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Thursday, October 28, 2021

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UncategorizedShow us the money

Show us the money

Or rather, developers should show us how much they’re going to make on a  project — and then we can talk about fair affordable housing and community benefits

Maximus will make a lot of money at 16th and Mission. But how much is enough?
Maximus will make a lot of money at 16th and Mission. But how much is enough?

 

By Tim Redmond

MARCH 19, 2015 — There’s a little-known provision of the San Francisco Sunshine ordinance — written back in the days when big developers were constantly asking the city for tax breaks, free land, or other handouts – that says those goodies have to come with a price.

Here’s the language of Section 67.32:

The city shall give no subsidy in money, tax abatements, land, or services to any private entity unless that private entity agrees in writing to provide the city with financial projections (including profit and loss figures), and annual audited financial statements for the project thereafter, for the project upon which the subsidy is based and all such projections and financial statements shall be public records that must be disclosed.

In other words, if you say you can’t make a project work without public subsidy, we want to see the numbers.

We probably could have raised the issue during the Twitter Tax Break discussions, but it would have been tricky: The mid-market tax abatement wasn’t for a specific project. And these days, what developers tend to ask for – which we (foolishly, in hindsight) didn’t put in the law – is favorable zoning.

Now what we get is demands for special height-limit exemptions, greater density, changes of use – the sorts of things that are often far more valuable than cash subsidies. I’m not a lawyer, and nobody has argued, as far as I know, that Section 67.32 ought to apply to spot zoning or other special land-use treatment (including change-of-use designations). Maybe that’s a legal case to be made.

But there’s a larger public-policy case to be made for this piece of San Francisco statute, and it comes into play with projects like the 16th and Mission development.

Maximus LLC, which wants to build 330 housing units next to the BART Plaza, has offered a series of community amenities – which the community has pretty resoundingly rejected.

The developer, of course, wants to turn a profit, this being a capitalist world. And Maximus representatives have made it clear that an alternative with 100 percent affordable housing doesn’t work financially.

Why not? What would it cost? What would, say, 50 percent affordable cost? What about 60 percent, which the city’s General Plan says ought to be the standard? How much has Maximus invested? What’s the expected return? At what price could the city, the San Francisco Land Trust, or a coalition of community-based housing organizations buy the land?

(This isn’t a crazy idea. In fact, it’s not crazy to suggest that the city and the CBOs start buying options on every piece of property in the Mission. An option doesn’t mean you have to buy the place; it means the owner can’t sell it without offering it to you first. Options are relatively cheap. Some places would make sense for nonprofits or the city to buy; this might be one of them.)

But again: What are the numbers? Truth is, we don’t know.

When a Maximus official was asked at the community forum to tell us about the figures – particularly, what the investors were demanding as a minimum return – he refused.

The Sunshine Ordinance doesn’t apply here. Maximus is using existing zoning, pushing a project that fits with the Eastern Neighborhoods Plan, which encourages housing near transit. I don’t think the ENP seriously considered the impact that luxury apartments would have on nearly property values, and thus on displacement, but whatever: That’s the current zoning.

But I don’t think this project is going to get approved in its current form. Sup. David Campos is pursuing a moratorium on new development in the Mission, and now that Scott Wiener has set something of a precedent for neighborhood housing controls (although he says the two approaches are totally different) there’s a good chance Campos can get six votes. That would halt the project in its tracks.

At the very least, Maximus is going to have to offer a lot more affordable housing – and every time a developer says that affordable housing doesn’t pencil out, or resists calls for community benefits, why doesn’t the city say:

Show us the numbers?

We know that high-end housing is staggeringly profitable; that’s why so much international capital is going into luxury condos in San Francisco. Let’s just take one example, offered by the Chron’s J.K. Dineen:

Millennium Partners is preparing to break ground in July on a $500 million condominium tower at Third and Mission streets, a project that could shatter records for the most expensive units ever in San Francisco.

