The city's skyline has changed, dramatically, of late. Will a March ballot proposition affect its future — or will the invisible hand of the market? Photo by Cristiano Valli

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The downside of writing a column about Proposition E, which we’ll vote on in March, is that it’s incumbent to explain what Proposition E would do. Bummer. It’s complicated.

And, not unlike the gap between high school physics and college physics, as you probe more deeply into the questions, the answers become more complex. And, also, more unknowable.

Here’s the high school physics answer: In 1986, San Francisco voters approved Proposition M, which put a cap on office development. Surely this city’s animus against “Manhattanization” was part of the appeal, but so was the rationalization that more offices equals more residents equals more congestion equals more people funneled into the housing market.

Prop. E would take things further. It would directly tie the amount of office space this city can construct to the amount of affordable housing it produces. And if the city comes up short on the latter — as it almost always does — then it will be proportionally restricted on the former.

The ballot measure is being pitched as a choice between “More affordable housing or less office space.” Promotional materials feature a cute row of houses on one balance of a scale and the unmistakable silhouettes of Salesforce Tower, the Transamerica Pyramid et al. on the other balance.

It’s hard to foresee San Francisco voters disagreeing with this sentiment — particularly the left-leaning electorate that will crash the polls in March to vote for Bernie Sanders or Elizabeth Warren in the primary. They will see Prop. E supported by a broad swath of San Francisco’s political mainstream — though not the mayor, the Chamber of Commerce, or the usual gang of Libertarians and Republicans who submit their ballot arguments handwritten and in all-caps.

That won’t matter at all. Voters will, barring unforeseen lunacy, go for Prop. E in great numbers.

This imagery seems well-designed to appeal to San Franciscans. Prop. E, meanwhile, was well-designed to appeal to developers with projects in the pipeline.

San Francisco’s electorate in March of 2020 would arguably vote for “less office space” even without the “more affordable housing” tie-in.

To dissuade these voters —  to counter the strong, simple argument of “more affordable housing or less office space” — you’d need a goodly amount of funding to mount a slick political counteroffensive.

Again, barring unforeseen lunacy, that’s not happening.

And that’s because veteran nonprofit developer and city politico John Elberling — who created Prop. E, signature-gathered it onto the ballot and is underwriting this campaign to the tune of $407,000 (so far) via the political arm of his nonprofit-housing outfit — saw to it that his most wealthy and powerful potential opponents would be placated.

All the developers with office projects in the pipeline are shielded from Prop. E via grandfather clauses. What’s more, several of the most powerful developers will actually be allowed to build faster if Prop. E passes, erecting whole projects instead of a years-long phased approach.

So when Mayor London Breed bemoans that the developers don’t have her back — as prior mayors did, too — that’s why. As Sascha the bartender put it in Casablanca: “I love you — but he pays me.

City Hall forces relying on for-profit developers to solve our housing problems have found they cannot rely on for-profit developers to solve their political problems.

John Elberling, the man behind Prop. E, says that only “a fucking fool” would argue we need to keep building offices to fund affordable housing.

Elberling, who is 73, will be pushing 80 by the time the jaws of Prop. E close on the city’s development process. He favors loose, comfortable clothes, loafers, and hats indoors. But he’ll be accused of being a stylish man before he’s charged with being an unsavvy one.

In Prop. E he has crafted a political juggernaut; Mayor London Breed, after putting forward a hastily crafted counter-measure, in December yanked it at the last possible moment. She can, it seems, read a poll — and has ceded the field.

The mayor’s efforts to counter Prop. E somewhat resemble Dan Marino’s attempt to make a tackle on this play.

Elberling’s detractors have plenty of complaints to make about Prop. E. They don’t figure to alter the outcome of March’s election. But they do annoy him.

Charges from the mayor’s office that his proposition would reduce office construction, he counters, are a candid admission that this city can’t even begin to hit its affordable housing goals — which is depressing and scandalous. Charges that Prop. E would induce deprivations in the office rental market, he says, ignore the millions of feet of (exempted) office space currently in the pipeline.

But what annoys him the most are charges from the mayor’s office that a reduction in office construction will bleed away fees intended for affordable housing. Per a 2019 city study, the fees for affordable housing reaped via the construction of office space are actually dwarfed by the affordable housing needs induced by that office space. 

