Developer wants huge density bonus — should we know why?

The Agenda: If supes upzone site for housing and cut the affordability to make it "pencil out," shouldn't the public see the developer's financials?

Fascinating housing discussion last week at the Board of Supes. The issue involves a large site at Geary and Masonic that for years was home to the now-shuttered Lucky Penny diner – and there’s a lot more to the debate than how much housing should be allowed.

The developer, Presidio Bay Ventures, wants to put 101 new housing units on the site, which would require a new Special Use District – essentially a spot rezoning of the site to allow a lot more housing density.

The project doesn’t “pencil out” without special benefits — or so the developer says. SF Planning photo via Hoodline.

The original zoning would have allowed only 23 units.

The site is in District 2, but also borders on District 5.

Sup. Catherine Stefani, who represents D2, is promoting the project as offering needed housing “for families and working people,” as she told the board members April 14.

Btu the project will include zero on-site affordable units; instead, according to the plan Stefani is promoting, Presidio Bay Ventures would put $4.5 million into the city’s affordable housing fund. Stefani said she hopes the money can be used for below-market housing in her district.

That’s not the 20-percent-plus that most projects this size have to set aside for BMR. In fact, at current prices, the city might be able to build seven or eight units for $4.5 million – less than ten percent.

The developer needs the upzoning, Stefani said, and can only pay the $4.5 million off-site fee – or the project won’t “pencil out.”

And in that case, she said, it won’t get built, the city won’t get the housing, and the site will remain a blight on the neighborhood.

But Sup. Dean Preston, who represents D5, said he’s concerned that the city would be giving the developer the right to build four times as many units – but none would be anything but market-rate.

He questioned the basis for the developer’s argument that the project won’t be financially feasible with any on-site affordable housing.

Presidio Bay Ventures has given that data to Stefani – but has not shared any of it with the public. And that’s one of the key issues in my mind: When a developer asks for a huge bonus from the city, on the grounds that they can’t build without it, shouldn’t they have to make those financials public?

Does the term “pencil out” include a massive profit for the developer and the investors? What profit level and return is appropriate and acceptable? What rate does the developer have to pay to get financing – and is that within the normal parameters for this sort of project?

Do the developer’s figures assume that the cost of building materials will continue to rise as it has in the past five years – when I think it’s highly likely that the post-COVID recession is going to send those costs way, way down?

Is there really no way to do this project without the city overruling long-established principles about the need for inclusionary affordable housing?

Maybe that’s the case. If it is, why not share the data with the rest of us?

Back in the 1990s, when the city was giving away cash to developers and businesses as incentives, the voters passed the San Francisco Sunshine Ordinance, which included this clause (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.

Does this apply to special upzonings? Should it?

And who will this housing be for? Will it really be priced for “families and working people” or will it wind up as pied-a-terres for the very rich or as investment properties that are never occupied?

The board passed the measure on first reading last week, but several supes said they wanted to know more before voting for its final approval. It comes up again Tuesday/21.

 

The Land Use and Transportation Committee will consider Monday/20 an emergency ordinance to stop all rent increases during the pandemic. Under the city’s rent control law, landlords are allowed an annual increase in rent that’s tied to inflation; the measure would halt that practice and keep all rents flat until further notice. That meeting starts at 1:30pm.

The Budget and Finance Committee also has an emergency ordinance to create a $10 million Disaster Family Relief Fund to provide financial support to undocumented and very-low-income families with minor children who don’t otherwise qualify for federal stimulus money. That meeting starts at 10am.