The great housing hoax
How a group of developers, hiding behind worker-friendly rhetoric, is poised to usher in the next wave of San Francisco gentrification.

By Rachel Brahinsky

OZ ERICKSON IS glowing with pride. Sitting in the driver's seat of his beige Lexus, Erickson holds up a pastel, color-coded map of the central waterfront, the sprawling parcel of bay-front land that sits south of Mission Bay, at the foot of Potrero Hill. "I was so proud of this," Erickson says, pointing out details on the map, an ambitious blueprint showing new housing, parks, and stores.

As a principal at the Emerald Fund development firm for the past seven years, Erickson has spent a lot of time envisioning a new layout for this part of town, where scattered live-work lofts and four-story apartment buildings are dwarfed by vast warehouses and parking lots, and where the potholes seem to outnumber the cars.

Erickson has a clipped, Boston-tinged accent and is an utterly likable guy. He has big dreams for the area. He says he favors building new mixed-use projects, where retail and housing share space, and he supports putting projects near transit to cut down on parking needs. "We have a responsibility to build," he says.

It's not always easy to be Oz Erickson: San Francisco neighborhoods often don't respond well to developers pushing ambitious agendas. A combination of NIMBY-ism and years of bad experiences with top-down planning policy has made this city wary of rapid change – and residents have a playbook of legal and political tools to block builders who are trying to do too much too fast. The people who live and work around the central waterfront don't like the idea that a developer can decide what goes where; they'd rather have a planning process that starts from the bottom up. And that takes time.

But if a ballot measure Erickson helped craft for the March 2 election passes, developers will have a new way to bypass community concerns.

In essence, Proposition J, the Workforce Housing Initiative, would force planners to fast-track construction of relatively tall, dense apartment buildings as long as they provide some below-market-rate housing. The condominiums – which would exceed neighborhood height limits by 15 feet – would first be allowed along the waterfront, in the core of the Financial District, and on several blocks in Chinatown (see maps, pages 18 and 20). But they could soon pop up almost anywhere else in the city.

It's being packaged as a panacea for the working class, but none of the proposed 10,000 new units would be rental housing. In reality, Prop. J is about high-end condos for the wealthy.

Prop. J's backers, led by the San Francisco Chamber of Commerce, argue the initiative represents the best way to provide home-ownership opportunities for the forgotten middle class. They say it's a creative way to convince private developers to invest in below-market-rate housing without direct subsidies.

It's true they've come up with a formula that appeals to investors. And Prop. J includes some planning ideas that just might be good for certain parts of the city. But the measure – which was put on the ballot without the benefit of a single public hearing – would re-zone parts of Chinatown with no input from area residents, and it would override a four-year-old planning process fought for by central waterfront neighbors, in which residents were prepared to accept a significant amount of housing – but on their own terms.

Even some critics of the measure agree with a lot of what people like Erickson have to say about creating neighborhoods that work – like making sure there's a healthy mix of stores, parks, and services for residents. But the proposition doesn't include any provisions to require such things and won't force developers to help with the huge costs of offering transportation, open space, and city services such as police and fire protection to that new housing and the people who live in it.

And opponents say the measure, which would force the already cash-strapped San Francisco Planning Department to advance $2 million for environmental studies, would force-feed a new wave of gentrification to a city where the displacement of working-class people is already a fact of life. In fact, some say Prop. J is part of a larger downtown plan to bring more rich people into the city to change San Francisco's demographics – and thus its politics.

"Those of us in the neighborhoods that have been heavily impacted by gentrification know this ballot measure really isn't about getting housing for those who need it," Sup. Chris Daly told a crowd assembled at a Feb. 7 rally against the initiative. "If you read carefully, you'll see ... it's only going to be affordable to the wealthy ... or to two-earner families that have decent jobs but have no kids."

Longtime affordable-housing advocate Calvin Welch adds, "This is high-income housing mandated by zoning, a new iteration of gated communities. Sixty-one percent are market rate, so the lowest-income residents will be upper-middle-income people."

On the waterfront

San Francisco's central waterfront – ground zero for this new plan – is unlike any other part of the city. Swampy freeway underpasses abut hulking warehouses, creating a generally desolate feel. Yet ink makers, stonecutters, set builders, and other craftspeople coexist here with artists, car repair centers, and a sprinkling of live-work loft dwellers tucked near Highway 280.

After many years of change, it's still a neighborhood in flux. Bounded by the bay to the east and the highway to the west, the central waterfront was once home to the Pacific Rolling Mills, which churned out iron parts for ships, bridges, and streetcars, and it was the heart of the city's industrial sector for more than 100 years.