Dineen, who knows the inside of the local real estate market as well as most real estate experts, says that the average sale will price out at more than $2,000 a square foot, meaning that the 190 condos will average $5.4 million.

I can do that math: That would mean $1.02 billion in sales.

Or: The developer invests $500 million and clears $500 million. Not a bad ROI. The city’s pension fund is trying to get above five percent in the stock market, which would make many investors happy these days. Most local businesses would die for a 15 percent profit. And building condos gets you 100 percent.

Would the project still “pencil out” if the developer had to spend another $200 million on affordable housing? Gee, I don’t know: Invest $500 and get back $800, in about 18 months? I suspect that some lenders might go for that.

But all of this is kept so secretive that the city never has the chance to ask the tough questions.

I can tell you this, from many years of watching these sorts of projects: The developer never, ever, comes to the table with a final offer. Never has anyone folded the tent and left after the city upped its demands. Which just shows how much money can be made in San Francisco real estate development.

And it shows that the city isn’t getting its share of the riches. Not even close.

 

Tim Redmond
Tim Redmond has been a political and investigative reporter in San Francisco for more than 30 years. He spent much of that time as executive editor of the Bay Guardian. He is the founder of 48hills.
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94 COMMENTS

  1. Thank you for bringing forth the idea that the City and other non-profit groups could become developers of wage-based housing. It is the most promising idea to generate wage-based housing in San Francisco. The City and/or a coalition of partners could build on land already owned by the City or some other government entity and take out loans (at today’s historically low rates) to construct units. They could be rented out as wage-based housing (based on a quarter of people’s actual wages) and the loans could be paid off. The housing stock would exist forever as a public asset. The City and other non-profits could also try to pursue partnerships with developers where a developer would assume a certain percentage of units built and the City and/or its non-profit partners would assume the other percentage. The City and/or its non-profit partners have lower expenses because they are not trying to generate a profit, they have no need to market their product, the permitting process is streamlined, and they have a ready population in need of wage-based housing. I also want to suggest we need to rethink the term market based housing and below market rate housing as in San Francisco, market rate is equivalent to the market for the global elite and not really the market for wage-earning, local Bay Area citizens like teachers, doctors, small business owners, professors, nurses, etc. I like the term wage-based housing because it accurately suggests that people are working, professionals but because of our current economic system, they can’t compete in the market place of the global elite because public sector and wage-based salaries have not kept pace with salaries in finance and technology.

  2. Unfortunately that is a very subjective view with a rather grandiose assumption drawing it’s own conclusion yet with doubts.

  3. Actually, the settlement of Yerba Buena was here while the colonists were still fighting the British for “independence (“we” won the battle but lost the war. Ditto the Civil War). Then this was Mexico (still is, no matter how much we pretend otherwise). This became “San Francisco” only after the southwestern parts of this country were stolen after the Mexican-American war. And The City was never congested until the Redevelopment Agency decided it should look like a hybrid NYC/LA . This was accelerated by the policies of Feinstein and The Brown Brothers, and is continued by the policies of various elected and un-elected entities. Both sprawl or congestion are planned; neither is necessary.

  4. If you believe only 0.1% are uncounted, I have a bridge to sell you; the Willie Brown Bridge; a shining example of the manipulation of statistics. The point is that there are thousands of people who are not counted no matter WHAT methodology is used.

    And who among the aforementioned public officials, or among the grifters and speculators is “trying to make more housing affordable?”

  5. I didn’t ask about sampling errors. I asked about the benchmark. If you don’t know what that is, just say so instead of ducking.

    But thanks for admitting that ACS isn’t helpful for solving our housing issues

  6. Is there ever TOO much towards a sense of entitlement that people expect in SF these days?

    Why do people have to pay to subsidize other people’s lifestyle choices?

  7. The world is a big, big place. There is lots of room out there for people who hate other people.

    None of that room is contained within cities, of course.

    San Francisco has been a city since about 1880.