“What we’re getting isn’t enough to offset the damage we’re doing,” he says. The contention that we need to build more offices for the sake of funding more affordable housing, Elberling says, is the argument of “a fucking fool.”

Prop. E, he says, “will slow down the growth of the problem” — or “push forward affordable housing directly, if the developers do it themselves, or indirectly if this lights a fire under City Hall’s ass.”

But will it? Here’s where we get to the college physics answers. Because even development professionals inhospitable or indifferent to Elberling’s measure tell me that the barrier keeping approved projects from being built isn’t our city’s myriad fees, but sky-high construction costs — which isn’t the purview of this proposition.

“The economy will determine what happens,” a longtime development professional says — not this or any proposition. “The reason there’s so much office space in the kitty is because the city stopped building offices for years.”

This city, in short, will be shaped by the invisible hand of the market. There are bigger forces at play than can be controlled by any one city and its electorate. And it’s hard to foresee just what the invisible hand will do — it is, after all, invisible.

“It’s a crapshoot,” admits Elberling. There is “a shitload of office space” in the pipeline but, if a recession hits, it may not fill up. It may not even be built.

The new jewel of San Francisco’s skyline, Salesforce Tower, defines today’s city economy much as a (pyramid-shaped) building named for an insurance company did in 1972. There is a lot of political weight riding on March’s election — but the trajectory of the city will be determined more by whether the Salesforces, the Googles, the Facebooks, the Ubers and others occupying our shiny new offices keep growing — and keep hiring.

And that? That’s not on the ballot.

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23 Comments

  1. A little more detail on how the big-developer carve-outs work would be nice. For instance, what’s the details on this: “What’s more, several of the most powerful developers will actually be allowed to build faster if Prop. E passes, erecting whole projects instead of a yearslong phased approach.”

    1. Without getting into the weeds, several major developers would be entitled to build their projects in one go — instead of in a metered, phased approach requiring years and years. If you’re a developer, you’d obviously want the former, which Prop. E grants: You get to build faster, before construction costs go even higher, or God knows what other world developments work against the project.

      JE

  2. Great article.

    “political arm of his nonprofit”?
    Fair enough – the NRA has its Political Victory Fund.

    Mr Elberling’s ideas on how affordable housing will get built are a bit laughable:
    “the developers do it themselves” – duh – not a chance.
    “lights a fire under City Hall’s ass” – hah!

    The longest lit fire has been burning under MUNI for decades and it’s plain to see where that’s gotten us.

    Getting into so called affordable housing is a byzantine process of qualifications and a lottery with degrees of specialness awarded to the special.

    I actually know of somebody who “won” an affordable unit recently!
    Only two years on the list – lucky.
    Then informed they were on the short list of 10 “winners” – being 10th on the list.
    The previous 9 winners declined the unit and our 10th was given one day to decide on the apartment.
    The prize? A tiny studio in the Tender Nob for $1500 a month.
    Winning!

    1. And yet a friend scored a nu 1BR in 100% “affordable” – costing ~$800k each – and will only have to pay $300/mth. AND its got granite countertops! (Why does a homeless senior need a 1BR with granite countertops??)

      1. Why can’t we build housing for homeless seniors in Sacramento where it’s much, much cheaper instead of the center of one of the most expensive cities in the world?

        1. Because these people are from HERE, have their friends, doctors, support system HERE. You Dennis seem to think we should just deport old folks out of your sight. Get over it.

      2. Not sure what your point is about granite countertops, but granite (while now out of fashion) is the absolute cheapest countertop you can get.

  3. Re: “Per a 2019 city study, the fees for affordable housing reaped via the construction of office space are actually dwarfed by the affordable housing needs induced by that office space. ”

    The authors of the study specifically cautioned against its usage to determine policy. On Page 6:

    “This analysis has not been prepared as a document to guide policy design in the broader context. We caution against the use of this study, or any impact study for that matter, for purposes beyond the intended use. All nexus studies are limited and imperfect but can be helpful for addressing narrow concerns. The findings presented in this report represent the results of an impact analysis only and are not policy recommendations for changes to the JHLF Program.”

