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Five Reasons Why San Francisco Needs to Use Public Lands for Public Benefit, Not Luxury Housing

The most important public policy priority for San Francisco is to reserve its surplus land for affordable housing.

Construction in San Francisco, September 2014. (Photo: Sharon Mollerus/Flickr)

A record number of students are homeless. Essential nonprofit organizations are being displaced from the communities they serve. Small, locally owned businesses can’t survive as rents soar.

The angst that is swelling throughout San Francisco and pushing outward to other Bay Area cities is not because people are resisting change. The angst is over the largest growing inequality gap in the country. At the forefront of people’s concerns is how much people now have to spend on rent. Market-rate housing is catering to the region’s new wealth, while the government is rolling out policies to make the city a rich man’s playground.

Also see: Five Reasons Why San Francisco Must Not Give Up Public Land for Market-Rate Development

One of the most delusional ways the city is addressing San Francisco’s growing inequality and housing crisis is to use half of its surplus land for market-rate housing. The city’s Public Land for Housing project, which will set the policy for how the city will use its surplus lands is now underway. Among the goals is to develop 2,000 market-rate housing units among the first five pilot sites. On these sites will be another 2,000 units affordable to people earning 120 percent of Area Median Income (AMI), or an income of $81,550 for a single person. This means that only half of what the city will build will be affordable to low- and middle-income people.

This is the second part of a two-part series on San Francisco’s public sites. The first part, entitled, “Five Reasons Why San Francisco Must Not Give Up Public Land for Market-Rate Development,” showed why this is such a poor economic decision for the city. Now, we explore the extreme needs of San Franciscans for affordable space and new policies to make public sites 100 percent affordable.

1. There are more homeless students than ever before. Teachers are homeless too.

The use of public lands is a question of priorities. The use of public lands should prioritize the people who face the brunt of the city’s growing inequality, and increasingly, these are the city’s children and families.

According to reports by KCBS, “the number of homeless children in California and the Bay Area is at an all-time high,” and the “percentage of students that are homeless in California has doubled since 2010. The Bay Area has more than 20,000 of them.” With this kind of need for children to be housed, it’s hard to see how putting forward public resources for market-rate housing would help.

The impact to homeless children is lifelong. The September 2014 report “California’s Homeless Students: A Growing Population” documents the barriers to graduating from high school or achieving a GED if the student is homeless and how this in turn inhibits these young people’s ability to succeed economically.

Unfortunately, it’s not just our youth who are becoming homeless. Even our educators are left with no place they can afford in San Francisco. The site [people. power. media] interviewed full-time substitute teacher and native San Franciscan, Vicky Ingrande. Ingrande is the mother of two children who attended San Francisco Unified (SFUSD). She and her kids are currently homeless.

Watch the interview:

After a divorce left her with bad credit and her rent increased at their home in Parcmerced, they were forced to leave. That was one year ago in July. Since then, “It’s been pure hell. I mean we’ve stayed with different friends. We’ve attempted to get into shelters. It’s really difficult to get into shelters. We’ve been to motels, but again there’s wait lists,” she said.

Both of her children used to attend SFUSD. Now, just her son continues to attend to high school in San Francisco, commuting from the room they’re currently renting in Oakland. “He’s struggling immensely in school. He used to be a really high-achieving student.” she said.

People who keep this city running – the nurses, firefighters, transit operators, and social workers – can’t afford to live in the city they support every day.

She knows that, unfortunately, this situation isn’t limited to her family. She sees the signs of homelessness in the students she teaches. “Homework is not always completed. They’re tired. I see a lot of students sometimes sleeping in class. Sometimes they haven’t eaten properly. Just, you know, basic things sometimes are not met by not having a stable place to live.”

Ingrande, along with 5,000 others, applied for the new affordable housing at 1100 Ocean Avenue, but she didn’t win the lottery to live there. In a few months, the place she’s renting may no longer have the room available, so she and her kids will have to look for a new place to sleep.

2. The city can’t house its workforce. Even government workers can’t afford it here.

People who keep this city running – the nurses, firefighters, transit operators and social workers – can’t afford to live in the city they support every day.

“It’s worrisome to me to think that all this work that people have done to create a place that people want to live in, that now, we’re kind of shut out. Or we get to come in with a day pass, and then we have to leave,” said Maria Guillen of the San Francisco Department of Aging and Adult Services. She currently lives in Daly City and commutes to work after the San Francisco rent-controlled apartment she lived in for 33 years was sold.

Watch the interview:

Guillen is also an organizer for Service Employees International Union (SEIU) Local 1021, which represents city workers. “If I were living in some other community in California, I’d probably be doing really well. But here in San Francisco, it’s still paycheck to paycheck,” she said.

No matter how long the business has been serving the community, they can be forced out by landlords seeking to capitalize on the rising commercial rates in the city.

