San Francisco way: link business, housing construction

Skyscraper office buildings, still being built at a rapid pace in many United States cities, bring tens of thousands of jobs to downtown districts. But too often there is no place for the office workers to live.

In the past several decades, San Francisco has become another "headquarters city," with glass towers looming over the gingerbread Victorian homes so much a part of this city's traditional image. Locally, it's called "the Manhattanization of San Francisco."

Without as yet passing any new laws or adding new levels to civic bureaucracy , the city has found a way to force downtown developers to help house those thousands of workers they're drawing to the city by requiring that they put up a specified number of housing units per square foot of new office space.

The housing shortage in San Francisco is particularly acute. Each year, 10, 000 new jobs are created in the city. But only some 1,000 new housing units are produced annually. Last year, there was a net increase of 820 new housing units; the vacancy rate last year was a negligible 1.1 percent.

This housing scarcity has sent rents to levels unthinkable for most urban office workers. For those who choose to live outside the city -- and often there's little choice involved --the costs of housing and commuting are rising to unprecedented levels. Automobile congestion and the squeeze on urban transit districts grow ever more severe.

In San Francisco, as elsewhere, the era when the city subsidize, in various ways, construction of desperately needed housing has ended. Thus, city planners have developed a technique which involves a novel use of the environmental impact reports (EIRs), mandated by state law. The new approach was first applied to two downtown office towers approved in March.

Under the procedure, the city planning commission requires that EIRs for office developments recognize and "quantity" the detrimental impact on housing. They must include information on how many workers are likely to be employed at each new building and how many of those are likely to become city residents, not commuters. Using a figure of two residents per housing unit, the report thus yields an approximation of the city's added housing burden for each new office building.

Finally, the planning commission determines that the EIR statement of impact on housing is a "significant finding," a legal term that under the law obligates mitigating measures -- in this case the construction of the specified number of housing units. These measures become part of the conditional use permit given the developers, and they carry the force of law. Provision is made for review of compliance at six-month intervals.

Five Fremont Center, a planned 43-story office tower, was calculated to produce a need for 550 housing units. As a result, developers of the $115 million to $120 million building must also build 550 units of housing in the next 5 1/2 years. The commission also stipulated that half of those units are to be for low- and moderate-income tenants.

The office-housing tradeoff policy has never been incorporated in city law. But city planning director Dean Macris intends within the next few weeks to ask the Board of Supervisors for an ordinance embodying this approach, in order to assure that all buildings are treated equally and fairly.

Late last week Mayor Dianne Feinstein included the planning commission's policy in her own new "all-out program for improved housing" in the city.

Substantial opposition is expected to the mayor's plan because it requires office developers to build market-ratem housing (or contribute to a city fund for housing), with no provision for low- or moderate-income housing as part of the trade-off. The mayor defended her stand by saying, "You can't push people to build if they can't do it profitably."

Meanwhile, Mr. Macris's department is experimenting with similar approaches to other problems associated with development. Recently the planning commission required that several hotels planned for the rundown Tenderloin district downtown make contributions toward low-income housing based on expected occupancy levels.

At the same time, the planning department and the mayor's office, along with the supervisors and downtown businessmen, are debating a building fee formula for getting downtown interests to contribute toward the maintenance of the city's financially pressed transit agency, the Municipal Railway. Macris calls transit "the other major impact" of downtown development.

He foresees a continuation of the "boom in office space needs" as this country shifts from a manufacturing to a service economy. Government no longer has the funds to cope with the effects of that boom, he says. But "the money is in the private sector, and they have a corporate responsibility" to "offset some of the problems [development] causes."

According to the planning director, San Francisco has had good cooperation from developers in forging this municipal-developer "partnership" because downtown builders recognize that the future growth of the area is dependent on construction of new housing.

But Gary Craft, a spokesman for Milton Meyer & Co., developer of the Five Fremont project, protests, "I don't think that is fair. . . . We're not in the business of building housing." Mr. Craft said his company specializes in office development and is being required to build housing because "the planning commission isn't performing their responsibility to provide land [for housing] at affordable levels" and has "no comprehensive strategy" on housing.

Craft said his company had identified several possible sites for compensatory housing. But he adds that other developers -- and his company in the future -- might not be so fortunate.

He acknowledges that in complying with the housing mandate his firm "expects to get a reasonable return for our money."

S. T. Chen, the other developer affected so far by the housing-office trade-off requirement, is less harsh on the planning department. Mr. Chen, who is putting up the 30-story Pacific III apparel sales center, believes that the process reinforces a responsibility developers have to "be sensitive to the economic and physical impacts" of their projects.

Nevertheless, Chen worries that "as mitigation measures add up . . . it's like killing the hen that lays the egg" -- and killing the development in the process.

That fear is of little concern to Bradford Paul, an official of San Francisco Tomorrow, an urban environmental group active in a decade-long citizens' battle against high-rises. Mr. Paul feels there's too much central-city development already, and he appeals for annual limits on high-rise construction.

He is concerned that an ordinance codifying San Francisco's new policy on housing trade-offs will not extract large enough housing commitments, especially for low-income tenants, for the scale of the developments involved. He also worries that the focus on housing will obscure "the real problems" of downtown concentration and the need to "regionalize development."

Another critic of local developers, who has long studied the inner workings of San Francisco government, observes that in the past some developers have tried to fulfill similar mandated trade-offs by hooking up with unrelated housing projects already planned by other parties.

Though the final form of San Francisco's new development policies is not certain, it is clear that developers in the city will henceforth have many more factors to consider as they assemble parcels and "financing packages" for downtown high-rises. In some way or another, they are going to be held responsible for the impact of new residents they attract to the city.