> a rate reduction by up to 75% of the standard tax rate for residential for up to 29 years could provide a strong incentive to encourage conversion. This would be implemented through a public-private partnership that will enable the BPDA, the City, and the proponent to enter into a payment in lieu of taxes (PILOT) agreement
This is actually a pretty nice rebate (similar to the one Ed Lee and Willie Brown proposed for Mid-Market redevelopment and Mission Bay's development respectively). I'd love for SF to use similar terms, but I doubt it's politically feasible anymore.
Is this as good as I'm imagining? Almost feels like any office developer would be looking at their offices and thinking about it, even if they're currently rented.
Property taxes are a big expense, but not as big as the debt on the construction costs. And you end up with massive additional construction costs for fewer square feet to lease.
So you only can do this if your bank decides to agree to take a haircut... which only happens if the bank is convinced you have no other options.
Reducing the property tax provides a sweetener that you and the bank can share to make it slightly more palatable.
I could imagine edge scenarios (not sure how common) where office buildings that happen to have residential friendly layouts do this first. Perhaps if that happened it would both raise demand for non-residential space (more people living nearby) and lower supply of commercial prop avail.
> Perhaps if that happened it would both raise demand for non-residential space (more people living nearby) and lower supply of commercial prop avail.
Yup, that's what economics does: the firms with the lowest cost to converting, do so. And it's a nice follow-on effect that more residential hopefully increases commercial demand.
This is mostly a factor where you have a big inventory of older commercial buildings. Advances in HVAC (and before that, lighting) have let you build bigger floors that are less desirable for residential use.
Yes. Left wing politicians need to remember a rising tide lifts all boats.
We need to stop treating things like zero sum games and that we need to take things away or redistribute finite goods.
Subsidizing things like education, housing, and healthcare.. without corresponding encouraging increases in SUPPLY.. just gives more dollars to the demand side to chase the same stuff.
Yes, typically the market responds, but in highly regulated markets the government needs to make sure they are encouraging rather than discouraging supply.
For example in NYC, an office-to-residential dev was talking about how depending on the neighborhood, there are basically cutoff dates of what construction year is eligible for conversion. In midtown it's something like 1960 whereas downtown it is the 70s or so. That is - nothing built after that date can be converted. And the dates are fixed, not changed in years, have to be renegotiated in zoning law periodically.
There's no fixed reason for this other than setting arbitrary numbers to limit the amount of conversions to residential.. that is.. reduce the ability to build housing!
When asked why, the developer basically said "it's sort of arbitrary but they do it so that a neighborhood doesn't get too much housing when it doesn't have enough schools or markets, etc".
Which is kind of crazy. Build the housing. Build the schools. Just.. build.
Yeah, it's a good thing we have a famously right-wing bastion like Boston to lead the way with good old fashioned conservative policies like more housing and less commercial real estate. /s
This is actually a pretty nice rebate (similar to the one Ed Lee and Willie Brown proposed for Mid-Market redevelopment and Mission Bay's development respectively). I'd love for SF to use similar terms, but I doubt it's politically feasible anymore.