The Pace is Still Glacial

$700 leases you a top or bottom pod

Ten (10) months ago we wrote about a creative solution to San Francisco's cost of housing:

The reported rent of $700 per month is a fraction of the cost of a studio apartment. Even if one can afford to pay much more for housing, being a pod person may appeal to finance or engineering types who work long hours in the office and just need a place to crash and wash up.

James Stallworth and his company, Brownstone Shared Housing, were unable to achieve profitability, and the landlord is trying to evict him for unpaid rent.

Last week, Brownstone’s landlord — the Prime Co., a Kansas-based real estate developer — filed an eviction lawsuit accusing the startup of owing more than $150,000 in rent payments. The alleged debt is equal to about a year’s worth of unpaid rent, according to court records...

The eviction lawsuit comes months after Stallworth and his landlord switched to a new lease contract that pivoted away from requiring the startup to make monthly rental payments, switching instead to a “revenue sharing” model.

Per the contract, which was viewed by the Chronicle, the landlord would receive 80% of all profits generated from the sleeping pods.

The common area

While Mr. Stallworth is primarily responsible for the likely failure of his pod-rental business, the City's labyrinthine regulations must share the blame: (bold added)

San Francisco Planning greenlighted the building’s residential conversion in October, only to rescind the approval a month later, after ruling that the project didn’t meet the city’s affordable housing requirements and accusing Stallworth of misrepresenting certain details of the project.

At that point, Stallworth faced over $300,000 in affordable housing fees, payment of which the city required from all housing developers with projects of 10 or more units.

Stallworth was offered a lifeline when legislation by former Mayor London Breed exempted downtown residential conversion projects like 12 Mint Plaza from paying the onerous fees. Brownstone’s sleeping pods were approved to operate again, pending final permits from the department of building inspection.

But those permits were never pulled, public records show. Dan Sider, the planning department’s chief of staff, said the lack of permits has caused Brownstone to accrue $69,000 in penalty charges with the department to date.

With only 13 (out of 30) pods approved for rental, Brownstone Shared Housing's gross income of $9,100 per month has no way of paying San Francisco's unpaid penalties and fees in addition to the cost of operations. Even if all 30 units were approved and leased, monthly rents of $21,000 minus an 80% profit-share going to the landlord makes the business proposition very iffy. There are operating expenses, plus the cost of the original conversion, that Brownstone has to recover.

Mayor Daniel Lurie has said he is trying to make government more efficient, but the pace is still glacial.