BMR and the paradox of “low income”

Let’s start with what BMR is: it’s a requirement of some new housing developers in San Francisco to rent or sell 12% of its units at below-market rates. This creates perverse incentives as I’ll show in the following example of below-market rental units at Rincon Green Apartments.

A one person household’s income can’t exceed $23,310.00 [1], or else they don’t qualify for the BMR units. Let’s take a look at the market rates of the units that a one person household would qualify for.

According to Rincon Green’s current leasing/floor plans page, studios go for $2,395 – $2,950 per month [2]. By [1], the BMR rate for these same units is $550, giving a savings of between $1,845-$2,400 per month.

On the low end, a person who makes $1 over $23,210 would have to pay an extra $22,140 in rent to live at Rincon Green. Therefore, it doesn’t make sense to make an annual salary between $23,211 and $45,350. But the max salary is, in practice, even higher than that: the difference in federal income tax (assuming use of the standard tax table [3], and filing status single) is $4,220 in 2013. So, for it to be worthwhile you’d have to make more than $52,623, and that’s not including the taxes on the extra $4,220, and not including any state/local taxes.

This is just the low end.

One bedroom apartments with the same floor plans as those available through the BMR program range from $2,796-$3,470/month at market rate and $581.00/month through BMR.

On the high end, you’d be paying an extra $34,668 in rent. Meaning that it wouldn’t make sense for you to make between $23,310 and $65,348 — again, probably more than this to account for differences in taxes on the extra money and state/local taxes.

With programs like San Francisco’s inclusionary housing, I’ve found one example where it doesn’t make sense to earn between $23,210 and $65,348 per year. All of that extra money would be going to rent that would otherwise be swallowed by the housing developers. And I’m sure it’s not an isolated example.

Should we really have programs that encourage people to work part time at Starbucks rather than get a job that requires them to actually think?

[1] Mayor’s Office of Housing and Development page on BMR units at Rincon Green
[2] Rincon Green floor plans
[3] IRS 2013 Tax Tables

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