San Francisco considers more than doubling office development fees: Associations object

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The San Francisco Board of Supervisor’s Land Use Committee has voted 2-1 to more than double fees on new office development, potentially scaring away new developments in an initiative to raise millions of dollars for affordable housing.

The Jobs-Housing Linkage Fee would raise money for affordable housing to offset the effects of more jobs on the city’s scarce housing market.

Currently the fee for new office construction is $28.57 per sq. ft., and for laboratory spaces $19.04 per sq. ft. Those numbers would increase to $69.60 and $46.43, respectively, by 2022, if the proposal by Supervisor Matt Haney receives final approval.

The San Francisco Controller’s Office presented a report to the committee on Oct. 21 by city economist Ted Egan analyzing the likely effects of the fee hike.

Egan says that the legislation has the potential to raise substantial new revenues for affordable housing. However, it could be costly for job creation in the city.

Among his findings:

  • Increased fees would increase development costs about six percent on average, leading to a loss of between 125,000 and 140,000 sq. ft. of new office space in San Francisco each year.
  • The square footage loss would result in “a loss of 520 to 585 office jobs,” or a “net job loss of between 1,275 and 1,500 jobs,” between 0.1 percent and 0.2 percent of all jobs in the city, on average, over the next 20 years.
  • Average spending on San Francisco office construction would decline between $61 million and $87 million per year. However, despite the decline in office development, “the increase in the fee is projected to lead to a $8 million—$9 million increase in fee revenue.”
  • Housing prices would decline on account of the new fee (by about 0.2 percent), and that “the additional participants in the expanded affordable housing programs would clearly benefit, and other low- and moderate-income residents may also benefit if the growth in affordable housing lessens competition at the low end of the private housing market.”

Despite complaints from developers, Supervisors Haney and Aaron Peskin voted in favor of the fee hike. Supervisor Ahsha Safaí was the sole dissenting vote, Curbed San Francisco reports.

“While we understand the need to address affordable housing concerns in San Francisco, this proposal is counterproductive, putting a heavy financial burden on non-residential development,” reads a statement from the Associated General Contractors of America (AGCA) to Construction Dive. “The city is risking continuing and future commercial development, and we have strong reservations that this will negatively impact the city’s growth development plans.

“These proposed changes could result in future construction coming to a halt, eliminating good-paying jobs to local workers.”

“ABC NorCal supports the construction of affordable housing and keeping all construction project bids fair and open,” said Sergio Cortez, workforce development manager of the Associated Builders and Contractors’ Northern California chapter. “However, we discourage any barriers that would impede on the progress of construction.”

The group has another idea, though: It would like to work with the city of San Francisco to train the homeless and other disadvantaged people to build affordable housing.

“The construction industry is at a shortage in workers right now, and we would love the opportunity for more individuals to go through our training and apprenticeship programs, to enter the workforce and start a new career,” Cortez told Construction Dive.

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