Over time a handful of Irish pubs sprung up to serve the mill workers, and Victorian homes, some of which are still standing in the Dogpatch Historic District, formed a distinctive, isolated community. When the shipping industry left San Francisco midcentury for larger, more modern ports, the bustling waterfront began to wither.

With its bay views and proximity to downtown, the area has always held an allure for developers, who once tried unsuccessfully to line the water's edge with hotels.

Pushed by the San Francisco Planning and Urban Research Association (known as SPUR) and prodded by area residents, the Planning Department began working on a Better Neighborhoods plan for the area four years ago, inviting residents to join in mapping out their neighborhood's future.

In December 2002, following hours of meetings, bus and walking tours, and discussions with other city agencies, planners released a draft proposal, suggesting the area take on about 1,600 new units of housing, which would be situated near the Third Street light-rail line that's now under construction. But budget cuts stopped the environmental studies necessary to bring the plan to fruition.

The slow pace of the process frustrated neighbors and developers alike, but the Better Neighborhoods concept remained popular. Last year then-supervisor Gavin Newsom, in an effort to pull in support during the runoff race for mayor, put out a press release supporting community involvement, saying he "offered a vision of city planning that would 'take planning to the neighborhoods and involve neighbors in master planning their community through the Better Neighborhoods plans.' "

At the same time, however, he was supporting the workforce-housing concept, which is effectively the opposite approach: it dictates planning guidelines for neighborhoods written without any resident input. Newsom introduced the measure at the San Francisco Board of Supervisors but then never asked for a hearing on it. Instead, he supported the Chamber of Commerce's signature drive, which put Prop. J on the ballot without public review – and over the objections of neighbors like Tony Kelly.

Kelly, a bubblingly energetic theater director, is president of the Potrero Boosters, one of the two main neighborhood organizations concerned with central waterfront development.

"What's wrong with Better Neighborhoods?" Kelly asks. "What's wrong with balancing housing with services so people have a better neighborhood around them? You need a local market, open space, you need the things that make a neighborhood.

"San Francisco has a long history of individual gadflies – some of whom have more influence that they should. But you can't legislate that out of existence, because it's part of – hello – democracy."

He points out that Potrero area residents have been clamoring for new housing for years. Back in 1999, residents wrote their own plan, calling for thousands of new homes – but also asking for parks, a public fish market, and other community services to support any new population influx.

The Emerald Fund's Erickson says he shares similar goals, but the slow process frustrated him. "Would I have preferred to flow through the normal channels? It just seemed it never ever got done," he says. "Meanwhile the housing crisis just got worse. In a perfect world it would have flowed through the normal channels."

But there's more at issue here than just process. Prop. J won't simply add more housing to Kelly's district – it will force residents to accept dozens of condos, mostly selling for more than $350,000. And workforce projects, under rules in Prop. J, would be expedited ahead of all others.

The way Erickson sees it, it's a pretty good deal, since the same condos could go for around $500,000 on the market. "Yeah – it's not a deep discount," he concedes. "But before you didn't have anything [below market rate]."

Whose workforce?

Almost everyone in San Francisco agrees the city needs more housing, and that need has been at the heart of a long list of political battles and debates. But the subtext of those debates is largely ignored by the Chamber of Commerce: housing for whom?

A stroll downtown near the chamber's headquarters is all the demonstration anyone needs of the desperate shortage of very-low-cost homes for the estimated 8,000 to 15,000 people who sleep on the streets or in temporary shelters at night. According to the Planning Department's own draft Housing Element, a document meant to guide housing decisions, the city's most urgent housing needs are for lower-income families with several children. Shelter for the wealthy – or even for upper-middle-class people with plenty of money in the bank and no dependents – isn't on the top of any reasonable person's list. And in reality, that's who this initiative benefits.

Under Prop. J, condominium developers would set aside about 26 percent of every new building for sale at below-market rates to individuals earning as much as 120 percent of the federally defined area median income, which is an average that includes Marin and San Mateo Counties and is about 20 percent higher than San Francisco's own median.

An individual earning up to $76,850 annually would qualify, as would two people earning $87,750 or a family of three earning $98,800.

The Chamber of Commerce insists teachers, firefighters, nurses, cops, and even office workers meet these salary requirements and will fill these homes.

But while some cops and firefighters might indeed fit in, the median teacher's salary, for example, is just $56,000, and most teachers make less. The typical registered nurse earns about $46,000 a year. Many of the professions the term "workforce" calls to mind – including secretaries, janitors, and bus drivers – make about that much, or far less. Even among general managers and executives, the mean annual wage is $75,000.

