“The next generation wants nothing to do with these buildings”

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The guest of honor at the Chinatown Community Development Center’s Lunar New Year celebration this year was not a local activist. Unlike years past, he was not a generous politician or business leader.

It was a building: a five-story beige stucco structure at 1005 Powell St. with a laundromat and beauty salon downstairs and 64 single-occupancy rooms, or SROs, upstairs that the organization had managed to buy and raise funds to renovate.

After the gold-and-red lion dancers sweated it out and Far East Café guests settled into hot tea at banquet hall tables, Chinatown CDC Executive Director Malcolm Yeung explained how the Powell Street building “signifies Chinatown’s trip over the past two years.”

ORS are the lifeblood of Chinatown, he said. They are home to restaurant workers and shop workers, new immigrants trying to settle in California, senior citizens playing mahjong and cards in Portsmouth Square. The ecosystem that makes San Francisco’s Chinatown the largest and most vibrant Chinatown in the United States — and which attracts tourists from around the world — would die without the affordable housing stock provided by ORS, Yeung said. .

Yet an increasing number of SRO buildings are coming onto the market, creating uncertainty about the community’s future.

“Over the past three or four months, we’ve seen more SRO ads for sale than at any other time in our memory,” Yeung said. “If you look at the bustling grocery stores and affordable take-out restaurants of Stockton Street, guess what’s above them? Look at the vacant storefronts on Grant Avenue, guess what’s above them? Losing ORS to speculation means losing the best version of Chinatown. It means losing the immigrant gateway that has served generations of newcomers since 1850.”

But if the path to owning 1005 Powell is any indication, buying and renovating these buildings is going to take a lot of patience and money. Before the pandemic, the CCDC had already spent more than a year trying to acquire the building, which houses low-income immigrant families, most of whom paid less than $500 a month, Yeung said. The building required a complete seismic upgrade, asbestos removal and tenant relocation during the 18 months of construction.

It took three years in total but, despite a pandemic-crippled Chinatown economy and rising construction costs, the CCDC was able to raise about $15 million to purchase and renovate the building. According to Rebecca Foster, CEO of Accelerator Fund, which provided the loan for the acquisition.

“There is a window of opportunity to move buildings to nonprofit ownership,” she said.

Hotel in San Francisco’s Chinatown.”/>

Ms Huang peeks out of her Single Room Occupancy (SRO) unit at the Clayton Hotel in San Francisco’s Chinatown.

Stephen Lam/The Chronicle

Chinatown is home to 15,000 SRO units in hundreds of buildings, which make up the majority of the neighborhood’s housing stock. Most units are under 200 square feet and many, like the Clayton Hotel on Clay Street, are well under 100 square feet. Some have sinks, some don’t. Most have shared kitchens and bathrooms. Unlike residential hotels in the Tenderloin, many of which are privately owned but operated by non-profit organizations, the vast majority of Chinatown SROs are owned by families or private investors.

While the Powell Street building has unusually large units and an elevator — rare in Chinatown — it’s not much different from half a dozen other SRO buildings that have hit the market in recent days. This includes three SRO buildings on Powell Street and further buildings on Grant, Kearny and Stockton.

Lawyer Allen Low, who represented CCDC in the purchase, said Chinatown is going through a “generational shift” where descendants of families who bought ORS in the 1970s and 1980s are seeking to exit the business.

“The next generation wants nothing to do with these buildings,” he said. “It causes quite a bit of discomfort.”

Malcolm Yeung, executive director of the Chinatown Community Development Center, stands for a portrait at 1001 Powell Street, an SRO building currently under renovation after it was purchased by the nonprofit organization.

Malcolm Yeung, executive director of the Chinatown Community Development Center, stands for a portrait at 1001 Powell Street, an SRO building currently under renovation after it was purchased by the nonprofit organization.

Stephen Lam/The Chronicle

Estate agent Brian Leung, who represents several sellers of SRO properties, said the majority did not want to own.

“A lot of these kids are too busy,” he said. “They are in technology or medicine. It’s not in their wheelhouse. They don’t want to be in town and they don’t want to operate an SRO building that their grandparents bought for nothing.

The difficulty is that any for-profit investor willing to take a chance would have to significantly increase their income to break even. The only way to do that is to raise rents.

