June 6, 2002

Harvey M. Rose
Budget Analyst
City and County of San Francisco
1091 Market Street, Suite 1025
San Francisco, CA 94102

Re: Review of the Affordable Housing and Home Ownership Bond Program

Dear Mr. Rose:

The Mayor"s Office of Housing (MOH) has reviewed the draft Review of the Affordable Housing and Home Ownership Bond Program provided to us on June 5, 2002. We appreciate the thoroughness of your review and your willingness to consider and incorporate suggested revisions during the drafting process. Your review will assist us in strengthening the Program in the future.

In general, MOH concurs with the findings and recommendations of the Review. This letter provides the response of MOH on aspects of the program where our view differs from that of the Budget Analyst. We appreciate the opportunity to incorporate this response into the Review.

Management Reporting - Finance Committee Reports (page 8)

The Review discusses the language of the Regulations and Board Resolution 1074-97 adopting them, and comes to the conclusion the Resolution required a separate report to the Finance Committee. MOH believes that the language of the Resolution does not bear this interpretation. The Resolution requires that information on the projects selected for funding be reported to the Finance Committee. The Annual Report provides, in our view, an appropriate format to present that information to the Finance Committee as well as the rest of the Board and the general public. If the Board of Supervisors feels that separate reports to the Finance Committee are desirable, we would of course be happy to provide such reports. If that is the case, we recommend that the Regulations be amended to incorporate a specific requirement for a report to the Finance Committee.

Accuracy of the DALP Database (page 9)

MOH has already completed a comprehensive review of the DALP application files and identified data errors for all DALP loans. The corrected data will be incorporated into the database in the near future. MOH will also revise its data entry procedures to ensure review of data for accuracy at the time the data is entered. We would like to emphasize the Budget Analyst"s comment that none of the errors identified either by the Budget Analyst"s sampling or in MOH"s own data review has resulted in an ineligible household receiving a loan, or a borrower receiving a greater loan than the amount for which he or she is eligible.

Question 1 (page 11): How many net new units, as opposed to rehabilitated units, of housing have been or will be created?

MOH concurs with the Review findings with respect to the reported numbers of narrowly defined "newly constructed" units, "rehabilitated units", and "beds provided in facilities designed for individuals". Taken together, the sum of all units and beds funded with Bond funds is 2,076 as noted by the Review. However, MOH strongly disagrees with the implied false dichotomies between "net new units" and "rehabilitated units" and between "net new units" and "beds in facilities designed for individuals" created by the form of Question #1 and the Review"s literal interpretation of the word "units".

MOH believes that rehabilitated units assisted by Bond funds should be included in the tally of net new housing.

The use of the phrase "net new units" in this question suggests that what is being requested is not simply how many dwelling units were newly constructed (as opposed to rehabilitated) but how much "net" new housing was created. MOH argues that nearly all of the "Rehabilitated Units" listed in Table V ("Net Rehabilitated Units Funded Wholly or Partially with Proposition A Funds") should more properly be characterized as "converted" rather than "rehabilitated" and should be included in the tally of "net new units".

The 150 units on Treasure Island that have been or will soon be occupied by homeless families were converted from former military housing, which did not conform to local building and fire codes. Once the Island came under the jurisdiction of the City and County of San Francisco, these units were not legally habitable until they underwent the moderate rehabilitation necessary to bring them up to local code standards. To the extent that they were then added to the City"s housing stock, they should be included in the tally of "net new units".

The 100 units converted at the Presidio for occupancy by formerly homeless veterans were similarly unavailable for civilian use until made ready for such use with Prop A funds.

The 134 units at the Ambassador were uninhabitable at the time they were purchased with Prop A funds. The City was in the process of suing the former owner for failing to correct serious health and safety issues. Only those persons who were most desperate for shelter of any kind remained in the few units that were occupied at the time the building was purchased. For all practical purposes, these units were no longer part of the City"s "existing housing" stock and but for the Prop A funds were likely to be either boarded up or demolished in the near future. Consequently, for purposes of measuring the productivity of the Prop A Program, these units should be counted among the "net new units" as well.

