In an admirable burst of optimism, a current BeyondChron post concludes that, unlike the rapidly gentrifying Mission District, the Tenderloin is not “… transforming itself into a place that low-income residents will no longer be able to afford. That’s not ever going to happen.”

A 304-unit market-rate housing project in the Tenderloin sparked a debate over whether gentrification and displacement will reach that part of town
A 304-unit market-rate housing project in the Tenderloin sparked a debate over whether gentrification and displacement will reach that part of town

The rationales offered for this bold prediction are:

  • There are few Tenderloin home ownership opportunities – single family homes or flats that could be converted to condos or TIC’s, so Ellis Act evictions will not become a “challenge.”
  • The limited amount of new market-rate housing that is built in the Tenderloin is consistently rental, not ownership.
  • There is no major retail shopping street or strong retail base to support new market-rate housing populations in general.
  • Local zoning and citywide SRO protections prevent its residential hotels from being torn down and replaced with market-rate housing.
  • Since the 1980s, various nonprofits have bought about 25% to 33% of the Tenderloin’s housing units and will keep them permanently affordable.

Unfortunately, this is a compendium of wishful thinking that ignores actual facts on the ground and capitalist economics, combined with an artificially narrow field of view.

First, of course, the immediately adjacent fringes of the Tenderloin are now visibly gentrifying — fast. Civic Center and Central Market Street are experiencing a burst of large-scale market-rate housing development with supporting ground floor “new SF” lifestyle retail. Existing apartment buildings on “lower Nob Hill,” which now reaches well south of Geary Street, are seeing huge jumps in their market rents and frequent landlord pressure to force rent-controlled tenants to move out (including an employee of my company, TODCO). These market dynamics will to continue to expand relentlessly.

And while the new market-rate housing that is built in the Tenderloin may start as rental, many of these buildings are also immediately mapped for subdivision so they can be converted to condos in the future when market conditions are ready for that, without needing any further city approval.

Second, it is apparent that Central Market Street is now becoming a local upscale neighborhood shopping street for all these new market-rate housing residents. The new hip Market Square in the Twitter headquarters building will be joined by a major retail complex in the Trinity Plaza complex now under construction. More is certain to follow due to the spending power of thousands of additional new market-rate residents in coming years. Please don’t suggest that Market Street is not functionally directly connected to the Tenderloin and its residents. And the largest single concentration of department, discount, and national chain retail west of Chicago is just a five-to-ten-minute walk away from the Tenderloin at Union Square and Hallidie Plaza.

Third, the zoning protections of the North of Market Special Use District adopted in the 1980s apply to less than two dozen city blocks and generally still allow for RC-4 high-density mid-rise new development, which developers can now further increase by 20% thanks to the state’s housing density bonus law. These protections are out-of-date, just like today’s ridiculously low 12% inclusionary housing requirement for new market rate housing in the Tenderloin and Central Market.

Fourth, all of the privately-owned residential hotels in the Central City neighborhoods, including the Tenderloin, long a vital de facto affordable housing supply up until now, are coming under relentless market pressures:

  • Those that have tourist licenses for some or all of the rooms that used to be rented to monthly tenants can now legally, with modest cosmetic upgrades, convert those rooms to European-style hotel or hostels advertised via Air B&B-type websites. Thanks to the ongoing huge jump in city hotel-rooms rates, this practice is spreading quickly, especially to the “better” SROs wherever they are located.
  • Those without tourist licenses can still take their SROs “upmarket” after modest upgrades to house the city’s new tech workers who find them to be a more desirable living arrangement than sharing a bedroom in an apartment with a stranger for the same monthly rent, now approaching $1500+ per month. This is spreading rapidly through the Mission now, with North Beach and Soma next. The “better” SRO’s in the Tenderloin will soon follow.
  • It is a big positive that a good number of the Tenderloin’s SROs have been bought by nonprofits and renovated for permanent affordable housing over the last 30 years. But the city funding to expand this has now dried up, due to the huge amount of money needed for the Mayor’s Public Housing RAD program and many promised new affordable housing developments in other Central City neighborhoods. So this will not continue at significant scale.
  • Worst of all, the homeless and special-program housing provided today by the many Central City master-leased hotels, many operated by the Tenderloin Housing Clinic, is highly vulnerable for the long term, because these city leases do not include an option to buy those SROs when that lease expires. If their owners have more lucrative options to sell, convert them to tourist use, or go upmarket at that time, many or all could be lost forever.

