Housing Policy

San Francisco Considers Not One but Two Bills Legalizing 'Missing Middle' Housing Citywide. Both Have Flaws.

The otherwise positive proposals are undermined by affordability requirements and density restrictions.


In what might seem like a Christmas miracle come early, the San Francisco Board of Supervisors is considering not one, but two, bills that would legalize lower density "missing middle" housing across the city.

Competing proposals introduced by Supervisors Gordon Mar and Rafael Mandelson would both allow the construction of four-unit homes (or fourplexes) on all residentially zoned land citywide. Combined with state-level reforms from earlier this year that make it easier to divide residential plots in half, both bills could theoretically allow up to eight primary residences where only one was permitted before.

Unfortunately, the two proposals also include micromanaging regulations that would lead to less missing middle housing being built than a more hands-off free-market approach would produce.

Mar's bill would permit up to four units of housing on all current Residential House zones, which currently allow between one and three homes. That sounds like a pretty sweeping reform. But there's a catch.

Mar's bill would require the new units to be rented out or sold at rates that are affordable to someone making 100 percent of "area median income." The San Francisco Chronicle, which first reported on the bill, notes that the current area median income in the city is $106,550 for a couple or $133,200 for a family of four.

Affordable monthly rent for a family making that amount of money would shake out to be $2,664, according to a press release from Mar's office—$2,000 less than pre-pandemic market-rate rents for a typical two-bedroom apartment.

"While we've overbuilt luxury housing, the housing industry has not been building for our workforce," Mar said in a press release. "I am proposing a new strategy to stabilize, protect and grow our middle class."

Mar's proposal certainly wouldn't produce much "luxury" housing. It also probably wouldn't produce much housing period, says Emily Hamilton, a researcher at George Mason University's Mercatus Center.

Requiring monthly rents be $2,000 below-market-rate rents is "a substantial subsidy," Hamilton tells Reason. "I would imagine units that are delivered under this bill would be either existing housing that could be chopped up into more units or perhaps provided by a nonprofit homebuilder or someone who is motivated by something more than profit."

Consider what happened in Austin, Texas. In 2019, the city technically abolished single-family-only zoning when it created the Affordability Unlocked program, which allows developers to build larger projects with more units and fewer parking spaces in exchange for making the new homes affordable to lower-income people. Specifically, it allows the construction of up to eight units of housing in single-family-zoned areas. But to build those extra units, a developer would have to make as much as 75 percent of the new units affordable to people earning below area median income, include a certain number of two-bedroom units, and adopt a host of tenant protections.

As a result, few Affordability Unlocked projects have been built in single-family zones. Those that have required substantial subsidies from the city government.

Mar's bill would likely have similarly disappointing results. One could even consider a form of "affordability trolling," whereby new housing is legalized but cynically inserted requirements prevent the units from being built.

Mandelman's fourplex legalization bill looks like laissez faire in comparison. It allows the construction of fourplexes citywide, without any of the affordability requirements in Mar's bill.

Nevertheless, it would require newly legal fourplexes to be built at densities no larger than what the city's current zoning allows for three-unit homes. (Mar's proposal has the same density restrictions.) According to Hamilton, that means Mandelman's bill is more suited for permitting triplexes than the fourplexes it technically allows.

To overcome the limitations of their dueling zoning reform ordinances, both Mandelman and Mar are also proposing companion bills to incentivize the construction of fourplexes.

Mandelman introduced a bill in February that would require people trying to build large single-family homes to get special conditional use permits (a long, expensive process in San Francisco). The idea is to steer people away from building "McMansions" and instead build more affordable multi-developments.

"The way much of San Francisco is zoned today makes it easier to flip existing housing into luxury monster homes than to build small apartment buildings for working people," Mandelman said in a July press release.

Mar has proposed streamlining permitting and providing direct financial assistance to homeowners who add below-market-rate units on their property. "By centering homeowners," said Mar, those incentives will "protect and build homes to meet our actual housing needs and to stabilize our community."

Hamilton thinks policymakers interested in affordability should consider more ambitious proposals that would allow larger multifamily housing in more areas of the city and speed up the process by which new buildings are approved.

