San Francisco is on the verge of a new housing era, propelled by California regulators’ orders to build 82,000 new homes here this decade. When it comes to funding those homes, however, the city remains a house divided — pardon the pun — even with the threat of a state takeover. This division was laid bare by the bizarre reception of a new housing law from some of the very people who approved it.
This week, after more than a year of campaigning, Mayor London Breed finally saw the Board of Supervisors approve her plan — unanimously, no less — to make it easier to turn parking lots and gas stations into housing. On the surface, it seemed a rare instance of housing comity between Breed and her board rivals.
Yet some supervisors, while voting the law through, disparaged its potential to help the city out of its housing jam. At a hearing before the vote, Sup. Aaron Peskin called a vote for the bill — dubbed “Cars To Casas” — “six of one, almost half a dozen of the other,” then added “whatever” before voting yes. (At least he didn’t do the hand sign.)
Peskin isn’t the only naysayer who voted for it. It’s true that Cars to Casas is no panacea, and that a combination of pandemic woes and recession uncertainty has changed SF’s building environment for the worse, but the new law is hardly a lost cause.
The dismissive attitude about it is not only strange, seeing that its detractors voted for it. It’s also another example of the strain of San Francisco discourse that housing should become untethered from market-rate development and instead lean heavily on public funds. Wishing to win the lottery isn’t the same as pragmatic policy.
Legislative lethargy
The mayor’s office initially introduced Cars To Casas in October 2021. (A few months ago the name got some blowback for being offensive to Spanish speakers, but it has stuck anyway.)
These new rules chop out the need for a conditional use permit to build homes on former autocentric spaces; other than CEQA, the oft-dreaded California environmental law, those permits are the top factor running up the clock on new construction, often adding 18 months to a project.
Under Cars to Casas, lots previously zoned in single-family areas can now have up to four units. Breed attempted to NIMBY-proof the deal in advance by specifying that it would not increase height limits, and she talked it up as an environmental win by snipping away at the accouterments of car culture.
With some 500 relevant sites around the city, some already allowing more than four units, that’s a potential yield of at least a couple thousand homes. In practice, only a handful of those properties will ever seriously be considered for redevelopment. The actual returns should be modest at best.
But like the fourplex plan earlier this year, it’s an incremental net gain over the status quo, and every little bit counts.
Sup. Dean Preston, while voting for it this week, remarked that it was “strange how much time and energy” went into the bill when, after all is said and done, “nothing is going to get built.”
What Preston left unsaid was that much of the time and energy — and subsequent delay — came at his request. After demanding for months a higher minimum of affordable housing for Cars to Casas projects, he held up a summer vote by ordering a study about the feasibility of his demands. (Breed noted the delay earlier this summer and called for the supervisors to take action.)
The study’s answer turned out to be no; requiring more affordable housing above current thresholds would probably make it harder to build.
The analysis, from consultancy Century Urban, also concluded that under current market conditions, all kinds of Cars to Casas projects weren’t economically feasible, and developers would sit on the sidelines.
‘The upzoning side of the legislation is kind of a nothingburger.’ — District 5 Sup. Dean Preston
Preston and others opposed to market-rate housing have used it as a cudgel: “This ordinance epitomizes the problem with our approach to housing,” the District 5 supervisor added during the hearing.
Asked why he then voted for Cars to Casas, Preston told The Frisc via an emailed statement: “I’ve always supported the [conditional use] side of this to make it easier to change from car to housing uses,” referring to a faster permit process. So a yes vote was warranted, even though “the upzoning side of the legislation is kind of a nothingburger since the feasibility study found private development isn’t feasible at these sites.”
Longtime market-rate and density opponents at 48 Hills did Preston several times better, and declared the study “shows that the entire YIMBY narrative is based on a fundamental economic falsehood.”
The study must have been one hell of a takedown of the for-profit housing system, no? Actually, no. Let’s look at what it said.
A grim prognosis out the window
Here’s an exact quote from Century Urban’s conclusion, with emphasis added: “At current construction costs, city requirements, and rental/sales rates, all prototypes studied are infeasible, though prototypes under the proposed ordinance are generally closer to feasibility than existing zoning.”
It’s important to underscore a couple things. First, the new rules are a net improvement — “generally closer to feasibility” — on the existing zoning.
Second, Century Urban is clear that construction on these lots is infeasible as things stand. Saying it’s impossible is like saying if I continue to sit in this chair forever, I will eventually starve to death; it’s a grim prognosis that goes right out the window if we consider that, eventually, I will stand up and go to the kitchen.
As construction costs, city requirements, and home values change (which they must at some point), building on these spots may be more attractive.
A mayoral spokesperson wrote that “it was clear from the study that more needs to be done if we are going to spur housing production broadly. The Mayor takes that as a call to do more to reduce barriers to housing, not an opportunity to moan that there’s nothing that can be done.”
Century Urban even points out that if some rules changes (“city requirements”) already in consideration go into effect, the scenarios it studied “generally improved in feasibility by 10 [to] 60 percent over existing zoning scenarios,” and that “modest cost reductions or revenue increases could provide for positive feasibility sooner.”
This isn’t to say Cars To Casas is a housing boom waiting to happen. The factors that need to change, like the high cost of labor and materials, are a huge problem, and the bill’s limit to just a few hundred sites was hardly ideal.
Here’s the truth though: Before COVID, there was plenty of developer zeal to get in on deals despite the thicket of rules and fees and permits and obstacles. Even so, the city didn’t wring enough affordable housing from the system that uses those market-rate fees to pay for it.
Changes under the hood of the system might be in the offing after the pandemic clogged the housing pipeline like a fatberg in a London sewer.
Still, Preston said he would prefer those parking lots and other sites be purchased with public funds and made into 100 percent affordable housing — bypassing the inclusionary, market-rate world entirely. “I wish the Administration would spend more time and energy on acquisitions and land banking for affordable housing, instead of legislation that grabs headlines but has little to no impact,” he said.
It would be great to have all those homes developed any way possible. But the last time the Board of Supervisors reviewed the Housing Element plan, they were in despair over how to fund that much construction, which could run as much as $19 billion.
What’s more, SF’s economic recovery is getting shakier by the minute. Waiting for a windfall of tax revenues and other public funds is not a strategy; inclusionary fees, tweaked for better affordable balance, will stay in the mix, which means giving developers the opportunity and incentive to build in the future.
So even if Cars to Casas produces only a few new homes in the next eight years, modest bills like this can be part of the groundwork for the next market upswing — and it won’t just be an upswing with the same old dynamics. If SF’s state-mandated Housing Element plan passes next month, the rules of the road will be fundamentally different for a far greater swath of San Francisco than just a few hundred parking lots and old gas stations.
The city must make building homes easier in neighborhoods that have historically (and successfully) resisted new housing. And more than half of them will have to be affordable.
For anyone whose appetite is suited only for thinking on a larger scale, well, that vote is coming up soon, and not passing the plan could trigger state penalties, including the loss of affordable housing funds. To riff on the words of Dean Preston, it’s very much a somethingburger.
Adam Brinklow is a staff writer for The Frisc, covering housing and development. He’s lived and worked in San Francisco for over 15 years.