Talks stall on $400 million in California affordable housing

Juliet Williams and Alison Noon

Thursday, August 18, 2016

 

SACRAMENTO, Calif. (AP) — California's Assembly speaker conceded defeat Thursday on negotiations over a plan to inject $400 million into affordable housing projects, a deal that was included in the $122 billion budget compromise legislative leaders negotiated with Gov. Jerry Brown this spring.

The funding was contingent on lawmakers approving Brown's controversial "by right" housing proposal to speed approval for developments that include affordable units. The proposal would give automatic approval to projects that meet existing zoning requirements and set aside at least one-fifth of the units for low-income residents. Developments near transit stops would need to set aside at least 10 percent of units.

Brown's proposal was aimed at quickly increasing the supply of housing. But it left some neighborhood activists furious at the prospect of losing a voice in approving construction that they fear will change the character of their communities, and it angered some labor unions.

Assembly Speaker Anthony Rendon, D-Paramount, said "I believe it's over."

"It's my understanding that there haven't been discussions in at least two weeks," he said. California's legislative year ends Aug. 31, so any compromise must be approved by lawmakers before then.

He added in an interview with The Sacramento Bee that linking the funding "has sort of backed us into a corner."

Housing groups announced last week that they were walking away from talks with the Democratic governor. In a letter this week, they urged Brown, Rendon and Senate President Pro Tem Kevin de Leon, D-Los Angeles, to provide the $400 million anyway.

"With little time remaining in the Legislative session and no real prospect of a deal, we must ask you to release the funds. Please do not penalize our state's most vulnerable residents for the failure to reach agreement on the streamlining proposal," said the letter signed by officials from more than two dozen community and social justice groups.

The budget deal says that if no agreement is reached, the Legislature can devote the money to other priorities, but lawmakers would still need the governor's sign-off. Rendon said he would like to commit at least $150 million to affordable housing.

A spokesman for Brown, Evan Westrup, did not immediately respond to a request for comment Thursday. A spokesman for de Leon, Anthony Reyes, declined to comment.

Rendon's declaration Thursday marks the latest concession in a string of legislative letdowns this year. Leaders have already lowered expectations on reaching a deal to extend California's climate change mandate to lower carbon emissions through 2030, which was to have been one of the Legislature's signature accomplishments this year. They also again failed to reach consensus on funding for a backlog of billions in needed road repairs.

Brown's willingness to spend heavily on housing was seen as a notable concession for a governor who has been both skeptical of the value of housing subsidies and eager to save for a recession he warns is coming.

There was wide opposition to Brown's proposal from dozens of worker, immigrant, environmental and tenant groups throughout California. They say forcing development "by right" is deeply undemocratic, giving real estate interests too much power over vulnerable residents who could see their homes razed for retail centers that lack sufficient affordable housing units.

 

 


Development with 25 percent affordable housing raises bar in SF

By Emily Green

August 18, 2016

The 1515 South Van Ness development will be 25 percent affordable housing without subsidies or zoning allowances.


For the first time, a new housing development in San Francisco is set to rent 25 percent of its units at below-market prices without receiving a city subsidy or being allowed to bypass zoning restrictions in exchange, signaling a new era in the fight over how much affordable housing developers must provide.

Last week, as approval of its project at 1515 South Van Ness in the Mission District appeared to be in jeopardy at the Planning Commission, Lennar Multifamily Communities said it would rent 39 of the 157 planned units to low- and middle-income families.

The decision instantly raised questions: Will 25 percent affordable become the new standard? Did Lennar set an impossibly high bar for other developers? And how much affordable housing can developers really offer and still turn a profit?

One thing was clear, said Supervisor Jane Kim, who sponsored a ballot measure in June to require developers to provide more affordable housing. “I don’t know if it’s going to be a new standard, but it’s going to be a hell of a lot harder for developers to say they can’t do 25 percent for that project size,” Kim said after the Planning Commission approved the project.

Projects that have reached higher affordability percentages are huge developments and are built on city-owned land or exempt from certain fees. The Giants’ 8-acre development along Mission Creek, which boasts 40 percent affordability, is being built on city-owned land. The $1 billion development at Fifth and Mission, known as 5M, will have 40 percent affordability, but the city has forfeited millions of dollars in fees to help subsidize the units. (The 5M developers are Forest City and Hearst Corp., which owns The Chronicle.)

The project at 1515 South Van Ness became the first development to reach 25 percent affordability without a city subsidy because of a last-ditch effort to win approval from the Planning Commission, which had appeared prepared to side with opponents and delay approval in the days leading up to its meeting last week.

Critics said the design was boring and, at six stories in a neighborhood of two-story buildings, too large. They said the 81 parking spaces could be used to build more affordable housing and the developer should do more to preserve legacy businesses by providing more subsidized commercial space.

But the key factor in the approval process was how much affordable housing it would offer. Lennar insisted it could not provide more than 20 percent. Housing activists in the Mission wanted 50 percent but could live with 35 percent.

Behind the scenes, the mayor’s office leaned on Lennar to up its affordable housing to 25 percent and to meet the obligations set in Proposition C, a ballot measure passed in June that requires new developments to sell or rent 15 percent of units to low-income families and an additional 10 percent of units to middle-income families. The Board of Supervisors is expected to revise those requirements based on a feasibility study now in the works.

While Prop. C doesn’t apply to 1515 South Van Ness because the project was far enough along in the permitting process when the measure passed, members of the Planning Commission indicated they would approve the development if it met the new affordability standard.

“That clinched it for me,” said Planning Commissioner Dennis Richards.

But Richards said there is always a dance with developers to get them to offer more affordability.

“I met with (Lennar) on Monday and they said, ‘We absolutely cannot go any higher than 20 percent (affordable) — that’s it,’” Richards said. “Then all of a sudden on Thursday morning they go to 25 percent. It trains you to believe their best and final offer is not their best and final offer.”

Lennar said it agreed to 25 percent because it figured out how to make the numbers work and still get a profit. But the fact that the project was in jeopardy — and the pressure from the mayor’s office — also appeared to play a key role.

The parent company of Lennar Multifamily Communities, Lennar Corp., is also developing the 750-acre, 10,000-home Shipyard Project at Hunters Point.

As the deal currently stands, 15 percent of the units at 1515 South Van Ness will be priced for people making up to 55 percent of the area median income — $56,050 for a family of four. An additional 10 percent of the units must be priced for middle-class workers earning up to 100 percent of the area median income, or $101,900 for a family of four.

Jeff Buckley, the mayor’s housing policy adviser who helped broker the deal with Lennar, said it showed that “25 percent can work in certain instances with certain developers who have the ability to leverage their resources.” But, he added, “I don’t think it’s an indication across the board that it works in every instance.”

Peter Schellinger, vice president of development for Lennar Multifamily Communities, said the company was able to make the numbers work because it moved the development into a “build to core” fund — a fund to hold investments that is designed to yield a more conservative return.

But he warned that other developers would not be able to do the same because few had access to such funds.

Eric Tao, whose company, AGI, has built more than 1,000 units in SoMa and the Mission, said he was “surprised” that Lennar could make the numbers work for 1515 South Van Ness.

“For us right now, until land value resets, 25 percent (affordable) doesn’t work,” Tao said. “We would actually lose money.”

John Elberling, executive director of the affordable housing developer TODCO, also cautioned that 25 percent may not become the new norm.

“We need to see Lennar’s numbers and understand their economic analysis to say if it applies more broadly.”

Both Elbering and Tao sit on the advisory committee that is making recommendations to the city controller for the feasibility analysis to determine the optimal affordable-housing requirement without jeopardizing development.

While the 1515 South Van Ness project will factor into that analysis, the project itself may yet encounter trouble.

The Board of Supervisors still has to approve it. Spike Kahn, an artist in the Mission and founder of Pacific Felt Factory, a nonprofit art facility, said she planned to appeal.

She said the Planning Commission should have waited to approve the project until the supervisors passed pending legislation establishing a special use district in the neighborhood that could require higher levels of affordable housing compared to elsewhere in the city.

“We just feel like we are a month away from really concluding the different rules and regulations of how best to help preserve this district, she said.

If she had her way, Lennar would sell the property back to the city, which would then build 100 percent affordable housing.

“We wish they wouldn’t be here making money off the Mission, when they could be making widgets and money somewhere else,” she said.

Emily Green is a San Francisco Chronicle staff writer. Email:  This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 

Mission District Housing Project Reaches 25 Percent Affordable

By Joe Rivano Barros

August 12, 2016 12:30 pm

 

A market-rate housing project reached an unprecedented 25 percent affordable housing on-site at Thursday’s Planning Commission hearing after a last-minute attempt by its sponsor to quell community opposition.

“We heard loud and clear: 25 percent, supported by rational research and the data, is the number,” said Peter Schellinger, vice-president in Northern California for Lennar Multifamily Communities, the developer of the project at 1515 South Van Ness Ave. at the corner of 26th Street and South Van Ness Avenue.

That level was not enough for Mission District activists, however, who wanted more time to negotiate with the developer to bump up the affordable housing even more. They said the project would set a precedent in the neighborhood and that it should be held to a higher standard.

“This [project] deserves to be thoroughly vetted to make it work,” said Erick Arguello, the president of the neighborhood association Calle 24.

That opposition came just minutes after activists had unanimously supported a smaller, four-story project at 2600 Harrison St. at the corner of Harrison and 22nd streets. Activist support for market-rate projects in the Mission District is rare, and planning commissioners themselves were surprised at the cooperation between activists and the developer.

