1 SOUTH SAN FRANCISCO
AFFORDABLE HOUSING FINANCING
PLAN (AHFP)
Fiscal Years 2025-2026 and 2026-2027
May 2025 DRAFT
2 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 .......................................................................................4
3. Inclusionary Housing Ordinance ....................................................................4
4. Commercial Linkage Fee................................................................................4
5. Program Administration .................................................................................5 B. Funding Needs Assessment ..............................................................................5 IV. Fund Performance ..................................................................................................7 A. Funds and Eligible Uses ....................................................................................7 B. Current Funding Commitments .........................................................................9 C. Fund 823 Anticipated Revenue ........................................................................ 10 D. Other Funding Sources.................................................................................... 11 V. Funding Plan ......................................................................................................... 12 A. Overview........................................................................................................... 12
1. Production.................................................................................................. 12
2. Preservation................................................................................................ 13
3. Protection................................................................................................... 13 VI. Monitoring and Reporting ...................................................................................... 14 VIII. Risk Assessment and Mitigation........................................................................... 14 A. Limited Financing Pathway ................................................................................. 15 B. Surplus Financing Pathway ................................................................................. 15 3 I. Introduction
The Affordable Housing Financing Plan (AHFP) outlines the City’s biennial 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 biennially by the Housing Division of the Economic and Community Development Department (ECD), with annual reviews to ensure funding availability 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, providing rental assistance to low-income South San Francisco residents experiencing an immediate financial hardship. The program was instrumental in assisting residents impacted by COVID-19 and the Shelter in Place Order. Since February 2020, Council has allocated $1,025,000 towards direct rental assistance and $146,500 for program administration. As of May 2025, the program has assisted 798 individuals, 324 being under the age of 18. During Fiscal Year (FY) 24- 25, Council appropriated $177,000 for this program.
4 2. Housing Nonprofits
Through its CDBG program 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 entitlement award of $443,482 during FY24-25. Furthermore, not all CDBG funds go directly to housing nonprofits; the City is limited to spending 15% of its entitlement on public service grantees (nonprofits). The remainder of the entitlement can be spent on public improvement projects, minor home repair, 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 and 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 new 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 5. Program Administration
Critical to the success of the City’s housing program is its administration. City staff monitor existing affordable housing units, review 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 Allocation (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 very 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 foot 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 make building housing affordable to any income level a challenge to finance, but most especially for units that are affordable to low and extremely lowincome 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 offset the cost of producing affordable units with the scale of market-rate 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.
6 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 State and Federal grants 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 very low-income units required for its 2023-2031 RHNA. 7 IV. Fund Performance
A. Funds and Eligible Uses
Table 1: Projected FY24-25 Year End Balances of Affordable Housing Funds Table 2: Grant Award Funding Availability
Grant Total Award Allocated
Funds
Unallocated
Funds
CDBG FY24-
252
$424,978 $424,252 $726
PLHA Y1 $217,980 $217,980 $0
PLHA Y2 $338,809 $338,809 $0
PLHA Y3 $372,500 $0 $372,500
LHTF $2,362,500 $0 $2,362,5003
IIG $28,817,500 $28,817,500 $0
PIP $890,0004 $0 $890,000
Table 1 above denotes the projected FY24-25 year-end balances for each housing fund, while table 2 denotes funding availability of the City’s current portfolio of grant awards.
While Table 1 illustrates the approximate FY24-25 year-end balances for housing funds, they are not comprehensive of anticipated credits and expenses that have yet to be formally incorporated into the fund balances. While staff can reasonably anticipate 1 Approximate year end balances for FY24-25 2 FY25-26 allocation to be determined. 3 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. 4 Proposed to be appropriated into Fund 205 with $890,000 in matching funds from Fund 823, pending Council approval.
Fund Source Projected FY24-25 Year End
Balance1
Funds
Commercial Linkage (823) $14,000,000
Affordable Housing Trust Fund (205) $200,000
LMI Housing Asset Fund (241) $1,000,000
8 credits and debits to housing accounts such as pending grant awards and rental and loan repayments from the City’s property and loan portfolio, there is typically a delay before staff have enough certainty to formally input these credits and expenses into the fund balances. It is advised to review Table 1 in conjunction with other information presented in this document, such as Table 4.
