The Inclusionary Housing Technical Advisory Committee evaluates city building codes and transfer taxes impacting residential project costs. It advises on alternative construction methods to reduce expenses and enhance affordability. The committee provides guidance on inclusionary housing requirements for developers.

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Breed hires new head of economic development to confront San Francisco’s doom loop

In the face of a <a href="https://develop.sfstandard.com/politics/city-hall/san-franciscos-deficit-swells-to-780m-in-latest-sign-of-budget-distress/">staggering city budget deficit</a>, San Francisco’s Office of Economic and Workforce Development is hiring urban planner Sarah Dennis-Phillips as its next executive director, The Standard has learned.



Mayor London Breed is expected to announce the appointment Wednesday afternoon, according to a City Hall source. A meeting was held Wednesday announcing the agency’s current leader, Kate Sofis, has stepped down from her position to pursue another job with the city.



The Office of Economic and Workforce Development carries out a variety of roles, from issuing grants and loans to small businesses to helping people with job placement. But with the city staring down the barrel of a $780 million two-year deficit, the biggest challenge for the department will be retaining Downtown businesses and filling spaces left vacant by the pandemic and a massive shift to remote work. Many of the city’s largest tech companies have no plans to require full-time, in-office work. Some companies uprooted from San Francisco entirely, while others have laid off thousands of workers.



Dennis-Phillips most recently worked as a senior director at developer Tishman Speyer, where she oversaw projects from building approvals and permitting to construction, according to <a href="https://www.spur.org/about/board/sarah-dennis-phillips" target="_blank" rel="noreferrer noopener">a bio on San Francisco Bay Area Planning and Urban Research Association’s website</a>. Dennis-Phillips routinely worked with local and state agencies in this role, and prior to joining Tishman Speyer, she for the city’s Planning Department before moving on to serve as deputy director of development for the office she will now oversee.



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“While some of the changes San Francisco has seen post-pandemic are painful, they also present an opportunity to rebuild our local economy with intention and forethought, to repopulate our streets with arts and affordability, and to broaden the benefits of economic growth to all of our residents,” Dennis-Phillips said in a statement.



In September, Breed appointed Dennis-Phillips to serve on the Inclusionary Housing Technical Advisory Committee, a <a href="https://develop.sfstandard.com/housing-development/an-obscure-committee-could-change-sfs-housing-rules-heres-why-it-matters/">little-known but influential group</a> that makes recommendations to the Board of Supervisors on how to set the city’s inclusionary housing rate, an affordability minimum that developers have often criticized. The rate determines how many units a developer must set aside for below-market-rate housing in any project larger than 10 units.



Dennis-Phillips holds degrees from the University of Virginia and Harvard University in architecture, landscape architecture and urban planning. She was not immediately available for comment.



Breed appointed Sofis to lead the Office of Economic and Workforce Development just two years ago. The department has 153 employees. Sofis earned $368,890 in total compensation in her role leading the department last year, according to government records. 



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="864" height="576" src="https://content-develop.sfstandard.com/wp-content/uploads/2022/02/Kate_Sofis_SFMade_10806979293.jpg" alt="" class="wp-image-34739" srcset="https://content-develop.sfstandard.com/wp-content/uploads/2022/02/Kate_Sofis_SFMade_10806979293.jpg 864w, https://content-develop.sfstandard.com/wp-content/uploads/2022/02/Kate_Sofis_SFMade_10806979293.jpg?resize=300,200 300w, https://content-develop.sfstandard.com/wp-content/uploads/2022/02/Kate_Sofis_SFMade_10806979293.jpg?resize=768,512 768w" sizes="auto, (max-width: 864px) 100vw, 864px" /><figcaption class="wp-element-caption">Kate Sofis has spent the last two years as executive director of the Office of Economic and Workforce Development. | Tom Cogill</figcaption></figure>



A report by The Standard early last year found that <a href="https://develop.sfstandard.com/politics/city-hall/london-breed-appointee-potential-conflict-interest-amazon-project/">Sofis failed to properly disclose her economic interests</a> before taking the job with the city, which included a stake in multiple nonprofit entities. Sofis was forced to recuse herself from negotiations with Amazon on a proposed shipping facility in the South of Market neighborhood due to her prior work as co-founder and CEO of SFMade, a nonprofit focused on supporting the city’s manufacturing sector.



However, a source said this issue did not play a factor in the change in leadership.



Due to the city’s budget shortfall—and potentially more cuts coming in future years—the pressure on the office and Sofis in recent months has been immense.



