By Paul McGrath, Principal & Mechanical Engineer

The multifamily residential landscape in the San Francisco Bay Area is on everyone's minds as we balance the demand for housing at affordable levels with the cost of construction and bureaucratic obstacles. MEYERS+ has extensive experience finding innovative solutions across the spectrum of housing from market-rate, below-market-rate, group and transitional housing.

Housing Conundrums

California has struggled to provide the basic need of affordable housing for its population. While not unique to California, the issue is felt more here than anywhere else; a state that currently has 2 million fewer housing units than it needs. The challenge is full of contradictions: rents that are the highest in the country, but are not high enough to make construction of new units pencil; a State mandated goal to add 2.5 million homes by 2030, but no financial backing to make it happen; people sleeping on the streets while luxury condo units remain unsold and office buildings with an vacancy rate of 29.4%; an affordable housing burden of 21.5% for below market rate (BMR) units that has the opposite effect of that intended; and an exodus from our cities while still facing an affordable housing crisis. We are indeed at a tipping point.

California has a need for more housing at all income levels, but specifically at the affordable levels, as recognized by the State. At a state level, California is currently delivering 120,000 annual units shy of the 180,000 needed to meet demand. Cities are mandated by the Housing Element to deliver significant number of units in the next seven years. Each City has their own requirement, with San Francisco slated to deliver 82,000 units of housing by 2030, which would be more than three times it has historically delivered. Although the law requires that the Housing Element addresses, removes, or mitigates governmental and non-governmental constraints to housing production, it allows for no financial incentive to pay for the construction of the housing.

Planning and Permitting Bureaucracy

The obstacles are many. The New York Times describes the laudable ‘everything-bagel liberalism’ goals added by government to affordable housing projects as adding “obstacles, expenses and delays”. The San Francisco Chronicle catalogs the "87 permits, 1,000 days of meetings and $500,000 in fees" required, for what? The median time to pull a permit in San Francisco for multifamily housing is 627 days. Entitlements take an average of 450 days. That's three years of bureaucracy from entitlement to permit, never mind time needed for design and engineering. Add to that a typical construction period of another three years, and the prospect of delivering 82,000 units in the next seven years seems daunting at best.

Utility Obstacles

Developers have had to pay hundreds of thousands of dollars for diesel generators because PG&E cannot provide temporary construction power. The San Francisco Chronicle reports that obtaining permanent electrical service takes significantly longer than it used to, with many projects having their openings delayed. “It’s completely unacceptable for completed projects to just sit there gathering dust because PG&E can’t get it together to turn on the power,” Wiener, D-San Francisco. “We’re in the middle of a housing crisis.” While introducing a Senate Bill 83 that would require investor-owned utilities to complete interconnection within eight weeks after a building is “green tagged,” meaning local officials have inspected construction work and signed off on connecting it to the grid, or financially compensate the project developer. .

Cost of Construction

Construction costs have increased unabated since COVID, seemingly unaffected by the economic slowdown: equipment escalation has tracked 1% per month over the past three years, with equipment vendor quotes only valid for thirty days. Supply chain issues and material escalation are hindering delivery of residential units, with generator lead times over twelve months. Balance this with apartment rents having dropped by 10% since the onset of the pandemic.

Office-to-Residential Conversion

MEYERS+ ENGINEERS has extensive experience in the conversion of office buildings to residential (OTR). Often an inefficient office building with a small floorplate makes a great residential building. An office building located in a residential or mixed occupancy neighborhood may be worth considering for conversion to residential. Successful projects such as 100 Van Ness (prior career experience) and The Pacific at 2121 Webster are precedents. OTR is no panacea: costs of construction mean that they often do not pencil, especially if a façade replacement is factored. The MEP systems for residential are significantly different from those for office buildings, but there is the possibility of creative re-use of equipment and systems. The major benefit is that you can save years of construction duration, and potentially bypass the years of planning wrangles to build the building if it is already in situ. With a housing crisis that is immediate, this is enticing. If perhaps residential is not the best solution, office-to-hotel may be, allowing for the retention of the existing, non-operable punched windows, and less impacted by a lack of views in the forest of other downtown towers. New hotels can benefit the housing supply by reducing the number of units taken off the market for short-term rentals.

