The fate of the eastern neighborhoods

How 40,000 market-rate housing units will threaten the last blue-collar jobs and working-class neighborhoods in San Francisco.

By Tim Redmond and Matthew Hirsch

IT'S A WARM Sunday afternoon in the South of Market high-rise conclave real estate brokers call San Francisco's newest neighborhood, and at the Beacon condominium complex, Alexis Emmel is lounging by the fourth-floor outdoor pool. There's a modest health club a few feet away. Across the street, a sister building has a self-contained dog park in the sky, a patch of green on a concrete platform 50 feet above King Street where pint-size furry pets roam around, sniff, and do their business. On the ground floor, there's a gourmet Safeway, and there's a Starbucks and Quiznos just down the street.

Emmel is young and single, and she works in the human resources department at Google's campus in Mountain View. She moved here a little less than a year ago from Walnut Creek, buying a two-bedroom condo where she lives by herself. She loves the downtown life.

"Everything's new, and it's not too crowded," she tells the Bay Guardian. "It's so convenient." For a Silicon Valley worker bored by the thought of peninsula living, the location is perfect: It's just minutes from the Fourth Street Caltrain station and I-280. Not that Emmel has to drive or take the train: Google runs between 8 and 10 passenger shuttles a day, ferrying more than 400 people to work and back.

The Beacon looks and feels like a college dorm on steroids: The halls are tastefully antiseptic, the residents young, well-off, and overwhelmingly white. "They're professionals in their later 20s to mid-30s and some empty nesters with a lot of equity in their homes," explains Blair Shephard, a live-in salesperson for the complex. Apartments run from about half a million dollars to $1.34 million. "There are also a lot of real estate speculators buying places," he says. "They think that property values here are going to soar."

This is what developers and some city officials see as San Francisco's future: high-rise, high-end condominiums, islands of serenity near transit corridors with ground-floor shopping and cafés. In this vision, some 40,000 new units, perhaps even more, will be built over the next 20 years, enough housing for 100,000 new residents.

The influx will transform the eastern neighborhoods of San Francisco. Not all of the new projects will be the soaring downtown tower models; many will come in smaller bundles. But all but a fraction of those new units will be at what the city calls "market rate," meaning the very cheapest of them – tiny one bedrooms – will go for half a million dollars.

It is, housing activist Calvin Welch says, a "socially psychotic plan.... We're becoming a gilded bedroom community for San Mateo and Santa Clara Counties."

Adds Sup. Sophie Maxwell, who represents southeast San Francisco: "We're building for people who aren't even here."

And if the new streetscapes are anything like the ones constructed so far, they will feature chain stores that could fit in well in any of a thousand communities across the country and an overall look and feel that will have little or nothing to do with the rest of San Francisco.

The process is already well under way. At least 2,400 new units have been built in the past two years, mainly in the South of Market area. There are 8,500 more already approved or in the pipeline for Mission Bay, the central waterfront area, Showplace Square, and the foot of Potrero Hill.

And as the new Third Street light-rail line nears completion, the condo developers will begin their inexorable march into the city's last middle-class black community.

• • •

Just a short three miles from the Beacon's outdoor pool, near the corner of Third and Palou, Eric Poole is hanging with his pals in front of a Chinese take-out place that has a thick, bank-style Plexiglas barrier to protect the cashier.

Poole was born and raised in the Bayview. His father was a contractor who bought a house with his GI benefits after the war. "It was middle-class homeowners, that was the neighborhood," he tells us. The 55-year-old unemployed shipyard worker still lives in the family home, but he won't be there much longer: His 82-year-old mother just put the place on the market.

"A whole lot of black homeowners are selling out," he says. "I know 18 or 19 on my block alone. My mother's going to get $500,000 for her place and move to Sacramento."

Poole looks out at the spiffy streetlights, the palm trees, and the stonework that mark the arrival of the rail line. He wanders over to push a brand-new crosswalk button. "They never had this stuff before," he says. "Something gets broken here now, they fix it the next day. It's a big old change coming."

Poole seems to know everyone on Third Street, where every business is locally owned. He's got a high five for the kids, a comment for everyone who passes by, and the attitude of someone who's always got an angle, always got something going on. And he's not happy about the future of his neighborhood.

"I see capital gain, multimillion-dollar development for a certain class of people," he explains. "Soon they'll start cracking down on people on the street: no loitering," he continues. "They don't want youngsters walking around. Slowly but surely, they'll clean it up. The corner liquor store is where we get our coffee now; soon they'll be going to Starbucks.

"The black people will be relocated. I don't know where."

Not everyone is depressed by the changes that are already starting to show up along Third Street. Alex Bell, 55, runs Bell's Dry Cleaning, just as his father ran it before. The cramped shop has been on Third Street for half a century, but its days are numbered. "I'm tired," Bell tells us. "And I don't want my kids working here." His family owns the building, and the one next to it, and they get offers from real estate agents and developers almost every day. Sooner or later, he'll take one of them, cash out, and retire someplace nice.

