The NIMBYs Have One Good Point

The ‘debate’ surrounding an affordable housing development in the Sunset is mostly word salad. But the project’s cost points to a bigger problem.

It appears San Francisco’s elected leaders are turning over a new leaf with respect to welcoming affordable housing in all corners of the city. Naturally, residents of neighborhoods that have long kept such proposals out of their respective communities are finding creative new ways to push back. Thus the circle of NIMBY-ism continues.

Last week, the Board of Supervisors unanimously approved a loan for a 98-unit affordable housing development in the Sunset District, all but ensuring the construction of the first 100 percent below-market-rate apartment building in that neighborhood. While Supervisor Gordon Mar did attempt to briefly postpone a key step in certifying the project, he stood fast in the final vote, directly contradicting the will of some of his loudest, angriest constituents. 

The vote marks a major change from a similar scenario that unfolded in 2016, when then-Supervisor Norman Yee bowed to vociferous opposition after an affordable housing development was proposed in tony Forest Hill.

In the half-decade since, new state laws and an impossible-to-ignore housing crisis have emboldened city leaders to take controversial votes in favor of affordable developments. However, despite mandates from Sacramento and the high visibility of our region’s unhoused population, grassroots opposition to said housing does not appear to have cooled. If anything, it has morphed into a more sophisticated litany of complaints — a laundry list of “we support affordable housing, but…” clauses — which seems certain to stalk the city’s ambitious housing goals beyond this particular project.

While the euphemistic language of Sunset NIMBYs failed to sway the board, opponents of the proposed development at 2550 Irving St. did identify an issue that deserves greater scrutiny: the sheer unaffordability of building it. If 2550 Irving is to be a portent of a lot more affordable housing to come — as city officials and state regulations say it should — its $960,000 per-unit price tag does not bode well. At that rate, it’s very difficult to see how the city will come anywhere close to meeting its ambitious affordable housing goals. 

A ‘Grotesque’ Building

Opponents of the development, located on Irving at the corner of 26th Avenue, generally steered clear of some of the most unsavory themes and coded language that defined the discourse around the failed Forest Hill project. 

During that debate, neighbors invoked the spectre of “formerly homeless people wandering around the neighborhood attacking our kids.” At a June 30 community meeting where nearly 200 people gathered to oppose the proposal at 2550 Irving, speakers were more strategic in their comments. 

First they raised the prospect of residual toxins. The property was once the site of a laundromat and a gas station; it is now home to a San Francisco Police Credit Union building. Some neighbors said the cleanup plan, which will need to be certified by the state Department of Toxic Substances Control, does not do enough to protect neighboring properties. It’s a serious concern, but not exactly a new one. In a crowded city like San Francisco, many new developments are built on top of former gas stations, and there are well-established procedures for cleaning up these kinds of sites. (At the massive Hunters Point redevelopment, where there are questions about potential radioactive contamination, these concerns are of a different magnitude.)

From there, things generally devolved. There were aesthetic complaints about the “big, grotesque, giant building,” which, at seven stories, would be the same height as a 1930s apartment building standing kitty-corner to the project. There were lots of comments about the fact that the building will include just 11 parking spaces — no matter that the N Judah and several major bus lines are within a short walk. There were invocations of a “right to light,” and the impact the building would have on neighbors’ future solar panels. There were thoughts about the wellbeing of residents of such a large building; wishes for “density with dignity” and “no hotel-like corridors.” Some neighbors called for a four-story building instead, although it was clear that many hoped the project wouldn’t happen at all.

Another theme of the meeting were pleas for more community engagement from the developer, the nonprofit Tenderloin Neighborhood Development Corporation (TNDC), and city officials. It became clear how productive those conversations would be as Mar’s brief, milquetoast comments were drowned out by chants of “Recall Mar!” 