Student and Group Housing

Let’s consider alternative approaches to reducing the cost. Taking a leaf out of the on-campus student housing book, where cooking and laundry facilities are centralized, commercial developers with off-campus housing geared towards students, recent graduates and workforce housing are looking to increase the population density and lower the cost of construction by creating an entry point to the housing market not available today. Colleges, such as the Conservatory of Music' Bowes Center and CCA have built their own student housing buildings. Some private high schools are doing similarly for their teachers. University campuses such as Cal and UC Law are accelerating the construction of on-campus housing.

cONSERVATORY OF MUSIC BOWES CENTER
student housing

Smart HVAC Choices - Keep it Simple

While sometimes frowned upon because of the ‘motel-feel’ stereotype, unitary systems are a viable choice for market-rate and affordable housing projects. They offer the benefit of stand-alone HVAC systems that do not require the complicated and expensive piping systems associated with more traditional condenser water heat pump or VRF systems. Consider the alphabet soup of PTAC (Packaged Terminal Air Conditioner) or VRP units. Compared to VRF, they offer a sustainability advantage by keeping the refrigerant within the box instead of the miles of refrigerant piping and associated parasitic leaks of global warming refrigerants that can be associated with distributed refrigerant systems. Modern PTACs with punched wall openings provide a more aesthetically pleasing alternative to the budget hotel wall-sleeve variety.

Although central ventilation systems provide the benefit of consolidated filtration and maintenance, compartmentalized solutions are worth considering. A $239 MERV-13 outside air fan providing balanced ventilation to a specific cfm via a dial switch is both cost-effective and arguably superior in performance to traditional approaches.

Residential units require exhaust for kitchen hoods, bathrooms and potentially clothes dryers. Let's make vented clothes dryers obsolete, and opt for European-style condensing units in residential units. A central amenity space with a few conventional, vented dryers for those residents who prefer it a practical concession. For the kitchens and bathrooms, exhausting vertically avoids wall penetrations, but the 24/7/365 rooftop scavenger fans waste significant energy (4 EUI points in our climate) to maintain the code subduct provisions by virtue of the quantity of makeup air (4-5x) that needs to be heated and cooled. The latest version of Title 24 concurs with this and penalizes the vertical approach to the point of obsolescence.

Independent Residential Unit Ventilation

Solutions and Good News

It has become clear that our housing crisis is both a crisis of affordability and bureaucracy. A paradigm shift is needed. Political intervention that reduces the cost and time burdens on development is essential. Incentives such as public funding, property tax abatement and reductions in impact fees are crucial for OTR conversion. The benefit would be a much-needed post-pandemic transformation of our downtown. Politicians are taking action, with a willingness to reduce the BMR percentage, challenge the monopoly electrical utility and streamline permitting hurdles. State Senator Matt Haney has introduced The Office to Housing Conversion Act, AB1532, which would “stop local governments from slowing down or killing office-to-housing conversions by making their approval automatic and imposing strict time limits on all building permits”, while simultaneously creating a fund that would provide grants to turn unused office space into housing.

The exodus from San Francisco has reached a point of inflection, with only 0.4% population drop from July 2021 to July 2022, compared to 6.3% the year prior. Supply chain issues will work themselves out over time, along with the material escalation. Organizations such as SPUR and their partners are advocating for change and the politicians are heeding their calls.

MEYERS+ has been part of the development of thousands of units in dozens of projects from market-rate, below-market-rate, group and transitional housing, facilitating smart systems choices and promoting modular and prefabrication strategies to lower the cost of construction. We are anticipating an acceleration in housing construction in the Bay Area and are looking forward to partnering with you to help deliver the 2.5 million new homes in California by 2030.