In a town where tenants hold considerable power and rent-controlled apartments are sacred cows, five rent-controlled homes on Nob Hill are slated for demolition. It’s rare, legal, and – because it’s San Francisco – a rather odd situation.
The apartments’ date with destiny also comes amid signs that SF’s fealty to rent control is under fire. Advocates hoped the November election would bring a local boost, with Aaron Peskin, a rent-control champion, running for mayor and a state measure to repeal restrictions on the ballot. With Peskin at the helm, the Board of Supervisors also had rent-control expansion queued up in case the state measure won.
But Peskin came in third, and the state measure lost with room to spare. San Francisco’s current rent-control rules will remain in place.
One fascinating test of those rules gained approval a few weeks before the election: a 33-unit condominium project that will demolish five rent-controlled apartments near Chinatown, in a building with some eccentric San Francisco history, no less.
It would seem like a nightmare for tenant activists, market-rate development skeptics, and preservationists, who often work together to fight new construction.
In SF, the demolition of rent-controlled homes requires a special permit and a hearing before the Planning Commission, which rarely acquiesces.
But the Planning Commission narrowly approved the project in September, with assurances from the developer that no one would be evicted or displaced. The apartments had been vacant for years, some for decades. But lately, one of them is occupied every minute of the day.
Squeaker vote
The property slated for a tear-down spans from 842-860 California Street. The plan calls for a new eight-story building with 33 condominiums, most of them one or two-bedroom homes.
That’s the kind of development Nob Hill rarely sees. The neighborhood only added 13 new units last year, ranked 18th in SF. (One new building did add 44 units in 2021.) For context, the top-ranked Tenderloin just down the hill added nearly 800 new homes last year.
The current buildings include two commercial spaces and five residential apartments, all built in 1907. SF’s rent-control stock is limited to apartments built before 1979. That’s still about 70 percent of the city’s rental units.
When Mayor London Breed proposed a law last year to allow demolition of rent-controlled apartments in one-or-two unit buildings without a hearing in certain narrow cases, the outcry forced her to ax it.
In this case, the project sponsor testified that the five apartments in question were empty. Vince Sosnkowski, a Tahoe-based realtor and developer, bought the buildings for $5.2 million in 2020. Prior to that, Nob Hill mainstays the Wiebe sisters owned the whole place, operating the Twin’s Armoire Boutique in one of the commercial spaces and living in two of the apartments for more than 50 years. The other three apartments were empty all that time, according to the Planning Department.
The other commercial space housed doctor’s offices until a few years ago, but one of the doctors told The Frisc all occupants have either retired or moved.
“This is indeed a rare set of variables that led to a demolition,” said SF Planning Department spokesperson Anne Yalon.
What’s more, the project complies with two main requirements of a state law, SB 330, that governs demolition of rent-controlled apartments.
One of the four yes votes on the Planning Commission was Amy Campbell, who said it was ‘irresponsible’ to turn down dozens of new units when San Francisco is so far behind on its housing goals.
The law requires the new building provide one-for-one replacement of the demolished rent-controlled units, but in 842 California, the 33 new homes will be for sale, not rent. Instead of rent control, five of the new units must be priced for buyers making no more than 80 percent of the city’s area median income. That would put the price tag in a range from $279,000 to $365,000.
A median two-bedroom condo outside downtown sells for well over $1 million in the current market, and a nearby 2021 building lists some units over $2 million.
SB 330 also requires the tenants of demolished homes get first dibs on replacement units. In this case there are no tenants. On top of the affordable homes, the developer is paying $2 million into the city’s affordable housing fund to satisfy the city’s inclusionary housing rules.
Still, the project barely squeaked by on a 4-3 vote at the September hearing. One of the four yes votes was Commissioner Amy Campbell, who said it was “irresponsible” to turn down dozens of new units when San Francisco is so far behind on its housing goals.
State regulators are demanding SF to permit 82,000 new homes by 2031. More than half must be affordable.
On the “no” side, Commissioner Theresa Imperial rejected it on the basis of the demolition. Commission VP Kathrin Moore, who lives on Nob Hill, mentioned neighborhood anger at the nearby large building that went up in 2021.
Commissioner Gilbert Williams also cited the demolition: “I was told this wouldn’t happen, but here we are. It’s hard to believe no one lives there.”
Planning Director Rich Hillis said the department had checked city records and voter registries to make sure the apartments really had remained vacant.
While the term “vacant” may seem cut and dry, in the case of 842 California there’s more than meets the eye: the building is in fact occupied 24 hours a day. And the first person to acknowledge this was the developer’s lawyer.
Occupant, not tenant
During the September hearing, Steve Vettel, a lawyer representing the project, told city planners that Sosnkowski hired “on-site security” to occupy the building around the clock and protect it from squatters – but they are not renters.
The Frisc visited the site and spoke to one of the watchmen, who confirmed he was there to keep up the property, and that the buildings had had problems with break-ins: “I’ve never seen so many needles.”
He stays there with his family under a service agreement with the owners without paying rent, he said. (He asked to speak anonymously.)
“We had our lawyers go over [the contract] and Planning confirmed it,” Sosnkowski said when reached on the phone. Planning spokesperson Yalon confirmed that the security guard and his family are not legally tenants.
“The focus should be that this is a high-end neighborhood and we’re getting new affordable units,” Sosnkowski said.
According to Vettel, the project’s lawyer, nobody has appealed the decision and the developer can apply for permits, though it’s too early to say when construction may begin.
Affordability how?
The plan for 842 California is moving ahead, but the shift of a single vote at the Planning Commission could have stumped it. That slim margin shows how there’s no consensus in San Francisco how to tackle the high cost of housing.
On one side, skeptics like the three commissioners who voted no on 842 California think market-rate housing only benefits people who can afford it, and affordability needs to be locked in.
The other side believes that supply and demand is a real thing in housing: build more and prices will come down. A growing body of national evidence shows that this economic principle does apply to housing.
With Daniel Lurie’s mayoral victory and a tilt toward a more development-friendly Board of Supervisors, San Francisco might now give that theory more runway. And there’s this: in two previous failed attempts to repeal statewide restrictions on rent control, SF voters were in the minority and voted for the measure. This time, the third try from a Los Angeles nonprofit executive, SF voted 58 percent against. The measure lost 60 percent to 40 percent.
Mark Baldassare, a researcher and pollster at the Public Policy Institute of California, said Californians generally say they support rent control when asked. Despite the November 5 results, he told The Frisc after the election, “there is majority support for the concept.”
Still, there won’t likely be an attempt to expand SF rent control anytime soon. Affordability will have to come via other avenues. One is SF’s “inclusionary” system: in every market-rate project, like 842 California, 12 to 16 percent of the units must be affordable, or else the developer must pay more into an affordable housing fund.
Another source is local bonds, like the $300 million bond SF voters passed in March. But a $20 billion regional bond for affordable housing never reached the ballot, and state and federal funds will be hard to come by.
With projects like 842 California, the city is trading five empty apartments for 33 new ones. Even with a lot more trades like that, SF will have a tough time making way for 46,000 new affordable homes this decade.