“I never thought I’d hear folks from this part of town talk about their support of a project,” said Dennis Richards, the vice-president of the Planning Commission.

Both market-rate housing projects — which will bring 176 units to the neighborhood — were approved unanimously by the commission and will likely be built in the next few years.

Housing Project a Template for Developer-Activist Negotiation

The 19-unit development at 2600 Harrison St. went first before the commission. The four-story building would replace a shuttered warehouse and create a small ground-floor light industrial space below housing.

Arguello said the project’s small size did not warrant the fighting that accompanies larger developments, and that early sit-downs between activists and the developer identified concessions that appeased activists and eliminated opposition.

Namely, the developer will pay a $1.1 million fee for affordable housing — in place of building below-market-rate units on-site — to the city’s Small Sites Program, in which the city buys buildings with less than 25 units, often keeping rental tenants in place and preserving the buildings as affordable housing in perpetuity.

Speaker after speaker supported the project, saying it should serve as a model for negotiations between housing activists and private developers.

“We think that this is the kind of process we’d like to see” for other projects, said Peter Papadopoulos with the Cultural Action Network, which formed to oppose the embattled 335-unit project at 2070 Bryant St. between 18th and 19th streets.

Arguello said “the most important piece” of the project was the small sites acquisition money. He would like to see the such fees paid by other housing projects in the neighborhood instead of the general in-lieu fee, which goes to a city-wide affordable housing fund.

The small sites money could be used to buy buildings in the Mission District, rather than fund below-market-rate construction outside the neighborhood, Arguello said. He praised the project’s sponsor for speaking to community groups early to strike a deal for the project.

The “Titanic Mess on South Van Ness”

The jovial atmosphere didn’t last long, however, when activists took to the podium to speak against a 157-unit development planned for 1515 South Van Ness Ave.

“The units that you’re gonna build ain’t for you and they ain’t for me, folks,” said Fran Taylor, a transit advocate who said the market-rate development would “squeeze out” those who could not afford the building’s high rents and “change the demographics” of the neighborhood.

Arguello and Papadopoulos, part of the organized opposition to the project, struck a conciliatory tone and said they needed a little more time to negotiate with the developer. They hoped to bump up the affordable housing on site and remedy other concerns, like the design of the building and its traffic impact.

The project calls for 157 units in a six-story building, with ground-floor retail space and six small trade shops that the developer said would be made available at 50 percent below-market-rate rents. The project would replace the shuttered McMillan Electrical warehouse and sits next to a plannedfully affordable senior housing complex.

Of particular concern was the size of the project and the precedent it would set for development in the Latino Cultural District, an area from Potrero Avenue to Mission Street and 22nd Street to Cesar Chavez Street designated a “Latino cultural and commercial district” by the city in 2014 in a symbolic proclamation.

Supervisor David Campos called for a halt to market-rate housing in the area last week — a request that was ignored by the commission on Thursday — until a study could be done to note the impacts of such housing on the area’s residents and businesses.

Arguello worried that the larger 1515 South Van Ness Ave., unlike 2600 Harrison St. building, would set more of a precedent for development in the cultural district and that he wanted between 30–35 percent affordable housing on-site.

That came even as Lennar Multifamily Communities, the developer and a subsidiary of the housing giant Lennar Corporation, offered an unprecedented 25 percent affordable housing on-site, or 39 units out of 157. That level has not been accomplished in San Francisco without city subsidies or upzoning, Planning Commissioner Rich Hillis noted.

“This project has the highest level of affordable housing on-site that we’ve seen,” he said.

The percent affordable is identical to the requirements set in place by Proposition C, the ballot measure that set affordable housing levels at 25 percent city-wide for new projects.

The 1515 South Van Ness Ave. project, however, was grandfathered in and is not required to meet the 25 percent threshold. It went from 13.5 percent affordable to almost double in a last-minute bid to win community approval.

The 25 percent level was meant to be re-examined after a feasibility study was done that would note whether project could afford to build at that level of affordability. That study has been delayed until the end of August.

The below-market-rate units at 1515 South Van Ness Ave. would be reserved for both low and moderate-income tenants. Fifteen percent of the total units would be available to those making up to 55 percent of area median income, or $53,300 for a family of three, while the remaining 10 percent would go to those making up to 100 percent of area median income, or $96,950 for a family of three.

Speakers themselves were divided roughly half in support and half against, some saying the project was just one of many needed in San Francisco to curb soaring rental costs and put a dent in the city’s — and neighborhood’s — housing crunch.

“As much as some folks might want, it is not possible to address the Mission District’s housing problem by putting a wall around [the neighborhood],” said Tim Colen, the departing director of the Housing Action Coalition, a pro-development advocacy group.

Planning commissioners heeded those calls on Thursday, saying the project had reached a good affordability level and approving it unanimously. Negotiations will continue between opponents and the developer, and opponents said they were not sure whether they would appeal the project but hoped to avoid the step and reach a deal instead.

 

 

Exclusive: The Mayor’s Allies Are Gearing Up for a Recall Battle

Joe Eskenazi August 1, 2016

But their fundraising efforts may not be all that they seem.

Mayor Ed Lee's backers have been asking loyal donors to make it rain. But why?

This year has been a miserable one for Mayor Ed Lee, who can barely stick a whisker outside of Room 200 without being booed by protesters. Now he is the target of a recall petition carried by the group of activists who previously brought us the ill-fated Mission Moratorium. In the age of Trump, God knows that anything can happen. But it’s fair to say that few veteran political professionals in San Francisco believe that the recall will ever make it before voters. “I consider it dead on arrival,” says mayoral frenemy Rose Pak.

But that hasn’t stopped Lee’s closest backers from using it to their advantage. As San Francisco has learned, supporters of the mayor have been quietly soliciting big bucks to battle a potential recall—an effort which many would-be donors suspect is less about combating the recall than about amassing a war chest for future mayoral priorities.

According to several sources, powerhouse Democratic fundraiser Stefanie Roumeliotes has been deployed by Team Lee to hit up deep-pocketed individuals. “This is in its nascent stages,” says one donor who received a call from Roumeliotes, and who describes the amount of money being solicited as a “five-digit ask.” Says another, who was rankled by the fund-raising call, “Most of the people who are being asked to give big checks know the recall is total bullshit. Everyone knows it’s not going anywhere.” (Roumeliotes—who on Friday also sent out emails for an Aug. 24 $100,000-a-couple Hillary Clinton gala in Piedmont—has not yet returned calls.)

The recall, agrees another longtime Lee supporter “has no legs.” And yet there’s a great deal that could be done with the heaps of money that the mayor’s allies hope to amass in the next few months. Unlike an official re-election campaign, donations to fight a recall are not bound by any contribution limits. This means those funds could be transferred to a committee that has “like restrictions” on money. In other words, dollars ostensibly amassed to fight a recall against Ed Lee can instead be used to fight...well, anything.

And, as it turns out, there are quite a few upcoming ballot measures that are not to Lee’s liking, and could use a five-digit infusion of capital. Progressive supervisors have saturated the November ballot with initiatives that would limit mayoral power—forcing supervisorial appointments onto the Municipal Transportation Agency board; creating an Office of the Public Advocate; and forming a commission to oversee the Mayor’s Office of Economic Workforce and Development, the Mayor’s Office of Housing and Community Development, and the Department of Real Estate.

These measures, in fact, were all deemed objectionable in a July 27 email penned by Jay Cheng of the San Francisco Association of Realtors, a Lee supporter who invited a bevy of pro-business and development advocates and moderate mayoral and board staffers to an August 3 morning meeting to be hosted by the Chamber of Commerce. The agenda: “putting together a campaign to oppose the bad government amendments” and “forming a coalition to oppose them on the November ballot.” The email titled Wednesday’s forthcoming get-together the “Exploratory No Bad Government Campaign Meeting.”

There is—to be clear—no proof of any direct connection between Roumeliotes’ fund-raising calls and the No Bad Government Campaign. But, should the recall fizzle, as many in the mayor’s orbit expect it to, that money likely could be redeployed to aid Cheng’s group or another with similar motivations. When asked if the anti-recall money will eventually be repurposed into a fight against other measures, Pak is resolute: “Oh, I’m sure. Let’s be honest about it.”

 

 

 

Exclusive: Huge S.F. housing projects in limbo as key study is delayed

By Ronald Li, August 2nd, 2016

In June, voters passed Prop. C, more than doubling San Francisco's affordable housing requirement to 25 percent of units for new market-rate projects. It was one of the biggest policy shifts in years, but the percentage could be temporary.

The Board of Supervisors passed trailing legislation that stated that a feasibility study would be released by July 31, which could lead to a change in the requirement based on the economic analysis.

But the study hasn't been completed on time, and the target release date is now the end of August, said Ben Rosenfield, the city controller, whose office is overseeing the study.

 

The delay is bad news for developers who have been awaiting the study's completion before moving forward with projects worth billions of dollars in potential investment. Now the real estate community will have to wait at least a month longer before it has more economic clarity. The Housing Action Coalition estimated in June that at least 1,600 units in the current pipeline will be hit with Prop. C and many may not get built as a result.

Rosenfield cited the complexity of the study and the time it took to hire firms as reasons for the delay.

"The initial legislative timeline that was established was very aggressive," said Rosenfield. "The questions that are being asked here are complicated."