  8. Thing is, if the methodology is broken, the results are meaningless, just like the assertion that ‘[t]hey didn’t count these.’ The Asian Law Caucus probably knows a lot about the law, but they appear to know little or nothing about surveys and statistics.

    If the Census does not count 0.1% of the people living in the city, what exactly is the problem? Some of those 0.1% will have been homeless, sure. What is the evidence that more of them were not the idle wealthy whom the Census similarly could not turn up?

    Anyone who tries to make housing more affordable is thinking about the homeless, whether or not that particular magical phrase passes his or her lips.

  9. Not everyone wants to live in a termite mound, so please respect others who wish to have a little space. However, I think a toll on autos is a great idea.
    Along with aggressive enforcement of existing laws by ticketing people who double-park and enter intersections on yellow or block crosswalks or sidewalks. $Millions$ more per year for public transit.

  10. You can argue about methodology all you want; the “fact” is there are thousands of people that are not counted, and that are living in illegal units. And I too can find articles on homelessness on Google. By “no one,” I was referring to our Mayor, the BOS, our State and Federal representatives, and the conversations on this discussion board.

  11. Most of the new building in town is going in around where I live, and I’m thrilled.

    The best way to reduce auto traffic in SF by 50% would be a nice, steep toll. $50 a day to drive in the city, say.

    Let’s do it!

  12. Sampling errors are handled on pages 20-22.

    Nobody has asserted the ACS will somehow solve anything. What is the utility of pretending someone has? It’s the best data available, though. To argue it isn’t is to assume the burden of proof.

  13. Whatever. And you “believe” a homeless count of four neighborhoods and that itself claims to be an “estimate” is “scientifically” accurate? Anyways, we should be building housing for the homeless and people living in illegal and sub-standard units. There are plenty of “market-rate” units available for anyone that can afford them.

  14. Pension funds that invest in real estate invest directly, usually through intermediary managers. Banks tend to do the lending.

    When pension funds want to lend money, they buy bonds, also usually through intermediary vehicles.

  15. Where in your cite is my benmark question specifically answered? It’s nowhere that I can see.

    I didn’t ask you whether the alleged housing crisis is real or not. I asked you how the ACS data will solve it, assuming that it is real.

    My two questions stand unanswered.

  16. Right, the most likely facts are the obvious ones. It’s obvious that a non-random sample taken at bus stops, libraries and service agencies will in no way be representative of the neighborhood as a whole. It is disappointing that the Asian Law Caucus did not involve any survey scientists. The city could use a real survey.

    There are probably 20,000 illegal units in the city. David Chiu is on record with an estimate topping out at 40,000, but that seems unlikely. There are probably fewer than 10,000 ‘uncounted people’ here. The Census does a very good job, at least when government shutdowns don’t interfere with their ability to follow up.

    The city counts the homeless every other year. The last count was early this year: http://sfgov.org/lhcb/event/2015-san-francisco-point-time-homeless-count

  17. No, here’s a tip: when it comes to choices between the “official story,” personal experience, and common sense, the most likely “facts” are the obvious ones.

  18. Even if I were to accept your premise that every survey is 100% accurate and complete, I am not sure how that will help you solve SF’s alleged housing shortage. Can you explain in detail?

    And answer my other question – what is the benchmark by which the accuracy of ACS can be assessed? It appears that you cannot answer except by some vague reference to alleged “expertise”.

    I await the answer to those two questions

  19. Yes, really. How have statisticians so snowed the world that companies commission market research, that politicians commission polls and that the government runs survey (unemployment) after survey (ACS) — but there is a heretofore undiscovered weakness that renders it all useless?

    A nice, clear explanation would be welcome.

  20. That’s from http://www.advancingjustice-alc.org/sites/asian-law-caucus/files/Report%20Excelsior%20in-law%20units%20final_0.pdf

    That study’s methodology is, to put it kindly, broken. They need a real survey scientist. You know, like works at the Census.