In February, Breed announced a new Downtown recovery plan designed to reactivate the central business corridor, and earlier this month the office released <a href="https://sf.gov/sites/default/files/2023-05/Roadmap%20to%20SF%202%20Pager.pdf" target="_blank" rel="noreferrer noopener">a two-page report</a> noting where progress has been made. This includes plans to create an entertainment zone, proposed tax breaks for new businesses setting up shop Downtown and investing in a <a href="https://develop.sfstandard.com/business/vacancy-ridden-street-near-sfs-union-square-gets-6m-investment/">Powell Street Promenade</a> to beautify the area where cable cars run by Union Square.



In March, the mayor and Supervisor Aaron Peskin introduced legislation to streamline the conversion of vacant Downtown office buildings into housing. The legislation has yet to work its way to the Board of Supervisors for a vote.



A group of entrepreneurs has also floated an intriguing proposal to resurrect Downtown: <a href="https://develop.sfstandard.com/housing-development/sf-doom-loop-convert-downtown-offices-student-housing-uc-berkeley/">Converting office towers into housing for college students</a>. Bilal Mahmood, a startup founder and former state Assembly candidate, has been studying the issue and meeting with government officials to gauge interest.

To jump-start housing, San Francisco could cut affordability quotas

As part of an effort to make it more financially feasible to build housing in the city, an advisory committee on San Francisco’s affordable housing policy has recommended a significant cut in the percentage of required affordable units in condominium projects.



San Francisco’s Inclusionary Housing Ordinance requires condominium developers to <a href="https://sf.gov/information/inclusionary-housing-program#:~:text=Guided%20by%20San%20Francisco%20Planning,affordable%20units%20throughout%20San%20Francisco." target="_blank" rel="noreferrer noopener">designate a percentage of units in their projects as subsidized affordable housing</a> to sell at below-market rates. Alternatively, developers can pay “off-site fees” that help fund stand-alone affordable developments. 



The Inclusionary Housing Technical Advisory Committee, made up of housing industry representatives and advocates and organized by the Controller’s Office, voted on the recommendations at a Wednesday meeting.&nbsp;



The new recommendations would lower the required number of affordable units in apartment projects from a high of over 23% to a new range as low as 12%, until another feasibility analysis is done in 2026.



These new percentages would apply to new construction, but the committee also recommended that “decision-makers consider allowing currently entitled projects to re-entitle with lower requirements, for a more limited period of time.”



The recommendations were originally released last March in a report describing current requirements as infeasible, even when state density incentives are applied.&nbsp;



That echoes long-standing complaints by developers that housing projects don’t make financial sense. This is especially true in the post-Covid environment, marked by higher costs <a href="https://develop.sfstandard.com/business/will-the-tech-downturn-be-the-death-of-sf-real-estate/">and a real estate downturn</a>. Reduced requirements would allow at least some smaller-scale condo projects to “pencil,” according to the report.&nbsp;



As possible incentives, the committee also approved forwarding what was described as a &#8220;menu of potential unendorsed ideas,&#8221; which range from property tax offsets and other subsidies.&nbsp;



Those ideas were part of a presentation made by Century Urban, a project management company, at Wednesday’s meeting. An additional list of ideas from the Council of Community Housing Organizations (CCHO), an affordable housing group, was also included.&nbsp;



The range of ideas reflects tensions between different interests on the committee.&nbsp;



Last September, two former leaders of the council, Peter Cohen and Fernando Marti, were <a href="https://develop.sfstandard.com/housing-development/an-obscure-committee-could-change-sfs-housing-rules-heres-why-it-matters/">appointed by the Board of Supervisors</a>; Cohen’s appointment attracted some controversy, because some supervisors found his approach divisive.



Cohen also made a presentation at Wednesday’s meeting, highlighting what he called a “housing balance” problem—where construction of new housing for above-moderate income levels has overshot state quotas by 54%, compared with units for other income categories, which met between 56% and 76% of goals—to emphasize the importance of the inclusionary housing policy.&nbsp;



