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‘The next generation doesn’t want anything to do with these buildings’

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The guest of this year’s Chinatown Community Development Center Lunar New Year celebration was not a local activist. Unlike in the last few years, it was neither a politician nor a generous business leader.

It was a building. There is a laundromat and beauty salon on the ground floor, and 64 single room occupancy units (SROs) are purchased by the organization and funded for refurbishment.

After the gold and red lion dance sweated and FarEastCafe guests settled on hot tea at the banquet hall table, Malcolm Young, secretary general of the Chinatown Community Development Center, said the Powell Street building “means a journey.” I explained.In Chinatown for the last two years

He said SRO is the lifeline of Chinatown. They house restaurant workers and clerk, a new immigrant trying to gain a foothold in California, and seniors playing mahjong and playing cards at Portsmouth Square. The ecosystem that makes San Francisco’s Chinatown the largest and most vibrant Chinatown in the United States and attracts tourists from all over the world would die without the affordable housing stock provided by SRO.

However, more and more SRO buildings are on the market, creating uncertainty about the future of the community.

“In the last three or four months, more SRO lists have been put up for sale in our memory than at any other time,” Yeung said. “What do you think is above the bustling grocery stores and affordable takeaway restaurants on Stockton Street? Looking at the vacant storefronts on Grant Avenue, what’s above it? Do you think that losing SRO to speculation means losing the best version of Chinatown, which loses the immigration gateway that has served newcomers for generations since 1850. That means. “

However, if the road to owning 1005 Powell is a sign, buying and refurbishing these buildings will require both patience and cash. Before the pandemic, the Community Development Center was already trying to acquire the building for over a year. The building was home to low-income immigrant families, most of whom cost less than $ 500 per month. The building required complete seismic retrofitting, asbestos removal, and tenant relocation during the 18 months of construction.

It took a total of three years, but despite the pandemic-stricken Chinatown economy and rising construction costs, the Community Development Center was able to raise about $ 15 million to buy and refurbish the building. According to Rebecca Foster, the fact that the Community Development Center was able to save it with funding from the Crankstart Foundation, the San Francisco Housing Accelerator Fund, and the Housing and Community Development Mayor’s Office is for preserving other SRO buildings. May provide a model. , CEO of Accelerator Fund, which provided the loan for the acquisition.

“There is an opportunity to transfer the building to non-profit ownership,” she said.

Lady Huang takes a peek from the SRO unit at the Clayton Hotel in San Francisco’s Chinatown. Approximately 15,000 SRO units make up the majority of the district’s housing stock.

Steven Lamb / Chronicle

In Chinatown, there are 15,000 SRO units in hundreds of buildings, accounting for most of the residential stock in the neighborhood. Most units are less than 200 square feet, and many (like the Clayton Hotel on Clay Street) are well below 100 square feet. Some have a sink and some do not. Most share a community kitchen and bathroom. Unlike Tenderloin’s residential hotels, which are mostly owned by private investors but run by nonprofits, most SROs in Chinatown are owned by families or private investors.

The Powell Street building has a very large unit and elevator, which is rare in Chinatown, but it’s not much different from the other five dozen SRO buildings on the market these days. This includes three SRO buildings on Powell Street and other buildings on Grant, Kearney and Stockton.

Alan Rowe, a lawyer who represented the Community Development Center at the time of purchase, said Chinatown was undergoing a “generational change” and descendants of families who purchased SROs in the 1970s and 1980s were about to leave the business. Stated.

“The next generation doesn’t want to have anything to do with these buildings,” he said. “It causes a lot of discomfort.”

Malcolm Yeung, Executive Director of the Chinatown Community Development Center, stands in 1005 Powell St., an SRO building currently under renovation after being purchased by a nonprofit organization.

Malcolm Yeung, Executive Director of the Chinatown Community Development Center, stands in 1005 Powell St., an SRO building currently under renovation after being purchased by a nonprofit organization.

Steven Lamb / Chronicle

Brian Leon, a real estate agent representing several sellers of SRO buildings, said the majority were not interested in becoming a landlord.

