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Thursday, September 23, 2021

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News + PoliticsThe Agenda, August 24-31: tax money for a non-union...

The Agenda, August 24-31: tax money for a non-union hotel?

Plus the next wall on the waterfront — and a capitalist-tool takedown of the Academy of Art University

The Hotel Renoir will become a high-end establishment, with public money -- but no guarantee of union recoginition
The Hotel Renoir will become a high-end establishment, with public money — but no guarantee of union recoginition

By Tim Redmond

AUGUST 24, 2015 – The entire Republican Party seems determined to attack immigrants. Donald Trump can’t talk enough about building a fence. Most of them seem willing to change the Constitution if necessary to promote a race-baiting agenda.

Tens of thousands have been deported under the Obama Administration. The Dreamers are having to fight for the right to stay.

And yet: If you have half a million dollars, you can come to this country easily, legally, from anywhere. It’s called the EB-5 program, and it’s been on the books for years. As we reported back when I was at the Bay Guardian:

If you’ve got the cash, the promoters say it’s easy. Invest  [$500,000] with a broker who’s doing some sort of development in a low-income area and you’re guaranteed the right to move to the United States, immediately, with your entire family. You can live anywhere you want (not just in the area where you invested). And you’re on track to become a U.S. citizen.

But the program, known by its federal moniker of EB-5, is riddled with loopholes and lack of oversight. It has a history of creating few or no jobs, and the projects it funds can harm low-income communities. The immigrant investors aren’t safe, either. They put their fate in the hands of brokers and immigration officials, and if everything doesn’t go according to plan (and sometimes they have no control over that plan), they lose their money and face deportation — sometimes years after settling into their new lives.

In truth, the real winners in this program are the private brokers who profit by connecting immigrant investors with projects that desperately need funding.

And one of the winners right now is the Kor Group, a real-estate partnership that is rebuilding the Renoir Hotel at Market and Jones.

The developers have raised $42 million from EB-5 investors, who get credit for putting money into a “low-income” area (Mid-Market/Tenderloin) that is in fact one of the hottest real-estate markets in town right now (thanks in part to the Twitter tax break).

According to the SF Business Times, the Renoir will become an upscale establishment:

The 1926 Renaissance Revival-style hotel, which closed in April 2013, will feature three “chef-driven” restaurants on the ground floor, as well as a 4,500-square-foot restaurant and bar on the rooftop with panoramic views of the San Francisco skyline.

The interiors will be designed by celebrity interior decorator Kelly Wearstler. She is known for her throwback theatrical aesthetic, sometimes described as “Hollywood regency” or “maximalism.” Along with the Viceroy Hotel and resorts in New York, Palm Springs and Los Angeles, Wearstler’s designs include the Avalon and Maison 140 in Beverly Hills and the Tides in Miami.

Perhaps not the sort of investment that Congress may have had in mind for low-income neighborhoods when it approved the program.

Still: The investors, by law, are supposed to create at least 10 jobs. And the developers say the Renoir project will create 800. But only 153 people will actually work at the hotel – and here’s the problem:

The developer has, according to the local hotel workers union, refused to guarantee that those will be union jobs – or even that the union can organize without interference or retaliation.

UNITE HERE Local 2 and immigrant rights groups will rally Tuesday/25 at 10am in front of the hotel to demand that workers in the hotel will have the right to organize – and to point out the flaws in the law.

A large majority of San Francisco hotel workers are immigrants, and are struggling against the worst affordability crisis in our city’s history. Moreover, millions of working people in the US currently have no path to legal status, or are waiting years to be reunited with family members who remain overseas. By contrast, US real estate developers like Kor profit from what amounts to “immigration reform for the 1%”, and investors get special treatment under US immigration law.

The hotel is also getting $13.5 million in “New Market Tax Credits” – a Clinton-era federal program that is sort of the commercial equivalent of the Low Income Housing Tax Credit, meant to spur investment in low-income areas. It’s had success – but has also been subject to abuse, in one case by a luxury hotel.

I wonder if the mayor and other supporters of the Twitter tax break will show up in solidarity with the workers.

 

Everyone’s on break at this point in the summer – the Board of Supes doesn’t meet, the Planning Commission doesn’t meet, a lot of the folks at City Hall are out of town.

But the fall campaigns are in gear – and so is an effort to challenge a proposed luxury highrise project on the waterfront.