The South of Market SRO housing stock – a functional extension of the Tenderloin SRO housing market – is illustrative of these dynamics. There are 34 Soma SROs remaining today (compared to the 72 in 1965 before the redevelopment era) with 2,365 total units. Nonprofits have bought 14 with 1,069 units that will be permanently affordable. Twenty are still privately owned, with 1,296 units. Nine of those are master-leased by the city with 820 units, but apparently none are guaranteed to be permanently affordable through an option to buy. Today’s market-rate asking rent for these private SROs averages about $1,100 per month, so switching to more lucrative tourist use or upmarket tenants when possible is very attractive to their owners, and it will happen.

In terms of a timeline, the only real difference between the SOMA and Tenderloin SRO housing markets is, at most, one business cycle. The current city economic boom is now invading all of Soma. The next one will finish the job and invade the Tenderloin. The one after that will finish that job in the Tenderloin. These cycles span about 15 years each, and the more valuable standard apartment buildings will turn over faster than the SROs. So by mid-21st Century, even the core Tenderloin neighborhood will have gentrified thanks to the market forces of America’s capitalism.

But it may not take that long. There is a greater than 50% probability of a very large earthquake in the central Bay Area in the next 30 years. Exactly when, how strong, and where is unknown, but it’s certainly coming. It could happen tomorrow. Even if there is not a great conflagration in the Central City, well over half of the larger pre-WWII buildings here – most of Tenderloin – will likely be damaged beyond repair. The seismic code retrofits now required by the city are intended to prevent their catastrophic collapse and loss of life, but not to ensure that they can brought back into useable condition afterward.

And the hard truth is no one has any idea what to do when this happens. Many thousands of city housing units will be irretrievably lost in mere seconds, especially in the Tenderloin and Chinatown, and much of Soma. Before Governor Brown blindly killed all redevelopment programs statewide five years ago, the city could at least have quickly approved a massive earthquake recovery redevelopment program to condemn and buy the ruined buildings and immediately start building new affordable replacement housing on their sites with Federal disaster aid. But now we have no tools at all.

I guess we just have to hope LA gets hit first.

 

 

  • Andy M

    This is a really good post. I hope that 48Hills has this writer contribute more often. He raises some excellent points and questions about what could happen in the TL in the future.

  • Cynthia

    Of course it will. The only question is how long it will take, and exactly the shape of the actions that will be taken to push out the current residents.

  • Elberling correctly identifies the cause of gentrification in San Francisco and the Tenderloin as “the market forces of America’s capitalism.”

    Those fighting gentrification need to take this to heart. The problem of gentrification can not be reduced to the machinations of politicians like Mayor Edwin Lee, or even individual corporate criminals like Ron Conway. The problem is a system based on producing housing for profit rather than for people. Progressive politicians and leaders can slow down the process of gentrification, but they can’t stop it. If we really want affordable housing for everyone, then we need to fundamentally alter the economic system in which we find ourselves trapped.

    This is, of course, obvious to anyone with their eyes open. But it bears repeating, over and over again, because so many well-meaning people put it out of their mind and try to live in a fantasy world about what is coming down the pike. I am glad Elberling made the point.

    • Andy M

      There are lots of places in the US where housing is affordable and produced by the for-profit model. This isn’t true in San Francisco because we have a chronic under supply

      • What the places in the US with “affordable” housing have is a chronic under supply of decent jobs.