“Many of these kids are too busy,” he said. “They are involved in technology and medicine. It’s not in their wheelhouse. They don’t want to be in the city and they don’t want to run the SRO building that their grandparents bought for free.”

The difficulty is that for-profit investors looking to seize opportunities need to significantly increase their bottom line to reach the break-even point. The only way to do that is to raise your rent.

“No one buys just to maintain rent,” Leon said. “If you’re trying to run a business, it’s not.”

The $ 2.85 million building currently on the market on Powell Street represents a challenge facing potential buyers. The eight-unit SRO building produces $ 3,032 a month. There are 3 free units. Two of the tenants pay $ 502 a month. One is paying $ 460. According to Redfin, the estimated monthly payment for a building is $ 14,478 per month, which is more than four times the amount the property draws in SRO.

“These SROs aren’t pencils. Real estate lawyer Law, who has been involved in numerous transactions in Chinatown, said:” There is no funding. Maybe you have the money to buy it. You can find it, but the operating costs aren’t there. Math doesn’t work. “

Nelson Ho is Wayne's liquor owner on the ground floor of a 50-unit single-room occupancy building on Kearney Street on the edge of San Francisco's Chinatown. The building was recently sold for $ 5.6 million and residents are worried about its future.

Nelson Ho is Wayne’s liquor owner on the ground floor of a 50-unit single-room occupancy building on Kearney Street on the edge of San Francisco’s Chinatown. The building was recently sold for $ 5.6 million and residents are worried about its future.

Steven Lamb / Chronicle

According to Law, the Chinatown SRO unit is one of the only “naturally affordable” units left in San Francisco. Most SRO residents do not have enough income to qualify for a typical subsidized apartment owned by a city nonprofit. These are typically sold at the median revenue of the region, or 50% of the AMI, and require an annual revenue of approximately $ 45,000. Residents are also not eligible for programs that provide supportive housing to formerly homeless people.

Carlos Serrano Quan, a real estate broker who grew up in Chinatown, said many real estate owners are fed up with the city’s regulations and the hassle of being a landlord. And while retail and office space is free, insurance and utility costs continue to rise.

“Many landlords don’t do this to kill. Tenants pay $ 247, $ 300, and $ 600 a month,” Serrano-Quan said. “But at the same time, they aren’t doing it because of their good heart.”

The Powell Street building is at the southern end of Chinatown. The apartment building, one block above the hill, grows as SRO gives way to Nob Hill with the Union Pacific Club, the Fairmont Hotel, and Beaux-Arts doorman buildings like St. Elizabeth on 901 Powell Street and Francesca on 850 Powell. Become. The three-bedroom condo is currently listed for just under $ 3 million.

Being located on the edge of Chinatown means that it is likely to be purchased by investors seeking to replace their current tenants with higher-income families.

“This place is pretty attractive in terms of what investors are looking for,” Yeung said. “As long as prices rise, it always happens first at the border.”

In the year of the technology boom from 2016 to 2019, Chinatown began seeing a small number of investors buying SRO buildings to replace low-income tenants with high-paying technicians. These deals didn’t work for investors (some of these buildings are now on the market at cheaper prices than they bought), but it’s only a matter of time before San Francisco begins to boom again. am.

Meanwhile, at 1005 Powell St., construction workers are busy removing asbestos. As the cable car rattles through the hills, AmOne Corp.’s project manager Cavan Wong said the refurbishment “modernizes the entire building for tenants.”

“It will be bright and clean. A new kitchen. A new bathroom. New electricity and plumbing,” he said. “And more outlets. It’s strange that a family of six survived in one outlet.”

Chinatown supervisor Aaron Peskin acknowledged his aide Sunny Anglo for continuing to trade even on the darkest days of the pandemic.

“Sunny and CCDC broke it every turn,” he said. “I honestly thought it would go into the ash heap of history.”

Anglo said the key to modernizing and protecting Chinatown’s SRO is to create a fund to keep the building afloat, even if it doesn’t have enough income to make a profit.

“We need an operational subsidy program in the city for non-homeless people,” she said. “If we are serious about housing for the elderly, we will have to face the reality that most of them live below the poverty line in San Francisco.”

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

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