Lutheran Social Services of Northern California had been paying $16.40 a square foot for office space in South of Market when a technology company came in with an offer of $32 per square foot, displacing the nonprofit that provides money management services for formerly homeless people.
Stories like that are becoming more common as nonprofits struggle to survive — some have not — amid skyrocketing rents fueled in part by a San Francisco economy strengthened by the flourishing technology industry.
There are about 6,000 nonprofits within San Francisco. City government contracts with about 1,400, which this year will receive a combined $528.8 million in city funding, to provide services such as mental health treatment, legal assistance for tenants and arts programs.
Nonprofit leaders are sounding the alarm that the hot tech industry is putting a rent squeeze on them as landlords seek to maximize profits. The problem is increasing as more of the leases near renewal.
Cindy Gyori, executive director of Hyde Street Community Services, a nonprofit providing mental health services in the Tenderloin, said her landlord is asking for double the rent when the organization’s lease is up. “We will be as homeless as many of the clients that we serve,” Gyori said.
San Francisco added 41,300 new jobs between 2011 and 2013, during which time commercial vacancies dropped from 12.4 percent to 9.3 percent and commercial rental rates increased from $39.67 per square foot to $52.69, a nearly 33 percent increase.
The economic success, however, has led to economic pressures that are reaching City Hall in the form of complaints about rent hikes, evictions and neighborhood gentrification.
Supervisor Jane Kim is focusing on nonprofits’ concerns, since she represents the Tenderloin and South of Market, which have large concentrations of social services programs.
“Forty-one-thousand new jobs is a plus for The City. It is something that we should be lauding,” Kim said during a Board of Supervisors hearing Wednesday where nonprofit leaders came seeking redress. “But we can’t have these stories accompanying what is also a success for our city.”
Kim vowed to have concrete proposals in the next six to eight months as talks continue. Ideas being discussed are loan assistance, development impact fees and selling off city-owned parcels to nonprofits at a reduced cost.
Nancy Nielsen, deputy director of Lutheran Social Services, said she found an alternative 7,000-square-foot space, at $18.50 a square foot, but it is in “very bad condition,” needing some $400,000 in improvements.
“We need some help to manage this crisis,” she said.