Rosenfield said that his office had been communicating to supervisors that the study could be delayed given its complexity.

"I don't think this is a surprise to any of the sponsors," said Rosenfield, referring to the Board of Supervisors members who supported the bill, including Jane Kim and Aaron Peskin.

An eight-member technical advisory committee was established to oversee the study, with the Board of Supervisors and Mayor's Office each appointing half of the members. A City Hall source said that the Board appointed Whitney Jones of nonprofit affordable developer Chinatown Community Development Center, SoMa activist John Elberling of Todco, Dan Adams of nonprofit developer Bridge Housing and Terence Cordero.

The Mayor appointed Eric Tao of market-rate developer AGI Avant, who also represented market-rate developers in the Prop. C negotiations. The other mayoral appointees include Lydia Tan of Bentall Kennedy, Jesse Blout of market-rate developer Strada Investment Group and Emily Johnstone of AFL-CIO Housing Investment Trust.

Three firms have been hired to perform the study: Century Urban, Rick Jacobus' Street Level Advisors and Blue Sky Consulting Group. The cost of the study will be absorbed by the Controller's office budget, said Rosenfield.

The advisory group will meet on August 24, and the study could be released publicly shortly afterwards.

"The deadline was a firm deadline," said Supervisor Peskin, a co-sponsor of the ballot measure. But he noted that the Board of Supervisors is on recess during the next three weeks and likely wouldn't have acted on the report until September anyway, so the delay was "no harm, no foul."

Housing projects proposed before this year have been grandfathered in and will have to provide affordable housing between 13 and 14.5 percent of units, far below 25 percent. But projects proposed this year and later are currently subject to the full 25 percent requirement, which developers have said could make them financially unfeasible.

One of the biggest projects in limbo is the Prado Group and SKS Partners' 560-unit redevelopment of the former University of California, San Francisco campus in Laurel Heights. Although the large project has been planned for the site for years, a formal plan wasn't filed until this year, meaning the project would currently be subject to the full 25 percent affordable housing requirement.

"We will be considering the implications once the study has been completed and the Board has made its policy decision with respect to the study's findings," Dan Safier, CEO of the Prado Group, said in June.

One possible change in policy following the study is that different areas of the city could have different affordability requirements: For example, the Excelsior's affordability requirements could be lower compared to downtown SoMa, given the difference in rents. Earlier this year, Oakland voted to establish affordable housing fees that varied between three zones in the city.

Peskin said that the delay had nothing to do with the other studies that the City Controller's Office had to complete in recent weeks on potential ballot measures such as the "tech tax" and replacement of industrial space.

Peskin said that the Board could vote on policy changes as soon as September, but depending on the complexity of the conclusions, a decision could come weeks later.

"I don't want it to languish," he said.

 

 


San Jose sues Santa Clara over CityPlace project


By Brice Druzin, July 29th, 2016

 

San Jose filed a lawsuit Friday against Santa Clara over its $6.5 billion CityPlace project, dramatically escalating a fight that's been brewing between the neighboring cities for months.

 

 

“The project is irreconcilably inconsistent with the City of Santa Clara's General Plan in material respects that create profound environmental impacts which, unnecessarily, have a regional effect,” attorneys for San Jose wrote in the 16-page complaint, filed in Santa Clara County Superior Court.

San Jose has sharply criticized the Related Companies' massive mixed-use project for not including enough housing to offset the estimated 25,000 jobs that will be created. City officials say the result will be increased housing demand in San Jose, lowering the city's already dismal jobs-to-housing ratio and putting increased pressure on overstretched services and infrastructure.

The move comes the same week that Santa Clara hired expert land-use attorney Tina Thomas, who promptly filed information requests with San Jose for 15 projects in the city, an obvious search for material that could potentially be used in litigation under the California Environmental Quality Act.

The battle between the two cities highlights the competition for regional economic development opportunities and the burdens of housing the workforce that comes with those projects.

For Santa Clara, CityPlace promises to give the city a central gathering place, something it has long lacked. It also will generate a huge financial windfall — officials say that taxes, fees and lease revenue will generate nearly $17 million a year, plus millions more for schools and transportation improvements.

For San Jose, CityPlace represents more competition to the city's main jobs district, North San Jose.

This isn't the first time the two cities have tangled in court. Last decade, the city of Santa Clara, Milpitas and Santa Clara County sued San Jose over its North San Jose plan, which allowed 26.7 million square feet of new industrial/R&D development and 32,000 residential units.

San Jose settled, and as part of a 2006 deal agreed to spend tens of millions of dollars in transportation improvements above and beyond what was called for in the North San Jose plan. That is one reason why San Jose’s traffic impact fees are so high for North San Jose, something that has been seen as a barrier to ground-up construction in the district.

San Jose city officials did not immediately return a call and email for comment.

 

Offers of free rent in San Francisco dent REITs

By Riley Mc Dermid, July 27th 2016

 


A glut of high-end apartment construction has hit San Francisco and New York City real estate investment trusts hard, Bloomberg reports, as landlord scramble to get tenants into high-cost markets where they have tons of supply from which to choose.

Equity Residential, the largest publicly traded U.S. multifamily owner, said Tuesday that it would cut its revenue forecast down to 3.5 to 4 percent — its third cut this year, trimmed from 5 percent in April. Shares of Equity Residential (NYSE: EQR) have already fallen 14 percent this year.

“After five consecutive years of exceptional fundamentals, elevated levels of new supply and slowing growth of higher-paying jobs in San Francisco and New York have created headwinds,” Chief Executive Officer David J. Neithercut said in a statement.

The country's second-biggest apartment REIT, AvalonBay Communities Inc.(NYSE: AVB), said it had been giving lease-signing concessions worth $300,000 to renters in the second quarter.

"[That's] four times more than in the same period a year earlier, Chief Operating Officer Sean Breslin said on the company’s earnings call Tuesday," Bloomberg reports. "The sweeteners, in the form of free months of rent, were greatest in New York, Northern California and New England."

Avalon Bay Chief Executive Officer Timothy Naughton said the company did not see the same "seasonal lift" its come to expect during the second quarter, which also saw weaker job growth in the markets where it owns property. Growing supply has continued to flood the San Francisco market, as well.

"In San Francisco, about 5,100 new units, the most in 26 years, are expected to be listed for rent in 2016, data from research firm Reis Inc. show," Bloomberg reports.

 

 


Pro-development lawsuit moves forward, escalating East Bay housing battle

 

By Roland Li , Jul 19, 2016

 

lawsuit against Lafayette claiming that the East Bay city illegally blocked a 315-unit residential development in favor of a smaller project has won a key ruling that appears to allow it to go to trial.

Contra Costa County Superior Court Judge Judith Craddick released a preliminary decision on Tuesday afternoon overruling the city's claim that the plaintiffs didn't have standing to sue and filed their petition too late. A hearing on the case is scheduled for Wednesday morning.

 

 

Members of the pro-density advocacy group San Francisco Bay Area Renters Federation filed the suit under the state's Housing Accountability Act, which states that local agencies may not reduce the density of a project that complies with local zoning unless there is a “specific adverse impact on public health or safety.” The plaintiffs argue that the city should have approved developer O'Brien Homes' proposed 315-unit project at 3233 Deer Hill Rd., which was targeting middle-income tenants, rather than 44 single-family homes, which were approved last year.

The case could have statewide implications, as the plaintiffs say they are prepared to sue more California cities that they allege have violated the law by downsizing or rejecting housing projects. Sonja Trauss, founder of the San Francisco Bay Area Renters Federation and the lead plaintiff in the case, said that her group is prepared to take more legal actions against cities that could include Berkeley, Fremont and Los Gatos.

The legal case is another salvo in an escalating battle over land use and disagreements over project size that has erupted in city planning hearings, public meetings and other lawsuits throughout the Bay Area. But in contrast to other legal actions that seek to block or shorten projects, the plaintiffs are pushing to build more units, with the central belief that more production of housing, even luxury units, will eventually lower the price of housing for all tenants.

That stance of "YIMBYism," or "yes in my backyard" pro-development advocacy, has made the group of mostly young renters a surprising ally of developers and corporate real estate investors, and also a foe of some progressive politicians.

"California has a crisis situation on its hands where there simply aren't enough places for people to live. As long as municipalities try to keep out lower-income families and young people, the housing crisis will continue," said Ryan Pattersonof Zacks, Freedman & Patterson, the attorney representing the plaintiffs in the case.

"By calling it to the court's attention that municipalities are avoiding state law to keep these populations out, this case can potentially put a stop to that illegal activity," said Patterson.

To fund the legal case, Trauss has raised $126,000 from Yelp Inc. (NYSE:YELP)CEO Jeremy Stoppelman, a supporter of more housing production, as well as $300,000 over two years from Open Philanthropy Project, which is largely funded by Facebook Inc. (NASDAQ: FB) co-founder Dustin Moskovitz and Cari Tuna's Good Ventures.

Steven Falk, Lafayette's city manager, declined to comment. He previously saidlast September that Lafayette was encouraging housing production in its downtown, particularly closer to public transit, but the Deer Hill site was further from BART and lower density was more appropriate on the site.

"Nobody disputes the argument that more housing supply is needed to reduce housing costs in the Bay Area. But SFBARF’s push to indiscriminately build housing units in every vacant suburban location, regardless of context, is poorly thought through, rushed, and runs counter to 50 years...of intelligent land use planning," Falk wrote in an open letter. "While SFBARF may have a point to make with its Sue The Suburbs effort, it started in the wrong place, and is wasting its time and money suing the wrong city."