It's a neighborhood with serious problems – violent crime and poverty are a part of daily life. And everyone agrees that the area needs an influx of money and economic development.

But this city has never been able to do large-scale development, certainly not this kind of housing development, without massive displacement and gentrification. And nearly every merchant we talked to in the heart of the Bayview seems to know that it's only matter of time before the local black-owned businesses that hire local black kids and serve local black families are gone.

• • •

Three years ago the San Francisco Planning Department launched what is now by far the largest ongoing planning and zoning process in the city, and one of the largest in the city's history. The eastern neighborhoods plan will ultimately affect nearly every square foot of land from Rincon Hill, at the foot of the Bay Bridge, to the Hunters Point Naval Shipyard, at the far southeast corner of the city.

It's a huge chunk of real estate, some 3,875 acres. It includes some of SoMa, Showplace Square, Mission Bay, Potrero Hill, Dogpatch, the Bayview, and Hunters Point. It has the greatest diversity of land uses anywhere in town: office buildings, multimillion-dollar condos, nightclubs, restaurants, low-income housing, upscale lofts, auto repair shops, a cement factory, a power plant, the city's largest sewage treatment facility, factories, warehouses, and more.

It's home to well-maintained low-income housing projects managed by nonprofit agencies, decrepit and sometimes truly foul public housing projects run by the city, and pleasant mixed-use neighborhoods like Potrero Hill and Dogpatch, where there's still a little bit of almost-affordable family housing and some working-class residents surviving the onslaught of housing prices that have reached truly incomprehensible levels.

It's also the last frontier for blue-collar work in San Francisco. There are, the Planning Department estimates, 53,000 people working in production, distribution, and repair (PDR) facilities in the eastern neighborhoods. And in even the best-case scenario, planning officials admit that close to 5,000 of those jobs will soon be gone.

That's the best case. It's more likely that, as housing developers eye the land in the southeast part of the city, many thousands more businesses that keep the city operating – that provide the supplies, infrastructure, and maintenance work for the San Francisco economy – will be forced out of town.

Here's how the Planning Department describes the situation in a document called the 2003 Eastern Neighborhoods Rezoning Options Workbook:

"The frightening dimensions of the city's housing challenge require that the land currently zoned for industry be carefully evaluated for its transformation to full-service livable neighborhoods."

In other words, when you translate the bureaucratic language, San Francisco officials have decided that the need for luxury condos for Silicon Valley commuters is so pressing that locally owned businesses and blue-collar workers have to be pushed out of the way.

Another planning document, released Oct. 6, suggests that as many as 17,500 jobs could be lost if current zoning policies stand. "Almost two-thirds of all ... industrial land is being rezoned and converted to areas where housing is encouraged and permitted by right," the Eastern Neighborhoods Proposed Permanent Zoning Controls report states.

• • •

The San Francisco Redevelopment Agency has operated since 1949 under a motto that pretty much sums up how official San Francisco approaches the housing problem. "Omnes Volunt Habitare in Urbe San Francisco," it reads. "Everyone wants to live in the city of San Francisco." Welch puts it more bluntly: "The demand for housing in San Francisco is insatiable."

That means, of course, housing development is a very lucrative business. The dozens of developers who have already put in applications for, or begun construction on, market-rate condos and rental units don't seem to have any fear that they'll lack for customers. The current units are selling just fine, and prices just keep rising.

Over the next 20 years, according to Planning Department documents, San Francisco could make room for developers to build between 66,000 and 78,000 new housing units. The Planning Commission adopted guidelines last year that call for closer to 40,000.

If flooding the housing market would actually bring down costs, that might ultimately make the city more affordable. It would come at a price, of course: Low-scale neighborhoods would become far more dense. Big towers would sprout in areas with open sky. Small, locally owned independent businesses would be replaced by chain stores. San Francisco would begin to look and feel a lot more like a strip mall. Hundreds of millions of dollars would have to be spent on schools, parks, water lines, police and fire coverage, and other basic services for all the new residents.

But there's no evidence at all that more housing ever equals cheaper housing, that there's any trickle-down effect of building market-rate units. The 2,500 new units constructed in the past two years haven't had the slightest impact on housing prices, which have continued to rise sharply every year.

There is, however, clear evidence that what the city needs is housing that its local workforce can actually afford. "There isn't a housing crisis in San Francisco," notes Tony Kelly, president of the Potrero Hill Boosters, a neighborhood organization. "There's an affordable-housing crisis."

The city's own Master Plan states that at least 40 percent of the new housing built in the city must be affordable to very-low- and low-income households, and 32 percent must be available to families of modest means.

That would mean that 72 percent of all new housing ought to be priced below – far below – current market rates. And with the city's current housing policies, there is absolutely no chance of anything even remotely close to that ever happening. In fact, current city law requires that only 12 percent of all new units built be sold at below-market rates.

So what will almost certainly happen (if current plans go forward) is that more million-dollar condos will be built on land that's now used for light industry. The property values in adjacent residential areas will soar, meaning people who own their houses and commercial buildings will be able to sell for a handsome profit – but onetime middle-class housing will be priced out of the reach of the next generation.

