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Monday, October 14, 2013

The cost to taxpayers of mid-Market displacement

Fascinating hearing last week on the displacement of nonprofits from mid-Market. Sup. Jane Kim asked the Budget and Finance Committee to look into the problem, and a long list of speakers pointed out how rents have soared in the area -- and the mission of service providers is at risk.

When you're running a nonprofit, you can't just raise prices to cover the increased rent. And you can't always move to cheaper space -- for starters, there isn't much cheaper space anywhere in the city, and more important, most of the nonprofits in the area say it's important to be near the communities they serve.

So if there's a fixed amount of money, and more of it goes to a landlord, there's less to spend on providing human services.

But beyond all the stories -- and the clear evidence that the tech boom set off by the Twitter tax break and the mayor's policies is causing serious problems for the non-profit sector -- the numbers are what got to me.

See, a lot of these nonprofits are city funded. San Francisco in essence outsources a lot of its social services, contracting with community-based organizations to provide everything from substance-abuse treatment and counseling to eviction assistance. Almost everyone agrees those services are desperately needed -- and the nonprofits, by and large, get high marks for their work. And in the end, if rents go up, either services are going to be cut (which nobody wants) or city funding will have to increase to cover the higher costs.

How much are we talking about? A lot.

According to information released at the hearing, there are 1,425 nonprofit organizations that have contracts with the city. The total tab for those contracts: $528.8 million a year.

The average nonprofit budget is $4.8 million, and the average rent is $224,000 -- that's about 4.6 percent of the budget currently going for office space.

In the past year, the average rent increase has been 33 percent.

Okay, let's play that out. If 4.6 percent of $528.8 million goes for rent, that's about $24.3 million a year in public money that goes to private landlords. Hike that by 33 percent and you're looking at a bite of about $8 million. A year. In taxpayer money. To make it possible for nonprofits to stay in mid-Market, Soma and the Tenderloin in the middle of a real-estate gold rush set off by Mayor Ed Lee.

Yes, mid-Market was (and in some areas, still is) rundown, and needed economic development. But there are costs to a policy aimed at attracting tenants who can pay high rents; there are impacts on the tenants who are already there. (Same goes for housing.) And the city has done nothing at this point to mitigate those impacts -- that is, to protect the existing population of nonprofits (and small businesses, too) that need affordable space.

I keep repeating my refrain, but the facts bear it out: When you do this sort of economic development planning, first you have to figure out how to protect the existing vulnerable populations. We don't bother with that in San Francisco. Not under Ed Lee.

By the way: I texted Kim after the hearing with a simple question: How much of the problem that she so effectively exposed at her hearing was caused by the Twitter tax break (which she supported)? No answer.

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