The suit also names developer O'Brien Land Co. LLC and Anna Maria Dettmer, the land owner of the site, as respondents. Allan Moore of Wendel Rosen, attorney for O'Brien Land Co. and Dettmer, didn't immediately respond to a request for comment.

"I think that a lot of municipalities and developers are looking to this case to indicate whether cities can get away with the old games," Patterson said. "The Bay Area Renters Federation is poised to continue this fight elsewhere."

 

 

Regulatory Costs Inflate New-Home Prices, Builders Say

Fees for park space, stormwater devices, endangered-species surveys; ‘I don’t build affordable houses anymore’

By  CHRIS KIRKHAM

July 22, 2016

 

As the cost of construction permitting has risen over the past decade, Atlanta home builder Dennis McConnell has taken a new approach with customers.

He now itemizes the regulatory costs so buyers can see firsthand why the price tags for his houses are so high. Among recent charges he has outlined: $8,000 for a new type of storm-water capture device required for each house, $3,500 for customized architectural plans required on every lot and about $15,000 to remove a tree from the property.

With every new regulation, “the more expensive it becomes,” said Mr. McConnell, president of Healthy House of Georgia. “I don’t build affordable houses anymore.”

As home builders pick up the pace after a punishing downturn, they face a bevy of new regulations and higher fees governing everything from environmental quality and park access to regulations on the amount of brick on a home exterior. Builders say many of the new requirements are well-meaning, but added up they translate to higher costs that are passed on to prospective purchasers.

For the past five years, the median new home price has been 32% to 38% higher than the median price of a resale home, according to data from the U.S. Census and the National Association of Realtors, the largest such gap since the figures started being tracked in the 1960s. Compliance costs are one of many factors affecting prices of new homes, economists said. Builders have also focused more on the move-up and premium markets throughout the economic recovery, meaning a tendency toward larger, pricier homes.

Several recent studies have documented how increased regulatory and permitting costs affect prices. A report by John Burns Real Estate Consulting in Irvine, Calif., concluded that new homes have become “permanently more expensive to build” because of increased regulations.

The study surveyed more than 100 building-industry executives, asking for examples of costs that didn’t exist a decade earlier. New regulations included a survey required in some areas of the Midwest to determine whether endangered bats are on a property, which builders said can cost $10,000 or more for each new development.

 

 

A report in May from the National Association of Home Builders found that the average cost for builders to comply with regulations has risen nearly 30% over the past five years. A study from housing-research firm Zelman & Associates calculated that local “impact fees” charged to builders and developers to pay for services such as roads, sewers and parks have climbed 45% since 2005 to an average of $21,000 per home across 37 major markets.

City officials argue that regulations and fees have increased at a reasonable rate and account for a much smaller portion of final home prices than costs such as land and labor.

“Impact fees don’t set the price of a home. The market sets the price of a home,” said Ed Hunzeker, administrator of Manatee County, Fla., which recently voted to raise impact fees for new developments by 80% or more over the next three years after cutting them during the economic downturn. “Somebody has to pay for new growth—the new roads, the new sewer lines, the new infrastructure required.”

In places such as Florida and California, where a 1978 ballot initiative restricts increases in property tax assessments, impact fees on builders and developers have long been a way to fund essential services.

The increases have prompted more pushback from developers in Texas, where fees have historically been lower.

Dallas has been one of the nation’s fastest-growing regional economies, where suburban development north of the city has turned onetime ranch communities operating on septic systems into sought-after, full-service destinations for families.

In the town of Prosper, north of Dallas, the city requires a dedication of one acre of park space for every 35 units (single- or multifamily) and a park fee of $1,500 to $2,000 for each unit.

 

Markings at the front entrance of the Atlanta home being built by Dennis McConnell showing how high the landscaping grade will reach. PHOTO: KEVIN D. LILES FOR THE WALL STREET JOURNAL


Last year, the city finalized a 10-year master plan for parks that proposes a new system of trails, ballparks and other recreational sites to accommodate a population expected to increase from 15,000 to 70,000. Nearly half of all residents surveyed for the parks plan said the best way to pay for the services would be through increased fees on developers, while less than 4% said increased property taxes would be the preferred method.

“There’s an expectation in the community that as the town grows, they don’t have to go to an adjoining municipality for a soccer game or for baseball fields,” said John Webb, the town’s director of development services.

Matt Robinson, general manager with Walton Development and Management in Dallas, said developers should pay their share for new services. But too often he feels that developers are an easy target when cities plan for future growth.

“When you do a parks master plan, it’s like asking somebody ‘Do you want a Ferrari or do you want a Geo Metro?’” Mr. Robinson said. “Everybody’s going to want the Ferrari.”

In other cases, builders argue that regulations from different authorities are in conflict. In Atlanta, for example, builders are now required to install underground stormwater devices as wide as 50 feet on every lot to better filter runoff.

The city also has a strict tree-preservation ordinance with penalties of up to $60,000 an acre for illegally clearing trees on lots. Mr. McConnell recently spent an extra three months redesigning a home to both build the stormwater system and avoid a $15,000 charge for taking down two large oak trees on a property.

“It requires these complex site plans not for life safety issues, but so they can control whether or not the house is too tall, whether it has the right look, or if the tree can be saved,” he said.

 

 


Economist Says Red Tape Is to Blame for Housing Crisis


But cutting it back would mean changing the way San Francisco feels about, well, San Francisco

BY ADAM BRINKLOW JUL 22, 2016

 

It’s the $1.4 million dollar question: How do we build more housing in San Francisco?

For a lot of locals, of course, the answer is that we shouldn't. These people would rather we concentrate on measures like affordable housing and reviving rent control for working people, and then let the wealthy worry about what a home costs for everyone else.

But the supply-side argument has gained ground in the last few years anyway. Note the "bipartisan" spiritbehind new in-law legislation, for example. And although building moratoriums get grassroots support, voters have repulsed them.

So if building more is not necessarily a dirty word with everyone these days, how best to make it happen?

 

Ralph McLaughlin, an economist with the real estate site Trulia, says he’s spotted a bugbear in the process: He projects that for every month you tack onto the average wait time for entitlements, the city’s overall housing elasticity (the measure of how quickly and easily the local housing market can jimmy up new supply) drops by 0.03 points.

 

For perspective, an elasticity score of 1 indicates that for every 1 percent increase in the price of housing in the city, that city responds with a 1 percent increase in new building. Trulia finds that Las Vegas has an elasticity rate of 1.17. Washington DC has 0.59, and New York City a mere 0.06.

And San Francisco? One of the lowest in the nation, a spare 0.04. The city’s housing stock has increased only 12.3 percent over the last 20 years.

 

Red tape is the culprit, says McLaughlin. Streamline the process, and you‘ll get better results. While it’s hardly a remarkable observation that A) building in San Francisco takes forever, and B) delays cost money and shrink development goals, McLaughlin testifies that this is a bigger problem than, say, restrictive zoning, and should be our number one concern.

Is he right? Well, he’s definitely not alone: The Federal Reserve said roughly the same thing back in 2012, for example.

Bloomberg pointed the finger at what it called the "one-sided environmental review" process in 2013. (Mostly a state mandate, of course.)

And UC Berkeley economists warned that "long permit-processing delays have all been associated with increased housing prices" back in 2005.

If you wanted to argue that City Hall should take some scissors to its red tape, you wouldn’t have trouble finding experts and commentators to back you up. So why might it not happen?

 

One counterargument is that elasticity is a potentially misleading statistic. McLaughlin himself points out, for example, that the broader context of Hurricane Katrina means that New Orleans’ terrible elasticity rating really has nothing to do with city politics.

The testimony of sources like the Fed and real estate sites will also be viewed with skepticism by some critics simply because they’re the Fed and a real estate site.

But there’s also the fact that even the most rabidly pro-growth San Franciscan probably doesn’t want to build like Vegas. As SPUR’s Ben Grant observes, "A city like LA thinks, hey, we're going to hell anyway, build whatever you want. San Francisco is convinced that it's perfect already."

Many label that attitude "selfish" and mere NIMBYism. But some rules are hard to argue with. I once asked former supervisor Bill Maher about the popularity of Prop K, the voter-approved 1984 law that stymies most tall buildings that would cast a shadow on public parks. Maher’s reply: "People like the sun."

 

Yes, sunlight has good PR. And so does San Francisco, as it exists now. Which is why "make it easier to build" is a simple plan with an incredibly complicated execution.

Building more would help, but as Forbes observes, it’s a trade-off. If you want to untie builder’s hands, skeptics have to be convinced that the trade is a good one.

 

 



Mayor’s veto could improve housing

By Tim Cohen, July 21st 2016

 

 

There’s a high-stakes chess game playing out in the state Capitol that hasn’t attracted the public attention it deserves, yet it could cause a tectonic shift in whether California finally addresses its chronic housing affordability and displacement crises.

Gov. Jerry Brown recently introduced legislation, loosely called “by-right housing,” that is favored by people who want California to dramatically increase housing production as a solution to its crushing housing shortage. In fact, by-right housing is standard in almost all American cities, but is an alien concept to San Francisco. Its impact could be enormous because it would result in the state taking some authority for making land-use decisions away from local jurisdictions. On the other side are interest groups to whom the governor’s policy is anathema. They are scrambling to figure out how to stop him and retain control over housing policies at the local level. Their rationale is that “community-based” decisions have a legitimacy that the state’s decisions always lack. Among those trying to stop him are most of The City’s supervisors.