Where have we heard this before?

The voters don’t tend to like big towers – particularly towers for the richest of the rich – and the Planning Commission will return the first week in September to a huge controversy.

The 75 Howard building is currently a parking garage. It’s making money, of course – parking garages are generally quite profitable – but there’s a lot more money to be made in fancy condos, particularly in a site with spectacular waterfront views.

On the other hand, the project will cast shadows on Rincon Park – and will be another tall building in a part of town where people want to stop tall buildings. A letter from Jerome Dobson, of Save Rincon Park, notes:

“Like the 8 Washington high-rise that the San Francisco voters overwhlelmingly rejected, the proposed plans show a 240-foot luxury condo tower … that would create the dominating effect of a wall on the waterfront. If approved, this project would overshadow Rincon Park and diminish the pedestrian experience along the waterfront, just as the old double-decker Embarcadero Freeway did for decades before it was removed.”

Lots of groups oppose the project, including the Sierra Club, San Francisco Tomorrow, the Harvey Milk Club, the Coalition for San Francisco Neighborhoods, the Alliance for a Better District 6, and the Potrero Hill Democratic Club.

Some of them worry about the environmental impacts, but there’s a larger concern here, and it’s getting expressed with the Mission Moratorium. At some point, we have to accept that luxury housing isn’t helping; it’s making things worse.

 

A lot of progressives in San Francisco have been complaining for years about the behavior of the Academy of Art University, which gobbles up housing and seems to ignore zoning laws with impunity.

So it was refreshing to see a remarkable investigation of the institution not by some left-wing group but by Forbes Magazine. Forbes writer Katia Savchuk put together a devastating two-part series on the AAU, revealing how the school not only offers false hopes to students who pay high tuition (with federally subsidized loans)…

But behind the shiny façade is a less than lustrous business: luring starry-eyed art students into taking on massive amounts of debt based on the “revolutionary principle” (Stephens’ phrase) that anyone can make a career as a professional artist. No observable talent is required to gain admission to AAU. The school will accept anyone who has a high school diploma and is willing to pay the $22,000 annual tuition (excluding room and board), no art portfolio required. It would be easy to accuse AAU of being a diploma mill, except the school doesn’t manufacture many diplomas. Just 32% of full-time students graduate in six years, versus 59% for colleges nationally, and that rate drops to 6% for online-only students and 3% for part-time students.

…. but thumbs its collective nose at local zoning laws with the support of powerful local politicians.

The Stephen family’s connection to City Hall dates back to the 1970s, when Richard Stephens, Elisa’s father and former AAU president, befriended future San Francisco Mayor Willie Brown – then a California assemblyman – at a downtown watering hole. “We used to paint the town,” Brown recalled last May.

Brown, who was mayor from 1996 to 2004, is an annual guest at AAU’s fashion show, and along with his girlfriend Sonya Molodetskaya, takes frequent trips to New York Fashion Week on the Stephens’ corporate jet.

In the 1960s, Forbes used to proudly promote itself as a “capitalist tool.” But the magazine is starting to realize, as more and more people are, that these for-profit universities aren’t just a threat to public education. They’re a scam.

I wonder if the head of the accrediting agency that has been so hard on City College (and so easy on the likes of AAU) is reading Forbes these days.

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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57 COMMENTS

  1. SF residents gain not so much from a larger number of residents but rather by a better quality of resident. If we have less people who need subsidies, care and services, and more people who generate success, prosperity and tax revenues, then the rising tide raises all boats.

    But even if the population doesn’t rise but merely improves in quality, we still need to build new homes because the expectations of the arriving winners will be higher than those leaving to make room for them.

  2. “‘[M]arket rate development’ does not set prices: buyers do. House prices are set by buyers, rents by tenants.” True, but what happens in the neighborhood matters. If a slaughterhouse moves into your community, property values go down. On the flip side, if a luxury development moves in property values go up.

    “Rent and eviction controls must be paired with aggressive public building, so that people have places to live.” Why do we keep saying that SF needs more and more housing and office development? What about things like parks and open space? What about things like light industrial to diversify the SF economy? Building housing and expanding the SF population is a choice. The question needs to be asked: How do we, as SF residents, benefit from higher density and a larger SF population?

  3. It’s fairly obvious what the moderators are up to. They are trying to increase the signal to noise ratio here, by excluding your endlessly irrelevant and trollish comments.