    But I’ve noticed that the highly progressive media doesn’t share that concern; like Mission Local, they often refer to the study while ignoring the explicit warning of the authors.

  4. This is pretty frustrating, because the people who want to block office space are the same people who are blocking new affordable housing.

  5. Why do we need anymore office space in SF… I don’t see any reason. there’s so much can’t places, because they’re unaffordable, whether that’s for business, housing, etc.
    I think office spaces would be better in a high-rise, they could be built in industrial area in South of San Francisco.

  6. One thing absent from this article is the fact that new office development is one of the primary drivers of tax revenue growth in SF. As our pension liabilities continue to balloon we will face deficits into the foreseeable future. This is poor timing for a poorly thought out policy. Affordable Housing Developers like elberling can’t seem to conceive of the fact that the city govt is charged with much more than just facilitating subsidized development. Crippling the city’s ability to generate new revenue will necessarily have negative consequences down the line and it’s hard to imagine this policy will be particularly effective for getting affordable housing built. What a terrible trade.

  7. Please explain to me what makes “Manhattanization” different from “more offices, more residents, more congestion, more people.” They’re the same thing the people who hate Manhattanization really want a gated city. Pretending it is different is NIMBY BS.

    1. John — 

      Tall buildings. Visceral reaction to them. Simple as that.

      Best,

      JE

      1. Joe,

        (Successful) cities are all about density and tall buildings.

        If one is viscerally opposed to that, move to the countryside or a small town.

        Simple as that.

  8. Damn right I am going to vote for this, and if I have the time, I will canvas for it as well. We are told non-stop about the housing crisis in California and especially in SF. But then they keep building more office space. Where are these new workers supposed to live? BART is full too, so now that these workers are getting hired for the new offices, there is not the infrastructure to get them downtown. Something like 15% of Bay Area folk are commuting over an hour each way. Build your stupid office towers near where people live so that they can walk to work instead of continuation of ideas from last century (IE, build housing away from the industry because the industry emits too much pollution to live nearby). There should be a moratorium on office space in the city until the housing crisis is resolved.

  9. Supply-demand-rents, better explain 21st Century cost-of-doing-business. Because speculators require interest payments (dividends) production costs increase. Whether commercial, residential or institutional, those signing the mortgage, rental or master plan are paying over-financialized sums of depreciated money to the highest betters first, the the next cohort, and so on it goes.

  10. Crazy commute times tell me that there’s too much office/commercial space, and not enough housing. It just seems easier/more profitable for developers to create these commercial spaces… which is why the housing developer is a non-profit. No developer wants to be the sucker who builds affordable (below market rate) housing so his buddies can develop the office tower nearby and make bank. It would make a lot more sense to require an increase in residential space in exchange for an occupancy permit for the commercial space, and if these credits are tradeable between projects, it could result in a payout from the commercial space developer to the residential developer that balances the desirability of doing each type of project, and ensures that the city’s square footage of each type of space rises together in a balanced way.

  11. SPUR and Mark Leno support E. What about Scott Weiner? I sorta trust the former 2, but Scott is the most analytical guy I know.

  12. This bill would stop adding to the glut of entitled properties not being built by requiring affordable housing be added first. Office projects in the pipeline not be effected. Unlike SB50, Prop E dos not reduce office development fees.

  13. “Proposition E, barring unforeseen lunacy, will pass — handily.”

    Barring unforeseen lunacy?

    Prop E is lunacy — an utter policy disaster.

    It’ll result in less affordable housing, increase the cost of office space for everyone (including most critically non-profits that are already struggling on this front) and will result in more and more people having to commute further and further to their jobs.

    Triply, totally and undeniably idiotic.

  14. It’ll be fun to watch San Francisco get more of what it deserves with the passage of this law.

  15. “They will see Prop. E supported by a broad swath of San Francisco’s political mainstream — though not the mayor, the Chamber of Commerce, or the usual gang of Libertarians and Republicans.”

    Republicans and Libertarians only represented 3.4% of the total turnout and yet 45% voted against Proposition E so this statement is bogus. Big business will not suffer as they can already pay top dollar for space. This proposition does nothing to address the rising of rents by those who commute from SF to growing companies outside SF.

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