Why did he do it?

Gov. Brown offers two basic reasons for why he introduced this surprising change in policy, which was probably informed by what he learned during his tenure as mayor of Oakland.

First, the only way forward is reforming our rules. Based on historical evidence, Brown believes local jurisdictions “don’t get it” and have worsened the housing shortage over the last few decades by using their rule-making authority to prevent, restrict or delay housing production

Second, and even more astonishing from a liberal Democratic governor, is that he bluntly said it is not financially feasible for the state to allocate public money to subsidize affordable housing in the amount needed to significantly improve the housing shortage.

The sides are drawn

Among the many notable supporters of the governor’s proposal are the mayors of San Francisco, Oakland and Los Angeles, as well as several large statewide affordable housing and anti-poverty groups. All have asked for sensible amendments to his proposal, but none have disputed the basic premises of the debate: California’s housing and land-use rules need drastic overhauling.

Recently, a majority of the Board of Supervisors — Eric Mar, Aaron Peskin, Jane Kim, Norman Yee, David Campos and John Avalos — passed a resolution that cleverly says they would support by-right housing only if it includes amendments that would, in effect, neuter it. They clearly see Gov. Brown’s proposal as a threat to their traditional authority over housing and land use.

The crux of the supervisors’ argument is this: They do not want any restrictions to the existing power of local residents to stop or delay new housing development. In the supervisors’ words, they insist “the approval of major developments [should] continue to allow for public review and local discretionary approval as is currently provided by local laws.” They say that when “neighborhoods and communities lack the ability to raise objections to major new projects through a public process, then the dangers of such adverse and disparate impacts are amplified.” To them, building more housing is dangerous.

These commonly held views explain why so many local jurisdictions around California have trouble approving new housing in the amount that the state’s housing shortage demands. These supervisors insist “local discretionary approval” is a civic right, but the governor says their antiquated approach is a major cause of the problem.

Mayor Lee should veto

What seems clear is that San Francisco’s housing crisis is not unique. Cities around the state face almost identical problems that are the result of entrenched interest groups’ long-standing power to strangle housing production. Mayor Ed Lee is being asked by a wide array of local constituencies to veto the supervisors’ misguided resolution. If he wants to help solve the housing shortage, Mayor Lee will need to confront the proponents of this tired, old thinking. Our times demand a new approach. You could help by contacting Mayor Lee today and ask him to veto the supervisors’ resolution.

 

 

SF Democrats get down to business, bickering after June election

By Emily Green

July 21, 2016

 

 

The members of San Francisco’s Democratic County Central Committee met Wednesday night, pledging that they wanted to create a new chapter of unity and civility. It didn’t take long for that veneer to rub off — all of about 30 minutes, in fact.

The meeting marked the newest chapter in the DCCC after progressives wrested control of the committee from the moderates in the June election. That’s important because the party makes endorsements in local elections and can spend money promoting those candidates.

The progressives wasted no time wielding their newfound authority Wednesday.

Out as chairwoman was Mary Jung, a lobbyist for real estate interests. Jung was so despised by the progressives that she was denied the authority to preside over the vote on whom should replace her.

That contest was between Planning Commissioner Cindy Wu and firefighter Keith Baraka. As expected, Wu won, on a 17-13 vote.

(One would be forgiven if they mistook Supervisor Aaron Peskin as president given his numerous comments on everything from procedural issues to how “the bloodletting” in the June elections is a great thing because it could lead to more unity.)

In their statements before the vote, both Wu and Baraka said they wanted to see more harmony in the party. But Wu’s decision to nominate Baraka as the party’s second vice president instead of first vice president generated a rebuke from Supervisor London Breed. She questioned why Baraka, who is African American and gay, couldn’t be the first VP, essentially the party’s No. 2.

Wu said the order of vice chair had nothing to do with importance but a question of what each position was charged with doing under the party’s bylaws.

That prompted John Burton, chairman of the California Democratic Party, to pipe in and say they were all arguing about a “bunch of B.S.”

Baraka, sitting quietly, took his name out of the running for first vice president. And then the members unanimously elected him second vice president.

The other vice president positions went to Petra deJesus, Pratima Gupta and Leah LaCroix — all minority women.

As for why anyone would want to be on the committee? Even some of the members were asking themselves that after the meeting.

 

 

Bay Area property tax assessments on a roll

 

By Kathleen Pender

July 9, 2016

 

 

Thanks mainly to rising property values and new construction, county assessment rolls — and therefore property tax revenue — have risen 6 to 9 percent in most Bay Area counties this year.

County assessors have until July 1 to complete their assessment roll each year, unless they request an extension. Most local counties have completed their rolls for 2016-17.

The gross roll is the assessed value of all taxable property in a county as of Jan. 1. In the Bay Area, the vast majority is residential and commercial real estate, but the roll also includes business property such as office and manufacturing equipment, plus boats and aircraft.

The net roll is the gross roll minus a few exemptions. It is the value subject to property tax, which is 1 percent statewide. If you add in voter-approved local taxes, it averages around 1.2 percent.

Property taxes go to public schools and community colleges; to county programs such as sheriffs, jails, courts and social services; and to cities within the county.

Most property owners will get their assessed values with their tax bill in October, although a few counties send out notices in June or July.

 

Market vs. assessed value: Assessed value should not be confused with market value. Property in California is generally assessed for tax purposes only when it is built or changes hands. Additions and major improvements are added to assessed value in between changes of ownership. Otherwise, the assessed value can go up only by an inflation factor not to exceed 2 percent a year.

Even though property values have skyrocketed, the inflation factor was about 1.5 percent this year and 1 percent last year, because it’s based on the California Consumer Price Index, which has been muted.

There are only a few ways assessment rolls can go up: by the inflation rate, when properties are sold for a price that is higher than the previously assessed value; when homes and commercial facilities are built; and when companies purchase equipment.

There’s one other way: If the market value of a property falls below its assessed value, the assessor must reduce its assessed value to its market value. This is a temporary reduction. As market values recover, assessors can bring the assessed value back up to where it would have been if the owner had never received the reduction.

During the housing crash, hundreds of thousands of Bay Area homeowners got reductions. In recent years, as home prices have bounced back, assessors have been unwinding those reductions, which adds to county tax bases.

County by county: In Santa Clara County, the net assessment roll increased by $30.9 billion — or 7.9 percent — to $419 billion. Almost half of that increase — $16.6 billion — came from changes of ownership, while $6.9 billion came from new construction. Of the new construction, 85 percent came from commercial and industrial development, Santa Clara County Assessor Larry Stone said.

Apple’s giant spaceship campus going up in Cupertino added $700 million to the county’s roll this year, on top of $820 million last year. Those figures are based on construction costs, and by the time it’s completed, they could total $5 billion. Stone expects that Apple will appeal its assessment, as will the owners of Levi’s Stadium, which hit the roll last year. “There’s nothing comparable to Levi’s Stadium, nothing comparable to what Apple will have. We expect there will be appeals,” Stone said.

Other big contributors to the county’s tax roll this year included Monticello Village in Santa Clara, an 825-unit apartment and retail complex that added $466 million in construction costs, and Samsung’s newly occupied North American headquarters in San Jose, assessed at $311 million.

In Santa Clara County, only 10,510 properties still had a lingering reduction this year, down from 22,436 last year and from about 136,000 in 2012-13.

In San Mateo County, only 2,874 homes still qualify for tax relief, down from 7,960 last year and 34,700 in 2011-12. San Mateo County’s net tax roll increased 7.6 percent this year. The city with the biggest gain was Menlo Park (up 12.5 percent), where Facebook has been expanding. Colma had the smallest increase (2.2 percent).

 

In Napa County, about 4,300 properties are still reduced, versus 6,100 last year and about 12,000 at the depth of the downturn in 2009-10, its assessor John Tuteur said.

Alameda County had 17,000 tax-relief properties this year, down from about 33,000 last year and more than 120,000 in 2010-11. Oakland has the most homes still in reduced status, Alameda County Assessor Ron Thomsen said. The city in Alameda County with the biggest increase in its property tax base this year was Newark, up 9.8 percent.

In Contra Costa County, the roll increased 6 percent, but the number of properties with older reductions was roughly the same this year as last, around 25,000. Although a lot of people had their values restored, some were added to the reduced list, Contra Costa Assessor Gus Kramer said.

That’s because home prices “ran up 10 percent from Jan. 1 to July 1 of last year. Then it was flat all summer, then it slowly fell off from mid-September through Dec. 31. Because of that, some people (about 1,000) who bought between June and September were entitled to a slight reduction,” based on their Jan. 1 market value.

In Solano County, 18,323 parcels still had the old reduction, down from a peak of 78,000 in 2012. “Our construction is slowly coming back, but it’s nowhere near where it was,” its assessor, Marc Tonnesen, said. In 2004-05 there were 2,400 to 2,500 buildings permits issued per year. “Now it’s around 500 to 600,” he said.

San Francisco’s roll increased 8.8 percent to $208 billion. Sonoma County had no numbers available Friday.

 

 

S.F. has a condo glut, with massive supply and dwindling demand, report says

By Riley McDermid    Jul 7, 2016


There are more condos now on the market in San Francisco than in the last four years, according to a report from real estate outfit Polaris Pacific, and there are even more under construction, swamping an already crowded market.

