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Saturday, October 23, 2021

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News + PoliticsFifth and Mission adds affordable housing -- but nowhere...

Fifth and Mission adds affordable housing — but nowhere near enough

Let’s take a look at the numbers — which show that even 33 percent on a big commercial project doesn’t mitigate the damage

Nice and pretty -- but this new development, like most big projects, doesn't even meet its own housing demands
Nice and pretty — but this new development, like most big projects, doesn’t even meet its own housing demands

By Tim Redmond

JUNE 17, 2015 – Now that Sup. Jane Kim has forced the Giants to accept a significant increase in the amount of affordable housing the team will provide at its Mission Rock development, the message is getting out: The level of below-market-rate housing the city currently requires is nowhere near enough.

So let’s take a look at the redesigned project for the buildings owned by Hearst Corporation at Fifth and Mission. According to the Chron’s J.K. Dineen, the developers

are beefing up their affordable housing and open space commitments in an effort to win approval in a political environment that is becoming increasingly demanding around issues of affordable housing.

First: that’s good news. The housing advocates – and yes, the advocates on the streets are driving this – have changed the political climate so that the typical 15 percent or so set-asides are not going to work anymore.

But it’s important in all of these proposals to put the amount of affordable housing in context. Commercial development creates a demand for housing; everyone agrees on that. In fact, market-rate housing creates a demand for housing.

The city wouldn’t be in the housing crisis it faces today if developers hadn’t been allowed to create millions of new square feet of office space (some of it without paying fees) that attracted thousands of new workers. (Peninsula cities share the blame; in fact, they allow office space and build no housing at all.)

Developers who just build office space are supposed to pay a fee to the city; right now it’s $24.03 a square foot. That’s based on a study that was done back in 1997 that analyzed how many new employees every square foot of space attracted.

Back then, office layouts gave most employees more space than they do today; the tech world likes open floor plans, which among other things tend to crowd in more people (fewer private officers, fewer cubicles).

So the number we use today is almost certainly too low, and the $24.03 doesn’t begin to cover the actual impact. For example, the Fifth and Mission project includes a 614,000 square foot office building. Based on the 1997 (conservative) study, that would generate a need for 307 affordable housing units.

The impact fee will total $14.01 million. Not even close, not nearly even close, to what’s needed to build that much housing. Not even enough to build 10 percent of the needed housing.

So the project starts with a huge housing deficit. Let’s do some math (sorry, but there’s a lot of math involved in this stuff) and see if the 33 percent affordable housing that the developer is promising will meet the city’s needs.

According to the Chron, the developer will build an 83-unit BMR senior complex, and contribute enough to pay for 71 units of a 103-unit project planned for the Tenderloin.

Then 58 of the 288 rental units in one housing complex would be sold below market rate, while another project will include 400 high-end condos.

Total, if I have my math right: 212 BMR units.

Now let’s look at the demand side of the equation. The office building alone will generate the need for 317 affordable units (.000517 units per square foot). The 400 luxury condos will create a demand of between 100 and 160 BMR units, based on the city’s own studies. Then add at least 58 more for the 238 high-end rentals.

Total demand for affordable housing created by this project: at least 475 units.

So for all the talk of adding affordable housing, this project will leave the city with a deficit of at least 263 units.

It will, in other words, cause more problems for the city’s housing crisis than it will solve.

We don’t know the exact figures for how much office space the Giants project will include, so it’s impossible to do the precise figures and see if the 40 percent affordability will be enough. My guess: No.

Bottom line: As long as we keep building market-rate housing and commercial office space at the rate we are approving it, the housing crisis is going to keep getting worse.

Now: At some point pretty soon, maybe as early as this fall, the city will hit the Prop. M limit. That 1986 ballot measure set an annual limit of 850,000 square feet of office space. The amount accumulates if it’s not used, and there was so little construction of any kind during the recessions of the early 1990s and the recent recession that there was plenty of room to spare under the cap.

But now that’s mostly used up. And the big projects already pushing for entitlements – like the Giants and Fifth and Mission – are going to bust the cap.

The City Planning Commission then has to choose which projects to allow – the so-called “beauty contest,” which typically isn’t based on beauty (most of these office towers are hideous) but on the level of amenities the developers offer.

City officials might consider, as part of that process, raising the jobs-housing fee to something the reasonably reflects the real impact these developers, who walk away with huge paydays, are having on the rest of us.



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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  1. The latest tech bubble will burst soon enough (well, ok…maybe not *quite* soon enough as far as most of us are concerned.) The writing i on the wall, same a before. Here’s to the sharing (the losses) economy getting popped right in the kisser.