A conceptual rendering of the proposed development at 2550 Irving (left) with its similarly-sized, 1930s neighbor across the street. (Pyatok Architects)

There’s something deeper going on here than neighbors “saying the racist parts out loud over affordable housing developments,” as a recent Chronicle editorial blared. While there were racist and classist overtones in a few comments at the meeting, it seemed the biggest issue for most opponents is development itself, and all that comes with it. In neighborhoods like the Sunset that have remained visually unchanged for decades, people simply don’t want to see a familiar landscape and way of life evolve. They don’t want to endure construction. They don’t want to have to look at a large new building. They don’t want to deal with increased competition for parking. And they especially don’t want to set a precedent that new buildings are welcome in their neighborhood. 

As city leaders begin to acknowledge the massive housing production goals handed down from the state, and act on the environmental code update they just passed, which includes a pledge to build 5,000 homes per year in the city, the kinds of sentiments expressed at the Sunset community meeting are going to continue to be a problem. But they’re not the only thing standing between the status quo and building a lot more housing.  

Not Cheap

In a presentation on the financing of 2550 Irving at the June 30 meeting, Joan Klau summed up her comments thusly: “The costs are ridiculous.”

On its face, it’s difficult to argue with that statement. At approximately $94 million, the development will cost $959,000 per unit, or $874 per square foot, according to a loan term sheet from the Mayor’s Office of Housing and Community Development. If these units were being offered on the private market, they would not be “affordable” to many San Franciscans. 

Katie Lamont, a spokesperson for TNDC, said the eye-popping costs for this particular building can be attributed to the fact that the land will need to be purchased from a third party, which is not the case for all of the city’s affordable developments. The budget also includes additional funds for environmental remediation. 

In fact, a review of publicly available information on the total development costs of several affordable projects planned or recently completed in the city reveal the price tag for 2550 Irving is fairly standard. Another pioneering affordable housing development on the city’s west side, this one in the Richmond District at 4200 Geary Blvd., is projected to cost $922,000 per unit and $1,087 per square foot. Other recent affordable housing developments range widely in total development cost, depending on local conditions and the building design. For example, 88 Broadway near the Embarcadero cost $1.124 million per unit, and $1,037 per square foot. The senior housing at 1296 Shotwell St. in the Mission was essentially half as expensive per unit, at $585,000, but still a pricey $800 per square foot. One under-construction affordable development on Treasure Island will cost $890,000 per unit, but just $637 per square foot. 

Generally speaking, building affordable housing in San Francisco is expensive because building in San Francisco is expensive. “The only thing affordable about affordable housing is the rent,” says Todd David, executive director of the San Francisco-based Housing Action Coalition (HAC). “The costs of building it are just about exactly the same as market-rate housing.” 

In 2017, the HAC took a sample of approximately 30 market-rate housing developments in San Francisco and found an average per-unit cost of $765,000, and development costs have certainly increased since then, David says. A survey of affordable and mixed-income developments receiving state tax incentives between 2009 and 2019 from the Terner Center of Housing Innovation found that projects in San Francisco cost an average $1,100 per square foot. Several market-rate developers contacted for this story declined to provide information on per unit or per square foot costs of their projects in San Francisco. 

Market-rate projects in San Francisco face higher costs in the form of fees for affordable housing and other community benefits, as well as longer, more uncertain permitting times. Thanks to SB 35, affordable projects in the city can now move quickly through the planning process without getting bogged down in endless hearings and lawsuits. However, putting together financing can still be a major source of delay and increased costs. Affordable developments must draw from a confusing mishmash of federal, state, and local sources, each with their own timelines and requirements. 

“You’ve got to raise your hand and jump up and say, ‘Pick me, pick me,’ to state and federal funding agencies and have your voice heard over hundreds of other projects,” says Jefrey Henderson, vice president of the real estate company CBRE. 

That means affordable housing developments are typically held to the highest possible labor and environmental standards, and often include community spaces like computer labs and low-cost nonprofit office space. They’re usually built to last, too, so as to avoid future maintenance costs that would be hard to cover with a cash flow of deeply subsidized rents. “Localities like San Francisco have increasingly turned to affordable housing to meet an ever expanding set of policy goals, including environmental sustainability, living wages and local jobs, [and] community amenities such as childcare centers and health care clinics,” the Terner Center report relays, before noting, “these worthy policy objectives” have become “a mechanism by which costs escalate.”

