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San Francisco housing development slowed due to high costs

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As San Francisco’s new home development has slowed down, Mayor London Breed is investigating whether the home building site will be up and running again by reducing affordable requirements or postponing prices.

On Friday, Bleed’s office called for a reconvening of the “Technical Advisory Board,” which is to regularly review the city’s comprehensive and affordable housing program. Since February 2018, the eight-member committee consisting of four mayors and four supervisory committees has not been held.

Bleed spokesman Jeff Cretan confirms that rising construction costs, high inflation, interest rates, and delayed pandemic recovery “are building the most homes, including affordable homes.” It’s definitely the right time to consider our policies so that we can. It’s possible. “

Supervisor Aaron Peskin, who co-sponsored the latest version of the city’s affordable housing directive, said the committee was “definitely time to reconvene.”

Push comes to see the city declining at every point in the home production cycle. Fewer new buildings are open. The lively construction site is far below. And there are few applications for new projects, in the meantime.

At a planning committee meeting on Thursday, urban economist Ted Eagan and land-use program manager Joshua Switzky gave an almost harsh outlook for future home development and office occupancy in downtown San Francisco.

Proposed housing on the land of Shrage Rock on the Bayshore Boulevard And Leland Avenue I’m stuck in science fiction.

Paul Kuroda / Chronicle 2021 Special

So far this year, 1,161 homes have been completed in San Francisco, with less than 3,000 new homes in San Francisco. Compare with 2021 when 4,649 units went online. Meanwhile, 4,100 units are under construction, compared to the highest value of 10,000 units built in 2016 or 2017.

The future doesn’t look so good. So far in 2022, about 800 units have been approved and are projected to be 2,000 units by the end of the year, or about half of the 10-year average.

On the other hand, the tens of thousands of approved units are sluggish because the cost of the building outweighs the revenue generated by rent and sales. Rents in San Francisco are still 14% below pre-pandemic rents, but construction costs are rising, Eagan said.

Developers also have to pay different fees depending on the size of the project, the location of the project, and whether the builder is taking advantage of any of the “Density Bonus” programs. For example, if 24-unit project developer Marc Babsin was approved by Diamond Heights, the price per unit would be exactly $ 261,000, while project builders and Folsom stagnated in 11 days would be around per unit. I will pay $ 75,000.

“Today, we’re hearing more and more about comprehensive numbers not working,” said supervisor Ahsha Safai. “Need to reset. It’s a failure.”

Many of the city’s residential pipelines are clogged. There are 14 projects consisting of 2,257 units that were entitled in 2018 or 2019 and have not started construction. Two phased megaprojects are underway, Treasure Island and Mission Rock, with several majors, including an expansion of 6,000 units for Park Merced, 12,000 units for Shipyards and Candlestick Points, and 1,679 units for Schlag Rock. Projects are stagnant. In addition, 8,550 units expected to be generated in large projects along the Central Subway in the future are stagnant.

Developer Eric Tao is a committee that reviews prices and requirements, and during the 2010 Great Recession, the late Mayor Ed Lee gathered a group of developers to trade leaders, lawmakers and supporters. To understand how to resume construction, he said he wanted to repeat what happened when he built.

In the end, the city lowered affordable housing requirements and postponed 80% of the price, so developers paid when residents moved to the building, not when a construction permit was obtained. This change has allowed some notable projects to grow exponentially, including the 655-unit Lumina project at 201 Folsom St. and the 198-unit affordable condominium development at 1400 missions.

“What happened was that we all got together and came up with some tools,” Tao said. “I think we need to do that again. It seems more difficult now — everything is more politicized.”

The important thing is to find the “sweet spot” that Tao called “the most affordable price possible”.

“We’re not saying we’ll get rid of it, we’re just saying we’ll postpone them until we can build and stabilize things,” Tao said.

The Mira Condo Tower (center) at 160 Folsom Street in San Francisco couldn't be built today due to exorbitant costs and costs, building developers say.

The Mira Condo Tower (center) at 160 Folsom Street in San Francisco couldn’t be built today due to exorbitant costs and costs, building developers say.

Lizhafaria / Chronicle 2019

The planning committee meeting on Thursday was attended by a number of builders and real estate attorneys outlining the challenges facing the industry.

Sarah Dennis-Phillips, senior director of Tishman Speyer, said the group’s latest building, the 392-unit Mira, which opened in 2020, does not work economically today. Tishman Speyer has a project approved by the former Creamery cafe site South of Market, but that project is not feasible.

“The cost is too high to generate acceptable profits,” said Dennis Phillips, a member of the commission reviewing fees.

JK Dineen is a staff writer for the San Francisco Chronicle. Email: [email protected] twitter: @sfjkdineen

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