  2. So you’re saying that the project is “doomed to failure” because you cant “walk or drive” in that area now – yet you want to ban autos in the city altogether. Would that not make more places “doomed to failure” in your estimation?

  3. 80% of city households own and use at least one car. So where would the voter support for “banning all cars” come from?

  4. Gasoline supply involves little competition. Most demand for gasoline is inelastic short term. Economic theory says producers set prices under oligopoly supplying inelastic demand.

    Property markets are the opposite. Most supply is inelastic short term, while demand is elastic. Economic theory says consumers set prices where supply is inelastic and demand elastic.

    The problem with Econ 101 analysis of the property market is on the margins: rents are sticky. They neither rise nor fall as quickly as the classical approach would predict.

  5. Not my “wishes;” apparently, it is the “wishes” of the “free market.” Apparently marketing gossip is not really profitable. All frivolous fads play out sooner or later.

    If Twitter is the crowning achievement of “tech,” we….are…doomed.

  6. “In order to have a walk-able urban environment, you need less density and more flexibility in driving?” is not what I said. I would ban autos in the City altogether, starting with “downtown.” And while I would indeed like to see “wide open fields,” I didn’t say it. And for both of your edification, the “real needs” of the City are housing and transportation infrastructure for the people who are already here.

  7. Nice economic theory, but it is not exactly reality. Do consumers set the price of gasoline? Economic theory says yes.

  8. Adding jobs is typically viewed as a good thing. As far as housing new workers, the city has made it’s bed with bad policy that makes it difficult and expensive to meet the demand for housing from new workers, thus we have $3,600 1BRs. You should always assume that property owners will act in their own economic self interest and ask the maximum rents possible, scarcity allows those rents to be very high. With more vacancy, property owners can’t get away with charging as much.

  9. Economics is a theoretical science. Nothing in economics can be proven in absolute, everything is theory. The trickle down theory has some merit, but taken alone it is rarely sufficient alone to stimulate long term growth and standards of living across the board.
    Gentrification can benefit neighborhoods in some ways and be dangerous when it occurs too quickly. Gentrification is supposed to occur over generations, as older residents of a neighborhood die and are replaced by younger people, some of the same ethnicity and some of different. The problem arises when housing and rental prices move up too quickly before people have any time to adjust. it is the shock and awe effect, as with any other inflation which spirals out of control. If food or energy prices doubled over five years an economy could be paralyzed. This is what OPEC did to the US in the 1970’s.
    if your neighbor’s house sells for 30% above the last year’s asking price then the price of your house is assumed to be 30% higher, depending on other factors. And if local property taxes are calculated by property values then your taxes could explode, in which case some people are forced to move. This is part of the theory behind rent stabilization. It has some advantages and disadvantages like anything else. If people become accustomed to living somewhere with rent control for 25 years and are suddenly forced to move of course they are going to be pissed off.
    Some countries go so far as to actually control housing prices, for example Germany. But that country has a history of inflation spiraling out of control and destroying the entire country so they are much more vigilant about any other type of inflation. In a “free market” housing will trade on supply and demand, but even free markets need some rules and stabilization.

  10. Yes. Twitter oughta IPO soon. Their tax break is soon to run out.

    Then, San Francisco can return to being just ‘really expensive’ instead of being insane.

  11. “What is clear is that more luxury housing has created a demand for more luxury housing. And building more offices has created more demand for housing”

    While I can accept that more offices create more demand for housing, I feel the former (Lux creates Lux demand) is not clear. At all!

    But, I can also accept that recent growth has not been well thought out at all. Infrastructure (sewers, schools, parks, police) is hardly supported; ignored most likely by pols intoxicated with proposed tax revenue, and knowingly? ignorant of future costs.

  12. Developers and property owners don’t set rents. Tenants do.

    Rents are high because demand far outstrips supply.

  13. No, I mean the crisis that was created by the development of offices and workspace AND the lack of planning for housing and infrastructure for those workers, COMBINED with the collusion of the developers and owners of large numbers of rental units to raise rents to help create a crisis – that benefits them.

  14. “Let’s try basic reading comprehension again.”

    I agree – you should give it a try.

    Writing that job creation should go elsewhere (because there is no housing for workers) is not saying that those who are here should go elsewhere, nor is it implicating the tech industry.

  15. The reason this project is doomed to failure is because you can’t walk
    or drive in that neighborhood today because of the “density.”

    – Um, yes you did say that. These are your exact words.

  16. That’s exactly what you wrote. Your constant arguing that your English doesn’t reflect your thoughts is tiresome. Which part of “the entire rest of the country is available for job creation. go there” are we suppose to parse as not telling the tech industry to go elsewhere? Seriously, your language is somehow is only limited to telling developers/investors/city officials to stand-down? Let’s try basic reading comprehension again.

