By J.K. Dineen, Reporter Feb 10, 2025 (SFChronicle.com)
The building at 100 Van Ness, seen behind San Francisco’s City Hall in 2012, was converted from office space into housing. But developers say that same project would cost 70% more today. Now, the city’s supervisors are considering two more changes to make it easier for developers to do conversions.Michael Macor/The Chronicle
For more than three years San Francisco policy makers and politicians have introduced measure after measure, incentive after incentive, aimed at attracting developers and investors to convert empty downtown office buildings into housing.
The city waived planning and building requirements. It streamlined approvals. It lowered affordable housing requirements. San Francisco voters approved a ballot measure to eliminate transfer taxes. Former Mayor London Breed released 30X30, a plan to convert 5 million square feet of office space in 30 buildings by 2030.
Yet, all the work has resulted in one project: a 124-unit conversion of the Humboldt Bank building on Market Street. A second conversion, the Warfield Building at 988 Market St., was in the works, but fell through after it was unable to obtain a construction loan for the conversion. The building is now set to become a hub for arts groups.
But while it would be easy to be skeptical, developers say two more changes are in the works that will finally make it economically desirable to repurpose vacant workspaces into places where people can live.
The first, introduced last year by Supervisor Matt Dorsey and former Mayor Breed, would exempt office-to-housing conversions in the greater downtown from a group of fees that add about $70,000 per unit to project costs. On Monday, the Board of Supervisors’ Land Use and Transportation Committee approved the legislation in a 2-1 vote, sending it to the full board for final adoption. The board will vote on the legislation in late February.
The other is the creation of a “downtown revitalization and economic recovery financing district,” which would allow developers to borrow against future tax revenue to finance construction. That legislation, which will piggyback on a 2024 bill sponsored by Assemblymenber Phil Ting, will be introduced at the Board of Supervisors in the coming months.
Emerald Fund President Marc Babsin, whose company converted an empty office building at 100 Van Ness to 400 apartments in 2015, said the two legislative moves will make a difference. He said rising interest rates mean that the 100 Van Ness project would now cost 70% more than it did a decade ago, while rents are about the same.
Babsin said his company has done detailed analysis for 15 properties that would be suitable for conversion, but none of them currently pencil out financially. Eliminating fees and creating the financing district would make at least four of them — and possibly eight — economically feasible.
“We can bring good jobs back to downtown. We are very close. We need this legislation and we need the tax exempt legislation coming up,” said Emerald Fund Chairman Oz Erickson.
But several SoMa-based community members pushed back against the fees waiver.
Angelica Cabande, executive director of the South of Market Community Action Network, known as Somcan, reeled off the fees the legislation would waive.
“They are the affordable housing fee, the child care impact fee, the downtown park fee, the public art fee, the school impact fee,” she said. “These are basic things that our communities, not just the South of Market but the whole city, need.”
The legislation was opposed by Supervisor Chyanne Chen, who asked that the bill be rewritten so as to exclude cultural districts and “priority equity districts,” which would mean that the waiver would not apply to large parts of SoMa, Chinatown, Union Square, Civic Center and the Tenderloin.
“We have heard from our community-based organizations in the neighborhoods directly impacted by this legislation and they are urging our board not to turn its back on our affordable housing tools and strategies,” she said.
Zachary Frial, an environmental justice organizer with Somcan, said all the pro-housing legislation passed in the last five years — both in San Francisco and Sacramento — has had little impact on the skyline.
“In spite of all these measures that are supposed to result in more housing development, the city (built) only 1,200 new units of housing last year, less than half the 2,500 units in 2023,” he said.
“It doesn’t seem like the problem is that there is too much red tape or that there are too many fees and requirements. The problem lies in market conditions.”
“How many more giveaways do developers need before they start actually building housing?” he added.
Supervisor Dorsey said the city remains committed to affordable housing and that this legislation would jump start projects that would otherwise not happen.
He said Chen’s proposed exemption “would swallow the rule and make the legislation unusable.”
Supervisor Myrna Melgar, who heads the land use committee, called the legislation “a drop in the bucket of the many, many things we have to do to rethink the business plan for downtown.” She said the city’s tax base — not to mention workers in the hospitality, tourism and construction industries — are dependent on the downtown’s revival.
“Inaction,” she said, “would have profound repercussions on the city.”
Reach J.K. Dineen: jdineen@sfchronicle.com
Feb 10, 2025
REPORTER
J.K. Dineen covers housing and real estate development. He joined The Chronicle in 2014 covering San Francisco land use politics for the City Hall team. He has since expanded his focus to explore housing and development issues throughout Northern California. He is the author of two books: “Here Tomorrow” (Heyday, 2013) and “High Spirits” (Heyday, 2015).
