This is the more interesting part of the article IMO:
> The glut of downtown office space, combined with San Francisco’s high housing costs, has led many to envision converting downtown commercial spaces into residential buildings, but not one residential development firm bid on this property. One residential development group that considered a bid was Emerald Fund… [that] ultimately viewed the prospect of a residential conversion as too risky due to the city’s high fees and its low-income housing requirement. Presently, the city requires 23 percent of the units in a large development be set aside for low-to-moderate-income tenants, but this means that developers would need to charge a substantial premium on the market-rate units for the project to pencil out.
> …
> Developer Eric Tao noted that permitting and other city fees, together with the city’s affordable housing requirements, are so costly that the purchase price of the building would need to drop to less than $100 per square foot… to economically justify a residential conversion.
So you really have a market that is “upside down”: Employment (represented by office space demand) is way down, and that in turn softens the market for residential space, and on top of that the numbers just don’t make sense.
Edit: I also feel compelled to point out that “low-to-moderate-income” is measured relative to average San Francisco incomes, not to state or national averages. They might still seem very high to outsiders.
It’s likely the only way a residential conversion works is if it is literally funded by a non profit or church or government explicitly as low to moderate income only.
And those have their own approval and NIMBY problems.
> The glut of downtown office space, combined with San Francisco’s high housing costs, has led many to envision converting downtown commercial spaces into residential buildings, but not one residential development firm bid on this property. One residential development group that considered a bid was Emerald Fund… [that] ultimately viewed the prospect of a residential conversion as too risky due to the city’s high fees and its low-income housing requirement. Presently, the city requires 23 percent of the units in a large development be set aside for low-to-moderate-income tenants, but this means that developers would need to charge a substantial premium on the market-rate units for the project to pencil out.
> …
> Developer Eric Tao noted that permitting and other city fees, together with the city’s affordable housing requirements, are so costly that the purchase price of the building would need to drop to less than $100 per square foot… to economically justify a residential conversion.
So you really have a market that is “upside down”: Employment (represented by office space demand) is way down, and that in turn softens the market for residential space, and on top of that the numbers just don’t make sense.
Edit: I also feel compelled to point out that “low-to-moderate-income” is measured relative to average San Francisco incomes, not to state or national averages. They might still seem very high to outsiders.