  17. No, you just said the project was doomed to failure because you cant walk or drive in that area due to “density”

  18. So “Tech” is one monolithic entity like an automobile. So you’re lumping Electronic Arts (gaming) to Google (search) to Apple (hardware) to Cisco (routers) as all one industry because they require engineers/programmers? Is 23andme tech or biotech? Is recruiting (linkedin) really then tech?

  19. What a weird perspective. In order to have a walk-able urban environment, you need less density and more flexibility in driving?
    How does adding housing not address the real needs of SF. The real needs of SF are wide open fields and easy driving?

  20. The reason this project is doomed to failure is because you can’t walk or drive in that area today because of the “density.” Imagine what it it will be like during construction? And then adding another couple of thousand people (and their dogs) to already over-populated streets, sidewalks, and transit? This project does not address any real needs the City has; this is speculation pure and simple:

    “While there are myriad masks of and distractions from the actual invader, the real enemy can be defined very exactly. It is what always attacks or demands more from collective life capital not under its control for external private gain. In the world-historical reality we live in, the ruling formula is: it always invades the evolved collective life capital bases of societies to multiply transnational corporate money sequences instead. This is the underlying ultimate law of the ruling disorder and its unseen deep war against social and ecological life bases to privatize for profit. It is only stopped by collective life-capital rule and regulation (as explained in depth in my Cancer Stage of Capitalism/From Crisis to Cure).”


  21. The defense industry only exists in the US because it is essentially subsidized by the government. Most heavy manufacturing is not profitable enough using US labor, so it has moved elsewhere. With increasing automation, the amount of jobs created by a farm bill type program to heavily subsidize US manufacturing likely wouldn’t create as many jobs as you think. The 20th century is over. People who would have held good paying manufacturing jobs in the 1960’s now work at Starbucks. In 20 years they will be replaced by robots.

  22. Why stop there? Should we force existing businesses to close? Pass laws which limit how much success a company can have?
    Anyone who argues that the laws of supply and demand just dont apply in San Francisco believes in SF exceptionalism.

  23. Who has a notion of “San Francisco exceptionalism”?

    Regardless of any aggressive plan to build residences for people, we need to stop or limit all office construction until the ‘crisis’ subsides.

  24. Yes, government making claims on developer profit as a condition of entitlement makes perfect sense. That is not subsidy, that is equity.

  25. Yes, it seems odd that some are advocating for a moratorium when he have had a virtual de facto moratorium on new build for decades now.

    The solution to not enough supply is to have even less supply?

    Raising the percentage fee for BMR’s won’t help either. You may get more BMR’s per project, but you will get less projects built because many will not pencil out with an arbitrary 30%-40% set-aside.

    Those developers will invest elsewhere, so we will get less market-rate homes and no more BMR’s than at present. Affluent NIMBY’s might like that but it won’t do the poor and low-income folks much good unless they win the BMR lottery.

    The default is that housing continues to be allocated by price. And the more that happens, the more the voter demographic will continue to turn away from Redmond’s constituency. The gentrification of SF becomes self-fulfilling once past a critical tipping point.

  26. If Lux housing creates the need for BMR, doesn’t BMR also create the need for additional BMR?

    Tim sez ‘The City’ pegs that BMR-demand at 25-40% for Lux (I would dispute that; in part given it was driven by ‘affordable’ housing providers on the TAC panel). But it does make sense that some demand is created – for Lux. Then it also makes sense that BMR creates its own demand (house cleaners don’t generally employ house cleaners, but they do shop at fast-food places, and need City services — probably at a higher rate than Lux users).

    How much additional BMR will we need for the BMR we mandate?

  27. We haven’t even remotely tried building. It seems strange to me that this notion of San Francisco exceptionalism also comes along with a “success in business is bad.” This town was founded on the success and greed of gold and silver mining, not bad artists, pretend muckracking, and burning man.

  28. Yes, I think Tim’s model is based on a socialist system where a central communist committee plans every aspect of the economy, and tells people where they can live and work.

    Tim’s system would compel tech jobs to move to Detroit while inducing poor people, unskilled people, the homeless and bad artists to move to SF, thereby ensuring that the voters in SF are much more amenable to his ideology.

  29. Tim thinks that adding market rate homes increases the cost of housing in general.

    So obviously if we demolish housing, it will become cheaper, by the same reasoning. Makes perfect sense.

  30. Who said anything about demolishing homes? Not tim.
    Detroit shows the folly of an economic mono-culture. When the American Auto industry wilted, so did Detroit. That is why a robust economy should be built on more than just one industry. Think tech is immune? Tell it to the techies of the nineties.

