Last week I invited a market-rate developer as guest speaker in my graduate housing class at the University of San Francisco. I told him that invariably a student would ask him about the mayor’s so-called “family” upzoning plan. His answer to the students was that it’s essentially just political posturing, and won’t have much impact on increasing supply. He’s a developer, he knows: Development is all about costs and interest rates and financing.
San Francisco’s family zoning plan is politicians pretending to be doing something, gaining political points from their YIMBY and tech donor allies, and attacking their labor and tenant opponents who didn’t support their campaigns, because the real things they should be focusing on — interest rates, costs, and financing, they either can’t (interest rates), or don’t want to (costs), or it’s too hard (financing).
When I consulted for a housing co-op which is considering developing on their property, we brought in a development financial adviser, and, not surprisingly, they told the co-op members that basically it’s going to be another ten years, if not more, before it makes financial sense to build higher than 85’ anywhere outside of downtown, and even that was iffy. Look around — where are the cranes?
On the smaller development scale, another housing friend ran into one of the residential builder guys, the ones who build medium sized buildings in the West side, and they are pissed off about the whole thing. They already have a hard time buying land to build on—much of it is being bought up by outside investors—and the rezoning is simply making the land more valuable, making it harder for them to acquire development properties.
Zoning is not the primary constraint to construction today—not in SF where it costs $800,000 or more to build a unit of housing. Nor is environmental review or planning approvals. If these were the constraints to production, then we wouldn’t have tens of thousands of already approved market-rate units unable to get construction financing (54,394 to be exact, stuck waiting for Wall Street to decide the time is ripe again to make 20 percent returns on their San Francisco housing investments).
One more zoning story: two years ago, my family was fortunate to move into a brand-new Habitat for Humanity middle-income development in Diamond Heights—after a three-year eviction fight from the apartment we had lived in for 24 years. The new eight-unit building is next to a row of single-family Eichlers. There was no opposition from the neighbors—only support! And there was no need for a rezoning: the current zoning was exactly what was needed to build stacked 3-bedroom family flats, three residential stories over garage with solar on the roof. Had they built higher, they could have gone to four residential stories, but that would have required an elevator, creating excessive costs just to serve a few units; had they gone even higher, they would have needed to build in concrete, too expensive for the size of the site. Or had there been density decontrol, they could have packed the site with micro-units, but their mission was to build for families.
Zoning changes that promote real family housing and affordable and workforce housing on corner lots and one-story commercial corridors, on parking lots and church sites, throughout the west and north of the city, that understand the interaction between site size and height and construction costs, are absolutely needed as part of a real housing plan. San Francisco has done rezonings with deep community engagement and participation from the communities most impacted: the Eastern Neighborhoods Mission Area Plan, the Western SOMA plan, etc., that resulted in plans that increased affordability and financing for infrastructure costs. Not perfect, but not just a landowner giveaway either.
But making zoning changes alone will NOT result in any new investment from private Wall Street funds. Zoning is not the constraint. Zoning does not create investment. The immediate impact of upzoning is to raise land values: If a zoning change allows 10 units when before you could only build five, your land value just doubled, with no work on your part. In fact, upzoning may even slow down production: Raising land values and changing heights for smaller sites above 65 feet that require more expensive concrete construction not supported by project financing will lead landowners to hold on to their investment sites for decades waiting for a magical day when the West Side rents are high enough to justify building.
So the rezoning plan—the way it is being done, in big swaths that don’t account for lot size or rent-controlled units—may in fact SLOW DOWN development. Which is why you don’t see many actual real live developers pushing for this.
You might see some marginal new construction, developers targeting commercial buildings with the lowest rents and apartments with the most vulnerable, lowest income renters, for demolition and rebuilding as micro-unit tech dorms. But even that will probably have to wait to the next post-AI boom and increase in rents. Right now, it’s all magical zoning bullshit, pushed by politicians without the guts to address the real issues of financing and costs, done simply with the goal of rousing their base, scoring political points, and attracting tech donors.