    And this is not the first local progressive website to censor or block you.

  4. Multiple large economic forces are combining to drive up housing. Profitable global tech firms headquartered and engineered in the regions, foreign capital as well as speculative venture capital all underpinned by an easy money policy at the fed. No single one is dominant, they all are working together.

    It is not like when there is one hiccup (for now) in any of these, then price will automatically respond. Sustained slack in any of these over a period of months with everything else remaining relatively equal would be what it would take to see prices fall.

  5. And yet it you who had dozens of posts removed by the moderators for trolling. Not one of mine was removed.

    The editor has decided.

  6. Like I said it’s about finding a balance and having too much of a good thing. I don’t think it’s healthy to have extreme volatility in housing prices and have American cities places where only billionaires can live

  7. Variances are often sought/granted because we are in a crisis. Most of the housing/development/political issues discussed on this site relate to displacement, income inequality and housing policy. Your argument is disingenuous because you want to debate this iparticular ssue at some level of philosophical purity that ignores reality in order to win the debate.

    But as you are really just trolling, you already know this, Sam, or whoever you really are.

  8. If vacancies were erased by the tech-led bonfire, then investment demand did not drive price.

    ‘[M]arket rate development’ does not set prices: buyers do. House prices are set by buyers, rents by tenants.

    Berkeley had both rent control and vacancy control for twenty years. The results were fine for a few long-term tenants, expensive listing services and finders fees for everyone else.

    Rent and eviction controls must be paired with aggressive public building, so that people have places to live.

  9. One could say to companies like FB, Google (I mean ‘Alphabet’ — is their stock symbol now ABC?) – if you want to locate here, build housing here. And they just might! But not if the locale is then gonna throw up road-block after road-block, connive, double-deal and generally make themselves PITAs.

    And anyway, I’ll bet there are reasons why localities around here favor allowiing companies to locate — sales tax revenue, Gross Recpt’ revenue , comm. prop tax revenue; features that normally aren’t part of the conversation but influence decisions and decision-makers.

    i’ll bet we could make it SO difficult to do business here that all those companies decide to move elsewhere (and take all their friends with them). Textiles was the ‘high-tech’ of the 19th century. Look what happened there: England, New England, Carolina, China. We can survive on tourist buses and Chrome messenger bags, no?

  10. You are mentally ill and should seek the help of a certified mental health professional to assist you in getting a handle on your mental illness.

  11. And here’s the problem…one narrow group, organized labor, whose agenda is laudable in theory but which is not justified in practice is the main problem that Tim sees because Tim gets paid by labor.

    Thus, the issues of a few dozen, perhaps a hundred or so people comes to dominate any public interest in this development that one might think that a progressive would value.

    Follow the money, it is all about who is getting paid.

  12. Unlike the market collapse of 7 years ago, this one originates in China and other overseas markets, and, is likely to have little impact on San Francisco housing prices. If anything, it will remind the world that in some ways the US is the best place to live – the Chinese market is a scam, they have spent billions of dollars building cities that no one can afford to live in and their economic growth is subject to cyclical cycles like everyone else’s. Rich Chinese who have money buy US citizenship so they are not subjected to the authoritarian rule and horrific air quality.
    Part of the job of city planners and mayors is to attract businesses to their own cities by offering business friendly environments and often tax breaks. However, they have to realize that there can be too much of a good thing. If ten big companies want to locate in a small city within a period of a few years, and you were a city planning commissioner, wouldn’t you think “Where are all of these people going to live?” its just common sense. They have to have the guts to say to a company like Facebook or whatever “I’m sorry but we can’t accommodate you at this time and unless you build housing for all of your employees you will have to locate elsewhere.”There are a lot of poor cities in the US that would love to have a new big or start up technology company base their offices there. THey can’t all be in the same place.

  13. marc sullivan is the biggest troll here. He had dozens of his posts removed by the 48hills moderators over the last 72 hours. They are getting wise to him.

  14. Gary, you never offer any real analysis of the issues. Just a ra ra for your side. Sad.

    One more time. We do not build new homes with the idea that they will make homes cheap. We build them because people want them.

    A Ford car is not more expensive to you because some people can afford a Mercedes.

  15. The law doesn’t guarantee that unions will work the new hotel? So what? Local 2 is very strong, and they will organize the place. This isn’t a big deal.

