5M megaproject clinches political victory by agreeing to build more middle-class apartments

A mega-project in San Francisco's South of Market neighborhood is exciting for its size an prize tag—and remarkable for the income levels that define "affordable" in San Francisco these days.

The trio of towers set to rise next to the San Francisco Chronicle headquarters got a political lift as developer Forest City agreed Tuesday to build more apartments dedicated to middle-class residents.

The late-night deal struck between developer Forest City Enterprises (NYSE: FCE.A), Supervisor Jane Kim and Mayor Ed Lee's office virtually assures Board of Supervisors approval for the $690 million 5M residential-office-retail project. The South of Market project has become contentious in recent months as it got caught up in affordable housing politics and gentrification anxieties.

This now marks the largest ever affordable housing commitment that a San Francisco developer has made for a project built on private land. The San Francisco Giants’ Mission Rock development, which voters overwhelmingly approved at the ballot box last week, also committed to building 40 percent affordable housing on port property after negotiations with Kim earlier this year.

At 5M, 40 percent of the units that will get built as a part of the project won’t be priced at market rate, and they will range in affordability. For instance, some units at an off-site Tenderloin affordable building will be reserved for formerly homeless residents, while a family of four making $152,850 a year would qualify for one of the middle-income units at one of the Fifth and Mission buildings.

Under the deal approved by the Planning Commission in September, 33 percent of the units as part of the development would have been affordable. The difference now lies in the pricing of the on-site below-market-rate units.

Before, one of the 5M apartment buildings would have included 58 affordable units priced for low-income people making half the city’s median income. Now, it will include 87 units priced for middle-income people making 100 percent to 150 percent of the city’s median income.

Kim said she became more open to middle-class units after hearing from local nonprofits that their “workers can’t afford to stay in the city.”

“From formerly homeless families to those in our service sector and hotel workers, we wanted to make sure there’s a wide range of units that are affordable,” Kim said. “Units don’t come online without this development.”