    Here is a tip: when a thesis involves the idea that career civil servants who gather data for a living are doing such a bad job that someone with no statistical training can discover 70% tenancies in an area described as 70% owner-occupied..

    ..bet all the money you have on the civil servants.

  21. Yeah, then we can fill in the Panhandle! Way too much open space in this town, and who needs a “panhandle,” anyway”? Imagine the views from Mt.’s Davidson and Sutro! And what you could charge for a condo at Ocean Beach! Though in all seriousness, I wouldn’t mind seeing the “zoological gardens” replaced by BMR housing; lots of it.

  22. I think most of those ideas are great! We absolutely need to extend the Central Subway into The Marina and upzone along the entire length. Noe could use some high rises too: if Pac Heights can have them, so can Noe Valley. I would even put some high rises on The Presidio, though I know the rich people who live near there would never go for it. It is crazy we built jobs in the Park and no new housing.

  23. OK, I’ve changed my mind. How about a row of condo towers on Marina Blvd.? Maybe a minimum height limit of 20 stories. They will look great at night from Sausalito, Belvedere, and Tiburon. Transit? We’ll just extend the Central Subway down to Ft. Mason and the Presidio. The Marina Safeway could use a little more diversity besides that one clerk. Maybe we can build some towers on top of Twin Peaks.You should be able to see these buildings from space. Add some spurs from the Forest Hill station and viola! Transit problem solved. Let’s see, where else? I know! Noe Valley! Tear down a bunch of those “quaint” little Victorians like they did in the Fillmore, and replace them with zarooney-plexes. Add a BRT line if necessary. That neighborhood could definitely use more traffic, noise, and pollution. And dogs. Where else? How about Bernal Heights…..

  24. Except they aren’t going to influence dick. This project will move forward as it’s much needed, despite the whining of these assholes.

  25. Low borrowing rates can increase risk because it becomes possible to borrow more, and that can rebound if the market turns south.

  26. A small rabble of “usual suspect” activists has little bearing on what the silent majority thinks.

    That is why Ed Lee has consistently high approval ratings even though the noise in all these fringe meetings is against him.

  27. Where is the demonstrable risk in a basically zero interest money market?

    Unless they build total shitboxes that no one would want to buy or live in they are getting a 100% taxpayer financed sweet deal.

    There is so much liquid cash from China looking to invest in the “distressed” bay area locations in exchange for green cards that risk is mitigated to losses you can’t comprehend.

  28. No, no no.

    You are a bad investor and have poorly articulated and unfounded opinion that are contrary to the market as a whole.

    Your particular investment strategy has put you in this place. You cannot blame anyone else.

    We are currently,in point of fact, in the lowest risk, lowest interest rate market for borrowing money to invest in developments that has ever existed.

    You are not part of that.

  29. Dear lord that’s bad math on everyone’s behalf. Your understanding of risk and risk mitigation is poor. I’d love to see the figures you’ve seen because I enjoy fantasy investment returns as much as the next ponzi scheme holder.

    Developers borrow money

    Pension funds lend money

  30. Investors come in many shades – some good, some bad.

    Your credibility and calibre as an investor might be more believable if you weren’t demonstrably exhibiting all the characteristics and pettiness of a very green, unqualified and unattractive investor: the type that would withdraw an investment were the market to flex.

    Your derived self-importance in this equation is classic grandiose and delusion that would red flag you in any investment scenario bar the most exploitative.

    PS I might have a bridge to sell you but it is literally in your back yard.

  31. Shocking as it may seem these days; an in-person vocal minority can still influence and achieve a lot more than a “commented-on-their-phones” majority when it comes to city politics.

  32. You sound as if you didn’t hear a word I said. You also sound as if you are repeating a developers mantra word for word. I’m willing to bet your neighbors don’t want any more congestion in Noe Valley; like you they want it in someone else’s neighborhood. You can’t even BREATHE in Tokyo. Paris is great; if you’re French. And you build the infrastructure FIRST. I can’t get on the train TODAY. How long do I have to wait?

