San Francisco Chronicle - (Sunday)
Developers seeking more, smaller units
Builders see housing density as solution to costs
At a time when tens of thousands of approved housing units are stalled because of a stormy economic outlook and rising construction costs, Bay Area developers are increasingly looking at a possible solution to breaking the logjam: adding more homes to already-approved projects.
In San Francisco, real estate agency Tishman Speyer is looking to increase the density at 655 Fourth St. — the former site of the Creamery, a popular tech hangout in the 2010s — from 960 to 1,148 apartments. In February, spokesman Bud Perrone said that the modification would make the project “better suited to the post-pandemic environ
ment.”
At One Oak — at the intersection of Van Ness Avenue and Market Street — developer Build Inc., recently won planning permission to increase the tower from 304 to 460 units. During a Planning Commission meeting where the project was approved, Build Inc. partner Lou Vasquez said it’s still not clear whether adding 156 units to One Oak — the average unit size was reduced from 1,200 square feet to 800 square feet — will be enough to attract capital needed to construct the tower.
And now it appears that whoever takes over the stalled redevelopment of the mothballed California Pacific Medical Center campus on California Street will be going back to the Planning Commission in the hopes of adding significantly more units to the project, which is currently slated for 273 homes.
With 31 buildings spread over 5 acres, the low-density, boutique scheme won city approvals in February 2020, about two weeks before the pandemic started. With spacious, familysize townhomes and flats, the project was tailor-made for a leafy enclave where the median house sells for $3.3 million. Neighborhood associations in both Presidio Heights and Jordan Park supported it.
At the time, Charles Ferguson, president of the Presidio Heights Association of Neighbors, said the developer “designed a project that fits into our neighborhood, whereas what is there now doesn’t fit at all.”
Now the property is back on the market — the original developer walked away from the deal — and the potential buyers are telling city planners something they are hearing a lot these days: The only way to make the project economically feasible is to significantly increase the number of units.
Elizabeth Watty, city director of current planning, said two developers met with city staff to talk about their interest in the CPMC property, which has been vacant since parent company Sutter Health opened its new hospital on Van Ness in 2018. Both stressed that they would have to add a significant number of homes to make it workable.
“In both scenarios there was a pretty dramatic increase in unit count,” said Watty. “We will see what they come up with.”
Cyrus Sanandaji, managing director of Presidio Bay Ventures, said his group took a serious look at the property, but eventually decided to take a pass. Their plan was to use the state density bonus to push the unit count to 400. While “the math worked” at the price they were willing to pay, the investor they were working with decided to pass “due to San Francisco’s inefficiencies.”
The likely new plan for the CPMC campus comes as the push for more density is coming both from developers, who are looking to jump-start stalled projects, and from city planners who have until the end of January to finish their “housing element,” a state-mandated plan to meet housing goals over the next eight years. Cities that do not win state approval for their housing plan face the possibility of losing local control over land use approvals.
That is a factor in Oakland, where a proposal has been submitted to add more units to Brooklyn Basin, a 64-acre master-planned project along the waterfront. There the developer is proposing to expand the community’s residential capacity from 3,100 to 3,700 units, including a 24-story tower. Oakland has to plan for 26,000 units between 2023 and 2031.
It’s also a factor in Alameda at the 2,800-acre Naval Air Station. There, the city, which is on the hook to create 5,353 new units in the next eight-year cycle, is looking to more than double the density from the current plan for 1,400 units, to about 2,900. Alameda City Council Member Tony Daysog said that he would support even more units on the 2,800-acre waterfront property, which would take pressure off aggressively developing the historic east end of the island city.
Alameda Point has a new ferry terminal, recently opened waterfront parks and a development agreement that requires 25% of units be affordable.
“We have the space there. We own the land. We have a new ferry system. We have the makings of a real transit-oriented, mixed-income neighborhood,” said Daysog. “If we are going to plan for 1,500 more units, we might as well plan for 3,000.”
Amending the plan, however, will be complicated because the original deal required the city to pay $100,000 to the Navy for every market-rate housing unit above the 1,400 cap. Daysog said the $100,000-per-unit fee would make development infeasible and that the city has begun discussions with the Navy about potentially amending the agreement.
In a region where land-use politics are contentious and entitlement can take many years, the process of amending existing projects is faster and easier than rezoning whole new neighborhoods, according to Matt Regan, senior vice president of public policy for the pro-business advocacy group Bay Area Council.
“Cities are looking at all their options and maximizing density on existing projects is the easiest place to start,” he said.
At the old CPMC campus, Watty said that the new developer has yet to submit a plan but that the proposal will likely include reducing the size of the average unit and making some of the buildings taller. In San Francisco’s housing element, California Street is one of the transit corridors that is being targeted for upzoning. If the developer who buys the campus decides to wait for new zoning there will likely be “a pretty dramatic increase in what could be allowed there.”
San Francisco Planning Director Rich Hillis said the department generally is supportive of developers who want to add units to existing projects. But he cautioned that planning staff would not be receptive to developers who want to increase density by simply replacing larger two- and three-bedroom apartments with studios.
In the case of CPMC, the original developers “were always under pressure from the neighborhood to do a lower-density project with larger unit sizes,” Hillis said. “They didn’t come close to maxin=g out density on that site.”
“Cities are looking at all their options and maximizing density on existing projects
is the easiest place to start.”
Matt Regan, senior vice president of public policy for pro-business advocacy group Bay Area Council