Not only would that produce more housing overall, but it would also produce more of the affordable "missing middle" housing.

Without modern zoning restrictions, U.S. cities historically built a lot of  housing affordable to working- and middle-class people, from Baltimore's rowhouses to New England's "tripledeckers."

Those were erected "not because of some policy intended to promote missing middle housing but because that was what made sense to build in those locations," Hamilton says.

California has made great headway on zoning reform at the state level this year, passing one bill that legalizes duplexes on almost all residential land in the state and another that makes it easier for cities to zone for smaller apartment buildings without having to go through onerous environmental review.

But both reforms still leave the details of this upzoning to cities to figure out. As we can see from the Mandelman and Mar proposals, that's where the devil is.

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  2. Will bums still be allowed to take a dump in front of said new “middle” housing?

    1. Are you seriously asking, "Does a bum shit on the streets of San Francisco?"

      1. Are you suggesting there is a smear campaign against San Francisco bums?

        1. That's a tissue of lies!

          1. I’m not crapping on San Fran. Turns out it is the bums doing that. Shiterally.

            1. I'm surprised they don't change the name to "San Tran" -- just don't call it Disco.

              1. San Francisco. The city by the bidet.

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  3. California has made great headway on zoning reform at the state level this year, passing one bill that legalizes duplexes on almost all residential land in the state

    Wait, they passed a ban on smaller municipality's bans? I have it on good authority that this, contrary to being reform, is as bad as being any one of the Hitlers of the rainbow.

    1. > Unfortunately, the two proposals also include micromanaging regulations

      Not in San Francisco! Unpossible!

  4. Combined with state-level reforms from earlier this year that make it easier to divide residential plots in half, both bills could theoretically allow up to eight primary residences where only one was permitted before.

    Unfortunately, the two proposals also include micromanaging regulations that would lead to less missing middle housing being built than a more hands-off free-market approach would produce.

    Libertarians: Beware of left-coast cities that act libertarian-sounding proposals, especially on zoning.

    "While we've overbuilt luxury housing, the housing industry has not been building for our workforce," Mar said in a press release. "I am proposing a new strategy to stabilize, protect and grow our middle class."

    And it won't work. It can't work. As I posted before using unassailable logic, this idea that all the existing housing will both maintain and grow its value (lest you have a violent revolt from homeowners who saw their housing prices drop by 42% because your 'affordable plan' actually worked) but NEW units will somehow be magically "affordable" is so laughable it should be dismissed out of hand.

    1. They did a similar sounding thing where I lived in the late 80s. Preached "Densification" as though it was infilling the city. The idea was "Denser housing means less traffic" but what happened was that the county got a crap ton of crackerbox, low-rent apartments all the way out at the ends of the freeways and the city didn't get any more density at all.

      Worst of both worlds. Shitty apartments and thousands more commuters on the freeways, semi-rural neighborhoods where now shitty apartments are staring into your back yard, and a net negative benefit on all the proposed selling points. But the developers who pushed "densification" through got to build crap that the folks they bought the land from were prohibited from building, so they got the land cheap and then fixed it so it was worth more! It was a win for someone.

      1. A "win/meh" situation, sounds like.
        And a fine example of a locally-inspired aphorism I came up with long ago: "Developers run local politics. Everywhere, all the time."

    2. I'm beginning to think that the value is derived from the location, and not the construction materials.

      But what if I want to open a ramen restaurant that is open on alternate Thursdays?

      1. Construction materials and methodology will make a difference in price for sure, but in a place like San Francisco, you're talking about a minority percentage of the price. The difference between Quartz, Laminate or Concrete countertops simply isn't going to add or subtract 500,000 to an average residence, until you stack so much high end materials that you're really starting to talk more about a movie-star Bel Aire mansion.

        There are other issues where high end materials probably won't be used (very often) in housing built in a shitty location. There will be exceptions for sure, but they're probably rare.

        As someone who lives in an expensive left coast city, the same house on a different street can change the selling price by several hundred thousand dollars, add a spectacular view to the exact same house, and you can push that price up to a million.