Another important factor to consider with Table 1 and 2 is that nearly every funding source has use restrictions. Federal and State 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. One notable exception to the use restriction rule however is the $890,000 PIP grant award from HCD, which could be appropriated as a cash contribution to Fund 205 pending a 1:1 match from a local source such as Fund 823.
Doing so would replenish Fund 205 with a total of $1,780,000, greatly benefiting a nearly depleted fund as shown in Table 1.
City governed funding sources such as 823 and 205 generally have much more flexible eligible uses. Notwithstanding, they do carry some State law restrictions and policy considerations set by the City. Table 3 to follow outlines the use restrictions on affordable housing fund sources.
Table 3: Eligible Uses of Affordable Housing Fund Sources Fund
Source
Fund Type Fund
Originator
Eligible Uses
Commercial
Linkage
(823)
Fee and Fund City Flexible. Must serve households
making less than 120% Area Median
Income (AMI). Annual State reporting
requirement dictated by the
Mitigation Fee Act.
Affordable
Housing
Trust Fund
(205)
Trust Fund City Flexible. Must serve households
making less than 120% AMI.
LMI Housing
Asset Fund
(241)
Former
Redevelopment
Agency Fund
(RDA)
City Can fund construction,
rehabilitation, or preservation. Must
focus on ELI households and no
households above 80% AMI.
Restrictions set by State Senate Bill
341 and other State laws.
PLHA Formula Grant California
Department
of Housing
Generally flexible. It can be used for
developing or rehabilitating LMI (Low
and Moderate Income) housing,
9 and
Community
Development
(HCD)
homeownership opportunities, as
well as social services with the
intended goal or preventing or
reducing homelessness.
LHTF Competitive
Grant
HCD Local 1:1 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
Development
(HUD)
Wide variety of uses but nuanced
program requirements. Priorities set
in the City’s CDBG Consolidated
Plan and Annual Action Plans.
PIP Competitive
Grant
HCD Flexible match funds for Fund 205,
provided the City also provides a 1:1
local match. Same restrictions as
Fund 205, provided the funds are
expended by June 2029.
B. Current Funding Commitments
A sizable portion of the City’s affordable housing funds are already committed to a project or program. These funding commitments largely reflect the use restrictions on the funds and grants themselves per Table 3. 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. Furthermore, if a grant such as PIP has a local dollar match requirement, the local match amount also must be considered.
Council also sets funding commitments for projects and programs such as the Emergency Rental Assistance program and administrative costs such as staff salaries.
While non-exhaustive and excluding administrative costs, Table 4 provides an overview of the City’s current housing funding commitments.
10 Table 4: Current Housing Funding Commitments
Project Type Project Type Funding Source Funding Total
Production Projects
1051 Mission Road Financial
Assistance
IIG: $28,817,500
823: $2,000,0005
$33,180,000
500 Linden Financial
Assistance
PLHA Year 1 & 2:
$556,789
$556,789
522 Linden Financial
Assistance
241 $1,076,373
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 $177,000
Services for
Persons
Experiencing or Atrisk of
Homelessness
Emergency shelter,
legal aid, shelter,
home sharing, etc.
205 $100,000
Nonprofit Housing
& Community
Development
Services
Youth mentoring,
oral health services,
tenant legal aid, etc.
HOME: $12,526
CDBG6: $41,500
$54,026
C. Fund 823 Anticipated Revenue
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. As of May 2025, the City has entitled enough commercial real estate projects to generate over $200 million in revenue for Fund 823. However, whether these projects move forward is dependent on the commercial real estate market’s recovery. The market for the past few years has been notably chilled due to the financial stress the industry is facing from high office vacancies, high interest rates, and falling asset values. This has resulted in both less 5 Proposed to be increased to $2,362,000 to meet the LHTF 1:1 local match requirement. This will allow the City to allocate the $2,362,000 LHTF award from HCD as outlined in Section V to the project. 6 Proposed to be re-allocated to General Fund. See Section V. 11 than anticipated revenue generation to date and more cautious projections for the fund over the next few years. Table 5 to follow provides estimates of Fund 823’s fiscal year performances from FY25-26 through FY27-28:
Table 5: 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
$19,273,000
27-28 Genentech Year 7, Healthpeak
Brittania Point
$8,452,000
Total $29,225,000
As indicated in Table 5, over the next three fiscal years the City’s current projections indicate roughly $29.2 million in revenue for 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 66% of this total is expected to be paid out during FY26-27, only 28.9% is expected in FY27-28 and just 5.1% in FY25-
26. Consequently, 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 AHFP 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. Likewise, proposed spending from other sources such as $41,500 from the General Fund for nonprofit community development services are also included.
