Thursday, January 04, 2007

Housing Supply Limitations in San Francisco

I am not at the 2007 ASSA meetings in Chicago. While I'll miss seeing many of my old friends, they know where to find me. My UCLA phone # is public information and I return some phone calls!

Tomorrow is my first day at UCLA and my son starts kindergarten on monday. So, there is a lot going on. Now that my Green Cities book has been published, I would have enjoyed sitting near the Brookings Institution booth at the Economics meetings and trying to convince people who walk by, and are browsing for books, to buy my book and better yet --- adopt it for their environmental economics and/or urban economics courses. At $12 a book, the ideas per $ spent is high relative to many other books!

At Starbucks today, I read an interesting article in the S.F Chronicle on subtle housing supply limitations . In this article below, note that the real estate developer thought he had a deal but two urban politicians are implicitly voiding the original deal and demanding more "affordable" housing to be set aside before they sign off on changes to the zoning code.

It appears that the politicians are raising the effective tax on the project, discouraging developers from developing new housing in this expensive city.
Such developers may respond by sprawling into the less regulated suburbs.


SAN FRANCISCO
Trinity deal hits a snag
Some supervisors want more units at a rate below market
- Robert Selna, Chronicle Staff Writer
Thursday, January 4, 2007


When 82-year-old Angelo Sangiacomo peers out the large windows of his penthouse offices above Market Street, he can survey a vast real estate empire amassed through decades of investing in apartment buildings.

But just a few steps from Sangiacomo's office near the corner of Eighth and Market streets, is Trinity Plaza -- a notable blemish on his record of profits and growth.

The converted motel with 360 rent-controlled apartments occupies a piece of land that Sangiacomo and others say is suitable for a bigger, grander residential development.

Earlier this year, Sangiacomo believed he had finally struck a political deal to end 20 years of opposition from politicians and tenants advocates over the fate of Trinity Plaza and its mostly lower-income occupants.

In exchange for the city allowing him to construct three towers that would be taller and larger than what is permitted in the mid-Market neighborhood, Sangiacomo would not only set aside 12 percent of the project to be leased at below-market rates, but also permit current occupants of Trinity Plaza to remain, without paying more, in apartments that would continue to be covered by the city's rent-control law.

But as the agreement comes back before the Planning Commission and the Board of Supervisors early this year for what were expected to be routine approvals, a deal once celebrated by both the developer and tenants in a city with a continuing affordable-housing shortage now appears to be in trouble.

"This is agony," Sangiacomo said in a recent interview, using an expletive to describe unspecified officials now arguing that the city is not demanding enough affordable housing from of one of San Francisco's wealthiest landlords. "What can you do with them? They're beyond reproach. They should be building a bronze statute out on that corner for me -- instead they want more."

Sangiacomo is called the father of rent control in San Francisco because his steep rent increases in the 1970s helped inspire a public response to protect tenants. Property records indicate that Sangiacomo and his numerous business entities own hundreds of properties in California, the bulk of which are in Sonoma and San Francisco.

Under city rent control, the San Francisco Rent Board sets the allowable annual rent increases at apartment buildings constructed before 1979, the year the law went into effect. When an apartment covered by rent control is vacated, the landlord can raise the rent to whatever the market will bear, but future yearly increases are again set by the Rent Board -- typically lower than market rates -- until the apartment is once again vacated.

Sangiacomo bought Trinity Plaza, a former Del Webb's Townhouse motor lodge, in 1977 and converted it to apartments.

His original plan, to raze the former motel and develop the property, has consistently been thwarted by officials and tenant advocates because a rebuilt Trinity Plaza wouldn't be covered by the city's rent-control laws.

Through talks with Supervisor Chris Daly, whose district includes Trinity Plaza, and who had stood in the way of demolition of the old Trinity Plaza building, Sangiacomo thought he had resolved that issue in late 2004, by agreeing to a unique arrangement: The 360 rent-controlled apartments would be replaced by the same number of brand new units to be grandfathered in under the rent control law, ensuring that current Trinity Plaza tenants would have low rents for life.