  33. People have to live somewhere, your desire for more open space and less density means more sprawl, more freeways, more pollution and longer commute times.

    Cities can have very high density and still have a very good quality of life. Go visit Tokyo if you don’t believe me. Paris is great and 3X the density of San Francisco. With sufficient investment in infrastructure, the kind that high density allows, there will be plenty of room on the train.

  34. You are asking me why someone who makes a living from X doesn’t openly criticize the flaws with X?

    Really?

    If ACS is the benchmark, then who benchmarks the benchmark?

  35. That does sound like an attack on all statistical sampling and all surveys.

    How is it that no practitioner of survey statistics has identified this weakness?

  36. I’m not trying to force anyone to do anything, it’s the “planners” and real-estate speculators that are forcing people to make the choice between 4-hour commutes and living in an overpriced cracker-box. The “suburbs” could become sustainable communities; fiber-optic networks (the information highway) should have replaced freeways years ago, especially in the Bay Area. And neighborhoods should remain livable; indeed become MORE livable by INCREASING the amount of open space. Crowing thousands of people into this or any other city will definitely have a negative effect on everyones quality of life; the aforementioned pollution, noise, expense, and danger from accident, crime, or disease. And you still won’t be able to get on the 14 Mission or N-Judah or BART…..

  37. By definition, ACS cannot measure its own accuracy because ACS is the baseline standard by which everyone else judges their accuracy.

    How do they know who they have not counted? Not by trying to count them, obviously.

    But this is just academic. You know that right?

  38. So you are instead going to force more people into the exurbs and onto the already crowded Bay Bridge? People have to live somewhere, your option is the environmentally worst one possible.

  39. The 2013 ACS San Francisco unit count of 380,000 was accurate to +/- 0.3%. Either the ACS is accurate, or the word accurate does not include a number accurate to three tenths of one percent.

    Which is it?

  40. Depends how much money you want to spend and how invasive the survey is.

    My point right now is that nothing we have done has led to a number that is accurate.

    Whether that matters is another thing. Personally I don’t think it matters.

  41. Is this an argument that the science underlying sampling and surveys is flawed? If so, please explain. How is the science underlying surveys so broken that nobody can count units?

  42. Probably nobody, wcw.

    The city has no idea how many illegal units there are in the city.

    Nor how many people live in them.

    Some things we know; other things, we guess or speculate.

  43. So YOUR facts are the ones we should believe?
    #1 – This is not Europe. And I wouldn’t want to live in the most crowded places there, either.
    #2. Vacancy rate, schmacancy rate; anyone that can afford an overpriced cracker-box can get one.
    #2a. The Census? You mean that thing that nobody, especially absentee landlords or “guests” fills out?
    Figures don’t lie, but liars can figure.

  44. Gee, have you ever heard of negotiations? A good capitalist understands that one always asks for more than one wants and negotiates down to what they really want.

  45. “Your question is circular, because you are defining “well managed” as avoiding the loss of money.”

    No, it is not. I was responding to a comment that implied that there is risk to the investment because ‘some protestors demand that they build 100% affordable.’

    And I was asking for data for all developments that are well managed (meaning that those that are badly managed may have lost money, but that isn’t due to government, protesters, NIMBYs or market forces).

    My statement that most risk is due to market fluctuations was not “casually” mentioned.

  46. “The community” hasn’t rejected anything, Tim. A vocal minority showed up at the neighborhood outreach, stamped their feet and threw a tantrum over a ridiculous set of demands. I know you’re biased here, but come on.

  47. Tim is also wrong in trying to compare Campos’ regressive ban on new homes with Wiener’s recent legislation for Corona Heights.

    The latter is not a ban at all, nor even anti-development. In fact there is a huge amount of new build going on in Wiener’s district, particularly along and around Market Street.

    Wiener’s new law simply imposes a mandatory CU on any development over a certain size.

