490 South Van Ness Site

The City of San Francisco has agreed to pay $18.5 million for the former “Quality Tune-Up” site at 490 South Van Ness Avenue and 16th Street in the Mission, a site which was purchased by a developer for $2.65 million in 2009 and successfully entitled for the building of 72 units of housing last year.

Revised 490 South Van Ness Rendering

Assuming the purchase is approved by San Francisco’s Board of Supervisors on July 28, the Mayor’s Office of Housing and Community Development will then issue a request for proposals from developers to build out the site as permanently affordable rental housing for families, serving three-person households earning up to $55,000 and four-person households earning up to $61,150.

At at negotiated price of $18.5 million, that’s $256,944 per entitled unit, not including the cost of construction.

And at $256,944 per unit, that’s a premium of at least 30 percent above the average price which market-rate developers have been paying for sites around the city and “more than most luxury developers have been spending,” according to a plugged-in local developer.

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Comments from “Plugged-In” Readers

  1. Posted by gribble

    Too bad for the eventual BMR folks that will live here that they will be within a half block of one of the worst managed SRO’s in the city.

  2. Posted by Kyle

    It’s actually 300k per unit, because the developer was going to build 12 BMR units anyways, so the net is only 60 units. At that rate the 300 million dollar housing bond gets land for 1000 units. (and then we still have to build them)

  3. Posted by JR "Bob" Dobbs

    Hmm, this is quite inconsistent with the city’s presentation to justify the proposed $310 million G.O. bond. There, the city writes: “We calculate the net present value of the direct and indirect benefits of a new permanently affordable unit to be approximately $400,000, using a 5% discount rate. According to the Mayor’s Office of Housing (MOH), the City’s cost per unit is approximately $200,000.”

    But assuming this stays at 72 units, the land acquisition costs alone are $250,000 per unit. Add in construction costs, and you are going to far surpass the $400,000 in “direct and indirect” benefits to built affordable housing on the city is using to justify the bond. Better to do nothing, according to the city’s own numbers.

    I’ll be curious to see what the formal bond offering papers say (where there is legal liability and not just whatever it takes to entice the voters).

  4. Posted by Snark17

    An astonishing waste of public money to benefit a handful of lottery winners.

    • Posted by moto mayhem

      absolutely. thats OUR money being thrown away

    • Posted by Hola

      Exactly.

    • Posted by Chris Brown

      It is still a rather gritty and uninviting part of town, and there are only so many people who want to live on South Van Ness and pay through the nose to do so. On top of that, you add all the concessions the city and the neighbors demand, along with all the other obstacles that get thrown up against any development proposal, and I can understand why the developer would want to take the money and run.

      Winning approval from the Planning Commission is never the final word anymore. The developer comes out with several millions of dollars in quick profit, and does not have to deal with the headache of building the units, while potentially fending off an appeal or a lawsuit, followed by the ordeal of having to market and sell the units while dealing with angry and unwelcoming neighbors.

      Also, this is a savvy political move. This deal helps alleviate some of the anger and resentment that lead to the proposed building moratorium heading to the ballot. Now, the city can say, “See, we are building 100% affordable housing, just as you demanded! So, there is no need for a building moratorium.”

      • Posted by Orland

        This developer had already gone through enough trials and tribulations to frustrate Job, and was finally set to transform this vile eyesore with construction to have begun about now. This is idiocy on the part of the City. I wish they had let this site simply go to build out as entitled

    • Posted by sfcommie

      If this is the money the developers contributed in lieu of 15% BMR requirement, I wouldn’t have problem since it is same as taking 15% from the market rate inventory. If it’s coming from the housing bonds that people have to pay back eventually, yes I would agree it’s a huge waste of public money to benefit a few lotto winners.

    • Posted by Oh Dear

      Exactly…

  5. Posted by sf

    Sad that $55,000 requires highly subsidized affordable units. This country’s economic policies are bass ackwards, and a tidal wave is coming soon.

  6. Posted by anon

    This is exactly what the city government should do to help increase affordability here.
    Now I’d like to see it happen at a dozen other sites around the city.

    • Posted by EcceMorons

      I’m gonna go out on a limb and guess that math wasn’t your strong point in college.

      • Posted by Futurist

        Yes, and either was his sense of logic and thought.

        Just a complete waste of public funds. Could be used for more trees and a parking garage near Valencia.

        • Posted by Dan

          The garage two blocks away from this site is not good enough for ya?

