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The Best Thing About the New Rem Koolhaas Building

Ian Eck | March 19, 2014 | Story Real Estate

San Francisco: It's for starchitects now.

That was the initial reaction to this week's announcement that world-famous architect Rem Koolhaas was selected to build a 550-foot residential tower on Folsom between First and Fremont. And true enough, the injection of star power into San Francisco's rather lackluster downtown architecture does seem like a turning point. After all, besides the Transamerica Pyramid, there's not much in the way of show-stopping buildings on our city's skyline (Coit Tower doesn't count).

But there's actually a more surprising aspect to the Koolhaas building: It's not just a luxury condo tower. It would actually represent a victory for affordable housing too. In contrast to many starchitect-designed buildings around the world (for instance, the Gehry Building in Lower Manhattan which, though beautfiul, sets aside no low-income housing), this project would include a sizeable number of affordable housing units—27% of the building's total.

The plan still awaits approval and details could change, but for now the contours are this: San Francisco will sell the land in SoMa to a team of developers (including Related California, the non-profit Tenderloin Neighborhood Development Corp., and Koolhaas's team) for $72 million. The catch: developers will have to set aside more than a quarter of the units for residents making 60% or less of the area's median income ($58,000 for a family of four). It's that aspect of the deal that has affordable housing advocates applauding.

"The city is doing exactly the right thing in how they’re disposing of these parcels," said Cynthia Parker, President and CEO of BRIDGE housing. She speaks from experience, as BRIDGE recently completed its own 120-unit development for the formerly homeless on land bought from the city. Parker's homeless housing project and the prospective Koolhaas site are two of eleven parcels of public land that are being put out to bid in the future "Transbay District." These real estate deals will ultimately help fund construction of the $4.5 billion Transbay Transit Center Project, which will include 4,400 new housing units, 6 million square feet of office and commercial space, and 100,000 square feet of retail—all by 2017 (we hope).

While hiring Koolhaas for this newest development may seem like a ploy to score cool points, it's actually a savvy bit of leveraging. The Koolhaas brand will give developers the opportunity to sell the project's high-end condos at exorbitant rates, while in turn supplementing the cost of affordable housing without risk of losing their shirts. It's a balancing act: high-margin expensive units offset low-margin (or no-margin) affordable units.

It's a deal that makes sense to economists too. Enrico Moretti, a UC Berkeley professor, believes that this kind of development could help address the city's overall affordability problem. "There’s a common misconception that luxury housing doesn’t help the rest of the market," he says. "It actually helps everybody because you’re accommodating lots of residents who would otherwise raise your prices."

But even if Moretti is wrong about the impact on affordable housing—hey, at least we'll have a Koolhaas to look at.

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