Chamber spokesperson Jaime Rossi insists there's no hidden agenda. "We're creating housing at a very high level and at a very low level," he says.

Rossi justifies the numbers by noting that two-income workforce families might qualify. He has a point: two teachers, each earning about $45,000, could live together in a one-bedroom workforce unit.

But housing activist Welch, who has been wrestling with the chamber over development issues for 30 years, says that's a misleading analysis.

By Welch's accounting, monthly housing costs for a one-bedroom unit would be $2,349, including condominium fees and taxes; a two-bedroom would cost $3,020 each month. The chamber won't confirm these numbers but has not disputed them.

Not many firefighters and bus drivers – except possibly some who are in double-income couples with no kids – can meet those monthly bills.

How can this be called workforce housing? There's a trick: Prop. J allows developers to price condos based on the assumption that owners should be able to spend 40 percent of their income on housing. That directly contradicts both common sense and existing city policy. As it says in the Housing Element, "overpayment comes when 30% or more of a household's income goes to paying rent ... or 35% or more goes to mortgage payments."

Again, for what planners call DINKs (people with double income, no kids) this might be possible. For single mothers, working families with children, single-wage-earner families and many, many others who make up the broad spectrum of the city's workforce, spending 40 percent of one's income on housing is simply not affordable.

Between 10 and 12 percent of the new units would be "affordable," but only because existing city law requires it. Most of the condos – about 61 percent – would be sold at market rate.

Beyond the cost of housing, there's also serious concern about what the measure will do to the already tight Planning Department budget. Prop. J would force the department to front $2 million to pay for areawide environmental studies in workforce zones. Again, though proponents insist developers will pay for the studies, the law leaves it open as to whether the builders would have to reimburse the department.

The initiative would also reclassify the workforce-style projects as "permitted use" structures, robbing the department of established "conditional use" fees. Conditional-use fees typically make up about 14 percent of the department's budget, coming to between $1 million and $1.5 million each year for the past three years.

Unlikely coalition

The call to gather on the Polk Street steps of City Hall on a recent Thursday morning in opposition to Prop. J didn't just pull in the usual crew of housing-rights activists, which tends to be a scrappy, multicultural crowd. The rally, headlined by west-side conservative supervisor Tony Hall, primarily drew white guys in their middle years, many from Hall's district. Their concern: Prop. J's potential to bring tall, dense, condo-style streetscapes to their quiet neighborhoods.

An unlikely coalition flanked the west-siders. Affordable-housing advocates and Mission District antidisplacement activists were shoulder to shoulder with Joe O'Donoghue, president of the Residential Builders Association (RBA), whose members are best known for the proliferation of live-work lofts that have gentrified the Mission and South of Market.

Truly, it was an odd scene. Normally these people are at each other's throats over housing issues, but Prop. J has brought them under the same tent. Under the initiative, "workforce" condos could eventually spring up everywhere from the Haight and the Richmond District to the Mission. Even Newsom's own Marina District is targeted by the plan.

Hall, who is the author of several ballot measures that were fought bitterly by tenants rights advocates and is often vilified by the left for his pro-big business positions, waxed populist. "It's not workforce housing. It's a get-rich-quick scheme" for developers, he said. "There's nothing in this legislation that mandates true workforce housing."

His concern stems from one of many confusingly drafted sections of the proposed law, in which Prop. J re-zones residential neighborhoods that are nowhere near the two identified workforce-housing zones to allow for workforce condos.

The Chamber of Commerce's Rossi vehemently denies the condos would be allowed all over town, saying, "Nothing here is outside of these two neighborhoods."

And supporters like Erickson insist there was never any intention to expand the realm of workforce homes. "I never thought it was appropriate for other neighborhoods. Not in a million years," he says.

Yet some Planning Code experts say that's exactly what Prop. J would allow. Former planning commissioner Dennis Antenore, for example, says there's no question how to interpret the proposition. "It's clearly stated here that the Planning Code is changed to make workforce housing a permitted use," says Antenore, who was fired by former mayor Willie Brown for refusing to back a developer-friendly ballot measure in 2000.

And experience shows that in this city, the slightest loophole that can be exploited by developers will be. The exploitation of live-work zoning rules that partly spawned the Brown-Antenore conflict is just one example.

Several other experts agreed with Antenore that the measure at a minimum opens the door to a cookie-cutter approach to citywide planning.

It's an approach Mayor Newsom has denounced in the past. "Heightened density may be appropriate [in some] areas, but only through a better neighborhoods planning process; through a community based planning process," he said in a November 2003 press release. "What's appropriate on Third Street is not necessarily appropriate for West Portal."