          • Posted by NoeNeighbor

            umm, that garage is actually 7 long blocks away from the site and is regularly full on weekend nights. So yes there is a need for additional parking in the Mission. Do you pay attention to facts much?

          • Posted by curmudgeon

            He probably meant the Hoff St garage, which is in fact only two blocks away, on 16th between Mission and Valencia.

    • Posted by sfcommie

      I don’t think you can ever increase affordability by building 75 units at a time. What we need is a thousand unit project at a time.

    • Posted by Jon Schwark

      They could double the height of this building and get twice as many units for the same land cost. At this price per unit, it is a really stupid investment.

    • Posted by JayJay

      I agree with you 100%. I’d rather see the city spend top dollars to have 100% affordable housing in this location, than another project of luxury housing for the highest city earners. Same goes for the sea wall lot. We need many more like this project. To those unhappy with how the city is spending your tax dollars, move elsewhere.

  7. Posted by moto mayhem

    so the city just paid 650% more than a private developer paid 6 yrs ago? this is exactly why the incompetents in the city govt should not be buying, negotiating or planning anything related to housing. Please stop wasting our tax money on bad investments and poor financial decisions. can you please just let us all burn our money?

    • Posted by EcceMorons

      Why would politicians let us burn our money when instead they can confiscate it and use it to buy votes for themselves?

      Yeah, I know…. They never taught us in Civics Class how democracy actually works….

    • Posted by New to SF

      Friggin criminal.

  8. Posted by anotherSF

    That is a small number of units for a lot that large. Vida has 50% more units and is on an awkward lot.

    • Posted by JayJay

      It’s not the lot that is awkward, it’s the building itself. VIDA is the biggest eyesore in the Mission. It belongs in SOMA.

      • Posted by curmudgeon

        That’s an odd thing to say. Vida is not a beautiful building, but it’s pleasant enough. One of the nice things is that it’s not tragically trendy (no orange detailing, for example). I can think of a lot of other buildings that are eyesores.

  9. Posted by neighbor

    truly insane
    300k per door for affordable unit lot value…when you figure developer was already required to do 12%
    Another 400 – 500k to build them
    close to 1M in lost property taxes annually city would’ve received if this was developed as market rate condos as planned..
    the city outbid all of the market rate developers who wanted to buy this site…
    there is no logic here.

    • Posted by EcceMorons

      Oh, there’s plenty of logic here. See my comment above re: politicians spending Other People’s Money to buy votes for themselves.

      Eminently logical.

      I think what you meant to say was “there are no ethics here.”

  10. Posted by sf

    So why doesn’t the city double or triple the height and build even more affordable units? Because San Franciscans are oh so fragile snowflakes. “We want affordability! We want human scale! We want no shadows! We don’t want private shuttles carrying people to work! We want rent control! We don’t want to pay or work for any of it!”

    • Posted by bleeper

      absolutely. You’d think with all the preciousness and charm bandied about in SF we would be living in some surrealist thomas kinkade painting. Instead, as I walked home I passed a homeless person pissing in the middle of the street and another one slumped over and nodding off in a neighbors planting box. This town is textbook how not to run things. We cannot maintain our extreme inflexibility and rigidity in planning AND provide homes for more people.

  11. Posted by g

    Going to give developers carte blanche to soak the city on basically all property acquisition. They’ll all bid them up just to screw over the city after being subjected to the torture marathon that nominally passes for an entitlement process.

    Would have been better off fast tracking approvals, bumping on site BMR requirements, and giving zoning bonuses. But noooo that might actually accomplish something for everyone.

    • Posted by Vic

      Fast tracking will never happen. Planning staff needs to milk the project, otherwise how would they justify their work when the boom times are over.

  12. Posted by BayviewSF

    If I know someone with power, I would buy a run-down rent controlled Mission building and sell to the city at top dollars. If I do not do it, someone else will do it.

    Could be a way to make someone rich.

  13. Posted by Emo

    We should put this boneheaded idea on the ballot.

  14. Posted by SFLogic

    The proposed building is designed to incorporate approximately 56,000 SF of rentable area. The price equates to $330 per rental square foot. This is the highest price ever paid for a residential development site in the history of San Francisco. Note: when you analyze these sites you need to be certain to look at price per rentable SF as well as price per unit, since the average unit size in one building might be 500 SF and another 1,200 SF. That’s the reason the purchase price on this property is particularly astounding.