12 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 to advance the City’s Housing Element goals categorized by the 3Ps. Please note the Funding Plan includes adjustments to the current funding commitments for housing projects shown in Table 4, such as allocating LHTF funds to 1051 Mission Road and re-allocating CDBG funds from housing services to housing rehabilitation projects. These adjustments are informed by input received from housing nonprofit operators and the shifting realities of the City’s housing stock and funding portfolio. Pending funding awards from PIP and PLHA (Year 3) have also been assigned to programs in the subsequent tables.
1. Production
Table 6: City Production Programs Funding Plan
Program Funding
Source
Funding
Target
Target
Population/
Geography
HE Goal /
Program
Projects
City
Financing
for
DeveloperLed
Affordable
Projects
1051
Mission
Road: LHTF,
IIG, 823
500 and 522
Linden:
PLHA Y1&2,
241
$37,500,000 Citywide Programs
CRT 4.2 and
4.6 1051
Mission Rd,
500 and 522
Linden
Regulatory
/ Zoning
Updates to
Accelerate
Housing
Production
Planning
fees. HCD
also
releases
grants such
as SB2 /
LEAP during
HE planning
cycles to
absorb local
costs
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
13 2. Preservation
Table 7: City Preservation Programs Funding Plan
Program Funding
Source
Funding
Target
Target
Population/
Geography
HE Goal /
Program
Projects
Preserve
Existing
Housing
Resources
and
Communiti
es
CDBG $80,000 Citywide,
focus on
communitie
s with high
risk of
displaceme
nt
Program
PRSV 1.2:
Prioritize
funding for
housing
rehabilitatio
n
718 Linden
rehabilitatio
n
AntiDisplaceme
nt Roadmap
270 (nonhousing),
823, PBF
$415,000 Citywide,
focus on
communitie
s with high
risk of
displaceme
nt
Program EQ
3.2:
Conduct a
public
hearing to
consider an
antidisplaceme
nt plan
Community
Advisory
Committee
meetings,
SRO /
Mobile
Home
Conversion
Ordinances,
Live/Work
Preference
Ordinance
3. Protection
Table 8: 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
Program EQ
8.5:
Continue
the
Rental
Assistance
Pilot
Program
City-funded
emergency
rental
assistance
administere
d by YMCA
Services for
Persons
205 (funded
by PIP)7
$100,000
annually
Persons
experiencing
Programs
SNP 7.2,
Emergency
shelter, legal
7 HCD has approved the City’s eligible use of PIP funds to be a $890,000 cash deposit into Fund 205, provided the City also provides $890,000 in matching funds from Fund 823, pending Council approval. 14 Experiencin
g or At-risk
of
Homelessn
ess
or at risk of
homelessne
ss
7.4, 8.3:
housing
solutions &
services for
persons
experiencing
homelessne
ss
aid, shelter,
home
sharing, etc.
Nonprofit
Housing &
Community
Developme
nt Services
PLHA Y3,
General
Fund
PLHA Y3:
$149,000
HOME:
$12,600
General
Fund:
$41,500
Citywide,
focus on LMI
households
Goal 1:
Equity
Homeowner
assistance,
youth
mentoring,
oral health
services,
tenant legal
aid, etc.
Economic
Advanceme
nt Center
and
Associated
Nonprofits
PLHA Y3 PLHA Y3:
$223,500
CDBG:
$50,000
Citywide,
focus on LMI
households
Goal 1:
Equity and
Goal 6:
Special
Needs
Populations
Operations
and
nonprofit
operators
VI. Monitoring and Reporting
While the Housing Division endeavors to produce a comprehensive biennial plan while updating funding availability and targets annually, the Plan does not have statutorily required monitoring or reporting requirements. The AHFP is an administrative, 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 public-facing 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 15 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 LHTF. 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, tap 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 and community services.
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, Fund 823 could see a major boost if there’s a substantial expansion of biotech office space in 16 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 would be 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.