Posted on: December 16, 2024
Source: San Francisco Chronicle; Author: J. K. Dineen
A complex under construction at 555 Bryant St. in San Francisco is seen in June. So far this year, the city has built only 1,205 new housing units. It’s the lowest amount since 2012.
San Francisco’s long pandemic hangover continued to suppress new housing construction in 2024, with the city on track to produce fewer units than any year since the aftermath of the Great Recession.
So far in 2024, just 1,205 units have been completed, of which 624 are deed-restricted affordable units, according to the city. That is about half the 2,593 homes produced in 2023 and well below the boom years of 2016-21, when unit completions ranged from 4,500 to 5,250. The two lowest years for new units were 2011 and 2012, which brought a combined 1,300 new homes in an economy that was still recovering from the 2008 crash.
The lack of construction cranes on the skyline is an indication that San Francisco is unlikely to meet its state-mandated Regional Housing Needs Allocation goals, known as RHNA, which requires the city to plan for 82,000 units between 2023 and 2031. A quarter of the way through the eight-year-cycle, the city has achieved about 4.4% of that goal.
The city would have to average 13,000 units a year over the next six years to reach its housing goals. Currently, there are an additional 4,792 units under construction, of which 2,210 are affordable.
While the numbers are down, the engine of some of the city’s biggest multiphase developments are starting to rev up, an indication that, with the right mix of lower interest rates and a revitalized downtown market, the city could go from the breakdown lane to the fast track in relatively short order.
Over the past year, city housing officials have worked with property owners to create enhanced infrastructure financing districts that allow builders to borrow money against future tax revenue in order to build out streets and utilities. These districts, known as EIFDs, have been created at the 2,600-unit Potrero Power Station, where the first 105-unit affordable structure has broken ground.
In the past two years, construction of infrastructure — the roads, sidewalks and utilities needed to build a neighborhood from scratch — has started to pay off at Treasure Island and Mission Rock, near Oracle Park, which together represent a big chunk of the units completed during that time period. Two buildings totaling 537 units have been completed at Mission Rock, and on Treasure Island, about 1,000 units have been built or are under construction.
Even for the West Coast, which is still feeling the effects of the pandemic slowdown, San Francisco’s lack of new housing production sticks out.
A state grant for infrastructure work will help jump-start another mega-project: India Basin, which will eventually have 1,525 homes, could see site preparation start in 2025. The first phase — 282 affordable apartments — is also expected to start at Balboa Reservoir, which will have 1,100 units. The city also is in talks with Prado Group, the developer of 3333 and 3700 California St. in Laurel Heights, about creating an EIFD, according to Judson True, director of housing delivery for Mayor London Breed. Those two projects will generate a combined 1,236 units.
“The table is set to create vibrant new neighborhoods and build thousands of homes as economic conditions improve,” True said. “We’re much better at helping get the infrastructure built, which has been a major impediment in the past.”
Multiphase mega-projects — from Pier 70 to Potrero Power Station to Treasure Island to Candlestick Point — represent about 38,000 of the 72,000 units in the city’s development pipeline.
In an interview, Breed, who lost her reelection bid to nonprofit founder Daniel Lurie, said she is confident that the changes made to local and state laws over the past few years will continue to fuel housing starts for years after she is no longer in office.
In addition to the infrastructure districts, Breed has been behind efforts to reduce or eliminate fees, make it easier and cheaper to convert empty office buildings to housing, cut transfer taxes and reduce the percentage of affordable units that market rate developers have to include. Meanwhile, state laws now mean that most code-conforming housing developments do not require Planning Commission approval and can not be appealed to the Board of Supervisors or blocked with a lawsuit.
San Francisco Mayor London Breed, center, appears at the groundbreaking of an affordable housing development at 1633 Valencia St. in July. Breed said she believes she has set the stage for a rapid increase of housing production, once interest rates fall.
“We’ve changed so much — there has been a lot of kicking and screaming to get this stuff done,” Breed said. “All the work we have done locally, all the political risks I have taken to get things done, the proposed zoning changes and cuts to fees and bureaucracy, I feel like I have set the stage for aggressive housing production in our city once interest rates come down.”
Meanwhile, in 2025 the city is required, under state housing law, to rezone certain areas in order to allow multifamily housing in neighborhoods that have traditionally not seen development. This includes the Marina, Cow Hollow, West Portal and the Sunset and Richmond districts.
“One of the last pieces we need to do besides hoping and praying for interest rates to drop, is we have to rezone the city,” Breed said. “We can’t be afraid to tear down buildings in order to build new opportunities. We gotta be open-minded about change and open-minded about creating more housing all over the city.”
Strachan Forgan, a principal at the architecture firm SCB, which has been one of the city’s most prolific multifamily residential designers over the past two decades, said his firm has studied about 20 residential-to-office conversions, but none of them work economically at the moment.
They are also working with property owners to convert some of the large approved, but unbuilt, office projects in the Central SoMa neighborhood to residential.
Despite multiple laws and a ballot measure making it cheaper and faster to convert office buildings to housing, only two projects are going forward.
“So far, those buildings are not making the returns needed to allow them to go ahead,” Forgan said.
Even on the West Coast, San Francisco is an outlier, Forgan said. SCB has designed a half dozen residential high-rises in Hawaii since the pandemic and is busy in Southern California.
Hawaii “has been incredibly resilient. We thought it was a COVID thing when people were working remotely, but post-COVID it has remained extremely strong,” he said. “L.A. and San Diego have also been hot spots for us. Generally, on the West Coast it’s busier outside of San Francisco than inside.”
Rudy Gonzalez, secretary-treasurer of the San Francisco Building and Construction Trades Council, said a lot of the projects that will help his members next year are industrial or public sector developments like the 2 million-square-foot SF Gateway development in the Bayview and jobs related to Proposition A, the $790 million general obligation school bond measure voters passed in November.
Currently, about 800 construction trades specialists are without work.
“If people didn’t realize that construction was a major part of the city’s economy, they realize it now,” he said.
Gonzalez said all the multifamily developers are busy winning approvals needed to add units to already entitled but long-delayed housing projects, which should help make them feasible at some point.
“That is not people doing it for fun, they are doing it because it’s the only way projects have a chance of working right now,” he said. “Multifamily is going to pencil when it pencils.”
Read the full article, here.
Posted in: News