More for Less? 

If San Francisco can afford these costs for developments like 2550 Irving — and it can, thanks to several local tax and bond measures, and an increasingly generous state government — then what’s the problem?

For one thing, scale. San Francisco is going to quite literally need hundreds of 2250 Irvings to meet its state-mandated affordable housing goals. The Regional Housing Needs Allocation (RHNA) process that guides zoning and development in California’s cities recently was beefed up to account for pent-up demand. San Francisco needs to plan for nearly 33,000 homes for extremely low- and low-income people between 2023 and 2031. If all of those homes are as expensive to build as the ones at 2250 Irving, the total cost would come to about $31.5 billion. And that’s not including an additional 13,000 “moderate income” homes that, in San Francisco at least, are often provided in subsidized affordable housing developments. 

The numbers are, for lack of a better term, ridiculous. 

There are some things that can be done to bring down affordable housing development costs at the margins within the current system.

One would be to simplify California’s affordable housing finance ecosystem, making it faster and easier to navigate, which is something Governor Gavin Newsom has said he wants to do. That could increase innovation and competition in this space: Only three developers have been responsible for 71 percent of San Francisco’s affordable housing developments approved between 2015 and 2019, a number that has been on the decline over time, the San Francisco Business Times recently reported.

Easing up on environmental and labor standards, while not exactly a winning political message in San Francisco, could help bring down costs, too. Many San Francisco affordable housing developments are subject to local hire and small business requirements that could be reformed. The HAC’s David says there’s long been talk of a negotiated residential wage with labor — separate from prevailing wages for more lucrative commercial projects — that could make it cheaper to build housing, but so far those conversations have gone nowhere. (Henderson half-jokingly says the city should build a new neighborhood just for construction workers, who are currently in very short supply.) San Francisco’s requirements for stormwater management and water recycling systems, as well as advanced air filters and strict solar and living roof mandates might be getting in the way of building a lot of housing, fast, according to another Terner Center report

Perhaps the above reforms could improve development costs by a few percentage points here and there, but to really achieve the scale of the need, San Francisco might need to totally rethink its approach to building housing. One promising avenue is technological. Modular housing construction, where apartments are built in a factory and stacked together on site, could make housing 25 percent cheaper and 30 percent faster to build, according to some estimates. However, construction unions tend to be against this innovation. 

Regulatory reforms hold some promise, too. Up-zoning to allow for high-density housing in more parts of the city would create a larger pool of lots for affordable housing developers to work with. It could also allow the private market to provide more middle-income housing like fourplexes in exclusively single family areas. Ditching minimum housing standards that essentially ban new SROs and group housing outside of a few select downtown neighborhoods could provide more last-resort housing to those who might otherwise be homeless.

Then there are two radically simple, and, at first glance, contradictory, solutions for the government to increase the amount of affordable housing. The first is to build off the success of Project Homekey by purchasing existing apartments and hotels for very low-income people — something the state already is pursuing through its $12 billion homelessness package. Another emerging program called Catalyst works similarly, purchasing new market-rate apartments and keeping rents affordable for the middle class. These programs add to the affordable housing stock at a much cheaper per-unit rate than ground-up construction. 

Meanwhile, an increasingly popular concept known as social housing would see the government become a developer, building housing for all income levels where the rents of the wealthiest would subsidize those of the poorest in a self-perpetuating cycle. Supporters like Supervisor Dean Preston and Assemblymember Alex Lee of Milpitas hope that something like a California Housing Corporation would unlock a lot of efficiencies by keeping work in-house, rather than relying on nonprofits or private companies. 

No matter how San Francisco approaches the sky-high cost of building housing, and creating enough of it to meet the need, one thing’s for certain: Neighbors are going to have to get over their fear of development. Opponents of 2550 Irving can rest assured that there’s going to be a lot more where that came from.

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