  16. “International purchases might have skewed urban, but don’t.” Do you have this data by city?

    “Had investment, foreign or domestic, ‘drive[n] up housing prices,’ vacancies would have gone up. Instead, vacancies are down.” They were erased by the tech-led bonfire.

    “A tech-led bonfire sounds suspiciously like an argument about increased demand and constrained supply resulting in higher prices. What happened to ‘market rate development ‘?” It’s still going on and has been all along. When it happens in an area like the Mission it drives up prices.

    “As for gentrification, that’s precisely the human cost of a willingness to live with a tight vacancy rate.” No, there are other ways to deal with a low vacancy rate: two that come to mind are rent control and vacancy control. The market is not always a panacea.

  17. International purchases might have skewed urban, but don’t.

    Had investment, foreign or domestic, ‘drive[n] up housing prices,’ vacancies would have gone up. Instead, vacancies are down.

    A tech-led bonfire sounds suspiciously like an argument about increased demand and constrained supply resulting in higher prices. What happened to ‘market rate development’?

    As for gentrification, that’s precisely the human cost of a willingness to live with a tight vacancy rate.

  18. Sure, though ‘live with a tight vacancy rate’ really soft-pedals the human cost of extremely high rents. To what end?

  19. It doesn’t matter if half of all foreign purchases are suburban. It does matter when purchases are concentrated in a relatively small area like San Francisco, the caveat being that we don’t know whether this is happening.

    All prices slumped during the recession. What we’re seeing now is qualitatively different; a tech-led bonfire heating up the office and housing market. The effects are particularly dramatic in the Mission where gentrification is evident at every turn. Does gentrification raise prices? You bet.

  20. Half of foreign purchases are suburban. If foreign nonresident sales were so significant, suburban price would move, too. The NAR releases only gross purchases, not net. Foreign, nonresident selling of non-primary residence is not tracked. We don’t even know the sign, positive or negative, of any effect.

    If market rate development results in higher prices for all housing, how could prices slump worst during the crisis in those areas that had seen the most market rate development?

  21. So if we’re willing to live with a tight vacancy rate, we could roll up the welcome mat, shut the plannning department, and tell the developers to go mine for gold in San Mateo and Santa Clara counties?

  22. It may be a rounding error nationally, but when it’s concentrated in certain areas — New York, LA, San Francisco — it has a bigger impact. It stands to reason that some amount of this is happening in SF, but I have no idea to what degree.

    If it’s happening at a certain level, and we don’t know what that is, you can argue that it has the same impact as market rate development and gentrification: higher prices for all housing. These are not, after all, “value buyers” looking for a fixer upper.

  23. Depends on the data source and on what you consider a vacancy. Using the same dataset, for rent plus for sale vacancies were under 2% of total units in 2013; 2014 is not out yet.

  24. So using the numbers you provided, the drop in vacancies and the new housing built pretty much covers the 50K in added population, although it could make for a tight purchase and rental market. What is the current vacancy rate?

  25. Foreign, nonresident buying not intended for primary residence accounts for about 50,000 home sales per year, in a market that sees 5,000,000 existing sales annually. It’s a rounding error.

    By what mechanism would ‘foreign capital’ drive up price?

  26. As of now, Ed Lee will win because nobody is running against his Conway-funded bank account.

    But let’s watch district 3 and the propositions and then decide how voters have ‘spoken’. And we already did speak on 8 Washington and height restrictions on the waterfront.

    Also, watch the Warrior’s arena project disintegrate.

    As for making homes “magically cheap”, a good ole correction will take care of that. Enjoy the ride while you can.

  27. Evidently the voters have already spoken on this subject by electing a mayor who will build homes for the economically successful. Maybe more voters are successful than you like to think. But if you are correct then Ed Lee will lose in November.

    Again, nobody builds market-rate homes because they believe that will make homes magically cheap again. Your premise is false.

  28. The majority of San Franciscan voters are not members of the current model of what you call ‘successful’ and we will vote accordingly.

  29. So where are all of these people living? In closets? Cars? Storage units? Perhaps they are crowding more of them into single houses or apartments, but this is not something I’ve noticed in my neighborhood.

  30. Foreign capital is probably a factor, although how much of one I don’t know. When foreign investment drives up housing prices those of us not already in a home find it more difficult to buy into the market.