  15. Posted by Joel

    I’ve been trying to wrap my head around this. Is it possible that the city is planning to go back and get entitlements for additional height? It could be politically feasible and justifiable. That’s the only way I see this being even remotely rational.

    • Posted by Kyle

      The MissionLocal article says:

      “What makes the 490 S. Van Ness. Ave. different is that it is a shovel-ready project because it has already been entitled by the city, said Olson Lee, of the Mayors office on housing.”

      So they’re planning to proceed with the existing entitlement.

    • Posted by Jon Schwark

      no doubt. THi sshould be built out to the same height as 1400 mission… 16 stories. Let’s stop messing around!

  16. Posted by Hola

    Yay, more housing projects in the Mission.

    • Posted by Futurist

      Should be market rate.
      Can’t afford it. then don’t buy it.

      • Posted by Serge

        Ding ding ding.

      • Posted by Orland

        What’s your position on removing the Prop 13 protection on your SF SFH and reassessing your taxes based upon current FMV? Removing the interest mortgage deduction (if you still have a mortgage) on your Federal taxes?

        • Posted by soccermom

          As long as the rule is applied to everyone, fair is fair. Anyone can save up and buy a house. Anyone can take advantage of a mortgage interest deduction. Changing Prop 13 would be fine too, as long the new regime would continue to apply to everyone.

          Only a few lucky families will benefit from the large subsidy paid by the city. Why shouldn’t the city take that $18.5mm and set up a fund that distributes rent-assistance to 1000 families in the city each year? Anything with a broader reach than 60 marginal units.

          Wouldn’t it be more fair for one thousand families to get $1,000 per year in affordability vouchers? Bank the rest and make the capital contribution grow for further years distributions?

      • Posted by JayJay

        Nope, it’s perfect just the way it is. We need many more BMR projects like this throughout the entire Mission, but 3-4 bedroom units to keep families in the city.

  17. Posted by jamesjr

    What is happening to SF? How can our leaders be so ignorant of basic math? What a total waste of taxpayer $.

  18. Posted by Amewsed

    I like to offer my rental properties in the Richmond district for $5M each. City can deal with the existing tenants.

  19. Posted by R

    So the city is paying a premium for this property because it’s been approved by the city?

    Um, doesn’t the city have any sway with the city to fast track a much cheaper piece of property?

    Where am I? What the hell is going on? Ed owe the developer some money?

  20. Posted by Pablito

    It would be nice to attribute this to payola and corruption by some City politician – but sadly – its probably just gross incompetence…..

    Real affordable housing should be affordable to build.

  21. Posted by EcceMorons

    I’ll keep saying it until people get it – it’s not incompetence and it’s not ignorance of basic math. It is brilliant politics:

    Spending massive amounts of Other People’s Money (taxpayers), even though it only results in maybe 100 to 150 people getting subsidized housing at a cost of maybe, what, $500,000 – $600,000 per subsidized tenant makes no financial sense, but it allows the politicians to have a talking point – “Hey, I’ve created TONS of affordable housing!”.

    That talking point costs the politicians nothing. It’s paid for by the ignorant voters, who lap up that talking point.

    Got a problem with this? Then don’t whine about it here where everyone agrees with you – explain it to your friends and neighbors who vote for these politicians (and the even-more-insane bond bill explained in the article right after this one – that one is even MORE crazy.

    • Posted by Serge

      Problem is that there is no convincing friends and neighbors. Especially the Mission Coalition people. They see only one thing and do not care for things like “facts,” “figures,” and “numbers.”

  22. Posted by Ross

    Here’s a simple way the city could cut the cost per unit in half: upzone the lot to allow twice as many units. Suddenly, as if by magic, $260 units become $130.

    • Posted by Pablito

      That would be the smart move. So the BOS will probably do the opposite and down-zone to half as many units to satisfy mission affordable housing nimbys…. 🙂

  23. Posted by New to SF

    Is it possible that these units are large, several bedroom rentals meant to house larger families? Trying to see if there’s a reasonable answer as to why this is so terrible expensive.

  24. Posted by unlivable city

    600% profit, thanks to Ed. Nothing happens in San Francisco any more unless someone is ripping off someone else. They should rename us San Fran-grift-o.

  25. Posted by Thanks City Hall

    Developer’s happy with the easy profit. Wonder if he/she has friends in the right places at City Hall.

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