Excelsior project’s deadline is nearing
A plan to build nearly 200 homes on Ocean Avenue in the Excelsior District would be the first San Francisco development to take advantage of the new federal Opportunity Zone program, designed to bring investment to economically distressed neighborhoods.
But the time is running out to take advantage of the program, and the project approval might get delayed due to opposition. If it does, the developer’s financing would fall through.
The Opportunity Zone program, which was part of President Trump’s 2017 tax overhaul, allows investors to get a 10% reduction in capital gains tax if those gains are invested into lowincome neighborhoods.
The tax break — the Excelsior, Bayview and Visitacion Valley are the only San Francisco neighborhoods that qualify — has attracted investors willing to finance a 193unit apartment complex at 65 Ocean Ave., a sloping oneacre parcel that several builders have unsuccessfully tried to develop since 2007. The project, which will cost $130 million, is scheduled to go to the Planning Commission in October.
“If this was not in an Opportunity Zone, raising the capital for this project would be impossible,” said Cyrus Sanandaji, managing director with developer Presidio Bay.
Many housing developments are currently not feasible because of construction costs.
While investors are embracing the project, it’s facing pushback from antigentrification activists who say that the development will
not be affordable to current Excelsior residents and that it will ultimately drive poor families and momandpop businesses from the neighborhood.
While all marketrate development in the city is politically divisive, the stakes are a little higher in the case of 65 Ocean, the developer said. That’s because the deadline to qualify for the tax break is the end of 2019. If the project is still tied up in an appeal, its financing will vanish.
“We have all the financing lined up but we need to be approved and past any appeals before the end of the year,” Sanandaji said. “That is the pressure on the project and on us.”
The 65 Ocean project comes as another developer, SIA Consulting, will hold a ceremonial groundbreaking Thursday for 915 Cayuga St., a 116unit housing complex that will be the biggest development built in the Excelsior District. Half of the project will be belowmarketrate rentals and the other half will be rentcontrolled units. It’s a major milestone for new housing in the Excelsior, which has produced only one significant new housing development in the past 10 years, the 64unit apartment building at 5050 Mission St.
Taken together the two projects will produce over 300 new housing units, 113 units of which will be below market rate. That is nearly as much as the 114 affordable units slated for the nearby 4048 Mission St., which will require about $71 million in public subsidy.
“We are building muchneeded housing in a part of the city with zero housing production,” said Supervisor Ahsha Safai, who represents the area. “The two projects are the equivalent of one of our affordable projects without one public dollar going into it. And it will happen a lot faster.”
While backhoes are onsite at 915 Cayuga St., the 65 Ocean Ave. developers face a likely fight at the Planning Commission next month, and the project is likely to be appealed to the Board of Supervisors.
In August the organization Communities United For Health and Justice — an alliance of several District 11 nonprofits — marched to the Ocean Avenue site. Project opponent Charlie Carlo Sciammas, an organizer with Poder, said that the community fears that rents at 65 Ocean Ave. will be as expensive as 5050 Mission, where a twobedroom unit rents for $3,850.
Rents that high would be affordable only to residents making three times the average household income in the neighborhood, he said.
“This is not housing that is going to meet the needs of the people in the community,” he said. “The market is producing more than enough housing for people earning more than $200,000, but for people doing daycare or cooking in a kitchen of a local neighborhood, those housing needs are not being met.”
But Joseph Mah, a project supporter who lives across from the development site, said that adding a mix of housing for different income levels will help save the Excelsior from the kind of gentrification that has displaced so many families and businesses in the Mission District.
“It’s only by building a mixedincome community that we will survive the stuff that has trampled other workingclass neighborhoods like the Mission,” he said.
He said the project would help neighborhood retailers, not hurt them.
“The retailers on Mission need people with money in their pockets, and they need a greater volume of customers,” he said.
The site at 65 Ocean Ave. — bounded by Alemany Boulevard and Cayuga and Ocean avenues — was once home to two preschools, Little Bear and Crayon Box. Little Bear has moved to a new building nearby, and Crayon Box temporarily relocated to Bernal Heights but will have a subsidized home in the new development. The developer says the subsidy on the 10yearlease — with another 10year option — is worth about $2.5 million.
Both schools support the development. In a letter to the Planning Commission, Crayon Box founder Adriana Razo said that the school is a strong supporter of the development.
“Without (the development), I do not know if Crayon Box would have been able to continue operations for much longer without sacrificing significantly on the quality of our childcare,” she said. “I am not aware of another privately funded project or marketrate developer that is doing more for its community.”