In the city alone, there are 1,037 new condos on the market, combined with 833 units that have already been lived in. Combine that with 2,560 currently under construction, and 5,688 lined up up to be built, and the city has hit its highest number of condos in five years, Polaris said.

In addition to a glut of inventory, certain sectors of the condo market are seeing cooling, according to a separate report from Paragon. You can read that report here.

 

 

"The S.F. market is clearly in some kind of transition, currently at a relatively moderate pace, hopefully signifying what is called a soft landing from an over-exuberant state," Paragon says. "The speed and scale of any further adjustment should become clearer over the second half of the year."

In addition, Paragon notes that luxury condo buyers are seeing less of a reason to splash out for high-end units in San Francisco, as more and more of them are being built and prices have wobbled.

"Year over year, the luxury condo market has seen a big jump in the number of listings and a significant drop in the number of sales," Paragon notes. "Among other factors, this market segment has clearly been impacted by increasing construction of luxury condo projects in the city."

Prices have continued to vary across the city, too, with the median price of a condo starting to flatten out, climbing only 2.7 percent in the last year after almost doubling since 2012. High-end neighborhoods that have favored condo developments have also seen their pricing dip, with the median price falling around $12,000 in SOMA in the last year.

 

 

Peskin 2.0? Back on the Board of Supervisors, the pugnacious politician is showing a softer side


Peskin's still making waves, challenging the mayor and pushing back on the city’s real estate and tech boom

June 24, 2016 by Ronald Li

 

Last year, on Dec. 8, a new yet familiar face strode into City Hall’s legislative chambers to a burst of applause.

Aaron Peskin had returned to the Board of Supervisors, representing District 3. A month earlier, the former Supervisor and Board president from 2001 to 2009 had re-emerged from private life. He defeated Mayor Ed Lee’s handpicked incumbent, Julie Christensen, batting away a candidate backed by hundreds of thousands of dollars from the tech and real estate industries.

 

Peskin said at his first Board meeting that he had no intention of returning to politics, but the city’s affordability crisis had become so severe that he felt compelled to act.

“The message of this election is clear: City government hasn’t been doing enough to ease this crisis, and there’s much more we can and should do. We have a mandate to take bold action on affordable housing,” said Peskin.

And then he voted to kill an $80 million public land deal where a 600-unit residential tower was proposed at 30 Van Ness.

It was a dramatic arrival, and Peskin’s impact and influence have only grown in the past six months. As the critical sixth vote for the previously outnumbered progressive bloc of the Board of Supervisors, Peskin has created a new majority and a sharp policy shift.

To some, Peskin’s arrival signifies a a new direction for the city, one that is less deferential to big tech money and real estate developers. Others fear that the return of a polarizing figure from the city’s political past presages a return to the fierce battles that marked his first stint in office, many of them over land use and development. Critics of Peskin say that he is a foe of development who delays and kills major projects.

He has already proposed a flurry of legislation, such as independent audits of city real estate deals and scaling down a density bonus program so it would not apply to market-rate projects. Peskin has also proposed a November ballot measure to remove mayoral control of three major city real estate departments. Supervisor Jane Kim, with Peskin’s support, also successfully convinced voters to pass Prop. C this month, which doubled the city’s affordable housing requirement to 25 percent, the most sweeping housing policy change in years.

At the same time, Peskin appears to be cultivating a calmer, less combative tone. The politician once nicknamed the “Napoleon of North Beach,” and known for his late night abusive phone calls to city officials and others who displeased him is older now, with a whiter beard, seven years after he was last in power. “I promise not to call you in the middle of the night,” Peskin told his colleagues at his first board meeting.

Sitting outside his favorite coffee spot, Caffe Trieste in North Beach in May, he told the Business Times he’s approaching the job differently now.

“When I was first elected I was 35 years old. I wanted to save the world in eight years,” he said. “I’m turning 52 next month. I see the world with more perspective.” Friends and allies say they’ve seen a calmer, more introspective Peskin as well. Part of that is circumstances. “When he was president of the Board, the pressure was immense,” said Jon Golinger, a member of the Telegraph Hill Dwellers who managed Peskin’s first campaign in 2000.

The best deal for the city

After the city’s economy roared back from the recession, issues like affordability, homelessness and transit have only intensified. And the stakes may be even higher, as one of the city’s most valuable assets — the very air where new buildings can rise or not rise — has become more valuable.

“Our fundamental job is to get as much for our shareholders, the people of the City and County of San Francisco, as we can,” said Peskin at his first hearing.

And Peskin is a veteran dealmaker who can recall tiny details from the city’s arcane planning code or hundred-page purchase agreements, according to colleagues and real estate sources.

Peskin is progressive on many issues like social services, affordable housing and LGBT rights. But on many economic issues, longtime ally Golinger describes Peskin as “almost fiscally conservative,” citing his disdain for wasting city money.

“Aaron is clearly one of the best minds on housing and land use that the city has seen in some time,” said Tim Colen, executive director of the San Francisco Housing Action Coalition, which has disagreed with Peskin on some housing policies. “He’s a nuts-and-bolts pragmatist who can get things done.”

Peskin’s skills have won him surprising support from some real estate groups. The San Francisco Apartment Association, which represents landlords, endorsed Peskin in last year’s campaign, despite his support of expanding rent control to post-1979 buildings, which the Association opposes.

“I want someone who will fight for the best deal,” said Janan New, executive director of the Association. “He has a vision for San Francisco. What I think we’re really lacking in this town right now is a vision.”

The obstructionist?

Foes, few of whom will speak on the record for fear of risking his ire, paint Peskin as an obstructionist who blocks all development. An examination of his voting record offers a more nuanced portrait. In 2009, he helped pass the Eastern Neighborhoods plan, which has led to the transformation of vast swathes of South of Market and the southeastern waterfront in one of the city’s biggest development booms.

“I remind people when they hurl accusations of being ‘anti-growth’ or ‘anti-real estate’ that I was the president of the Board that presided over the rezoning of over 20 percent of the city and was an integral force in greenlighting the largest single housing development that the city has built since World War II at the Hunters Point Shipyard,” said Peskin.

At the same time, Peskin can be brutally effective at shutting down projects that he hates. The rejection of a citywide ballot measure that would have raised height limits on the waterfront in 2013 essentially killed developer Simon Snellgrove’s 8 Washington tower proposal.

Kilroy’s Flower Mart proposal in South of Market agreed to additional concessions last year that would preserve the existing market after Peskin and groups threatened a ballot measure to block the project.

Peskin also backed a lawsuit to block Lennar Urban and Wilson Meany’s Treasure Island plan, despite supporting the project while he was supervisor ( see related story). His reasoning was that the developers sought to change the terms of the deal around 2010, following the global recession. But he noted that the initial agreement assumed a 30-year timeline and that meant anticipating downturns in the market.

Peskin remains unapologetic for supporting the lawsuit, which was ultimately rejected. “The city made a terrible mistake in walking away from its original deal. And they got taken advantage of,” said Peskin of Treasure Island.

As for more market-rate housing development, which economists and the state’s Legislative Analyst Office say will alleviate high housing prices eventually, Peskin says it’s one piece of the city’s toolbox to combat unaffordability.

“Supply is definitely part of it. But we also have to remember what kind of supply,” said Peskin. “Certainly building market-rate, $2,200-a-square-foot Infinity towers serves a need. But it’s not going to house a schoolteacher.”

The Supervisor v. the Mayor

Many of Peskin’s proposals seek to shift power away from the Mayor’s office and give more oversight to the Board. Peskin stresses that he has a long, productive relationship with Mayor Ed Lee, and they now meet every few weeks for coffee or a meal. But Peskin said he believes there is a leadership vacuum in City Hall, and a wave of cash from the tech industry is seeking to exploit that void. “I am concerned that a handful of primarily tech billionaires have captured the political hearts and minds of City Hall. Somebody needs to stand up to them,” said Peskin.

And Peskin has a particular billionaire in mind, one who has spent millions loudly supporting Mayor Lee’s initiatives and candidates: Ron Conway, founder of Angel Investors, an early investor in now gargantuan tech companies including Google, Facebook and Airbnb.

“He’s a bull in a China shop and throws his weight around and has undue influence in the administration,” said Peskin. “But there are many, many tech companies that are very much a part of the ethos of San Francisco.”

Conway declined to comment.

Peskin said that part of growing older was recognizing that no entity was monolithic, whether tech or housing activists.

“I don’t see tech as the enemy,” said Peskin.

Observers say that the differences between Peskin and the Mayor are as much about style, with the understated Lee a sharp contrast to the fiery Peskin. “The mayor has chosen the approach of seeking consensus. That is, in itself, a form of leadership,” said Michael Theriault, secretary-treasurer at the San Francisco Building and Construction Trades Council.

Mayor Lee’s spokeswoman defends his leadership style, as well as his record.

“With all due respect to Supervisor Peskin, who is extremely passionate about this city and its citizens, many will beg to differ about the accomplishments of Mayor Lee,” said Deirdre Hussey, a spokeswoman for the mayor. She noted that unemployment in San Francisco has dropped to 3.1 percent in June, and the city has more housing constructed and in the pipeline than any other California city. “Some politicians measure accomplishments by how many fights they pick and how many headlines they garner, and Mayor Lee has a different style. He measures success by how much he gets done and how many people he gets involved in solving some of the city’s most challenging issues,” said Hussey.