The city is going have to pay one way or another to keep its employees, as the cost of living keeps rising mainly due to housing. An article by The San Francisco Chronicle about the salary demands by Local 1021 in April 2014 said, “The bulk of the raise requests, covering about 20,000 workers, would cost the city an extra $279 million over the life of the contracts, which range from one to three years, according to the city’s Department of Human Resources.”

By continuing to support market-based housing, the city will have to deal with cost-of-living increases for its workers or continue to see them living farther and farther from San Francisco.

3. Small businesses are closing. They need affordable rent too.

There is no commercial rent control in California. No matter how long a business has been serving the community, they can be forced out by landlords seeking to capitalize on the rising commercial rates in the city.

Business closures and relocations in San Francisco have skyrocketed in recent years. Between 1992 and 2011, business closures and relocations rose by nearly 900 percent, said a city report published in October 2014. In 2011, a total 12,767 businesses in the city closed or relocated. Longtime businesses that have been open at the same location for five years have seen closures or moves increase over 600 percent in the same period.

It’s no surprise that commercial property sales rates have also skyrocketed. The report says that it cost $675.10 per square foot in 2013, an increase of over 250 percent from 1999.

When a small business closes, the city loses job-creators, women- and minority-owned establishments and jobs for local hire.

Neighborhoods like the Mission District have seen many small businesses close as the neighborhood gentrifies. “The landlords are flipping their long-term leases in order to be able to have perhaps a trendier restaurant or a bar or something fancier, where they can triple or quadruple the rent that they’re been getting,” said the co-owner of L’s Caffe on 24th Street and Mission, Gabriella Lozano.

“When we first opened in 2005, the community was based of large families – more than anything, Hispanic- and Spanish-speaking. And so our baseline of customers were big families,” she said. “However, in the past five years, things have changed where those families have been evicted and, where in the past lived a family of seven or eight people, now live one or two. And that reflects on our business. So instead of having six or seven people having dinner here, now I have one or two. And they’re not having dinner. They’re coming in with their computers, and they sit down with a cup of coffee for six hours,” she continued.

Watch the interview:

Lozano now has to close the restaurant half of the day and lay off staff.

When a small business closes, the city loses job-creators, women- and minority-owned establishments and jobs for local hire. By the way, job creation is mostly from established businesses, not startups. In fact, in “the last two decades, about 60 percent of the private sector’s net new jobs [nationally] have been created by existing establishments.”

Nonprofits are facing an average increase of over 30 percent for those entering a new lease.

While Lozano struggles to be as entrepreneurial as she can in the new realities of the city, her experiences are a far cry from the popular belief that the move to attract tech jobs creates jobs in other fields. Instead of the 4.3 jobs created with every new tech job, it’s fewer customers for Lozano, more layoffs for her employees and less affordable goods for people in the neighborhood.

The only way for small business owners like Lozano to continue with their neighborhood-serving business is to have a stable, below-market lease with the city, which could be a priority with city’s development on public sites.

4. Nonprofits are being displaced by skyrocketing rent.

Local small businesses aren’t the only ones that have to compete with Salesforce, Facebook and other billion-dollar companies for commercial space in the city. Nonprofits are also charged the going market rates, with no rent control.

“You’re in the same market for space where a for-profit company, and particularly a start-up company or a tech firm, has the resources to be able to pay the rents that the market is asking for,” said April Veneracion, legislative aide to District 6 Supervisor Jane Kim. “Nonprofit organizations are challenged by the fact that they are grant-funded and depend on limited resources,” she said.

Watch the interview:

Nonprofits are facing an average increase of over 30 percent for those entering a new lease, according to a May 2014 report originating from a city investigation initiated by Supervisor Kim’s office. The increases mirrored those faced with citywide rent increases of over 30 percent from 2011 to 2013.

If left to the market forces, the city’s nonprofits will always be vulnerable.

“The financial burden of renting in the city may require nonprofit organizations to devote a greater proportion of resources to renting, taking away from resources that could go to providing services to San Francisco residents,” said the report. The city has invested a lot of money into creating and sustaining a professional and effective network of community-based nonprofit services organizations and arts organizations. As these organizations struggle to keep up with rent increases and moves as a result of evictions, this threatens the public benefit of these investments. This also threatens to destabilize neighborhoods and vulnerable people, and it diminishes opportunities for the residents who rely on these services.

One of the recommendations of the report was to provide grant relief funding to help pay for some nonprofits’ rent, but this is only a Band-Aid solution. Similar to small businesses, if left to the market forces, the city’s nonprofits will always be vulnerable.

“I think there’s a potential for public sites to be available for nonprofit offices and nonprofit spaces. I think public sites are also seen as an opportunity in terms of the affordable housing needs that we have in the city – but it’s certainly an opportunity, I think, for nonprofit office spaces, especially if it becomes a priority for the city,” Veneracion said.