        • Andy M

          I don’t know what you mean by “decent jobs,” but folks in Nashua, NH (where I grew up), Minneapolis, Phoenix, basically every city in Texas, Denver, Las Vegas, Atlanta, Nashville, Pittsburgh, Chicago, Salt Lake City, Des Moines, Fargo, etc. seem to be able to employ their citizens and keep the cost of living low.

          Given the cost of living, jobs here in the Bay Area are terrible. Even very well-paid professionals can barely afford to live.

          Don’t get me wrong, though, I don’t think San Francisco should only be accessible to the wealthy. Solving the affordable housing problem doesn’t require up-ending capitalism. It’s just that California absolutely did not take the steps necessary to do that.

          • Kim Ann

            I moved to the Bay Area from Arizona. Your assumptions are very, very wrong. People in Arizona have a lower cost of living, but they also have low wages and few jobs. Most job “creation” focuses on the service industry and call centers. It’s the primary reason I came here. The struggle is just as real there, but housing is more available because developers can and do destroy surrounding desert ecosystems to build housing.

    • RR592

      Marc, while you and Elberling may be correct that the local situation should be seen in the much broader context of capitalism and global economic forceds there is realistically nothing that can be done about either.

      So to focus on “thinking globally” and trying to bring about international socialism, no matter how desirable that might be, can lead to not “acting locally” which, realistically, is all we can hope to achieve.

  • Great article except nobody ever mentions the large Southeast Asian community that’s been the most impacted by non-profits and luxury conversions. This link will give you an idea of the concentrated poverty in the TL: https://drive.google.com/file/d/0ByCmEDgJmKyZNFcxOHd1LTRlM2s/view?usp=sharing. The document says that 90% those who are recently homeless, people w/ behavioral health diagnoses, and other vulnerable populations are placed in the TL, nowhere else. This level of concentrated poverty is disastrous to children, let alone vulnerable adults. The chemically addicted and mentally ill are easily preyed upon by drug dealers. The DEA estimates the TL underground drug industry to be around $400 million. This is also the neighborhood w/ the greatest # of children, btw. The SEA population was estimated to be around 20,000 w/ over 700 businesses. To learn more about the TL history and cost of housing, read these documents: https://archive.org/details/finalreporttende1992nort and http://www.sfbos.org/Modules/ShowDocument.aspx?documentid=51064.

  • Tom Charles

    “Existing apartment buildings on ‘lower Nob Hill’…are seeing huge jumps in their market rents and frequent landlord pressure to force rent-controlled tenants to move out (including an employee of my company, TODCO).”

    Maybe TODCO should pay its employees more rather than expect landlords to subsidize TODCO’s employees’ housing costs.

    • FLOlmsted

      And maybe landlords should stop asking for obscene profits on their properties. Their taxes and expenses haven’t gone up 30% in the last 3 years, why should their asking rates?

      • RR592

        Come on, you know how capitalism works. You ask for the most you think you can get. You don’t just looks at your costs and “add 10%”.

        If someone bites then your asking rent was correct. If the place sticks then you either lower the asking or accept a long vacancy

        • FLOlmsted

          Excellent argument for why capitalism is a fatally flawed economic system, especially in regards to anything to do with basic welfare (food, clothing, shelter, healthcare, etc).

          Good thing we don’t live in a totally capitalist country. Now, to expand regulations and protections!

  • Tom Charles

    “There is no major retail shopping street or strong retail base to support new market-rate housing populations in general.”

    “Market-rate” is by definition the highest rate the market will bear. Just because there isn’t good retail there, doesn’t mean that market rate for that area won’t be charged, even if it is lower than Noe Valley or other fancy neighborhoods.

  • FLOlmsted

    Tangential question – what the hell is going on with retail in SF? How many boutiques do we need selling variations on the same black, grey, and beige clothing and Portlandia-style knickknacks? I kind of wonder if we’ve already hit that point, with so many vacant storefronts all around the city (I do realize insane asking rents are to blame for a lot of that).

