[GuestOpinion] Confessions of a "Newbie" Developer

I am an “accidental” developer of a 75-unit rental project in the Mission. I have spent 3 ½ years, $490,000 in development expenses, and $180,000 in application fees on my project without yet having a Planning Commission hearing date. My property is a “soft site”: a parking lot and coin laundry (which I own and operate), with no existing housing or historical significance, on the Mission St. transit corridor, one block from a BART station.

Best case, my project will take 7 years from start to finish: 3 ½ years spent so far, 6 months of further approval time, 1 year to get building permits and 2 years of construction. If my project is blocked, as is likely, its timeline could easily stretch to 10 years.

Here are my observations as a “newbie” developer:

1. San Francisco has rules, but does not follow them. Even a completely code compliant project is subject to “discretionary approval”. Discretion can mean anything, which provides endless occasion for shakedowns. The Planning Commission can deny a project that “looks too upscale”, casts a shadow on a beer garden, or imperils “secret LGBT tunnels” in the Tenderloin. Two virtually identical projects a few blocks and a few months apart, one 25% affordable and one 100% affordable, were respectively rejected and approved unanimously by the San Francisco Board of Supervisors within the past 6 months.

2. San Francisco constantly changes its rules, thus creating huge uncertainty for developers, which inevitably translates into delay and higher costs. In just the past few years, the Mission Moratorium almost passed (which would have shut down my project), and Proposition C passed (increasing the affordable housing percentage from 12% to 25%). Now, new inclusionary legislation is being considered by the Board of Supervisors that will change the rules yet again. Beyond these major changes, there have been countless smaller changes that impact builders, such as imposition of the Interim Mission Controls and the implementation of the Calle 24 Latino Cultural District.

3. Everyone can block a project. No single organization or individual can say yes. Even if a builder reaches an arrangement with one party, any number of other parties may stall that builder’s project in an effort to extract concessions. After the developers of 1515 South Van Ness agreed “voluntarily” to raise that project’s affordable percentage to 25% in response to a last minute demand from the Mayor’s Office, they were blocked by Calle 24, who demanded a $1 million “donation” for a “cultural stabilization fund”. Large projects, such as the “Monster in the Mission” or the “Beast on Bryant” are delayed almost indefinitely, creating huge carrying cost impacts.

4. San Francisco continually adds project requirements and impact fees that raise costs. For example, one of the changes being considered in the new inclusionary legislation would add $1.6 million in fees to my project. These fees are inevitably passed on to renters and buyers.

5. San Francisco is actively hostile to state laws, such as the State Density Bonus Law and the Housing Accountability Act, that are meant to bypass “discretionary approval”. Even now, some 38 years after the passage of the State Density Law, San Francisco has refused to pass its own local density bonus ordinance, as is required by the Law. San Francisco anti-development groups actively fight to sabotage these state laws, despite San Francisco having highest rents in the United States and highest regulatory burden on housing production (more than $500,000/unit) of any city in the United States. In all of San Francisco's history, only one market-rate State Density Bonus project has ever been approved. My project will likely be only the second market rate State Density Bonus project ever to come before the San Francisco Planning Commission.

6. As I have experienced myself, anti-development activists routinely harass the developers of anything other than 100% affordable housing. In San Francisco, certain non-profit affordable housing, such as the Mission Economic Development Agency and the TODCO Group actively use their influence, government funding, and non-profit status to oppose market-rate housing.

So, why does this situation exist, and what can we do about it? That will be the subject of my next op-ed.

Robert Tillman is a “newbie” developer in the Mission. We welcome op-ed submissions from our readers on any topic of local interest. To submit yours, email info@baycitybeacon.com.