  31. I can’t wait for the part where the influx of hipsters, activists and artists start moving to Detroit in larger numbers. It will be so awesome and affordable…that is until everyone else starts doing it, and then business starts to move back in. The cycle begins anew.

    In the following decade, they will be wondering what happened to the black population of Detroit and then blame whoever moved there after themselves. The only thing that might save them is that Detroit doesn’t have rent control because Michigan doesn’t allow it.

    Meanwhile in Portland, people are pushing for rent control (Oregon also doesn’t allow it) despite the fact that in the same amount of time between 2009 and 2015 their rent has only increased 1.4 times, whereas San Francisco has increased 2 times. Rents in San Francisco are 2 to 3 times higher than in Portland, so be careful what you wish for.

  32. That has nothing to do with what I wrote. I don’t blame tech workers. I blame developers, city officials and investors.

    What is clear is that more luxury housing has created a demand for more luxury housing. And building more offices has created more demand for housing that we don’t have.

    If we have a housing crisis, and we acknowledge that we cannot build enough homes fast enough, why allow more office towers? It is idiocy.

  33. Absolutely. Don’t let the door hit you one the way out, tech workers. We don’t need your kind around here. Go to Detroit where you belong.

  34. The idea that all job creation is good is rubbish. We are supposedly in a crisis. We have limited ability to respond to housing needs. The entire rest of the country is available for ‘job creation.’ Go there.

  35. This is why developers and the city shouldn’t even bother trying. It will never, ever be enough.

    There’s a basic fact progressives fail to grasp. Nothing is free. Affordable is another way to say ‘subsidized’. Somebody is paying that subsidy. Maybe part the developer, part market rate buyers, part the city (for tax revenues bypassed).

    What progressives fail to grasp is that the more we fill the city with people who depend on the San Francisco government for support, the more the San Francisco government has to depend on people like Ron Conway for support. The greater the budget shortfall, the greater the power of those who can make up the shortfall.

    San Franciscans who have been filling San Francisco with the needy and dependent and in various ways subsidized for the last sixty years have put us where we are today: the rise of Ron Conway, Ed Lee, rampant office building, tax incentives for corporations, infilling luxury condos. It’s the world progressives helped create and things like this only set us up for more of the same in the future.

  36. You mean a national relocation policy whereby we tell people where they should live? All because we can’t build more housing?? Give. It. Up.

  37. I have an idea I think developers AND housing advocates could probably get behind: why not just auction off office space allowances to any project that has to exceed the Prop M cap? Surely this would have to be approved by the voters, but I think it would be politically palatable because it would end up generating fairly significant funding to keep working class families in SF AND continue to create service jobs that ultimately support the new office workers.

  38. Actually, I think Detroit has the potential to be the next place where there’s a creative explosion. And if we had any kind of national industrial policy (other then Defense) we would be directing new development there, instead of to the Bay Area.

  39. “Commercial development creates a demand for housing; everyone agrees on that. ”

    Wait … no, “everyone” didn’t. Otherwise, everyone would all be off buying huge, random plots of dirt-cheap land in Wyoming, building a shopping mall next door, and waiting for the cash to roll in. It would be the only sensible thing to do.

  40. The Peninsula doesn’t ‘share the blame,’ the Peninsula (with the San Ramon Valley) is poster child for bad jobs-housing fit between low-wage jobs and affordable units:


    If anything, San Francisco has done an adequate job:

    Among the Bay Area’s three largest cities, we find that San Francisco and Oakland succeeded in placing affordable housing in neighborhoods with greater need for improved jobs-housing ratios, but San Jose did not.

    http://explore.regionalchange.ucdavis.edu/ourwork/publications/executive-committee-publications/the-effectiveness-of-regional-housing-policy-evidence-from-the-san-francisco-bay-area [PDF]

  41. Why not just turn SF into one big housing project? What a festering cesspool the city will become when all the people with good jobs and money move away and the city no longer has a tax base to support the glorious welfare programs.

  42. By Tim’s argument Detroit should be the best place to live in America. It creates no jobs, demolishes homes and is far less “unequal” than SF.

  43. I find that one of the hallmarks of intelligence is knowing when you’re talking nonsense and keeping your mouth shut.
    This NEW DATA based on “math” is just a regurgitation of decades old philosophy – the stuff that cashed out bruggman published in his “the ultimate highrise”
    Tall buildings cost more than they benefit the communities they exist in. Hear that – almost every major city on earth? You’re all doing it wrong!!
    Now we learn that more jobs are bad and more housing is bad. Why oh why can’t we have no jobs and no housing?
    One wonders why the first person to step foot in SF didn’t realize that fact and just live here by himself. From what I read in this article – SF should seek to emulate the asteroid that the little prince lives on.

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