Supervisors hold hearing on soaring commercial rents as dozens of nonprofits warn services are at risk

Supervisor Jane Kim convened a lengthy hearing on Oct. 9 to examine how rapid commercial rent increases and early lease terminations are affecting nonprofit organizations and the services they provide. The Budget & Legislative Analyst (BLA) summarized data showing sharp decreases in commercial vacancy rates and double‑digit rent increases in South of Market between 2011 and 2013, with Class C buildings experiencing steep percentage increases that disproportionately affect lower‑cost nonprofit tenants.

BLA staff surveyed local nonprofits and reported responses from roughly 90 organizations. The average annual rent reported was $224,738—about 4.6% of the average nonprofit’s budget—and organizations that entered new leases in 2012–13 reported median rent increases of roughly 33%. The BLA noted many nonprofits are mission‑tied to the neighborhoods where their clients live; about 71% of survey respondents said proximity to the neighborhood is essential to service delivery.

Nonprofit leaders gave first‑hand accounts: Lutheran Social Services, Mission Economic Development Agency, AIDS Legal Referral Panel and others described double or triple rent increases, short‑term leases, costly tenant improvements and relocation challenges that threaten continuity of services for vulnerable populations (seniors, people living with HIV, families and clients dependent on clinic access). Several speakers urged short‑term measures—low‑interest loans or a nonprofit space capital fund, one‑time tenant‑improvement grants, targeted cost‑of‑doing‑business increases for city contractors—and longer‑term solutions including city acquisition of buildings for nonprofit use, development‑linked requirements (inclusionary nonprofit space) and partnerships with foundations to buy and hold property for nonprofits.

Supervisor Kim proposed convening a multi‑agency work group (including the Mayor’s Office of Housing and Community Development, OEWD, the Arts Commission, and philanthropic partners) to evaluate options such as a revived nonprofit space capital fund, use of city surplus property, inclusionary requirements for commercial conversions and tenant‑improvement assistance. She and attendees noted lessons from a previous nonprofit space initiative (a $2.5M fund a decade earlier) and recommended revisiting those models.

The hearing produced extensive public testimony from about 50 organizations and advocates citing displacement of arts groups, health clinics, legal services and community centers. Kim said the session was the start of a multimonth process to refine and pursue a portfolio of policy responses.

What happens next: Supervisor Kim asked city staff and departments to evaluate past efforts, compile options and convene stakeholders to develop a set of short‑ and long‑term actions to stabilize nonprofit space and preserve critical services; a work group and follow‑up reports were proposed.