  48. Funny thing, state law mandates housing goals:
    http://www.hcd.ca.gov/hpd/hrc/plan/he/

    Currently this doesn’t work. Proposing more of the same without explaining what would change may not be quite as dishonest as citing 1950 as an endpoint, but it’s getting there.

    All pension funds are bound by ERISA. Investing in 100% affordable housing is a money loser, hence illegal. Proposing something illegal without explaining what must change is even more dishonest than selective use of endpoints.

    These articles look worse the more closely they’re read. They’re right about some things, but so wrong, dishonest and misleading about everything else that they’re useless, and that’s being kind.

  49. #1. Density is desirable if YOU don’t have to try and get on the N Judah at rush hour. Density is a function of economic activity, poor planning, and intransigence, and benefits both for and non-profit corporations, not communities of humans. Density is by definition noisy, dirty, expensive, unsightly, and unsafe. Like NYC, and the “dense” parts of the Brooklyn, Queens, and the Bronx.

    #2. There are plenty of uniq available. They are either unaffordable for the average person/family, or not on the market because of AirB&B and other sublet scams.

    #3. The solution to the problem is that housing should be built first for the people that NEED it, then for those who WANT it. Profit margins should have no bearing on an individuals human right to housing. If the “free-market” can’t provide the services needed by the community, it’s “governments” job to either make them do it, or provide an alternative.

    As for the second article, these were the actual conclusions:

    “There is a tremendous amount of capital running through San Francisco’s economy that can be captured and put to use for affordable housing. We need to partner with businesses especially Tech to create a Workforce Housing Equity Fund;

    SF needs to partner with unions to invest pension funds in affordable housing;

    The City needs to use its Public Lands for 100% affordable housing for 0 – 120% AMI.

    The recent offer by Oakland’s Mayor was generous, but SF should work with the Governor and surrounding Bay Area governments to create a Regional Housing body like our Bay Area Air Quality Management District that treats affordable housing as a regional issue where every jurisdiction is held accountable by the State to actually meet its Housing Element goals.”

  50. Tim, why is it that Campos complains about people criticising his proposed moritorium when he hasn’t drafted it yet, but it is ok to tout it as a great thing when he hasn’t drafted it yet? Doesn’t he want his cake and want to eat it, too? And really? 100% affordable? Isn’t that just a huge eff you to middle class people in SF who are being priced out? Why no love/concern for us? Lastly, I hope your vote counting on the proposed moritorium is as accurrate as your vote counting was on election night (collar tug).

  51. Man, those articles are all kinds of wrong. In the first:
    #1, density is desirable; the benefits of cities should be shared broadly, and density is immensely preferable to sprawl. New York City is not particularly dense; it includes Queens and the Bronx, too.
    #2, household composition changed radically over this period. San Francisco has by far the lowest percentage under 18 in the country.
    #3, medians measure sales mix, not price. ‘Affordable housing’ makes things worse for everyone who does not receive it.

    The second article is not as wrong, but its conclusion is. Rents after inflation came down from 2002-2006 — when population loss and development led to an oversupply of housing units.

    http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=14Jl

    This map shows what is actually going on:

    mappingregionalchange.ucdavis.edu/sites/default/files/bayarea.PNG

  52. Ok I’ll do that when you show me one well managed retirement fund that lost money… Are you seriously saying that the Plaza 16 demands for 1970 Mission would allow Maximus to make money? Have you read them? That project isn’t even asking for a variance.

  53. Your question is circular, because you are defining “well managed” as avoiding the loss of money.

    Plenty of developments failed in the 2007-2009 real estate bust because of market conditions and not because of the demerits of the developments themselves. The “market fluctuation” risk that you casually risk is in fact enormous, especially since developments have to be leveraged by borrowed money to make them fiscally viable.

  54. Characterizing someone’s position as NIMBYism is no more name-calling than describing someone as being liberal or conservative. There is an element within the progressive movement in SF who think we should be building no market-rate homes, and NIMBYism is the correct term to use for them, because they typically do advocate building more homes in the city’s suburbs.

