Nonprofits in San Francisco Priced out of Space and City Responds

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July 5, 2014; San Francisco Chronicle

Last week, I wrote a newswire about a social enterprise that was closing up shop in San Francisco due to rising rents. And according to this article, that space problem is systemically acute for nonprofits. Many San Francisco nonprofits are being driven from the city by rising rents in Mid-Market, where owners are doubling prices after rehabbing buildings to make space for Square, Uber, Dolby, Zendesk and Twitter. More than a dozen nonprofits have moved to Oakland, where rents are about half of those in San Francisco, while many others are barely hanging on.

Nonprofits that have decamped to Oakland include Great Schools, the Kapor Center for Social Impact, New Leaders, Muslim Advocates, Catholic Youth Association, the Sound Room, Amazon Watch and The Transgender Law Center. Also leaving for Oakland was CompassPoint, which wrote a study in 2000 on the same issue, now intensified.

Bill Nork, a commercial real estate broker in Oakland, says the exodus of the nonprofit segment of the market is the most significant they are experiencing. “They simply can’t afford the substantial rent increases they are facing in San Francisco,” he said.

The Kenneth Rainin Foundation has committed $5 million to address this issue and the city’s Board of Supervisors takes the problem seriously enough to have voted in March to establish two funds, a $2.5 million rent stabilization fund to help service organizations and a $2 million fund for arts organizations. But these funds are to be administered by an as-yet-undesignated third-party nonprofit. Supervisor Jane Kim has also convened a “working group on nonprofit displacement,” which has produced a report including recommendations.

NPQ has written quite a bit about the same problem in New York City. Are others in other cities experiencing the same problem with commercial space rents nearly double what they were a few years ago?—Ruth McCambridge


  • James Leehan

    Santa Fe, NM has a different twist on the nonprofit rent problem. About 20 years ago the City annexed 3.5 sq miles of land and encouraged developers to build low and moderate income housing. They did. The result: A huge concentration of low income families (43% of children under 18) far removed from youth and family services historically located on the other end of the City. The City purchased property and facilitated construction of a building to provide programing space near the new population center and turned it over to a nonprofit board — the Santa Fe Youth and Family Center Consortium (Zona del Sol). It was called a Consortium to foster collaboration between agencies. Great idea. Problem: In order to maintain the building the nonprofit board must charge rent. Even though the lowest in the City the rent is still a deterrent for agencies already having debt-free facilities in the other end of the city, Raising the money for maintenance and management costs is much more difficult than soliciting money for programs. The fact that the Rainin Foundation and the City of San Francisco are making a financial commitment to this issue is encouraging. Maybe others will follow.
    James Leehan
    Executive Director (part time)
    Zona del Sol

  • Charles Shelan

    Occupancy costs can stretch already amemic nonprofit budgets to the outer limits. Our sector has little abilitiy to build in sufficient margins and due to high occupancy costs, many nonprofits are relegated to 3rd class, inadequate quarters. My organizations recognzied early on that we simply could not afford market based rents so we made a concerted effort to fund the purchase of buildings through a series of successful capital campaigns which saves us $350,000 a year in rents. A responsible amount of the savings are re-invested into very low cost rent back to the agency at half the market rate. The re-invested funds are then placed in a Building fund which is used to finance capital expenditures such as a new air conditioning system, roof, etc. We are also fortunate to be in a market where capital costs to purchase are not out of reach comapred with San Francisco or NYC. As a result, we have modern and efficient building spaces that send a positive message to our clients and to the community.

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