“The idea of capping market-rate housing is heretical to many people in this room, so we won’t go there,” Cohen said, “but that would mean meeting not only 100% of our affordable-housing needs but 154%, which seems like an almost impossible task.”&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="2500" height="1667" src="https://content-develop.sfstandard.com/wp-content/uploads/2023/04/FEATURED_042023inclusionary-2500x1667.jpg" alt="" class="wp-image-151962" srcset="https://content-develop.sfstandard.com/wp-content/uploads/2023/04/FEATURED_042023inclusionary-2500x1667.jpg 2500w, https://content-develop.sfstandard.com/wp-content/uploads/2023/04/FEATURED_042023inclusionary-300x200.jpg 300w, https://content-develop.sfstandard.com/wp-content/uploads/2023/04/FEATURED_042023inclusionary-768x512.jpg 768w, https://content-develop.sfstandard.com/wp-content/uploads/2023/04/FEATURED_042023inclusionary-1536x1024.jpg 1536w, https://content-develop.sfstandard.com/wp-content/uploads/2023/04/FEATURED_042023inclusionary-2048x1365.jpg 2048w, https://content-develop.sfstandard.com/wp-content/uploads/2023/04/FEATURED_042023inclusionary-650x433.jpg 650w, https://content-develop.sfstandard.com/wp-content/uploads/2023/04/FEATURED_042023inclusionary-370x247.jpg 370w, https://content-develop.sfstandard.com/wp-content/uploads/2023/04/FEATURED_042023inclusionary-800x533.jpg 800w, https://content-develop.sfstandard.com/wp-content/uploads/2023/04/FEATURED_042023inclusionary-450x300.jpg 450w, https://content-develop.sfstandard.com/wp-content/uploads/2023/04/FEATURED_042023inclusionary-20x13.jpg 20w, https://content-develop.sfstandard.com/wp-content/uploads/2023/04/FEATURED_042023inclusionary-185x123.jpg 185w, https://content-develop.sfstandard.com/wp-content/uploads/2023/04/FEATURED_042023inclusionary-740x493.jpg 740w, https://content-develop.sfstandard.com/wp-content/uploads/2023/04/FEATURED_042023inclusionary-400x267.jpg 400w, https://content-develop.sfstandard.com/wp-content/uploads/2023/04/FEATURED_042023inclusionary-1600x1067.jpg 1600w, https://content-develop.sfstandard.com/wp-content/uploads/2023/04/FEATURED_042023inclusionary-225x150.jpg 225w, https://content-develop.sfstandard.com/wp-content/uploads/2023/04/FEATURED_042023inclusionary-900x600.jpg 900w, https://content-develop.sfstandard.com/wp-content/uploads/2023/04/FEATURED_042023inclusionary-72x48.jpg 72w" sizes="auto, (max-width: 2500px) 100vw, 2500px" /><figcaption class="wp-element-caption">Lumina&#8217;s Main Street Tower, right, is seen rising against Infinity Towers, two towers at left, on Sept. 18, 2014. | Lea Suzuki/The San Francisco Chronicle via Getty Images</figcaption></figure>



On the other hand, Eric Tao, managing partner of L37, a developer, floated the idea of further reducing inclusionary requirements as part of including sites in a citywide Enhanced Infrastructure Financing District. 



&#8220;It&#8217;s only fair that incremental property tax generated from such developments that otherwise wouldn’t have happened go towards production of affordable housing to [replace] lost units,&#8221; Tao told The Standard in an email. 



&#8220;If we go from 22% to 10% for a 100-unit project, and that allows it to become feasible, the project creates a new tax base of $80mm, or $900k per year of new tax revenue, that can more than pay for bonds to fund the economic gap necessary to make up the lost 12-units going from 22% to 10%,&#8221; Tao added. 



The recommendations are to be included in a report from the Controller&#8217;s Office to the Board of Supervisors, which will be released later this year.&nbsp;



Housing boosters welcomed the decision with cautious optimism.&nbsp;



“I’m curious to see what the board will try to move forward with,” Jane Natoli, San Francisco organizing director for YIMBY Action, told The Standard. “We know the percentage doesn’t work as is, and the [Inclusionary Housing Technical Advisory Committee] seemed to get that too, with the central tension being we don’t know what that maximum point of flexibility is.”



“Adjusting the inclusionary policy to help make housing projects more financially-feasible to build is a necessary step in the right direction, but that alone won&#8217;t solve the problem.” Corey Smith, executive director of the Housing Action Coalition, told The Standard in an email. “It takes far too long and costs far too much to build the new homes SF residents desperately need.”



<figure class="wp-block-image"><img decoding="async" src="https://lh5.googleusercontent.com/1C09WSwAekhTq9CfNiFVtWjYkI5gDrPg_jc2TlT4I4jV1o0gK3vz_YTwcyFnYzhzePiOqziVdUR-vcCyGtV2mjgia0KqAI5t7ND82rJJAbfznxdlr26VgkDyedWvr8_3Z0AsUBTyKZo3gUnrvmi2aWo" alt=""/></figure>

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