At a recent anti-Prop. J rally, Sup. Sophie Maxwell said if people in her district (which includes the central waterfront) had been included in the process, the measure might have come out quite differently. "What about the 400 to 500 bus drivers who live in my district? Were they consulted? What about the people working at the bank? What about the people who are working in the nonprofits? Were they consulted?"

That's part of what's spawned the upsurge of political energy against the measure from so many different quarters. Along with every housing rights group in town, the Coalition for San Francisco Neighborhoods voted unanimously against Prop. J, even though many in the group are Newsom supporters. The majority of the Board of Supervisors has come out against it, as have Assemblymembers Mark Leno and Leland Yee, along with two current and seven former planning commissioners.

Even SPUR, the group whose work the Chamber of Commerce cites in defending Prop. J, isn't backing it. Members were particularly disturbed by the way it steamrolls over the planning process and voted to stay neutral.

Sup. Aaron Peskin, who represents Chinatown, put it this way at the anti-Prop. J rally: "I'd love to work with the new administration, but you have to consult with the people in the city. This initiative re-zones Chinatown, and nobody in Chinatown was consulted."

Plus, he added, "If this is workforce housing, how come the workforce, the San Francisco Labor Council, opposes this? Figure that one out."

The chamber's baby

High on the 13th floor of the historic Russ Building, a Gothic structure in the heart of the Financial District, there's a large office with blond wood paneling and a hushed sense of importance. Here, just a few blocks away from the Transamerica building, the Pacific Stock Exchange, and most of the city's major banks, the downtown brain trust that constitutes the Chamber of Commerce makes its home.

Over the years, in concert with other groups including the Bay Area Council and SPUR, the chamber has churned out policy proposals to make San Francisco friendlier to development. They've supported plans to "redevelop" areas like SoMa and the Fillmore District, promoted hotels along the waterfront, and pushed for the spread of high-rises and what was termed the "Manhattanization" of San Francisco (see graphic, page 16).

In the past several years, chamber senior vice president Roberta Achtenberg – who once was a relatively progressive city supervisor and a senior housing official in the Clinton administration – has taken on the workforce-housing concept as a pet project, although she declined several requests to speak personally with the Bay Guardian about the proposal.

Several city supervisors told us Achtenberg approached them over the past year about sponsoring a workforce-housing bill, but only Newsom fully took on the cause. His name is on the first ballot argument supporting it in the voter handbook, and one of his 21 policy papers, often referred to during the campaign, is all about workforce housing.

Now, in the wake of rumors that internal campaign polling shows the measure lacks traction, and as opposition grows, several sources told us Newsom is trying to distance himself from it. His spokesperson Peter Ragone repeatedly refused over a two-week period to answer our questions for this story.

With or without Newsom's enthusiastic public support, the chamber is gathering a war chest that will likely keep the opposition campaign running ragged for the next month. Already the group has spent at least $267,784.

Several of the developers and downtown interests that helped bankroll Newsom's mayoral effort are also backing Prop. J. The Swig Co., Webcor Builders, and Nibbi Bros., all past Newsom donors, each gave $5,000 to the pro-Prop. J effort. Erickson's Emerald Fund gave $1,000.

Pacific Gas and Electric Co. gave $10,000, and the Bechtel Corp. gave $7,000.

The No on J camp has mostly people power, reporting less than $1,000 in the bank, although O'Donoghue's RBA has pledged to put $200,000 toward defeating the measure.

Meanwhile the anti-Prop. J forces are working on an alternative, dubbed Public Benefits Incentive Zoning, which has already been the subject of several public hearings and will likely come up for discussion at the Board of Supervisors again before the election. The idea is to design a law that would force developers to pay for truly affordable housing, for spaces for nonprofits, for open-space preservation, and for other community services, in return for the right to expand beyond previously established height and density limits.

"We start with the notion that density is a value, that it confers value on a development, and that a public value should be balanced by a public benefit," says Welch, who is working with Sup. Jake McGoldrick's office on crafting the legislation.

The idea is to increase the housing stock while pushing builders to do more to invest in the local infrastructure. It's an approach that directly counters Prop. J and will be subject to hours of hearings and public scrutiny.

As Welch says, "there are important elements in Prop. J that have not been revealed by the proponents. But it's clear that this really wouldn't house the vast majority of the San Francisco workforce. The policy being pursued here is a kind of studied displacement. You're left with kind of a sinking feeling in your stomach."

Tali Woodward and Helen Christophi contributed to this story.

E-mail Rachel Brahinsky