TWTR Twitter Inc

By Alejandro Lazo | Photography by David Butow 

SAN FRANCISCO -- Lucho Cabrera, a 53-year-old formerly homeless man, turned to an unlikely place during his recent hunt for affordable housing: a $3 million community center built by Twitter Inc. across from the social media giant's sleek art deco headquarters.

The NeighborNest center exists because the city five years ago struck deals with tech companies to move to the gritty Tenderloin area in exchange for tax breaks particularly attractive to start-ups. Twitter, Zendesk, Spotify and others snapped up new headquarters buildings, turning a dilapidated commercial strip known as Mid-Market into a new tech hub replete with hip espresso cafes and artisanal lunch joints.

For low-income residents such as Mr. Cabrera, who now get free technology training and child care at the community center, the corporate neighbors are welcome. "You hear stuff on Twitter taking over, " Mr. Cabrera said. "Hey, these people are helping us."

Across the U.S., tensions over gentrification have given rise to community benefits agreements, which seek concessions from developers in exchange for community support for their projects. Activists hail such agreements when they benefit those likely to be displaced by neighborhood change.

But critics of the San Francisco tax breaks say they have cost the city revenue without bringing enough concrete benefits to the community. Advocates for the poor also say the Tenderloin's redevelopment threatens to strip away one of the last redoubts for low-income residents in an ever-wealthier city.

After Twitter considered leaving San Francisco in 2011, Mayor Ed Lee created a temporary tax break for companies that moved to the Mid-Market and Tenderloin areas. These payroll tax breaks were attractive for start-ups paying workers with stock options. For the mayor, the deals offered an opportunity to retain a burgeoning, homegrown technology industry while revitalizing one of the city's poorest zones.

Companies with more than $1 million in payroll signed community benefits agreements in exchange for the tax breaks. In 2014 and 2015 alone, those agreements yielded 17,000 volunteer hours, $1.7 million in cash grants and $2.5 million in donations, according to a city tally. The tax breaks have spurred job growth and revenue from sales and property taxes, the city said. But the tax breaks have so far cost the city nearly $40 million.

Critics of Mr. Lee's agreements say they should have included stronger local hiring commitments and more money for affordable housing. They also argue the language of the deals is ambiguous to the point of being unenforceable.

Julian Gross, an attorney who has negotiated several community benefits agreements, said those struck by the city are "closer to a handshake deal."

Donald Falk, chief executive of the Tenderloin Neighborhood Development Corp., which builds affordable housing, said the "jury is out" on whether the tech boom has helped low-income people prosper.

"I am just not seeing that good employment opportunities are materializing for Tenderloin residents," he said. "I am not seeing a lot of good housing opportunities for low-income residents."

Matt Dorsey, a spokesman for the city attorney, says the agreements are strong because the city can always withhold its tax breaks. Todd Rufo, director of the city's office of economic and workforce development, says the tax breaks were "bringing long-desired improvements to the Tenderloin."

Tom Tarantino, Twitter's public policy manager, said its deal with the city has led to meaningful community investments. "We take our responsibilities as a native member of this community seriously," he said.

Few are in disagreement that the deal has led to big changes in the neighborhood. Just three blocks from the community center, Xi'an Chandra Redack, a musician who works at an organic grocery collective, says the owner of her 84-unit building is trying to oust tenants from rent-controlled apartments to make way for more lucrative commercial tenants.

The owners of her building have filed suit against the city, saying they are in a bind: having been told by the city that the space is zoned commercial but unable to evict any tenants to be in compliance with that zoning.

The Tenderloin has long been a holdout to the city's gentrification despite its prime location abutting wealthy Nob Hill, the touristy Union Square area and sitting just a few transit stops away from the city's financial district. The reason is due in part to its unique housing stock -- with many rent-controlled and below-market-rate apartments, as well as single-residency occupancy hotels -- and because politically powerful advocates for the poor have fought to preserve the area as one for low-income families.

These days upscale residential developments are rising alongside nonprofit agencies, soup kitchens and religious rescue missions. Investors are buying apartment buildings and developers are planning new ones.

Annual household income in the neighborhood was roughly one-third of the city-wide average in 2015 at $37,390, according to a Census data analysis by Esri, a software-mapping company. An analysis of rents by the start-up Zumper shows a one-bedroom apartment in the Tenderloin cost an average $2,295 in February, up from $1,895 in July 2014.

Nathan Hubbard, the head of commerce for Twitter, recently noted the disparities in the area, posting a photograph on his Twitter account showing hypodermic needles along a strip of Market Street's green bike lane.

"The dichotomy and stratification of SF: in the foreground, discarded needles," he tweeted. "In the background, Uber and Twitter."

Joseph Nagle, 29, the director of marketing for an electric-vehicle charging station company, EverCharge, recently moved into a newly built loft studio in the Tenderloin with his girlfriend. He considers the rent, of $2,300 a month,to be a bargain.

"For that kind of money, I can't imagine where else I would live in the city," he said. "The Tenderloin was really the only choice."

Write to Alejandro Lazo at alejandro.lazo@wsj.com

(END) Dow Jones Newswires

April 29, 2016 12:48 ET (16:48 GMT)

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