“S.F.’s Sale of 30 Van Ness Boosts Busy Area’s Residential Outlook”

SF Chronicle, November 22, 2015

The city has reached an agreement to sell 30 Van Ness Ave. to developer Related California for $80 million, setting the stage for a 600-unit residential tower to rise in the middle of a rapidly developing midtown crossroads where more than 4,000 housing units are in the planning pipeline.

The proceeds from the sale of the building on the northeast corner of Van Ness and Market Street will go toward construction of a city office building that will be part of a larger mixed-use office-and-residential development that Related is planning to build on the nearby Goodwill site at 1500 Mission St. That project would include 500 residential units and 450,000 square feet of city offices and is the latest in a series of new buildings planned for the area.

San Francisco Director of Real Estate John Updike said Related is planning to use a tax-exempt bond to increase the percentage of affordable housing at 30 Van Ness from 12 percent, which is required under the city’s Market and Octavia Area Plan, to 20 percent. The city is also looking at a subsidy that could increase the affordable housing number to 33 percent.

“The Board of Supervisors gave me the direction to negotiate the best deal, and we came back with that deal,” Updike said.

Another developer, Carmel Partners, had offered more money for the site but was not as flexible in terms of increasing the project’s affordability, Updike said. Related also agreed to pay the $2 million city transfer tax that is usually paid by the seller.

‘Screaming deal’ for city

The city will lease back the space at 30 Van Ness from Related at $20 a square foot for the next three years, which will allow enough time for the Goodwill project to get built. While the city will continue to pay for building operations — that’s about $11 per square foot a year in costs — the rent is still about half of the current market rate.

“It’s still a screaming deal,” Updike said.

Affordable housing advocate Peter Cohen, co-director of the Council of Community Housing Organizations, said Related’s offer of 20 percent affordable is “a good starting point” but that he hopes the developer will make a bigger contribution.

The planned apartment tower at 30 Van Ness is part of a residential boom taking shape in a four-block area around Van Ness and Market. In addition to the Goodwill and 30 Van Ness projects, the housing pipeline includes a proposed 700-unit complex at 10 South Van Ness, now occupied by a Honda dealership; a 268-unit development at 1540 Market St.; 354 units at 30 Otis St.; 300 units at 33 Gough; 587 units at 1601 Mission St.; and 200 units at 1621 Market St.

Creating vibrant district

Given all the residential development interest in the area, city planners are scrambling to come up with a plan that will add open space, affordable housing, and pedestrian and bike improvements to a part of town defined by traffic-choked roadways and some of the most dangerous intersections.

In October, city planners presented preliminary ideas around rezoning what they are now calling the Hub, the area in and near Van Ness between Mission and Market.

The city is selling property at Market Street and Van Ness Avenue to a developer, setting the stage for residential development.Photo: Santiago Mejia, Special to the Chronicle

Maia Small, an architect and urban planner with the city working on the Hub, said the department is still looking at the planning process and public outreach needed to rezone the area, which is part of the Market-Octavia plan passed in 2008.

Ideas include offering developers additional height in exchange for higher levels of affordable units; building plazas and pedestrian-friendly alleyways; creating traffic bulb-outs and pocket parks; and reducing the amount of parking allowed in new buildings.

“It’s basically taking a disconnected set of blocks and forming a neighborhood,” Small said.

But rezoning the area will require reopening the Market-Octavia plan, a process that could take several years. It’s unlikely that many of the developers who have bought sites in the Hub will be enthusiastic about delaying their projects while the city undertakes a new environmental study.

Small said the city is pushing ahead as quickly as possible.

“We understand that the development is happening very quickly, so an efficient process is very important,” she said.

Pedestrians cross the street near the Civic Center Hotel (left) and San Francisco Honda, a formerly dreary area known as the Hub that now offers hopes for affordable housing.Photo: Santiago Mejia, Special to the Chronicle

Cohen said the “market is moving so fast they are going to miss the cycle if they aren’t aggressive enough.”

Affordable housing focus

Jason Henderson, a professor of urban planning and transportation at San Francisco State who sits on the Market & Octavia Community Advisory Committee, said he is all for increased density in the Hub, as long as it comes with affordable units and transportation concessions.

“At a regional level, you can’t get any better than this in terms of locating housing, but the level of affordable housing is going to be the biggest concern,” Henderson said. “That’s the whole reason we are in the conversation about rezoning the hub.”

Henderson also said that that any rezoning of the Hub should include no increases in parking. Developers are now allowed 0.25 parking spots per unit, but most of the major projects, including 1 Oak St., 1601 Mission and 10 South Van Ness, are asking for higher ratios.

“If you were to build thousands of units with no parking, that would likely get rid of some of the luxury units and bring it down closer to more middle-class housing,” he said. “It’s time for the city to really up the ante, push the envelope. Everybody wants to be here and live car free in San Francisco, so let’s do it. The developers can figure it out. The financial people can figure it out.”

The 30 Van Ness deal will go to the Board of Supervisors budget and finance committee next month and to the full board on Dec. 8. The city is hoping to close escrow in January.

J.K. Dineen is a San Francisco Chronicle staff writer. E-mail: jdineen@sfchronicle.com