What would a real FAMILY zoning plan do if you were really doing it to encourage development and not just for the political drama and tech donors? First, exclude all the rent-controlled buildings. The planning department already says that they didn’t count new units from those buildings, because they are in fact hard to demolish (but not impossible—it’s just the cost of doing business). But eliminating densities and increasing height limits in those buildings will add to their values, will bring in investors with a business plan based on evict and demolish, causing hell for tenants, and more vacancies, even if ultimately it’s hard to demolish. Why pick a fight you don’t need to? Because this plan is NOT about building housing—it’s about politics and attacking your enemies.
That would still leave a huge number of one-story commercial sites, car washes, banks and groceries with parking lots, etc. On those sites you could increase heights depending on the lot size. Bring in real developers to say what they would build. Fifty-to-65 feet is probably the sweet spot for wood-frame buildings in the outer neighborhoods, maybe 85 feet max if the sites are big enough to justify it. Third, make this real “family” housing. We should be measuring bedrooms, not “units,” as our goal.
Sure, eliminate densities based on number of units per lot size, but require a unit mix that more accurately reflects San Francisco’s needs: at least 50 percent two-bedroom or larger (similar to what cities like Emeryville require).
Finally, have a real affordable housing plan. The State HCD and the City’s own Housing Element both predict that only about 43 percent of future households will be able to afford new construction market-rate rents (though the reality was that when we were actually building a lot of new units in 2017–2020, only the top 20 percent could afford new rental units, and only the top 10 percent could afford new condos, but, hey, let’s dream that some trickle down actually works). We need to account for the other 57 percent.
This plan actually LOWERS the affordable requirements! You need to set aside the land for the needed affordable sites. So identify a number of lots over 10,000 square feet, say all the publicly-owned lots, all the church lots, banks and grocery stores and car washes with parking lots, and apply the upzoning there ONLY for projects that build at least 50 percent affordable, from low to moderate income—still far below the actual “need,” but given where the market is now, they would probably be the first projects to actually get built. That’s the zoning piece.
But none of that answers the real questions, which are financing and costs. That’s what’s keeping those tens of thousands of ALREADY APPROVED units from getting built. You have to have public financing, because the Wall Street investors that market-rate developers depend on all have their heads deep in AI’s ass, and aren’t going to come back to building housing for a decade or more. You need to get a public bank off the ground and capitalize it, you need to work out the tax issues to make project revenue bonds work for workforce housing, and you need to begin thinking of the city as a builder of housing, just like it builds sewers and water systems and sea walls with a long-term capital bonding plan. Social housing.
Start land banking those sites that make sense for low-income and workforce housing—BEFORE you upzone it to make it much more expensive to buy!
The construction cost issue is tougher—my developer friend talks about how he’s building for $100,000 less per unit in South City. There’s got to be some deep conversations with the GCs who charge an SF premium and the building trades about moving the whole cost issue so you can actually get people building rather than waiting for the next boom. Countries that really care about housing (from the Netherlands, Denmark, and Ireland to Singapore) have construction cost controls — knowing that is a monopoly constraint to housing supply and affordability. But nowhere in the US. Viva la Capitalism. Just deregulate baby, and magical thinking will provide!
There are really only three ways to build new units in SF: 1) low-income housing requiring deep up-front public subsidies, 2) market-rate luxury housing dependent on equity investors who demand 20 percent returns and build only when the rents are soaring, or 3) social housing dependent on shallow up-front subsidies and low-interest permanent loans. That’s it. And zoning won’t solve that. We do the first one relatively well in SF, though only meeting about 50 percent of need. We do the second one ONLY when Wall Street says “go,” which is only when there is a tech boom. And we’ve never done the third.
My Yimby friends will say it’s a pipe dream to imagine that we can build a social housing system in SF (never mind that Seattle is already starting to do it). That’s not a pipe dream: that’s identifying a problem—how to build housing needed to keep a city functioning and livable for current and future generations—then working for real solutions to make it happen. If they were actually serious about building enough housing for all who need it, that is what they would be putting their efforts into. But public financing for housing does not fit their tech libertarian deregulation and austerity ideology. They are trapped in their own world-view with no way out except empty upzoning dreams. They end up pushing false solutions and making arguments that even developers don’t think will amount to anything. It’s a failure of political will—and a failure of imagination.
Fernando Marti is a community architect, artist, and affordable housing advocate.