    But seriously, how long has NEMA been open, and all of the retail spots are vacant? What about Venn up Market towards Duboce? Only thing there is a seasonal H&R Block out of a dozen retail slots. It took 8 Octavia maybe 2.5 years to fill their retail spot. I was just telling someone about the retail in Trinity and the new shopping mall on market (Market Street Place), and she asked ‘who’s moving in there? SF already has nearly every major retailer represented!’

  • auweia

    this is a great post and includes a point I’ve been trying to tell people for years about the city contracts Randy Shaw has with his master leased SRO’s. Those contracts have to be renewed every 5 years. I remember my SRO – The Seneca was bought by the patels in 1996 for 4 million and 15 years of THC contracts at 1 million per year they could have bought the building 4 times over. So now the city is stuck with 1 million per year contract for the Seneca alone and if they don’t renew the contract then all of the contract residents might get evicted, because ironically the city contract also no longer has rent control for all those tenants

    That was a very good point that goes mostly ignored and people are shocked to find that out, which shows a huge difference between non profits like Todco and TNDC which actually own the buildings they run. In Randy Shaw case, the vulnerable people he’s housing are just as vulnerable as they ever were

  • AlbertoRogers

    Those who ignore history are doomed to repeat it. The Tenderloin was built for, and for much of its history occupied by, the gentry. It was at one time the highest cost housing west of the Mississippi today it is SROs. The single biggest source of affordable housing is aging market rate housing, not housing built by affordable developers. The more we protest stop market rate housing the bigger problem we pass on to our kids as there are fewer and fewer aging market rate units becoming affordable.

  • sugarntasty

    Willing to fight, ask Rodney Fong and Cindy Wu of planning depts. why sudden rezoning of
    Tenderloin expansion. REITS controlled by “NAIOP and BOMA. S.F I read spoken to fellow advocates those of gentrified policies. Essential criticism 30% going exclusively…micro housing
    developments supported by Ed,London and Scott rest for profits. Zoned R-3 height density according fees only problem “developer” refuse to include “BMR” units community lesser. Than
    150 why profits we must without fuss attend planning meetings if not going approved “Mid-Market” lose corporate majority foreign REITS I persist fight. Affluent controlled Ed and city hall where shall residence majority living SRO and THU dwellings reside? Ed doesn’t have answer not concern, haven’t you learn Ed Lee administration is charade only affluent new Hong Kong,Osaka,Shenzen and London. Demand developers finance low income housing communities Tenderloin or buldings not approved criticism Ed and Rodney Fong allowed. Developers to build anywhere city use Tenderloin as example contributing to “BMR” housing. 75 Howard St ideal REIT Using Ed, friends Ellis Act TNDC presented 1400 Mission formerly all “BMR” for sale until we lobbied! Paramount LLC concur with stipulations “BMR” inclusion of units. Going build lesser amount of Eddy and Taylor located Tenderloin originally 153 units could gotten MODHC fund why not Ed? Instead more evictions high rises for affluent what about 425 Manson former Water Dept of S.F. Now hotel or possible condo, affordable housing forgotten suggested 425 Mason turn into Micro housing? Charade being paid by fools looking opposite once again Ed gotten caught in lies nice try problem. Attitude whom chosen to retain housing “BMR” units those losing residency ineligible immediate housing contradiction of Ellis act policies Ed! Using homeless groups and disable as “game” whom remain lame or tamed to accepted Ed policies of fair housing. Aware H-REITS exempted from “BMR” inclusion look for
    Mission Bay and Financial district called San Franhattan ratio of global banks. Ed going support
    5 M development what those immediate area. Battle appeasing NAIOP if can’t approved for
    San Francisco taking to L.A whom going have large. Ratio of gentrified buildings with Long Beach odd, mayors all Democrats along governor where. Respect of working class Ed did you say anything worth merit refuse disclose policies. Proven your dishonest fair housing San Francisco where losing sq ft daily turning away for resolutions. Mr.30,000 units before 2020!

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