff salaries. While non-exhaustive and excludes administrative costs, Table 3 to follow provides an overview of the City’s encumbered housing projects.
Table 3: Encumbered Housing Projects FY24-25
Project Type Project Type Funding Source Funding Total
Production Projects
1051 Mission Road Financial
Assistance
IIG: $28,817,500
LHTF: TBD
TBD LHTF
500 Linden Financial
Assistance
PLHA: $556,789,
LHTF: TBD
TBD LHTF
522 Linden Financial
Assistance
241 $1,076,373
2230 Gelert
Boulevard
Property Acquisition 823 $676,7815
Preservation Projects
Anti-Displacement
Roadmap
Community
engagement and
policy
270 (non-housing):
$200,000
823: $200,000
Partnership for the
Bay’s Future (PBF)
Grant: $15,000
$415,000
Protection Projects
Emergency Rental
Assistance
Direct aid 241 $180,000
Nonprofit
Programs
Legal aid, minor
home repair, etc.
CDBG $285,000
C. Fund 823 Anticipated Revenue
While anticipated revenue from most sources such as 241 and CDBG are expected to align with the amounts indicated in the annual revenue column from Table 1, Fund 823 has an exceptional variance from year to year. This variance is a result of the Fund’s reliance on the performance of the City’s commercial real estate market, and consequently consideration of the anticipated yearly funding availability is prudent. Table 4 to follow provides estimates of Fund 823’s fiscal year performances from FY25-26 through FY27-28:
5 Council authorization approving the resale of $676,781, with proceeds from resale replenishing back into Fund 823
Table 4: Commercial Linkage Fee (Fund 823) Projected Revenue FY25-26 Through FY27-28
Fiscal Year
Payout
Fund Contributing Projects Anticipated Total Revenue
25-26 Genentech Year 5 $1,500,000
26-27 Genentech Year 6, Trammel
Crow, SanFo
$26,520,460
27-28 Genentech Year 7, Healthpeak
Brittania Point
$8,452,000
Total $36,472,460
As indicated in Table 4, over the next three fiscal years the City’s current projections indicate roughly $36.5M of revenue into Fund 823. While these numbers are projections and thus could change according to real estate market performance, there are a few inferences that could be drawn. For example, whereas 73% of this total is expected to be paid out during FY26-27, only 23% is expected in FY27-28 and just 4% in FY25-26. Given the substantial variance between these numbers and that of the annual average shown in Table 1, financial planning of Fund 823 is critical to ensure sustainable use of the fund towards the City’s housing objectives. This includes strategizing the timing of property acquisitions, notice of availabilities (NOFA), and property rehabilitations around the expected payout dates of commercial linkage fees. Likewise, this could include seeding funding towards either a revolving loan fund or a rainy-day set-aside during abundant payout years to stabilize housing fund performance over time.
D. Other Funding Sources
While the AFHP is primarily based on housing-specific funds and grant programs, other funding sources have and can be used to further housing priorities. Committed appropriations, such as the Council directed appropriation of $200,000 from the General Plan Maintenance Reserve (Fund 270) towards the Anti-Displacement Roadmap, are included in the Funding Plan in section V.
One potential source that could be leveraged to further housing priorities are community benefits fees collected as a part of the Community Benefits Program. Community benefit fees are collected from developers who opt to pay a fee instead of constructing a community benefit to secure a floor area ratio bonus for a nonresidential project. The City’s zoning code (Section 20.395.004) specifies multiple eligible uses for the funds, including affordable housing. The Community Benefits Program was established in 2022 and has generated roughly $1,000,000 to date. While forecasting is not yet feasible at this time given the recency of the program and the option for developers to pursue their own community benefit projects, staff anticipate additional revenue generation over time.
V. Funding Plan
A. Overview
Based on the performance of the City’s housing funds in recent years, the City will prioritize a strategic programmatic use of funds aligned advancing the City’s Housing Element goals categorized by the 3Ps.
1. Production
Table 5: City Production Programs Funding Plan
Program Funding
Source
Funding
Target
Target
Population/
Geography
HE Goal /
Program
Projects
City-Led
Acquisition
and/or
Housing
Developme
nt
823, PLHA $450,000 Citywide Programs
CRT 4.1 and
4.6 718 Linden
rehabilitatio
n
City
Financing
For
DeveloperLed
Affordable
Projects
LHTF, PLHA,
IIG, 823, 241
$35,000,000 Citywide Programs
CRT 4.2 and
4.6 1051
Mission,
Road, 500
and 522
Linden,
Regulatory
/ Zoning
Updates to
Accelerate
Housing
Production
Planning
fees
charged to
property
owners /
developers.