And the light industry will go.

"The record is very clear," Welch, who has been following local housing trends for more than 30 years, notes. "High-end housing drives out industrial uses."

• • •

There's not a lot of land left in San Francisco for businesses like wholesale trade, food processing, printing, construction, light manufacturing, and repair shops. Only 800 acres still accommodate the 53,000 jobs in those categories – jobs that are crucial to the functioning of the city economy.

The Association of Bay Area Governments, which provides regular projections of job growth and housing needs for Bay Area cities, projects San Francisco will need to make space for another 18,000 PDR jobs in the next 20 years.

But city planning documents acknowledge there won't be any place for those businesses to go. "Estimates of available space under proposed plans and rezoning efforts indicate that the city could provide enough space for office, institutional, and retail, but not for PDR," the Rezoning Options Workbook notes. "Because of their linkage to other jobs, a decline in the PDR job sector could trigger a job decline in other sectors of the economy.

And the rash of condo-based "new neighborhoods" could trigger a much bigger economic problem than that. Small, locally owned independent businesses have long been the source of most of San Francisco's jobs – particularly jobs for local residents who lack advanced formal education. When they're replaced with the sorts of chain stores that you see in the new downtown areas, wages will drop, money that stayed in the community will be sucked out of town instantly, and the very health of the local economy will be at risk.

"Everyone working here is from this neighborhood," Garland Steuben, who own Rudy's Barbecue Pit on Third Street, told us. "That's not who Starbucks is going to hire."

Welch makes the broader argument: "We're not producing jobs for our residents, and our residents aren't working here."

That's not a healthy mix.

• • •

Take a walk through the area that the Planning Department calls the "central waterfront," and neighbors call the foot of Potrero Hill, Third Street, and Dogpatch, and you can see why the developers are drooling. There's actually open space, undeveloped land. And there are a lot of low-rise warehouses and light industrial facilities that could easily be demolished and replaced with much more dense – and much more profitable – housing.

But it takes a lot more than condo towers to create a neighborhood – and the areas in the developers' sights have never had the sort of basic infrastructure that's needed to support downtown-level density. Unless every new building is going to have its own self-contained dog park, there needs to be open space. Unless (like the Beacon) the new projects will almost by definition exclude families with children, there will need to be schools and recreation centers. Other than the Third Street rail line – which is designed to take people downtown – the central waterfront is very poorly served by transit.

Police and fire coverage for the area was never designed for a population of the size that planners and developers are discussing.

The tab for all this will be huge: tens, maybe hundreds, of millions of dollars. Nothing that developers pay under current law will even begin to offset those costs.

"You're going to have to talk about big development impact fees," Kelly says. "There's just no other way to pay for all of this."

• • •

In the end, after all the debate over infrastructure, zoning, PDR businesses, and political process, there's a question that almost nobody seems to want to ask:

Why are we building any new market-rate housing in the first place?

It's not an insane query. The median annual income for all households in San Francisco, according to the Mayor's Office of Community Development, is $55,000. For African American households, it's $44,000. The income required to afford the lowest-priced new condos on the market is about $175,000 a year, according to standard mortgage calculators – meaning only a small percentage of the people who live in the city could ever possibly buy a "market-rate" unit.

In fact, a demographic breakdown on the MOCD Web site shows that fewer than 3 percent of the residents of Bayview-Hunters Point could afford the lowest-priced new condos.

What that means, of course, is that the next generation of African Americans in the southeast part of the city won't be able to do what their parents did: buy a home and live in a middle-class black neighborhood made up primarily of homeowners. That same pattern is evident among working-class people of all ethnicities: They can't buy (or even rent) the housing that the city is providing.

What's going on here is fairly simple. San Francisco, by public policy, is building housing for a very different city. San Francisco 2025 will be richer and whiter. It's residents will live in homogenous, clean neighborhoods with homogenous, clean chain stores. It will look and feel on the ground a lot like a hundred other upscale urban places look and feel. It won't feel much like San Francisco.

The demographics will lead to political and cultural changes too. The new residents, if normal trends continue, will be more economically conservative, less likely to approve taxes to pay for social services, and less likely to be sympathetic to homeless people, day laborers, unions, and small local businesses.

Is that the city we really want? Because none of this is inevitable. For the last half-century, city planning and economic development in San Francisco have been driven by a desire to accommodate the needs of developers and big businesses. But there are other ways of looking at things.

"If the goal is a sustainable city, a sustainable economy," Welch argues, "then existing housing is the most valuable, existing jobs are the most valuable, and existing residents are the most valuable."

That approach would mean looking at jobs for unemployed San Franciscans and future jobs for their kids. It would mean preserving the industrial base in the city. It would mean building housing that current renters – working people and families – could buy and live in, instead of places that appeal to out-of-towners and speculators. It would mean working with the neighborhoods, not against them.

It would mean turning the current planning process entirely on its head. And if we still want to live in San Francisco in 20 years, we better get started.

E-mail Tim Redmond at tredmond@sfbg.com.

E-mail Matthew Hirsch at matthew@sfbg.com.