Reacting to the housing crisis

One of the biggest deals that Peskin and colleague Jane Kim have made is Prop. C, which raised the affordable housing requirement for new projects to 25 percent. Developers initially were shocked by the new requirements and said the new threshold would kill new housing. But a series of marathon negotiations led to virtually no opposition to the ballot measure, which passed this month.

Eric Tao, CEO of developer AGI Avant, the main negotiator on Prop C for the business community, said he, Kim, Peskin and Mayor Lee met multiple times earlier this year. “I felt that there was a lot of mutual respect,” said Tao.

They ultimately agreed to allow projects proposed in the last few years to pay lower requirements. The 25 percent change may also change following a study by July.

“If Prop. C had passed without a trailing ordinance, the pipeline would have been destroyed. Now the pipeline would be preserved,” said Tao.

However, projects proposed this year or in the future are currently subject to the 25 percent requirement, which developers like Oz Erickson have said will kill future plans.

Having four negotiators essentially deciding sweeping citywide policy with no public input has drawn sharp criticism from the more moderate supervisors. “The process has been a farce,” said Supervisor Mark Farrell, a moderate, who described the process as a backroom deal. “If we’re going to create new regulations around affordable housing, we need to make sure we’re not changing the rules in the fifth inning in the game and cratering their process.”

Supervisor Scott Wiener, another moderate member of the board, is also critical of Prop. C.

“I don’t like the direction the board is going on housing. We’re at risk of going back to the days where we’re looking at any excuse to not build housing,” said Wiener. But he’s also complimentary of Peskin as a person.

“He’s very smart. He’s very engaged. He’s thorough,” he said.

Mayor in the making?

Peskin will be running virtually unopposed again in November for his board seat, but the 2019 mayoral election also looms on the horizon. Lee will be termed out and a free-for-all is expected. Will it include Peskin, as some observers speculate?

“I doubt it. I like where I’m at,” he said.

In the meantime, even if there is a downturn in the coming years, the influence of big money on the city is unlikely to waver. And Peskin believes that the tech industry’s vast coffers has made it an insidious force in city politics.

“It’s the Wild West. They’re behaving like the railroad barons of the 1850s,” he said. “I’m not trying to be the sheriff, and I’m not looking for a fight, but I’m not going to shy away from my responsibility.”

Residential Builders Association of San Francisco :: rbasf.com


Economist Says Red Tape Is to Blame for Housing Crisis


But cutting it back would mean changing the way San Francisco feels about, well, San Francisco

BY ADAM BRINKLOW JUL 22, 2016

 

It’s the $1.4 million dollar question: How do we build more housing in San Francisco?

For a lot of locals, of course, the answer is that we shouldn't. These people would rather we concentrate on measures like affordable housing and reviving rent control for working people, and then let the wealthy worry about what a home costs for everyone else.

But the supply-side argument has gained ground in the last few years anyway. Note the "bipartisan" spiritbehind new in-law legislation, for example. And although building moratoriums get grassroots support, voters have repulsed them.

So if building more is not necessarily a dirty word with everyone these days, how best to make it happen?

 

Ralph McLaughlin, an economist with the real estate site Trulia, says he’s spotted a bugbear in the process: He projects that for every month you tack onto the average wait time for entitlements, the city’s overall housing elasticity (the measure of how quickly and easily the local housing market can jimmy up new supply) drops by 0.03 points.

 

For perspective, an elasticity score of 1 indicates that for every 1 percent increase in the price of housing in the city, that city responds with a 1 percent increase in new building. Trulia finds that Las Vegas has an elasticity rate of 1.17. Washington DC has 0.59, and New York City a mere 0.06.

And San Francisco? One of the lowest in the nation, a spare 0.04. The city’s housing stock has increased only 12.3 percent over the last 20 years.

 

Red tape is the culprit, says McLaughlin. Streamline the process, and you‘ll get better results. While it’s hardly a remarkable observation that A) building in San Francisco takes forever, and B) delays cost money and shrink development goals, McLaughlin testifies that this is a bigger problem than, say, restrictive zoning, and should be our number one concern.

Is he right? Well, he’s definitely not alone: The Federal Reserve said roughly the same thing back in 2012, for example.

Bloomberg pointed the finger at what it called the "one-sided environmental review" process in 2013. (Mostly a state mandate, of course.)

And UC Berkeley economists warned that "long permit-processing delays have all been associated with increased housing prices" back in 2005.

If you wanted to argue that City Hall should take some scissors to its red tape, you wouldn’t have trouble finding experts and commentators to back you up. So why might it not happen?

 

One counterargument is that elasticity is a potentially misleading statistic. McLaughlin himself points out, for example, that the broader context of Hurricane Katrina means that New Orleans’ terrible elasticity rating really has nothing to do with city politics.

The testimony of sources like the Fed and real estate sites will also be viewed with skepticism by some critics simply because they’re the Fed and a real estate site.

But there’s also the fact that even the most rabidly pro-growth San Franciscan probably doesn’t want to build like Vegas. As SPUR’s Ben Grant observes, "A city like LA thinks, hey, we're going to hell anyway, build whatever you want. San Francisco is convinced that it's perfect already."

Many label that attitude "selfish" and mere NIMBYism. But some rules are hard to argue with. I once asked former supervisor Bill Maher about the popularity of Prop K, the voter-approved 1984 law that stymies most tall buildings that would cast a shadow on public parks. Maher’s reply: "People like the sun."

 

Yes, sunlight has good PR. And so does San Francisco, as it exists now. Which is why "make it easier to build" is a simple plan with an incredibly complicated execution.

Building more would help, but as Forbes observes, it’s a trade-off. If you want to untie builder’s hands, skeptics have to be convinced that the trade is a good one.

 

 

 


Pro-development lawsuit moves forward, escalating East Bay housing battle

 

By Roland Li , Jul 19, 2016

 

lawsuit against Lafayette claiming that the East Bay city illegally blocked a 315-unit residential development in favor of a smaller project has won a key ruling that appears to allow it to go to trial.

Contra Costa County Superior Court Judge Judith Craddick released a preliminary decision on Tuesday afternoon overruling the city's claim that the plaintiffs didn't have standing to sue and filed their petition too late. A hearing on the case is scheduled for Wednesday morning.

 

 

Members of the pro-density advocacy group San Francisco Bay Area Renters Federation filed the suit under the state's Housing Accountability Act, which states that local agencies may not reduce the density of a project that complies with local zoning unless there is a “specific adverse impact on public health or safety.” The plaintiffs argue that the city should have approved developer O'Brien Homes' proposed 315-unit project at 3233 Deer Hill Rd., which was targeting middle-income tenants, rather than 44 single-family homes, which were approved last year.

The case could have statewide implications, as the plaintiffs say they are prepared to sue more California cities that they allege have violated the law by downsizing or rejecting housing projects. Sonja Trauss, founder of the San Francisco Bay Area Renters Federation and the lead plaintiff in the case, said that her group is prepared to take more legal actions against cities that could include Berkeley, Fremont and Los Gatos.

The legal case is another salvo in an escalating battle over land use and disagreements over project size that has erupted in city planning hearings, public meetings and other lawsuits throughout the Bay Area. But in contrast to other legal actions that seek to block or shorten projects, the plaintiffs are pushing to build more units, with the central belief that more production of housing, even luxury units, will eventually lower the price of housing for all tenants.

That stance of "YIMBYism," or "yes in my backyard" pro-development advocacy, has made the group of mostly young renters a surprising ally of developers and corporate real estate investors, and also a foe of some progressive politicians.

"California has a crisis situation on its hands where there simply aren't enough places for people to live. As long as municipalities try to keep out lower-income families and young people, the housing crisis will continue," said Ryan Pattersonof Zacks, Freedman & Patterson, the attorney representing the plaintiffs in the case.

"By calling it to the court's attention that municipalities are avoiding state law to keep these populations out, this case can potentially put a stop to that illegal activity," said Patterson.

To fund the legal case, Trauss has raised $126,000 from Yelp Inc. (NYSE:YELP)CEO Jeremy Stoppelman, a supporter of more housing production, as well as $300,000 over two years from Open Philanthropy Project, which is largely funded by Facebook Inc. (NASDAQ: FB) co-founder Dustin Moskovitz and Cari Tuna's Good Ventures.

Steven Falk, Lafayette's city manager, declined to comment. He previously saidlast September that Lafayette was encouraging housing production in its downtown, particularly closer to public transit, but the Deer Hill site was further from BART and lower density was more appropriate on the site.

"Nobody disputes the argument that more housing supply is needed to reduce housing costs in the Bay Area. But SFBARF’s push to indiscriminately build housing units in every vacant suburban location, regardless of context, is poorly thought through, rushed, and runs counter to 50 years...of intelligent land use planning," Falk wrote in an open letter. "While SFBARF may have a point to make with its Sue The Suburbs effort, it started in the wrong place, and is wasting its time and money suing the wrong city."

The suit also names developer O'Brien Land Co. LLC and Anna Maria Dettmer, the land owner of the site, as respondents. Allan Moore of Wendel Rosen, attorney for O'Brien Land Co. and Dettmer, didn't immediately respond to a request for comment.

"I think that a lot of municipalities and developers are looking to this case to indicate whether cities can get away with the old games," Patterson said. "The Bay Area Renters Federation is poised to continue this fight elsewhere."

