San Francisco Chronicle - (Sunday)
Mayor faces major hurdles in housing quest
Mayor London Breed’s goal of attracting 30,000 new residents and students to downtown San Francisco by 2030 faces major challenges — as evidenced by the near-void of construction cranes in the area since the pandemic.
The 2010s boom that added Salesforce Tower and thousands of housing units to the Transbay district has petered out. Construction at First and Mission streets on what was to be the city’s second-tallest tower, Oceanwide Center, has been suspended for years and its Chinese developer has gone bankrupt. One of the few major active projects, the $1.2 billion Hayes Point, paused construction last year.
Citywide housing production plunged 46% in 2022 from the prior year, according to the Planning Department. The city’s state mandated housing plan calls for 82,000 new units by 2032, with the highest percentage growth proposed in the southern and western areas of the city, rather than downtown.
The Mayor highlighted legislation to ease zoning restrictions downtown and a new state bill that would exempt many projects from onerous environmental reviews. That’s alongside an ongoing effort to attract a new University of California
campus as well as historically Black colleges.
Real estate experts are skeptical that Breed’s goals are achievable. Breed’s remarks sounded “like a political speech, not a policy statement,” said Rudy Gonzalez, secretarytreasurer of the San Francisco Building and Construction Trades Council, which represents around 7,500 construction workers. The powerful union has not yet endorsed a mayoral candidate this year and is in bargaining with the city.
Gonzalez said the city’s shortcomings on homelessness don’t give him much hope for
bringing more residents and students downtown. More than 850 of his members are unemployed due to lack of construction projects, he said, with some people traveling outside the city for jobs.
The mayor’s push to turn empty offices into homes has resulted in a few proposals, but the city’s own economist said there’s unlikely to be many given the high cost of construction and weakness in the city’s residential market. A ballot measure to exempt such projects from transfer taxes the first time residential units are sold was leading after initial vote returns this week, but the city report said it was unlikely to make many more projects feasible if it passed.
Robert Sammons, a research director at real estate brokerage Cushman & Wakefield, called Breed’s goal “ambitious” and said there were major hurdles like finding suitable development sites and overcoming high costs.
“We all know how long anything takes to get done in this city under the best of circumstances,” he said.
Sammons agreed that officeto-housing conversions would be hard to scale. “There are only so many buildings that will work for conversion. And it’s very expensive to do — in a market with high costs including the need for earthquake retrofits,” he said.
Outside of conversions, he said adding housing downtown would require demolishing existing buildings, which could make project feasibility difficult. The historic North Financial District has seen virtually no new projects for decades due to lack of sites.
Deeper into South of Market, there are more opportunity sites, but lack of neighborhood amenities like retail and vibrancy could discourage projects, Sammons said.
Prior to the pandemic, the city approved the Central SoMa plan to spur taller buildings between Second and Sixth streets. The goal was to bring 32,000 new jobs and 8,800 new housing units to the area. But high costs and weak tenant demand has frozen all major projects.
There has been some academic expansion in the city: UC College of the Law San Francisco built a 656-unit housing project in the Tenderloin. But other downtown institutions have shrunk during the pandemic, with San Francisco State University shuttering its facility in the former Westfield mall. Golden Gate University also sold one of its buildings last year.
In December, California’s Legislative Analyst’s Office projected a $19 billion state funding deficit for schools and community colleges over three years, another obstacle for any expansion.
Despite the hurdles, Sammons has optimism for the city’s revival.
“All that said, there’s probably no central business district in the world better located for something like this to work — waterfront access, climate, geography, transit, convenience to other neighborhoods,” Sammons said. “Most cities would kill for all of those positives.”