    3. So, first off, I strongly suspect that you are absolutely correct.

      That said, man, SF is a very weird edge case. It's *so* small, and *so* many more people want to live there than actually do, that I can't imagine that the presence of a whole bunch of new feelings would drop existing prices much.

      Though, I suppose that's sort of where you're going with the second half of what you said: That the new stuff would *also* be expensive, because there would still be a huge surplus of people "bidding" on it.

      Add in the fact that almost everyone I know who lives in SF actively does not want more people there, and it seems implausible that this situation will ever get sorted.

      I have it on good authority that the Big One of 2106 is really going to shake that market up, though.

  5. Has anyone tried showing these people what happens if you don't keep adding more regulations and restrictions to cure the problems your older regulations and restrictions created?

    Can't someone just point them to Realtor.com and type in Houston or any other city that has no such issues of government mandated housing shortages?

    1. The problem is that NO city wants to lower their housing prices. A municipality or political district may be happy that their housing prices are currently low compared to another district, but no one wants to see a general drop in property values from wherever they are at this very moment.

      A small flyover town where a nice single family home with a yard can still be built for $90,000 doesn't want to see those houses going for $72,000 three years from now. And cities like San Francisco or New York have no interest in seeing their million dollar cold-water-walkup real estate sell for $200,000 ten years from now. Even if everyone in the country looks at the property, neighborhood and build quality and "knows" it's only worth $42,000.

      1. Exactly so.

        I have argued this repeatedly here.

        The left wants to scream "greedy developers" and the right wants to cry "power hungry officials"

        But the real answer is "homeowners want sustained and rising property values". Which is perfectly reasonable. It is the largest asset and investment most people ever have.

        Which also explains why these big cities are stuck with politicians who think they can insert housing at the bottom of the market.

        You cant. Simple as that. If you allowed a developer to build a high rise condo with 1,500 square foot units and they promise to sell them for $150,000 each in Manhattan, they will all be resold for market rates next week, depressing the market for dilapidated 1920's era 750 square foot units.

        Enter rent control and other restrictions.

        The dumbest way to run a railroad.

        1. homeowners want sustained and rising property values

          So do property tax collectors. It's hard to say which are more vicious.

          1. It’s pretty easy to say who’s more vicious.

          2. Technically the property tax collector can still squeeze more money out of you even if your value goes down. many people don't understand how property values work because "value" is used as a fig leaf to justify the amount you're taxed, when in reality "value" is really only a formula to determine your piece of the tax "pie".

            This has been discussed in detail here before, but I'll try to summarize briefly.

            The state (or county) tells the assessor "I need X billion in property taxes, go find it."

            The assessor then uses property "value" to concoct a formula that extracts X billion from all the property owners "fairly". If you're bill gates with a huge mansion, you pay more. If you're pensioner living in a ramshackle ranch house on the outskirts, you pay less. But if they need X billion out of the political district, they're going to find it.

  6. Given SF rent control and housing laws, you have to be a fool to build a four unit building below market rate building there.

  7. >>Consider what happened in Austin, Texas

    several square blocks between Stubbs bbq & 6th St look like that Brad Pitt zombie movie except everyone's still alive and much smellier than I assume zombies are

  8. They passed a similar law in Raleigh NC. It does not apply to newer neighborhoods with HOA deed restrictions. Guess where the politicians live.

  9. While we've overbuilt luxury housing..
    It’s just stupid to build what is in demand.

    1. Living in San Francisco *is* a luxury.

      To the sort of people who actually want to live there, anyway. I'd find it like being sentenced to hell, personally.

      But seriously. 'Ooh! San Francisco!" There are jobs and clubs and bars and museums and houses in other places. Wanting that specific iteration of all of those things is a demand for a luxury good, given the current availability of it

      1. Or certainly a *scarce* one, perhaps.

  10. Something here doesn't add up: If housing costs are so high in the area, where are people making the medium income living?

    1. Some people have rent control. Some people have very long commutes.

  11. The State isn't telling commuters how far they have to drive.

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