 

 

 

SF approves affordable housing development boost

By Joshua Sabatini on April 27, 2016 1:00 am

San Francisco approved a change Tuesday to policy that will boost affordable housing among projects in the planning stages and even further for new construction.

The housing policy change comes as San Francisco continues to grapple with housing costs and increasing evictions, creating a challenging tension between developers and tenant advocates.

The Board of Supervisors approved the legislation Tuesday in a 9-2 vote. It would go into effect if voters in June approve Proposition C, a charter amendment that would allow the board to adjust inclusionary housing requirements rather than voters, who currently have that power.

“The market should be accountable to building more affordable and middle income housing and not just luxury housing,” said Supervisor Jane Kim, who led the policy effort along with Supervisor Aaron Peskin.

Supervisors Scott Wiener and Mark Farrell opposed the legislation. Both argued The City shouldn’t set requirements until economic feasibility analysis is conducted, which must happen by July 31 under the approved law.

“The legislation puts the cart before the horse,” said Wiener, while warning it may result in a “de-facto housing moratorium.” Similarly, Farrell said, “I don’t believe in arbitrary rates before feasibility studies are conducted.”

But Peskin noted that when the first inclusionary law went into effect 15 years ago at 12 percent there was no feasibility study and that the projects in the pipeline were treated “lightly.”

Per the policy approved Tuesday, projects have to add on top of the existing 12 percent an additional 1 percent if they filed in 2013, 1.5 percent if filed in 2014 and 2.5 if filed in 2015. The rate bumps are expected to generate about 200 additional below-market-rate units. New projects would have to hit 25 percent of the units at below-market-rate.

“This is a historic moment,” Peskin said. “We are doing a fine job of building $5 million condos that nobody can afford. But for the rest of us, we have got to bring that into balance.”

Supervisor Norman Yee called the proposal a compromise. “Pretty much everybody is saying I wish it could be better but it is a compromise,” Yee said. “It’s going to be way better than 12 percent,” he added.

Supervisor David Campos, who represents the Mission, said the proposal is a “step in the right direction” but noted “there are number of people in my district who want to have the number be higher.”

Despite Wiener’s concerns about requiring too much affordable housing that could reduce development, some who fought for a moratorium last year on the construction of market-rate housing in the Mission were unhappy the new inclusionary requirements didn’t go further.

“Apparently, the board learned nothing from last year’s takeover of City Hall, the Mission Moratorium or the groundswell that brought about Prop. I,” tenants rights attorney Scott Weaver, the author of Prop. I, wrote in an email. Prop. I proposed an unsuccessful temporary halt on market-rate development in the Mission, often considered ground zero for the housing crisis.

“On the one side we have big money — especially with the likes of Lennar — and on the other, a housing crisis that is especially affecting the Mission. Who wins?”

Also on Tuesday, Wiener introduced legislation with the support of Mayor Ed Lee that would prohibit city spending, such as travel, purchasing and contracting, in states that have passed laws being criticized for discriminating against the LGBT community.

Namely, North Carolina recently approved a law requiring transgender people to use public bathrooms corresponding with their birth certificate gender.

“By banning the use of taxpayer dollars in these states, we can set an example for other jurisdictions and build momentum to put an end to this nonsense,” Wiener said in a statement.

 

 

Regulatory Costs Inflate New-Home Prices, Builders Say

Fees for park space, stormwater devices, endangered-species surveys; ‘I don’t build affordable houses anymore’

By  CHRIS KIRKHAM

July 22, 2016

 

As the cost of construction permitting has risen over the past decade, Atlanta home builder Dennis McConnell has taken a new approach with customers.

He now itemizes the regulatory costs so buyers can see firsthand why the price tags for his houses are so high. Among recent charges he has outlined: $8,000 for a new type of storm-water capture device required for each house, $3,500 for customized architectural plans required on every lot and about $15,000 to remove a tree from the property.

With every new regulation, “the more expensive it becomes,” said Mr. McConnell, president of Healthy House of Georgia. “I don’t build affordable houses anymore.”

As home builders pick up the pace after a punishing downturn, they face a bevy of new regulations and higher fees governing everything from environmental quality and park access to regulations on the amount of brick on a home exterior. Builders say many of the new requirements are well-meaning, but added up they translate to higher costs that are passed on to prospective purchasers.

For the past five years, the median new home price has been 32% to 38% higher than the median price of a resale home, according to data from the U.S. Census and the National Association of Realtors, the largest such gap since the figures started being tracked in the 1960s. Compliance costs are one of many factors affecting prices of new homes, economists said. Builders have also focused more on the move-up and premium markets throughout the economic recovery, meaning a tendency toward larger, pricier homes.

Several recent studies have documented how increased regulatory and permitting costs affect prices. A report by John Burns Real Estate Consulting in Irvine, Calif., concluded that new homes have become “permanently more expensive to build” because of increased regulations.

The study surveyed more than 100 building-industry executives, asking for examples of costs that didn’t exist a decade earlier. New regulations included a survey required in some areas of the Midwest to determine whether endangered bats are on a property, which builders said can cost $10,000 or more for each new development.

 

 

A report in May from the National Association of Home Builders found that the average cost for builders to comply with regulations has risen nearly 30% over the past five years. A study from housing-research firm Zelman & Associates calculated that local “impact fees” charged to builders and developers to pay for services such as roads, sewers and parks have climbed 45% since 2005 to an average of $21,000 per home across 37 major markets.

City officials argue that regulations and fees have increased at a reasonable rate and account for a much smaller portion of final home prices than costs such as land and labor.

“Impact fees don’t set the price of a home. The market sets the price of a home,” said Ed Hunzeker, administrator of Manatee County, Fla., which recently voted to raise impact fees for new developments by 80% or more over the next three years after cutting them during the economic downturn. “Somebody has to pay for new growth—the new roads, the new sewer lines, the new infrastructure required.”

In places such as Florida and California, where a 1978 ballot initiative restricts increases in property tax assessments, impact fees on builders and developers have long been a way to fund essential services.

The increases have prompted more pushback from developers in Texas, where fees have historically been lower.

Dallas has been one of the nation’s fastest-growing regional economies, where suburban development north of the city has turned onetime ranch communities operating on septic systems into sought-after, full-service destinations for families.

In the town of Prosper, north of Dallas, the city requires a dedication of one acre of park space for every 35 units (single- or multifamily) and a park fee of $1,500 to $2,000 for each unit.

 

Markings at the front entrance of the Atlanta home being built by Dennis McConnell showing how high the landscaping grade will reach. PHOTO: KEVIN D. LILES FOR THE WALL STREET JOURNAL


Last year, the city finalized a 10-year master plan for parks that proposes a new system of trails, ballparks and other recreational sites to accommodate a population expected to increase from 15,000 to 70,000. Nearly half of all residents surveyed for the parks plan said the best way to pay for the services would be through increased fees on developers, while less than 4% said increased property taxes would be the preferred method.

“There’s an expectation in the community that as the town grows, they don’t have to go to an adjoining municipality for a soccer game or for baseball fields,” said John Webb, the town’s director of development services.

Matt Robinson, general manager with Walton Development and Management in Dallas, said developers should pay their share for new services. But too often he feels that developers are an easy target when cities plan for future growth.

“When you do a parks master plan, it’s like asking somebody ‘Do you want a Ferrari or do you want a Geo Metro?’” Mr. Robinson said. “Everybody’s going to want the Ferrari.”

In other cases, builders argue that regulations from different authorities are in conflict. In Atlanta, for example, builders are now required to install underground stormwater devices as wide as 50 feet on every lot to better filter runoff.

The city also has a strict tree-preservation ordinance with penalties of up to $60,000 an acre for illegally clearing trees on lots. Mr. McConnell recently spent an extra three months redesigning a home to both build the stormwater system and avoid a $15,000 charge for taking down two large oak trees on a property.

“It requires these complex site plans not for life safety issues, but so they can control whether or not the house is too tall, whether it has the right look, or if the tree can be saved,” he said.

 

 

 

San Francisco just became the first big US city to require solar panels on new buildings as Board approves Legislation requiring Solar Panels on New Buildings

SF Gate – April 19th 2016

 

San Francisco may be known for its fog, but the city wants to turn the sunny days it does get into power for its buildings.

The San Francisco Board of Supervisors on Tuesday unanimously passed legislation by Supervisor Scott Wiener that would require new construction that is shorter than 10 floors to install solar panels or solar water heaters on top of both new residential and commercial buildings.

According to California law, all new buildings with 10 floors or less must have at least 15% of their rooftops designated as solar ready — meaning not in the shade.


Wiener's legislation takes that requirement a step further by requiring that space to actually have solar panels installed. To meet the requirement, developers can either install solar photovoltaic or solar water panels, both of which supply 100 percent renewable energy.

The new rules also make San Francisco the first major US city to mandate solar panels on new construction, although other California towns like Lancaster and Sebastopol have instituted similar laws.

“By increasing our use of solar power, San Francisco is once again leading the nation in the fight against climate change and the reduction of our reliance on fossil fuels,” said Supervisor Scott Wiener, who put forth the legislation, in a statement. “Activating underutilized roof space is a smart and efficient way to promote the use of solar energy and improve our environment."

 

The new rules don't go into effect until January 1, 2017, after which any construction that falls under the state law to include solar-ready space will have to actually install it.

If a developer isn't happy about adding in solar, Wiener has a backup plan. He's also introducing legislation that would allow people to add a living roof like a garden on top instead of the solar installation.

 

 

 
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