“Winners, Losers in SF Panel’s Compromise on Affordable Housing”
The high-stakes fight over which San Francisco housing developers will be required to increase affordable-housing levels significantly if Proposition C passes in the June 7 election spilled into public view Monday, with some developers claiming a raw deal.
The Board of Supervisors’ Land Use and Transportation Committee hammered out details of trailing legislation for Prop. C, a ballot initiative that would double the city’s affordable housing requirements to 25 percent on-site or 33 percent off-site.
While Prop. C would apply to any project filed after Jan. 12, the trailing legislation deals with the hundreds of projects in the development pipeline that have not started construction.
Under the legislation, developments proposed in 2013 would be required to add 1 percent affordable units, 2014 projects would add 1.5 percent and 2015 projects would add 2.5 percent. Those figures are on top of the 12 percent the developers were required to include under current city law.
The 2013-15 projects represent about 12,000 planned housing units, and the bumps would add about 200 units to the city’s permanently affordable housing stock.
Striking a balance
Prop. C sponsors Jane Kim and Aaron Peskin, a committee member, emphasized that the goal is to get developers to include as many affordable units as possible, without squeezing a project’s bottom line so much that it doesn’t make economic sense.
“We know that market-rate developers can do far more than 12 percent given the market and the value that we, as a city, confer on land,” Kim said during the meeting.
Among the big losers were projects that either filed their initial paperwork after Jan. 12, 2016, or would rise more than 120 feet. They include 3333 California St., the UCSF property where San Francisco development firms SKS Investments and the Prado Group want to build 558 units near Laurel Village, a part of town where new housing is a rarity.
Supervisor Mark Farrell warned that the legislation could kill that housing proposal in favor of an office use. The project application was submitted in March, although the developers have been talking to the community for well over two years.
“We want to do everything we can to encourage residential building,” said Farrell, who represents the area. “In many cases, it’s easier to do commercial.”
About a dozen proposed projects of more than 120 feet would also be subject to the 25 percent requirement. This includes 1001 Van Ness Ave., where Oryx Partners wants to put 240 units in a 130-foot building. Juan Carlos Wallace, a partner in Oryx, said that doubling the number of affordable units there would take away $11 million from the bottom line.
“We are not a high-rise product, we are a mid-rise and one that is at risk, along with 200 union jobs,” he said.
In a letter to the board, Wallace said the legislation “needlessly penalizes the Van Ness corridor and would jeopardize years of work.”
“Our project is not a high-rise tower on the top of a hill, nor does it have waterfront views,” he said. “Many of the units are thus priced at more moderate levels relative to high-rises in other parts of the city.”
Supervisor Scott Wiener, a committee member, said the trailing legislation was the result of backroom deal-making, with some builders treated differently than others. He also objected to the short timeline committee members had to digest several amendments, which continued to be introduced well into the meeting.
“This is the most significant piece of housing legislation we will vote on during our tenure on board,” Wiener said. “We owe it to the public to have a fair and transparent process, and that has not happened here.”
Over two months of meetings since the Board of Supervisors voted to put Prop. C on the June ballot, Kim and Peskin managed to appease major developers, enough so that they are unlikely to campaign against the June ballot measure.
Eric Tao, the developers’ de facto lead negotiator, whose company, AGI, has built more than 1,000 units in SoMa and the Mission, said ideally the entire pipeline would have been grandfathered at the 12 percent level, but given the politics and the affordable housing crisis, the deal was the best the developers could expect.
“It’s not perfect — there are still people being left out, still projects being hurt,” Tao said.
That meant usual alliances were frayed, with most developers supporting Peskin and Kim, and the moderate supervisors and the trade unions left complaining about backroom dealing. The carpenters union posted a tombstone and a massive hooded skeleton outside City Hall to protest the legislation.
Peskin denied backroom deals were made: “Everyone who is in the pipeline should be treated in the same way. And that is precisely what this legislation does.”
The question of whether entire neighborhoods would be included in the grandfathering was undecided until Monday’s meeting. Initially developers with projects in parts of SoMa and the Mission were out of luck. SoMa projects were eventually included in the grandfathering, and Mission projects were added at the meeting.
On Monday, the committee’s third member, Chairwoman Malia Cohen, proposed a motion that the legislation be delayed a week — it passed 2-1, with Peskin opposed and Wiener in favor.
‘A national model’
Peter Cohen, who heads the Council of Community Housing Organizations, said the legislation is groundbreaking.
“You are talking about legislation that every city and state in the country would be jealous of,” Cohen said. “This is how we get things done in San Francisco — it’s why we are a national model of solutions around affordable housing.”
Developer Oz Ericson of the Emerald Fund said the grandfathering legislation means that the vast majority of projects in the pipeline will get built, but he worries about the future.
“I personally can’t make 25 percent affordable work — the costs are simply too high,” Ericson said.