5. The lotteries and wait lists for affordable housing in San Francisco number in the thousands.

In January of this year, San Francisco’s Housing Authority made 200 units available to homeless individuals and families. During the six days the wait list opened, it received more than 10,000 applications.

The most recent affordable housing development to receive applications is at 1100 Ocean, near the entrance to City College’s main campus. This development has 45 family units and 26 units for youth aging out of foster care. According to SFGate, “A recent lottery for the family units drew 5,572 applications.”

Quoted in this article was Amy Beinart, at that time the housing director for the Bernal Heights Neighborhood Center, codeveloper with Mercy Housing for 1100 Ocean. “Beinart pointed out that 1100 Ocean Ave was a city-owned property, and there is a growing pressure to ensure that other public sites are set aside for affordable housing. Development of at least three of these sites, including 1050 Mission St., will be initiated in 2015. ‘I believe that 1100 Ocean was a great example of the use of public land for public good and is a model of what we need to do,’ she said.”

How the city can build 100 percent affordable housing on public sites without selling out to for-profit developers:

1. Stop trying to solve affordable housing through market-rate housing, and instead tax large businesses directly.

The city should continue to implement its inclusionary housing program, which forces developers to build or set aside units for affordable housing to get approval for their new market-rate development. There should be some accountability for market-rate developers to give back.

But trying to actually solve the problem of affordable housing by building more market-rate housing is the wrong approach. Housing needs are driven by economic activity and growth, so why not look to the industries that create the needs for housing to provide subsidies for affordable housing? After all, the health of these industries depends on having people they can hire who can get to work and afford to live on the wages they’re paying.

The nexus that the city should be looking at to capture capital for affordable housing lies within the fact that large businesses create large housing needs. The current Jobs Housing Linkage Fee program is a fee charged on a new job-creating space and is only triggered when that new space is more than 25,000 square feet. What about all the businesses that have far more than that amount of square footage but are scattered among various locations (think Starbucks); or are not currently covered under this fee program (think private hospitals and building construction); or have a huge spillover effect of creating service-sector jobs that support their industry (think Tech)? Instead of granting tax write-offs, the city should be holding corporations accountable for the housing infrastructure needs they’re creating.

These businesses located outside San Francisco that have a significant number of employees living in the city should pay a fee to the city’s affordable housing fund in order to mitigate that impact.

Businesses might not like to pay taxes, but they need a stable economic environment to thrive for the long term. If businesses could invest in affordable housing for their workers, by paying directly into the city’s affordable housing fund, then the city could show tangible results by using that money expeditiously to develop its own lands for housing affordable to San Francisco workers.

Locally generated funds are more flexible to apply to different preferences, such as people who work in San Francisco or are under threat of eviction in San Francisco. Local funds can apply to different income levels to be able to serve people all the way from extremely low- to middle-income, and to build family-sized units.

There’s plenty of high-cost housing being built. That part of the market takes care of itself. Better for the economy to look instead to tie economic activity and economic growth to the creation of affordable housing. This is the most appropriate and forward-thinking nexus, one that will result in sustainable economic growth.

2. Regional jobs – housing nexus.

As evidenced by the tech buses and increased ridership on CalTrain of commuters from San Francisco to jobs on the Peninsula, we need to evaluate the housing needs in San Francisco that result from businesses throughout the Bay Area. These businesses located outside San Francisco that have a significant number of employees living in the city should pay a fee to the city’s affordable housing fund in order to mitigate that impact.

3. Prioritize nonprofit, arts, child care and locally owned small businesses.

Once these developments have public subsidies to make the housing affordable at below-market rates, there is very little pressure on the commercial or retail spaces at the ground level to make the kind of money that for-profit developers expect. For-profit developers have to maximize their returns on investment. Nonprofit developers don’t have the same economic pressure, so they’re able to fit in lower-paying commercial and retail uses. They can prioritize nonprofits, arts uses, child care, and locally owned small businesses. They can also require that these businesses prioritize hiring from the community.

4. Pay in installments, so the city doesn’t hamstring the general fund.

If the Mayor’s Office of Housing and Community Development (MOHCD) has to pay something, whether it’s market price or something lower than that, rather than tying up too much money all at once, MOHCD can pay for the sites over a period of time rather than in one lump sum. MOHCD’s affordable housing fund has to cover all development costs including land and construction, so if too much money is tied up from buying large parcels of land, this could delay construction of affordable housing.

5. Hang on to these assets. Don’t let them go.

The most important public policy priority is to set the land aside and reserve it for affordable housing. These sites are “surplus,” which means they are currently unused or underutilized, and the city doesn’t depend on these sites for revenue. There’s no reason why they can’t continue to be used as they have been until they can be developed for affordable housing. Once public sites are gone from public control and developed with market-rate housing, they’re gone forever.

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