San Francisco's non-profit and arts organizations are critical to our prosperity and cherished by our diverse residents. They provide an extraordinary range of irreplaceable services - theater, childcare, dance, homeless shelters, environmental advocacy, economic development, training programs and more - to our city's residents. Non-profits are also important employers and economic players in San Francisco. Two timely studies have just been completed to inform our city about a serious threat to our non-profits: the rapidly escalating cost and scarcity of the space in which they work.

Concern over the impact of space affordability on non-profits led a group of organizations to commission these studies. One study, by CompassPoint Nonprofit Services, looks at the entire non-profit sector. Because of the unique space needs of arts and cultural organizations, the other study, conducted by arts consultant Laurie MacDougall, looks at this subset of the non-profit sector. Both studies explore current space use, the extent of space at risk and strategies for avoiding displacement. The representative sample of 488 organizations is 28% of all active non-profits in San Francisco. The research also included neighborhood focus groups, in-depth profiles of non-profits facing space issues and interviews with key informants from nonprofits, foundations, as well as advocates and policy makers.

Current Space Utilization

Study respondents are currently using over 2.4 million square feet throughout San Francisco. They are located in commercial office buildings, light industrial space, quasi-governmental, public and religious spaces (the Presidio, Fort Mason, public schools, churches/synagogues), in buildings they own, and in buildings owned by other non-profits.

• Non-profits occupy 2,462,109 total square feet (owned, rented, and donated) in San Francisco.
• Most non-profits are small. Fifty percent of non-profits occupy less than 2,700 square feet. Seventy-five percent of respondents utilize 6,934 sq. ft. or less.
• 20% of non-profits have more than one site in San Francisco.

The good news: not all non-profits are at risk. 1,635,000 square feet of space occupied by non-profits and arts organizations is not at risk for at least three years.

• Secured Space: 13% of non-profits and 4% of arts groups own their space and so are not at risk. Non-profits that responded to the survey own 942,000 square feet of space or 40% of space occupied by non-profits. Additionally, 38% of all arts groups lease or sublease secured affordable space owned by the City, federal government, churches or schools.
• Long-term Space: Of non-profits that lease space, 28% have leases that expire in 2003 or later. Non-profits with long-term leases tend to be larger and occupy 2 million square feet, or 48% of all leased space. 38% of arts space leases (127,431sq. ft.) are due to expire in 2004 or later.
• Confidence in ability to renew leases: 25% of all leasing non-profits are confident that they can renew their lease.

The bad news: many non-profits are in immediate serious risk. 803,496 square feet of non-profit and arts space is at risk within the next three years; this represents 33% of non-profit- and art-occupied space. Displacement risks include: the immediacy of lease expiration, confidence in ability to renew leases, the difference between current and market rates, and the percent of the total budget that is spent on rent.

• Lease expiration: 803,496 square feet of non-profit space is at risk. 19% of leased non-profit sites are month-to-month and 13% of sites are due to expire in 2000, for a total of 202,000 square feet. This group represents our most at-risk population of non-profits. For arts groups, a total of 186,858 sq. ft. of space is at risk. Thirty-five percent of arts organizations have already lost their lease, are on month-to-month leases, or have leases that expire by the end of 2001. Much of this space is subleased to a large number of arts groups for rehearsals, performance, exhibitions, etc. Most of the art space is very specific to arts use, and not easily replicated. Arts respondents have been doing business at their present locations an average of nine years at extremely low rents.
• Confidence in ability to renew leases: Non-profits reported that 13% of their site leases cannot be renewed; 42% can be renewed but at much higher, or market, rate; 20% are unsure if they can renew.
• Discrepancy between current occupancy costs and market rate: The average monthly non-profit rent expenditure was $4,320, though 50% of non-profits pay less than $2,470/month. The mean percentage of operating expenses directed to rent was 7%. If these non-profits were to pay $35/square foot, the percent of their budget dedicated to rent would increase to 20%. This increase could jeopardize the mission and effectiveness of many organizations. Arts groups pay a significantly higher proportion of their budgets (17%) on rent costs. Arts organizations holding leases subject to the real estate market are paying an average of $14.50 per square foot per month, and adjusting to market rates would mean a 300%-550% increase in space costs for these groups.
• Non-profits - by their nature - have few ways of absorbing such large increase in occupancy costs. They cannot raise their prices because most charge nothing or very little for the services they provide to low-income people. Even performing arts organizations, which earn income from ticket sales, must raise 50 to 75% of their annual operating budgets from contributions. Additionally, many funding sources (federal, state, and city government and foundations) will not pay for overhead costs higher than 10% of all costs.

Changing Neighborhoods Impact Non-profits

• Fifty-three percent (53%) of CompassPoint's respondent sites and 56% of Arts Study respondent sites are in the Mission, SOMA or downtown.
• CompassPoint respondents reported that 40% of their employees live in their site neighborhoods.
• Fifty-two percent (52%) of CompassPoint respondents and 44% from the Arts Study said that it was important for their work to be located in a particular San Francisco neighborhood.

Assessing the Impact of Displacement

Thousands of people are involved with San Francisco's non-profits - as employees, as clients, as board members, as patrons and as donors. Many community members are dependent on the services they receive from non-profits. Non-profit displacement will erode our quality of life and the strength of our economy, by reducing critical services, arts and cultural events, and a major employment base for the city.

• Non-profit survey respondents employ over 6,600 people and have more than 16,000 volunteers.
• Half of non-profit survey respondents provide direct human services that reach over 20,000 clients per day.
• Arts organizations holding at-risk leases report 893,000 visits to their activities each year (this figure includes duplicate visitors).
• Of the 83 direct service organizations that may have to leave all or some of their current space within the next three years, 27% provide human services, 15% provide employment and training, 11% do advocacy, 10% provide health services, 6% provide housing assistance, 6% work for the environment, 3% provide childcare, 2% provide recreation, 2% develop our economy, and 18% provide other kinds of direct services.

Responses and Strategies

There is no single solution to this complex problem. Both short-term, long-term, self-help and publicly provided solutions are critical. Multi-layered approaches should take advantage of the talent and resources of the non-profit sector, the City, foundations and others interested in developing solutions.

Short-Term Solutions

• Financial Assistance
• Technical Assistance
• Education and Training

Long-Term Solutions

• Develop non-profit space in conjunction with City funded and authorized projects.
• Encourage private sector development of non-profit space.
• Develop a funding pool for grants, loans and equity to acquire, develop and/or rehabilitate buildings or space within buildings to house non-profits at permanently affordable rents.
• Develop permanently affordable buildings that house a variety of non-profit and arts organizations. 81% of the arts are willing to share space or co-locate, a practice that is already common among arts groups, and 69% of non-profits are willing to share space or co-locate.

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