    And stating the golden rule, that he who has the gold makes the rules, should not provoke you or anyone into name-calling. It’s simply reality – the city needs outside investors, which is why cities, states and nations all try and attract investor dollars.

  55. Really? Please give us examples of major developments that were managed well but lost money. And if they exist, please provide us with the percent of all well-managed major developments that lost money. The only major risk is market fluctuation.

  56. Capping profits is what we do with regulated utilities. It is possible that a utility approach to homebuilding is a good idea here. Unfortunately, the SFHA is quite possibly the single worst public housing agency of any medium or large city in the US.

  57. Also on a 10 year timeframe, its not really that big of an ROI. Stock market returns for 10 years are comparable.

  58. How many years do they have to tie up that capital to get a 100% ROI? The annual ROI would be quite a bit less, especially when you get into the 10 year time frames it takes to get a project done here. What is the risk that they will pay a ton of money for a property and then have some protestors demand that they build 100% affordable or just turn over the property to them for free (plaza 16 style)? Risky investments get a premium.

  59. 16th & Mission is a filthy, disgusting dump of drugs, prostitution, and shady-looking people who live in the nearby SRO hotels. Gentrify that corner to the max and get the riff-raff out, once and for all.

  60. Stop with the name calling. I am not a NIMBY. I have advocated for increasing the population of SF to 1.5 million through well-planned development, not the episodic variance development we have now.

    Your last sentence is revealing. I can’t comment further as it would be seen as name calling.

  61. Building somewhere else is exactly what developers will do if you increase their costs without compensation. Now, you probably don’t care if nothing gets built because you’re a NIMBY. But if the city builds no new market-rate homes, then there will be no affordable housing funds generated from that, and we will have less BMR homes as well as less market-rate homes.

    In other words it will just be more of what we already have – high costs and barriers to build, which of course is why we have a housing affordability problem in the first place.

    As an investor, I really don’t care where I build as long as I make my numbers. The reality is that the city needs me more than I need the city

  62. Nope. Developers extract so many benefits from the city – if they want to build, under a profit cap, they know in advance what the max profit will be. But they assume all the risk.

    If you don’t like it, build someplace else.

  63. The quid pro quo for “capping profits” would surely be for the city to “cap losses” if the BMR housing is set above a certain level.

    In other words, the city would step in and bail out the completion of the project if the developer goes bankrupt on the deal

    Sounds fair to me.

  64. Your math is wrong. You compare a development making a 50% profit with the 5% returns the SF pension fund tries to get. But that 5% figure is annual, whereas the 50% figure is over the duration of the project.

    And that duration isn’t the 18 months you claimed. It can take a decade to build a major project from conception to sale, mostly because of all the regulations and obstacles that you support. And that puts the ROI right back at 5% a year. And that involves a lot of risk.

    The figures I’ve seen indicate that a large development pencils out at about one third land and upfront costs, one third construction and one third profit. A 30-35% profit over a number of years seems quite modest to me.

  65. That’s not what Egan said in 2012; he speculated that it would take 100,000 new units to have the same effect as giving $4 billion in down-payment assistance to lower income households.

    Moreover, he was wrong. A significant building program would help everyone, a large transfer program would hurt everyone but recipients and property owners. Adding units makes the whole market more affordable. Adding significant demand via grants to an undersupplied market does the opposite.

    Estimate the unit deficit by assuming 2.3-person households. The city added 80-90,000 people since 2007, but per Planning built only 20,000 new units through 2014Q3. The unit deficit is around 20,000, give or take.

  66. Interesting take on the Sunshine ordinance that should be used when appropriate.

    I think the next logical step would be to cap profits by condition of permit. I believe that the synergistic effect of doing that would benefit San Francisco and change the dynamic from development of luxury condos to condos for the middle class.