Only the 72 rehabilitated units at 1301 Polk Street were habitable, existing housing units at the time they were purchased with Prop A funds. In this instance, the existing units are being converted from single-room occupancy hotel rooms suitable for largely transient occupants to full dwelling units suitable for permanent occupancy by low-income seniors.

MOH believes that beds in new group housing should also be included in the tally of net new housing.

By taking literally the use of the word "unit" in Question #1, the Review fails to include in its description of net new housing the new housing created with Prop A in "facilities designed for individuals".

Only 26 of the 264 beds in group housing listed in Table VI ("Facilities Designed for Individuals - Number of Beds Provided") were or will be created in habitable, existing housing converted to a new use. The remaining 238 beds were either converted from former military housing on Treasure Island like the converted units discussed above or are being newly constructed and should be included as "net new housing" for San Francisco residents

Therefore, our estimate for the amount of net new housing to be supplied with Proposition A funding support is 1,978 new units or beds in group housing, including 1,342 newly constructed dwelling units, 398 units either converted from military use to civilian use or returned to habitability from uninhabitability, and 238 beds in newly created group housing. In addition, 98 units or beds were converted from one form of housing to another; and all 2,076 units or beds were made permanently affordable to low or very low income San Franciscans.

Question 3 (page 17): How many firefighters, police officers, and teachers have benefited from the home ownership portion of Proposition A?

While this question focuses only on a few specific occupations, the DALP program serves a very broad cross section of San Franciscans. It may be helpful to expand on the Budget Analyst"s response and provide summary information for all borrowers in the program.

For the approximately 217 loans closed through the end of April 2002, the following occupations were reported for the 340 individuals comprising the borrowers (many households reported more than one employed member):

Category	Number of Individuals	Typical descriptions
Hotel, restaurant and tourist industry services	69	cook, housekeeper, custodian, waiter, kitchen helper, chef, laundry worker, bartender, cleaner, bellman, parking attendant, musician
skilled trades	59	construction worker (all trades), laborer, driver, bus driver, mechanic, letter carrier, welder, press printer, window installer
professional, management	55	financial services, program manager, union organizer, database administrator, engineer, social worker, business owner, compliance officer, human resources manager, graphic designer, travel agent, accountant, webmaster, recreation director
clerical and administrative	38	legal secretary, office clerk, data entry, secretary, payroll specialist, administrative assistant, teller, computer technician, postal clerk, library page
manufacturing	36	seamstress, garment worker, packaging, assembler, helper
retail	34	store manager, cashier, sales clerk, buyer, customer service rep., stock clerk
educational	22	teacher, music teacher, school district supervisor, child care provider, school aide
medical technical	12	registered nurse, certified nursing assistant, medical technician, home care worker, dental assistant, lab technician
Law enforcement/ security	7	security guard, deputy sheriff, parole agent, criminal investigator
Retired, disabled	8
Total individuals:	340

Question 4 (page 18): In the budgets of the completed projects, what were the original total budgets in comparison to the final budgets: and, in addition to Proposition A funds, what other sources of funding were used?

Table VIIIA contains additional information compiled by the Budget Analyst, including a calculation of the Cost per Unit and the Cost per Bed for each of the completed developments. The Budget Analyst provides no comments on this data. MOH would note here that a variety of factors affect costs per unit and per bed. Notably, the costs of rehabilitation can range considerably, depending on the rehabilitation needs of the property. As the Budget Analyst notes, too, the costs of the Rites of Passage Program property includes acquisition of the building.

For new construction, costs are less variable overall, but still reflect a range of construction types, land costs, unit sizes, and other factors. For the projects reported, it should be noted that John King Senior Community and Presentation Senior Community were senior developments, consisting of studios and one-bedroom units, whereas 8^th Street Community Resource Opportunities serves families and contains predominately two, three and four bedroom units. In addition, because 8^th Street is intended to serve homeless families, the building contains a substantial amount of space dedicated to supportive services for the residents, increasing the total development cost significantly.

Again, we appreciate the opportunity to offer these comments, and thank the Office of the Budget Analyst for their efforts.

Sincerely,

DARYL HIGASHI
Director

DH/JRL