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Ozzie Rohm
YIMBYs Against Housing
On April 26th, an application for a Conditional Use Authorization at 1600 Jackson Street in San Francisco, came before the San Francisco Planning Commission. The hearing gave us a rare glimpse into the YIMBY’s real views on building more housing.It turns out that the orthodoxy of build at any cost and transit-oriented development goes only as far as the developer’s proclaimed profit margins.
The site was originally planned to be mixed-use development, with retail on the ground floor and residential apartments above. The property consists of nearly a 20,000 square foot lot that could have accommodated about 62 apartments above the retail. But instead, the developer now wanted the project to be a Whole Foods 365 and Amazon retail store, with no housing at all.
Neighborhood activists at the hearing lobbied for housing instead of wasting this unique site on what would essentially be a grocery pickup and food court.
Coming fresh out of the battle against Senator Scott Wiener’s Senate Bill 827 (SB 827), the community was unified in support of local control of planning and development that would produce community serving housing, particularly because in this instance no tenant or businesses would be displaced in the process.
Staunch supporters of SB 827, YIMBY Action and San Francisco Housing Action Coalition (SFHAC), were also there, but surprisingly, only two people from this lobby showed up and neither one of them advocated for using the site to build housing. Why?
Because they claimed that it was not profitable enough for the developer to do so. They claimed this without providing any evidence that this was true. After all, what does “profitable enough” mean, anyway?
Todd David, who was the Political Director for Scott Wiener’s State Senate campaign and is now the head of SFHAC, took the podium to say the following:
So this is the exact project where the rubber meets the road and everything we’ve been talking about for the last kind of 6 months here. Alright, the cost of building housing when you add all of them together: construction, labor, cost of financing, BMR costs, impact fees – That’s the reason we’re not getting housing on this site. The developer is a developer who does mixed use developments. This is a perfect location for housing. The neighborhood wants it. The developer wants it. The project does NOT pencil and this is a self-inflicted wound by the city and county of San Francisco that we’re not getting housing here. I don’t know about these other developers who are saying that the project can pencil. I’d be really curious to talk to them. I can tell you that my members are telling me that there are projects all the time in San Francisco all the time that will not pencil. So as an organization we have no opinion about Whole Foods versus you know, retail. But what I’m so frustrated with is this missed opportunity: we have a neighborhood that wants housing, we have a developer that builds housing and we have a project that does not pencil out and this is because of policies that our re-elected officials have put into place.
What is so bizarre about his statement is that he is basically saying that the costs of construction, labor and materials, financing, and the costs involved in offering below market rate (BMR) housing is the fault of elected officials, even though the impact fees, planning fees and permit fees involved – the only thing the city controls – are a miniscule part of the overall development costs. If they were waived entirely, it’s unlikely the project would be any more feasible.
Then Laura Clarke, the Executive Director of YIMBY Action took the podium to say the following:
...but I think we need to take a critical eye at this and say why we aren't seeing a proposal for housing here. And I think Todd laid it out pretty clearly. There are financial reasons that the developer who's experienced in building housing looked at the options and decided that it would be easier and less expensive...they didn't want to face the process of coming through you all in order to get their permits for housing. And they gave up.
Again, Ms. Clarke’s arguments mirror Mr. David’s, putting all the blame on the Planning Commission. But, she went further. She concluded her diatribe with a list of demands.
Unless you guys are dedicated to saying okay, let’s see housing at this site.That means we’re going to have to make sure that they probably get grandfathered in the old inclusionary rate.They’re looking at new inclusionary rate and they’re deciding it doesn’t make sense with current construction costs and everything else.Are you going to lower their fees?Are you going to make sure they get a density bonus?Are you gonna make sure that they’re by-right and they get through the process with all speed and haste?...
Wow, why don’t we just waive compliance with the Building Code, while we’re at it, and forgo inspections in the interest of making it “pencil out” for the developer!?
Both speakers also appeared to simply accept the developer’s “sob story” that he had to “give up,” without even trying, because it’s just too hard.
Their rhetoric is typical of so-called “housing advocates,” who are either uninterested in learning how development works or incapable of grasping it. What their explanation does show is that the missing piece to the puzzle is subsidy of some kind. So, if they really want housing, why didn’t Ms. Clarke and Mr. David offer their considerable connections to raise grants funding or underwrite low interest financing to make the deal “pencil?”
Of even more interest is the fact that back in November, 2017, Ms. Clark had sent a letter to the Planning Commission opposing the plans for developing 1600 Jackson Street into a Whole Foods grocery store! Her letter specifically ends with the following paragraph:
Village Properties has the opportunity to add dozens of housing units in a rare underutilized infill site. We agree with groups like the Middle Polk Neighborhood Association and the San Francisco Housing Action Coalition: The Planning Commission should deny permits for any project on this site that does not include a substantial number of housing units.
So, why the change of heart?
Could it be that when the push came to shove, their densification mantra is only reserved for neighborhoods where developers' return on investment are highest? Or is it that our housing crisis should only be addressed by building in poorer neighborhoods but not in Russian Hill, where well healed donors live?
The plot thickens
According to the Chronicle's article from April 23, 2015, after the Lombardi family closed down their Lombardi Sports at this site in January of that year they quickly sold the building for $7.5 million to a partnership led by Village Properties.
Village Properties was said to be working on the plans for some housing development when they were approached by Target with a lucrative offer to rent the site. The Target deal never materialized, but the developer’s plans quickly changed to renting the entire site for retail. Hence the Whole Foods 365 scheme.
Village Properties claims that the cost of demolishing the current structure and developing the site for mixed-use residential and retail is too high to justify the project. But a quick math indicates otherwise.
Village Properties has been doing business in San Francisco since the late 1980s. Their portfolio includes the following projects with completion dates of 2018 and 2017:
- 580 Hayes Street consisting of 31 residential units above ground floor retail – Total cost of construction has been listed as $13,000,000 (in the permit on file) plus $549,000 for shoring and excavation and another $125,000 for demolition. Assessor’s value for the structure stands at $17,132,000.
- 1450 Franklin Street consisting of 69 residential units over ground floor retail – Total cost of construction has been listed as $30,860,000 plus undisclosed cost of demolition and a few other costs in the 10's of thousands of dollars, for various expenses. The Assessed value for the structure stands at $36,752,319.
Using the numbers from the developer’s portfolio, above, one can conclude that a mixed-use project at 1600 Jackson Street more than pencils out! Including the purchase price of $7.5 million, the profit margins hover around half a million dollars per unit. Imagine that!
The case is not closed
The Planning Commission gave the developer 90 days to figure out a way to fit in "some" housing at the site alongside Whole Foods 365 without having to demolish the current structure.
For a link to the Planning Commission hearing, click on Item Number 21, 1600 Jackson Street on the right panel to at:
http://sanfrancisco.granicus.com/MediaPlayer.php?view_id=20&clip_id=30400
Ozzie Rohm is a community organizer and a co-founder of the Noe Neighborhood Council.