“Nobody is going to buy it just to keep rents where they are,” Lueug said. “Not if you’re trying to run a business.”

A building currently on the market on Powell Street for $2.85 million shows the challenges facing any potential buyer. The eight-unit SRO building generates $3,032 per month. It has three vacant units. Two of the tenants pay $502 per month. One pays $460. The estimated monthly payment on the building, according to Redfin, would be $14,478 per month, more than four times what the property pulls in with ORS.

“These SROs don’t sketch. They’re not going to make any money,” said Low, a real estate attorney who has been involved in numerous transactions in Chinatown. “The funding is not there. You may be able to find the money to buy it, but the operating funds aren’t there. The calculation does not work.

Nelson Ho, owner of Wayne's Liquor, is seen behind the counter in San Francisco.  Located under a 50-unit single occupancy building (SRO) on Kearney Street on the outskirts of Chinatown, the building recently sold for $5.6 million as occupants fret over its future.

Nelson Ho, owner of Wayne’s Liquor, is seen behind the counter in San Francisco. Located under a 50-unit single occupancy building (SRO) on Kearney Street on the outskirts of Chinatown, the building recently sold for $5.6 million as occupants fret over its future.

Stephen Lam/The Chronicle

Chinatown’s SRO units are among the only “naturally affordable” units left in San Francisco, Low said. Most SRO residents do not earn enough to qualify for a typical subsidized apartment owned by the city’s nonprofit organizations. These are typically priced at 50% of the Area Median Income, or AMI, which would require incomes of around $45,000 per year. Residents are also not eligible for programs to provide supportive housing for formerly homeless people.

Real estate broker Carlos Serrano-Quan, who grew up in Chinatown, said many landlords are fed up with city regulations and the hassle of homeownership. And while retail and office space remains vacant, the cost of insurance and utilities continues to rise.

“A lot of owners don’t do this to kill. They have tenants paying $247 per month or $300 per month or $600 per month,” Serrano-Quan said. “But at the same time, they don’t do it out of the goodness of their hearts.”

The Powell Street building sits at the southern end of Chinatown. A block up the hill, apartment buildings swell as ORS gives way to Nob Hill with the Union Pacific Club, Fairmont Hotel and Beaux Art doorman buildings like the St Elizabeth at 901 Powell St. and the Francesca at 850 Powell, where a three-bedroom condo is currently listed for just under $3 million.

The location on the edge of Chinatown means it would have been more likely to be bought by an investor looking to replace current tenants with higher-earning families.

“The location makes it a bit more attractive in terms of what investors can look for,” Yeung said. “To the extent that you see price increases, it always comes to the borders first.”

During the tech boom years between 2016 and 2019, Chinatown began to see a few investors buying up some SRO buildings to replace low-income tenants with higher-paying tech workers. While those deals haven’t worked out for investors — many of these buildings are now on the market for less than they were bought for — it’s only a matter of time before San Francisco begins to thrive again.

The building at 1001 Powell Street, which contains ORS occupancies, will be renovated to have updated amenities, including more power outlets, a common problem in ORS.

The building at 1001 Powell Street, which contains ORS occupancies, will be renovated to have updated amenities, including more power outlets, a common problem in ORS.

Stephen Lam/The Chronicle

Meanwhile, at 1001 Powell St., construction crews are busy removing asbestos. As the cable cars climb the hill, project manager Cavan Wong of AmOne Corp. said the renovation would “modernize the entire building for tenants”.

“It will be clear and clean. New kitchens. New bathrooms. New electrics and plumbing,” he said. “And many more points of sale. It’s crazy how families of six survive on a single electrical outlet.

Supervisor Aaron Peskin, who represents Chinatown, thanked his assistant Sunny Angulo for sticking to the deal even during the darkest days of the pandemic.

“Sunny and CCDC chased him at every turn,” he said. “Honestly, I thought this would end up in the dustbin of history.”

Angulo said the key to upgrading and protecting Chinatown’s ORS is creating a fund to help keep the buildings afloat even if they don’t generate enough revenue to turn a profit.

“We need an operating grant program in the city for people who are not homeless,” she said. “If we’re serious about housing seniors, we’ll have to face the reality that most of them live below the poverty line in San Francisco.”

JK Dineen is a writer for the San Francisco Chronicle. Email: [email protected]: @sfjkdineen

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