Scott Wiener has an idea he thinks could help solve both of those problems at the same time.
Wiener is a member of San Francisco’s Board of Supervisors. He wants to allow owners of these buildings to finance earthquake retrofits by converting garages and basements into apartments. Current zoning does not generally permit the addition of new units in these buildings. For landlords, this zoning change would unlock thousands of dollars in new rental revenues — more than enough to pay back the substantial costs of shoring up the buildings. And for tenants, the change would add to the city’s housing stock, relieving some of the upward pressure on rents.
“I could see it potentially being a few thousand new units,” Wiener says.
Wiener’s plan is similar to a successful law in Israel that added entire floors to apartment buildings while making a dent in the country’s huge seismic-retrofit backlog. The aim of these creative real estate tools is simple: to give property owners a financial self-interest in strengthening their buildings.
Strong incentives like these are badly needed to save lives in earthquake-prone cities around the world. Building collapse is the leading cause of death in earthquakes. While new buildings are generally constructed to withstand shaking — at least in developed countries with known seismic risks — the economics of retrofitting older buildings are notoriously unfavorable.
For one thing, the work is expensive. Seismic retrofits often involve adding shear walls or steel-braced frames, jacketing columns in concrete, and installing new support columns. A case study on Istanbul by earthquake engineering researcher Mustafa Erdik found that fully retrofitting a residential building costs about 40 percent of its replacement value. The decision to retrofit can make a building uninhabitable for months, Erdik notes. And there’s no evidence that having the work done adds value to a home or increases the rents a landlord can charge.
The incentives governments generally offer have proven inadequate. Common ones include offering homeowners subsidies, tax credits or low-interest loans to finance the work. According toa recent World Bank report, for example, two-thirds of local governments in Japan offer subsidies for retrofitting work. Despite the help, only 300,000 houses were reinforced between 2003 and 2008, leaving Japan’s backlog of houses left to retrofit at more than 10 million.
Laurie Johnson, an urban planning and disaster recovery consultant based in San Francisco, says Wiener’s plan for offering additional density could be a powerful tool for local governments. “Permitting additional density bonuses is a fairly common incentive for requiring building upgrades of any sort,” Johnson says. “This may be an untapped incentive to align with the seismic retrofitting agenda.”
Building up
Israel’s experience is instructive. Israel is situated along the Dead Sea Rift, an active fault system responsible for several powerful quakes in recent history, including the magnitude 7.3 Gulf of Aqaba earthquake in 1995.According to Israel’s Housing and Construction Ministry, 810,000 homes in Israel must be reinforced against earthquakes, including 70,000 in high-risk areas.Israel’s National Master Plan for earthquake reinforcement and retrofitting, known as TAMA 38, originally passed in 2005. It is intended to bring buildings constructed before 1980 into compliance with Israel’s seismic safety standards.
TAMA 38 has been revised three times, most recently in May 2012. With each iteration, lawmakers added or sweetened incentives granting private developers the right to add rentable units to buildings as they do the retrofitting work.
“The third edition made a big difference,” says Sagi Tamari, a senior city planner for the city of Tel Aviv. Building owners were granted the right to add two floors atop existing buildings or to new buildings constructed on the same site. Developers were also allowed to add 25 square meters to each apartment, and to add units to the ground floor. Rentable space added under the projects is exempt from taxation.
Applications under the program soared — up to six times previous totals, says Tamari. “Today, we have hundreds of applications for approval, compared to before when we had, maybe, less than a hundred in a year.”
Aside from improvements made expressly to harden the building against earthquakes, developers have typically added elevators and balconies to buildings, as well as a small “security room” (mandatory in Israel per a 1991 law) that is usually a poured-concrete shell with a small window. Building owners also often use the TAMA 38 projects as an opportunity to upgrade water, sewage, and electrical systems, or to install energy-efficiency improvements.
Upgrades are paid for from the sale of the new upper-floor apartments. There are no costs for current residents, who often live in their homes during construction. The entire process — from planning to approval and construction — can take up to five years.
The primary criticism voiced about TAMA 38, one Tamari echoes, is that projects have flourished in large cities such as Tel Aviv, Ramat Gan, and Haifa while foundering in small towns. Property values are higher in the big cities, and that’s where developers expect to make a profit.
“This is what is running the program,” Tamari says. “Not really the fear of an earthquake. It’s become a real estate tool.”
Tamari says buildings that happen to be in rural areas, even those in areas at high risk of an earthquake, see little if any TAMA 38 projects. “On the periphery and out of the city center, sometimes you don’t even have one building that gets fixed. But, in Tel Aviv, where I am much more afraid of tsunamis than an earthquake, all of the construction is here.”
A new mandate
In San Francisco, the retrofit focus is on what are known as “soft-story” buildings. These are unreinforced wood-frame structures whose ground floors are especially weak because they have open interior spaces, picture-frame windows or garage doors. During the last major quake to hit the area in 1989, a number of these buildings collapsed in the city’s Marina District.After years of stalled attempts to implement San Francisco’s master plan for seismic threats, the city’s political leaders now appear fully committed to undertaking the necessary measures to protect residents and at-risk buildings against a major earthquake.
Last year, Mayor Ed Lee signed a bill that mandates retrofits for soft-story multi-unit residential buildings over the next four to seven years.The mandate applies to buildings of two or more stories, containing five or more residential units, which were permitted for construction before January 1, 1978.
As many as 4,800 buildings in San Francisco are covered by the soft-story retrofit mandate. According to the city, the cost of reinforcing them will run between $60,000 and $130,000 per building.
Wiener’s plan in San Francisco is a little different than Israel’s TAMA 38. Rather than allowing owners to enlarge buildings, San Francisco would allow additional units only within a building’s existing structure. Known as “in-law” units or “granny flats,” these would be small apartments with their own entrance, kitchen, bathroom and living space. Rents in San Francisco vary a lot by neighborhood, but the median monthly rent for a studio apartment is $2,300. Wiener says some building owners will be able to add multiple units to their buildings, multiplying their new revenues — and the city’s housing supply.
“We’re in the midst of a housing crisis here in San Francisco,” Wiener told me, noting that the city has added 85,000 residents but just 20,000 housing units since 2003. “Production is not keeping up with population growth. It’s not surprising that rents have exploded.”
Wiener’s bill has not yet become law but he is confident it will clear the Board of Supervisors by early February and be signed by Mayor Lee soon after. Besides making buildings safer, the plan appeals to many of San Francisco’s progressive ideals.
For example, Wiener notes that studies have consistently found that in-law units are more affordable than traditional units. Because the units would be added within existing buildings, dispersed across the city, the projects should not be drawn into San Francisco’s notoriously acrimonious neighborhood battles over new development. Historic preservation advocates are not likely to balk since, by providing owners a new source of income, the in-law units could help pay for the upkeep of aging buildings. Last, as Wiener told the San Francisco Chronicle, units added to buildings already under the city’s rent-control law would be subject to that law, resulting in a net addition of rent-controlled housing.
“In the climate we’re in now, and the very legitimate anxiety around housing costs,” Wiener says, “people are more open to different ideas.”
This story was originally published by Citiscope.
