SAN FRANCISCO—An ordinance to protect this city’s housing stock may present a rare opportunity for student housing developers to do business in one of the country’s hardest markets to enter. Last month, the San Francisco Planning Commission overwhelmingly passed an ordinance proposed by the City and County Board of Supervisors that would both ban the conversion of residential housing into student dwellings and provide incentives for educational institutions and developers to build more student housing. It has a few more rounds to go before being signed into law by the mayor, but its final passage is likely, say insiders.
“We have a lot of educational institutions in San Francisco, and our housing market is a bit out of whack and expensive,” Scott Wiener, a supervisor and author of the ordinance, tells Student Housing Alert. “We’re really not meeting the housing needs of our residents and the educational institutions have struggled to provide good housing for their students. Our goal has been to try and provide incentives for educational institutions to create their own housing so we’re not cannibalizing the existing housing.”
With 14 postsecondary schools, San Francisco has an aggregate student population of over 120,000. The educational institutions provide housing for only a portion of those enrolled, leaving over a third of those students to find their own housing. Currently, students must either find accommodations through websites such as Craigslist or lease apartments owned by private landlords. Multifamily rents in San Francisco are already one of the highest in the country; the average studio apartment in the city can lease for around $2,000 per month. Further, officials report that students pay as much as 20% more for units than traditional residents. Many universities have also entered into master leases on all or portions of existing apartment buildings or residential hotels—an inexpensive form of housing in the city—and converted the units for students.
These arrangements, according to city officials, are further depleting San Francisco’s already-scarce housing inventory and pushing low-income individuals our of apartment buildings and long-term lodging properties. Just 76 multifamily units were delivered in San Francisco last year, according to Marcus & Millichap research. This year, another 1,440 units are expected, expanding the rental stock by 1.1%. The firm expects the market’s vacancy to hit 3% by year’s end, the lowest level since 2001, and rents to rise 6.7% over the year to $2,011.
Though officials won’t name specific schools, the biggest issue seems to be the Academy of Art University. The for-profit institution has seen its enrollment grow exponentially over the past decade, from 2,300 students to more than 18,000, making it the largest private school of art and design in the US. Like many local colleges and universities, it doesn’t have a traditional campus like the state universities, but rather, much like Manhattan’s New York University, its buildings are spread around the city.
Last fall, the Academy sent a letter to the City Planning Commission detailing its expansion plans, which called for leasing available buildings within the city. The institution already owns or operates 17 residential buildings throughout the city, five of which were former residential hotels totaling 263 units. Including its academic buildings, the school as of last year owned 39 properties throughout the city, making it what some call the single largest landowner in San Francisco.
The ordinance, if passed, would ban the conversion of existing units into student housing and would require the neighborhood to be notified of any new student housing proposals, while providing certain incentives. One exception to the conversion ban would be older existing properties that are on an adjoining lot to the educational institutions.
The reaction, says Wiener, “has been generally positive. There’s been a growing frustration with the conversions and people are very supportive. We’ve worked very closely with the educational institutions to make sure we’re addressing their needs, and it’s been a very long and collaborative process. At this point, I think we have pretty broad support. People recognize the importance of the higher education industry—it provides job and taxes and brings young people into the city. We just want to make sure we have a smart housing policy around it.”
For more on the ordinance and its impact on the student housing community, see part two of this story.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