    If the Chronicle wasn’t such a lazy newspaper they’d take a look at this issue.

  31. “Increasing supply does not change demand; why would it?

    You are correct. It doesn’t.

    But it can help change the supply/demand ratio at the margin. That doesn’t necessarily imply lower prices but it does imply prices that are lower than they otherwise would be.

    What really would change demand would be building a large number of artificially cheap homes, as some suggest. That would increase demand, thereby negating any alleged affordability benefit.

  32. Why would anyone assume the reason that new homes are built for the successful is that they somehow magically makes homes cheaper for the poor?

    At best it would be a by-product of the BMR housing fees thereby generated, and a slight easing of demand from those buyers for existing housing stock.

    No, homes are built for the successful simply because there is demand for it, and because it does not require taxpayer subsidies. No developer builds a million dollar home because they think it will make SF homes cheap.

  33. Increasing supply does not change demand; why would it?

    The city built new housing, but far too little. Between 2010 and 2014, there were seven thousand new units completed, but population increased nearly 50 thousand. At 2.3-person households, the city should have added 20 thousand units, not 7.

  34. Turning anything into housing for the wealthy in this crisis does not ease demand or bring down rents, regardless of what irrelevant economic tell us.

    We’ve been adding luxury housing for about 5 years now and the crisis is worse.

  35. One more example of dirty politics and one more hit to San Francisco’s reputation. Probably not the sort of article that SF city leaders want to see in a national business magazine.

  36. Your first paragraph is a non-sequiter. Fiirst, we don’t know how much Chinese investment in SF is driving up housing prices and rents. Second, we don’t know to what extent China’s economic problems are hurting the people who would invest in foreign real estate, which is currently a haven for the uber-wealthy.

    It is notable that when China tried to halt falling stock prices, the victims of the bubble were said to be middle-class Chinese chasing high returns and fortune.

  37. Not to worry, “The Progressives” have politics all under control because they bend over backwards to take care of people who can’t or don’t vote, developers and immigrants first and foremost, only second to taking care of their nonprofits funding streams, while telling voters to fend for themselves and be happy with crumbs and corruption.

  38. ‘[A]ngry and magical’ is a good description of the argument that San Francisco’s housing shortage is caused by capital flows. China is way down lately. Rents surely must follow, right?

    Maybe, just maybe, building places to live for people who want places to live is a good idea, not a bad one.

  39. We must continue to sacrifice our City to The Market, doing whatever it commands, until The Market has been appeased and we avoid its angry and magical wrath.

  40. “The Dreamers are having to fight for the right to stay.” How does entering or staying in the country illegally give one the right to live here?

  41. The stock market is melting down, and San Francisco progressives rejoice!

    Twitter stock down 5% today, and it’s still only 10AM in New York! Hurrah!

    Hope the trust funds of leading San Francisco progressives aren’t being hammered too hard!

  42. Maybe not laughable, but any objections are with the City’s current zoning:

    While earlier drafts of the 75 Howard proposal requested heights of 350 feet and 292 feet, the project sponsor is now proposing a 220 foot proposal – exactly what existing city zoning allows at this site.

    http://www.socketsite.com/archives/2015/06/spokesperson-for-code-compliant-waterfront-tower-speaks-up.html

    Isn’t turning housing for automobiles into housing for people exactly what we should do when demand for the latter far exceeds demand for the former?

  43. If Forbes can get the attention of the City Attorney, perhaps the courts can levy the fines the institution owes for years of ignoring the zoning laws. So far Planning Department officials have ignored the many complaints filed against AAU for illegally removing rental units from the market after evicting tenants. Your point about the accrediting system is also well taken. How many complaints will it take to get the City Attorney’s attention?

  44. A lot of progressives in San Francisco have been complaining for years about the behavior of the Academy of Art University, which gobbles up housing and seems to ignore zoning laws with impunity.

    Translated: CCHO and the SFIC have a bug up their ass about AAU because the AAU does not pay CCHO and SFIC so Tim is on it.

    Am I reading that too narrowly?

  45. and here’s the problem:

    The developer has, according to the local hotel workers union,
    refused to guarantee that those will be union jobs – or even that the
    union can organize without interference or retaliation.

    Either Tim’s friends get theirs or there is something very, very wrong.

    Am I reading that too narrowly?

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