Project wins approval at Lucky Penny site with no affordable housing

Development was originally slated to include 23 percent below-market units

A 101-unit project on the site of the former Lucky Penny restaurant is moving forward with approval from supervisors, but without the affordable housing originally promised.

Supervisors on Tuesday voted to remove the requirement to include affordable housing in the development on-site at Geary Boulevard and Masonic Avenue.

Upzoning was allowed under the premise that the new building would be home to mixed-income households, but the developer will instead pay $4.5 million to be used for affordable housing elsewhere. Supervisor Catherine Stefani, who led negotiations for the site in her district, is seeking to hold the funds for an affordable housing site in the area.

The project at 2670 Geary Blvd., next to Trader Joe’s and across the way from Target in Laurel Heights, went from a proposed 23 percent affordable housing to zero after the developer said it was no longer financially feasible to include affordable housing.

That claim became a matter of debate at Tuesday’s meeting, with Supervisor Dean Preston pressing for more information on the project’s finances.

“Maybe that’s true, but I think it’s incumbent upon the developer to prove more than that statement and see if there’s a way to have middle ground here,” said Supervisor Dean Preston, whose district borders the site. “I think that if this board is going to allow this legislation to move forward, that it’s important that we do it in a way that doesn’t set precedent.”

The property has sat empty and boarded up since Lucky Penny closed in 2015. Developer Presidio Bay first sought to expand the density of the project proposed for the site by including low and middle-income housing first under the density bonus program HOME-SF, and went from 21 units to 101 units.

But the special use district created to allow for boosted density previously required the units to be included on-site, with no option to pay an affordable housing fee. After Presidio Bay said the union labor costs were $10 million more than anticipated, the Planning Commission made paying a fee toward affordable housing an option in January.

Supervisor Hillary Ronen also sought more information on the project’s finances, prompting Stefani to ask that her colleagues trust that she pushed for affordable units on-site.

“The implication that I just haphazardly put this legislation forward without answering questions is one I take a little bit of offense to,” said Stefani, who has worked on the development for six years. “The more delays, the more uncertainty, the more cost, the more likely this project does not get funded, and I’m gonna have an empty, dilapidated parking lot and building in District 2 that’s been there since 2015.”

Similar questions were raised on Monday at the Land Use and Transportation Committee, which forwarded the item as a report to get it to the full board more quickly after previous delays stemming from the coronavirus response.

Cyrus Sanandaji, Presidio Bay managing director, said at that meeting that the ballooning costs meant choosing between union labor and affordable housing. He is also overseeing development at 65 Ocean Ave., which will have 25 percent affordable units on-site.

“Frankly the choice we were left with and the gaps that we needed to bridge in feasibility came down to cost,” Sanandaji said Monday. “Time is the element here.”

Preston sought to delay the item one week to allow time for supervisors to take a closer look at the finances, in a motion that was backed Supervisors Hillary Ronen, Shamann Walton, and Matt Haney but failed to pass. He was ultimately the sole dissenting vote on a motion to move the project forward.

Preston said he still questions what makes 2670 Geary Blvd. a special enough case to warrant going back on original affordable housing plans that were supposed to justify the project’s scale. The developer’s choice to pay a fee points to a larger barrier to affordable housing citywide, he said.

“One of the challenges of getting affordable housing onsite in District 2 and higher-price areas is if you have the developer fee-out instead of building it on-site, the funds tend to be used elsewhere where it’s cheaper to get land and to build,” Preston said. “My hope is that by having that discussion publicly, that in itself sends a message that the board’s going to take a hard look.”

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