Also, as required of developers of all new residential projects at the time, 12 percent of the new non-rent-control units would be made available at lower-than-market rates.

Another benefit to the city, according to some observers, was that Sangiacomo said he'd rent all of the new units as apartments rather than offer some for sale as condominiums -- a rare scenario in San Francisco, where rental housing for people who can't afford down payments is at a premium in part because developers typically earn a higher rate of return on condominiums.

For Sangiacomo, the deal made good business sense, allowing him to build a large, mostly market-rate housing development on land that had sat underutilized for decades.

In August of 2006, the city Planning Commission signed off on the deal -- agreeing to let Sangiacomo add 500 units to the project, bringing the total to 1,900 units. Twelve percent, or 185 of the non-rent-control units, would still be rented at more affordable below-market rates. When completed, the apartments would house more than 3,000 tenants.

Daly, the former advocate for affordable housing who was running for re-election as supervisor earlier this year, hailed the agreement as a political win for all involved.

But on Nov. 7, to the surprise of Sangiacomo and Daly, two members of the Board of Supervisors, Jake McGoldrick and Sophie Maxwell, succeeded in persuading some of their board colleagues, at least temporarily, to block height and density amendments to the city's general zoning and development plan that would have allowed the project to go forward.

They said they needed more time to study the Trinity Plaza proposal, and both have tried to get a better deal out of Sangiacomo.

"They're (Sangiacomo) asking for an extraordinary, unheard-of level of density," said McGoldrick. "I say, 'Fine, take it, but give us more units that are below market rate.' ... If they can't do more, then maybe they shouldn't be getting more density."

Part of what emboldened McGoldrick and Maxwell to ask for more is that the week before the Planning Commission signed off on the deal, the Board of Supervisors passed legislation amending the city's so-called Inclusionary-housing law, raising to 15 percent the share of units in new developments that must be leased or sold at below-market rates.

Daly and others who have worked behind the scenes to help broker the deal with Sangiacomo have made it clear that they are frustrated by what they consider 11th-hour interloping by McGoldrick and Maxwell, which threatens to interfere with what they believe is a good bargain for the city.

Daly said he is fully prepared on his own to ensure that Sangiacomo meets the higher 15 percent affordable-housing standard without help from McGoldrick and Maxwell.

"They'll agree to the 15 percent," Daly said of Sangiacomo. "I don't need to hear that from them."

But Sangiacomo, who said that he would lose money on the rent-controlled tenants and that he has already spent millions on environmental studies, consultants and other issues related to Trinity Plaza, said he is on the verge of giving up on his plans for Trinity Plaza.

"I've learned that sometimes the best deals are the ones you walk away from," Sangiacomo said. "I've had it ... I'm trying to do something good for the city and keeping my word, and they're making it impossible to do anything."

Kate White, Bay Area Director of the Urban Land Institute, a developer group, said if Sangiacomo does walk away, it would amount to a lost opportunity for the city to get some much-needed new rental housing.

White said the critics' push for more affordable units is reasonable, given how big the project would be. The rent-controlled units do not represent long-term affordable housing because they revert to market rate when vacated, she said.

"This is such a huge increase in density at a great location; it will be very profitable, assuming that it ever gets built," White said. "It could be a fabulous thing for the city and for that mid-Market area."

Ken Werner, chairman of the Trinity Plaza Tenants Association, said he believes the new apartments will be built despite the current problems. He said the agreement in which Sangiacomo pledged to preserve the rent-controlled units was the first time in San Francisco that a tenants association and a landlord worked together to find such a solution.

"I think Mr. Sangiacomo will continue to work with us," said Werner, 58, who has lived at Trinity Plaza for more than 13 years. "We need rental housing in this city. ... This agreement will protect rent-controlled apartments and increase the stock of rental housing in San Francisco."

E-mail Robert Selna at rselna@sfchronicle.com.

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URL: http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/01/04/BAG31NCDR51.DTL

1 comment :

Anonymous said...

^^ nice blog!! ^@^

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