HCD also
releases
grants such
as SB2 /
LEAP during
HE planning
cycles to
NA Citywide Goal 2
(Creation /
Facilitation)
and Goal 3
(Remove
Constraints)
Zoning and
policy
updates to
fulfill
General Plan
and Housing
Element
goals and
programs
such as
updating our
density
absorb local
costs
bonus
ordinance
2. Preservation
Table 6: City Preservation Programs Funding Plan
Program Funding
Source
Funding
Target
Target
Population/
Geography
HE Goal /
Program
Projects
Acquisition
of existing
affordable
housing
properties,
such as
SROs
PIP, 823 $1,780,000 (E)LI
households,
citywide
with focus in
low and
moderate
opportunity
areas
Program
CRT-9.2 –
Preserve
naturally
occurring
affordable
housing
SRO
Property
Acquisition
with PIP
funds and
823 (local
match)
AntiDisplaceme
nt Roadmap
270 (nonhousing),
823, PBF
$415,000 Citywide Program EQ3.2 –
Conduct a
public
hearing to
consider an
antidisplaceme
nt plan
Community
Action
Committee
meetings,
SRO /
Mobile
Home
Conversion
Ordinances
3. Protection
Table 7: City Protection Programs Funding Plan
Program Funding
Source
Funding
Target
Target
Population/
Geography
HE Goal /
Program
Projects
Emergency
Rental
Assistance
241 $180,000
annually
(E)LI
households,
citywide
with focus in
low/mod
opportunity
areas
Program EQ8.5 –
Continue
the
Rental
Assistance
City-funded
emergency
rental
assistance
administere
d by YMCA
Pilot
Program
Nonprofit
Housing
Programs
(legal aid,
minor home
repair, etc.)
CDBG $285,000
annually
Citywide
with
emphasis on
areas of
higher
displaceme
nt risk
Goal 1:
Equity
City funding
to Project
Sentinel (fair
housing
services)
and
Samarian
House
(emergency
shelter). Full
list included
in the SSF
CDBG
Consolidate
d Plan
VI. Monitoring and Reporting
While the Housing Division endeavors to produce a comprehensive plan biannually while updating funding availability and targets annually, the Plan does not have statutorily required monitoring or reporting requirements. The AHFP is a supplemental planning effort to guide the City’s medium term affordable housing project spending into alignment with existing housing goals. Nearly all funding sources have their own respective reporting requirements set by either City, State, or Federal law. This is also true for the City’s primary housing policy documents: the Housing Element and General Plan. Most publicfacing annual reports can be found on the City’s Housing Division webpage.
VIII. Risk Assessment and Mitigation
While AHFP’s funding targets are based on recent performance of the City’s grants and fees as well as educated guesses on future indicators, market and regulatory conditions are a constant evolving target. Hypothetical scenarios such as construction cost spike due to climate disasters or drastic changes in federal trade policy, are difficult to model and are largely outside the City’s control. What is in the City’s control, however, is having the best and worst-case funding pathways available to either accelerate or safeguard housing priorities during funding fluctuations without delay. Whereas the funding plan in section V corresponds with the most likely economic scenario, the alternate pathways are described in the following subsections.
A. Limited Financing Pathway
While the funding plan outlined in Section V was developed using primarily current balances and grant commitments, the plan could be impacted by considerable inflationary spikes or the retraction of committed funds from grantors. Similarly, in the scenario of an underperforming commercial linkage fee, there would be additional pressure to maintain adequate cash flow to pay for upfront program costs and local match requirements for grant programs such as PIP. The AHFP is likely to be resilient to any one of these scenarios, though a combination may require the City to evaluate establishing new revenue generating streams, tapping into non-housing specific funds, or scaling back projects.
If scaling back is necessary, the Housing Division will prioritize programmatic strategies using the following considerations, in the order indicated:
1) State and Federal Statutory requirements
2) Regulatory and grant agreement obligations
3) Highest impact for disadvantaged and historically underserved communities 4) Project viability and delivery
5) Highest impact on progressing housing priorities in General Plan and Housing Element
In practical terms, this may entail reducing the number and scale of property acquisitions and financing agreements that do not have pre-committed grant funding. Likewise, the City could reduce non-obliged funding commitments to non-profits that provide housing services, especially in the scenario of reduced federal funding for grant programs such as CDBG.
B. Surplus Financing Pathway
The surplus pathway would apply in scenarios such as a significant decrease in interest rates that could reduce the cost of affordable housing financing or if grant funding markedly increases. While the likelihood of the surplus pathway taking effect is low given the current stance of the Federal Reserve and the State’s budgetary challenges, it’s possible for the economic climate to change over the next two years. Additionally, the City’s Commercial Linkage fee could see a major boost if there’s a substantial expansion of biotech office space in the City. In the surplus scenario, the Housing Division will prioritize programmatic strategies using the following criteria in the order indicated:
1) Highest impact for disadvantaged and historically underserved communities 2) Project viability and delivery
3) Highest impact on progressing housing priorities in General Plan and Housing Element
The practical term of the surplus scenario is heavily dependent on how the surplus arises.
For example, if the surplus arises because of declining interest rates, the most logical programmatic expansion could come City-led financing and property acquisitions. If the surplus arises due to increased additional grant funding, the City will have more flexibility to pursue the rehabilitation of 226-246 Grand Avenue to bring those properties online with affordable units. Alternatively, if the Commercial Linkage Fee exceeds performance expectations, the City could pursue more policy driven interventions such as providing additional financial support for tenant legal aid. Lastly, as is prudent in any surplus scenario, the City could use seed money from surplus years to establish stabilizing funding mechanisms such as a revolving loan fund or a reserve fund. These mechanisms could greatly assist the City in maintaining consistent programs and pipeline projects even during revenue constrained years.