The city of San Francisco is in a quandary. Like many big cities, it faces an affordability crisis, and city leaders are looking for a way to build housing to help low- and middle-income residents stay there.

But one proposal to give current residents of a historically African-American neighborhood help to do that has run afoul of the Obama administration.

Consider the case of Mack Watson. At 96, he is a vision of elegance in his freshly pressed ribbon collar shirt, vest and sports coat. He has called San Francisco home since 1947.

"Nothing is like San Francisco. Like the song, I lost my heart in San Francisco," he says minutes after finishing lunch at the Western Addition Senior Center on a recent day.

But Watson lost more than his heart in San Francisco. He is among thousands of black San Franciscans who are being displaced by gentrification. He can still recall when this neighborhood, the Western Addition, was a hub of African-American life.

"The mom and pop businesses. They're all gone. Nightclubs and restaurants, all that stuff. Theaters. They all gone," says Watson.

Watson witnessed firsthand as San Francisco's African-American population plummeted from about 13 percent in 1970 to less than 6 percent today.

He might be gone, too, except that he lives with his grandson's family in a house with stairs that are tough on his aging legs.

That's why he applied for a lottery for a brand-new, 98-unit affordable housing development for seniors partially financed by the federal government. The complex, named for Willie B. Kennedy, a former San Francisco supervisor, is scheduled to open before the end of the year.

The city wants to give current residents, many of them African-American seniors like Watson, something called a "neighborhood preference" in that lottery.

London Breed, a San Francisco supervisor who grew up in the Western Addition, supports the neighborhood preferences. "And all we're doing with neighborhood preference is saying that for the people who live here we're going to give you a priority, the right of first refusal, you still have to compete in a lottery with other residents of the neighborhood, but you have a better shot," says Breed.

But officials at the Department of Housing and Urban Development said no, you can't do that. They told the city last month that its neighborhood preference plan would violate federal fair housing laws by limiting equal access and perpetuating segregation in this historically African-American neighborhood.

Yes, there is an irony in this and the city is, in its own sense, trying to turn this neighborhood preferences, which have been used to discriminate, on its head to enable it to help maintain diversity in the city.

Tim Iglesias, a University of San Francisco law professor

In other words, the law designed to give African-Americans a fair shake in getting housing is being cited as a reason why they can't get a preference to stay in the community they've called home.

That leaves the city in a tough spot, says Tim Iglesias, a University of San Francisco law professor.

"Yes, there is an irony in this and the city is, in its own sense, trying to turn this neighborhood preferences, which have been used to discriminate, on its head to enable it to help maintain diversity in the city," says Iglesias.

This issue also divides fair housing advocates. In New York, for example, a fair housing group has filed suit against that city's policy of using "community preferences" for affordable housing units, saying it perpetuates segregation.

San Francisco officials met recently with HUD to press their case to use neighborhood preferences. They say the plan is vital to stemming the tide of gentrification that has driven thousands of people of all backgrounds out of the city. The agency agreed to review its decision.

Breed, the city supervisor, says that while she is optimistic, she is also realistic.

"It's not going to reverse the African-American population in San Francisco. It's not going to reverse the gentrification that's also happened in the community," Breed says. "But what it will do is give just a tad bit of hope to some people who are still struggling to stay here."

Still, time is short. About 5,000 people applied for the complex's 98 units, and the lottery is scheduled for next week.

Copyright NPR 2020.