  67. If you know anything about the RE development business, you should know that it has extreme ups and downs. Any given developer or investor will have projects/years/cycles where they make bank and projects/years/cycles where they lose their ass. The city already extracts significant concessions from developers for a variety of city services, including low income housing. You can’t just point to a temporally strong market and ask for a lot more without understanding and considering the downsides. If you succeed, you’ll just suppress future new developments, making existing housing more expensive.

    You guys consistently miss the bigger picture: SF is a very desirable city, and people with means will continue to seek housing here. The moratoriums, restrictions and protests only distort the market further to the privileged: 1- those with enough money, and 2- those privileged by government intervention (rent control, BMR, housing subsidies, etc.) Either way, you cannot provide for the common man. Commoners are taking care of themselves and exploring Oakland and other affordable nearby communities.

  68. San Francisco has a deficit of 100,000 units. http://www.sfexaminer.com/sanfrancisco/leveling-sf-housing-field-could-take-100000-new-units/Content?oid=2703869 That deficit has lead us to the crisis that we’re now in that has turned every single unit in sf into a luxury unit except those few recently constructed BMR units SF has extracted from developers on recent construction. For every market rate unit we don’t build we place an equal number of existing units beyond the reach not just of the poor or working class, but out of many middle class folks too.

    By playing this kind of phony game of NIMBY’ism under the veiled concern of displacement, progressives are making matters worse and threatening a broad based backlash against progressive policies and not-for-profit organizations across the city.

    It’s absolutely an abrogation of responsibility by progressives to push these sorts of anti-developer initiatives in the middle of a crises caused by lack of development. It’s crippling our economy and seriously undermining our ability to provide services fol our citizens, particularly the poor and at risk. http://www.nasdaq.com/article/californias-housing-costs-hurt-economy-increase-poverty-report-finds-20150317-01055

  69. Asking developers how much they are going to make and then extracting the maximum number of BMR/P units is just going to get you more ultra-lux units. The higher the ticket charge, the higher the margins must be to cover. Why not simply tax luxury?

    If every truly lux unit costs a 10% tax, and every modest, dense unit gets you a 5% bump, things would change in a hurry — and you’d go further towards normalizing the market than by adding a handful more lottery winners to the BMR/P sweepstakes.

    If you want less of something, tax it. Right now, because BMR/P is per unit, it implicitly taxes small, low margin units and subsidizes luxury. Let’s repeat, because it is important: this approach subsidizes luxury at the expense of something more modest.

  70. Tim, one thing you discount in your consideration of returns is the element of risk. A new development can take up to a decade from inception to sale, and that involves a significant risk that the market will reverse and that there will be a total loss.

    That risk is amplified because of the leverage necessary to make these projects pencil out given the massive cost headwinds.

    So looking at returns without regard to risk is a totally unrealistic way of assessing such projects. Investors who take major risks with their capital in a politically over-sensitized location expect and demand out-sized returns to compensate for that.

  71. Perhaps you could tell us what you think should happen — do you support a moratorium? Do you support the 16th and Mission project? I am a bit confused.

  72. If only we had a District Supervisor with a clue and spine. The 800 pound elephant in the room that you _never_ acknowledge, Tim, is cowardly Campos.

    Show one damn tangible, written proposal from the dude since he returned from his vacation in Bali that addresses _any_ single Mission crisis. If you or any of Campos’ enablers — hello Andy Blue and the Plaza 16 Coalition — have links to his written proposals for solutions, share them.

    It’s seven weeks and counting since Campos opened his pie-hole about a moratorium. For Mission folks who say moratorium like the Jews used to say, next year, Jerusalem and the promised land, start demanding delivery of Campos’ draft language — if he has it.

    How many people have to be evicted and number of luxury condos erected and “community” meetings run by the same people saying stuff they’ve said a zillion times, with the same paid “organizers” from the nonprofit mafia getting their hooks into the agenda, have to take place before there finally is organized effort to get a plan from Campos?

    After attending the dysfunctional steering committee of Plaza 16 (Nonprofit) Coalition this afternoon, I see more of exactly why Maximus could easily win approval of its project at 16th and Mission.

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