San Francisco wants to set up a tax increment financing district for office-to-home conversions in Downtown.
Mayor Daniel Lurie and Board of Supervisors President Rafael Mandelman launched a bill to create a district in the Financial District, Union Square, the East Cut, Rincon Hill, Yerba Buena and on Market Street from Civic Center to the waterfront, the San Francisco Business Times reported.
Conversion projects would receive annual property tax increment distributions for 30 years to offset development costs. Eligible projects would have until the end of 2032 to opt into the financing district.
The proposed legislation comes after only two developers pitched office conversions — and only one project, a 120-unit conversion at 785 Market Street, has moved forward.
A tax increment financing district for office-to-home conversions could make such projects finally pencil out, housing advocates say.
The district would allow the city to refund part of any increase in taxable value created by office buildings converted for residential use to help cover the costs of construction and infrastructure, according to the city Office of Economic and Workforce Development.
The financing district, if formally established, would check an important box for developers eying office-to-residential projects in downtown San Francisco: property taxes, according to the Business Times.
Locally based Emerald Fund has argued that the city should consider refunding a portion of property taxes to converted buildings if it wanted to see more of those projects built.
The developer also recommended waiving transfer taxes and lowering affordable housing requirements.
“If you do these things, you’ll see a lot of development, because the developers aren’t doing anything — we’re all looking for something to do,” Emerald Fund President Marc Babsin told the Business Times in 2023.
San Francisco voters passed a ballot measure last spring to waive a transfer tax for converted office buildings.
In February, the city moved to exempt conversion projects from development impact fees, including affordable housing fees — effectively waiving inclusionary requirements for those projects.
But the city was unable to implement any kind of property tax refund because property tax in California is governed at the state level.
Last year, former Rep. Phil Ting proposed a law to allow San Francisco to establish the tax increment financing district. And Lurie and Mandelman responded with local legislation.
Lurie said a financing district would help office-to-home projects get built. The city has targeted 1,200 buildings that would be eligible to opt into the district, according to Lurie’s office, among them 50 properties that in the right conditions could be converted into 4,400 homes.
— Dana Bartholomew
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