San Francisco’s latest budget is out, and it’s ambitious. But will the investments it proposes move the needle to change some of the city’s longstanding problems? Nationwide, 20% of offices are vacant. In San Francisco in the spring quarter, that figure was nearly 32%. The city is also near the very top of the list when it comes to highest homelessness rates in the country.

“Marketplace Morning Report” host David Brancaccio spoke with San Francisco mayor London Breed about steps the city is taking to turn its fortunes around. This includes addressing homelessness, increasing the availability of affordable housing and convincing a new generation of business leaders to call San Francisco home. The following is an edited transcript of their conversation.

David Brancaccio: You’re working to get more than 220 more police officers hired. You want 800 prevention places to help people at the edge stay out of homelessness. Will these, and other of your initiatives, do you think, Mayor, be enough? Will the narrative that San Francisco is a bit of a mess, to be avoided, will that be different maybe a year from now?

London Breed: Well, I hope that it will be different. I think that it will be considerably different. But I just want to take us back, because this is not just about homelessness, the challenges that exist in San Francisco. We have many issues with open-air drug dealing, fentanyl has risen to a crisis level. And we have support from the state and the federal government, finally, to address some of the challenges around law enforcement. So our goal is to do everything we can from a local level to not only make the appropriate investments to increase our police force, to make sure we have alternatives to policing, to make sure that residents of this city, in all parts of the city, feel safe. And that definitely will take some time, to get to a better place, to help deal with the challenges around the narrative. But at the end of the day, the help that we get from the state — the California Highway Patrol, National Guard — the federal government with the U.S. Attorney’s Office and the Drug Enforcement Agency, I think that the amount of support that they are bringing in to help us combat the issues around open-air drug dealing, and in particular, opioids and fentanyl, which is really killing people at alarming rates, will have a tremendous impact on our city.

Brancaccio: Why all the extra help needed for the open-air drug dealing? The police not enough?

Breed: Well, the police are not enough, mostly because of our challenges around capacity. We are over 500 officers short. We are definitely making sure that parts of our city are covered. But, the effort around just making even one arrest is very time consuming. The officers now wear cameras, there are reports that need to be done, it takes officers off the streets, there’s a whole case that needs to be built. So there’s a lot more time that goes into even a single arrest that occurs. And we now finally have a district attorney who is prosecuting people. In fact, for the past year, she’s filed almost 800 cases related to drug dealing in the city. And our goal is to make sure that we’re doing everything we can to hold people accountable. But this is not the only thing that we’re doing. This is just one thing. And my hope is that we’ll see some change as a result of what we’re trying to implement in the city.

Brancaccio: Let me ask you this: I work out of New York City, and like your city, New York has a huge gap between rich and poor. It has vacant office space galore post-pandemic, like San Francisco. Homelessness, terrible problem here. But as I look out the window here in July, the streets are packed with tourists, there’s energy beyond tourism that I’m not seeing as much these days when I visit your city. What accounts for that difference?

Breed: Well, the tourists, the visitors are up, actually, in the city. And I think that we have certain areas, because I think what’s happening is there are certain parts of the city, like our downtown shopping area, that continues to struggle, but Union Square in the downtown area is typically packed with a lot of folks who are shopping because of the many stores that exist in that particular area of downtown. The Pier 39 and Ferry Building and our new attractions near the Golden Gate Bridge or Tunnel Tops Park and other places — those places are typically very, very much packed to capacity, in Golden Gate Park and some of our other attractions. So the numbers have gone up, not as much as we’re used to — San Francisco has never had to work hard to attract people here. But things have definitely changed. I think the narrative that’s out there about the city has had an impact on tourism. But, ultimately, when people get here what I find interesting — because I’m out in the streets, talking to visitors, talking to people — they’re like, “San Francisco isn’t what people told us it was going to be.” And I start digging deep and asking questions: “Well, why?” “Well, I had a great time. I went to this restaurant, I went to this neighborhood, I experienced this.” And I said, “Would you come back?” “Of course I’ll come back.” I’m getting a different perspective. It’s not to say that the problems and the challenges that people are talking about don’t exist in certain parts of the city. But, at the same time, there are still a lot of great things going on in San Francisco. And I think the people who are coming here have a completely different perspective. And hopefully that word gets out as well.

Brancaccio: It’s such a contrast. I mean, people see these headlines that Nordstrom is leaving downtown San Francisco, and what you’re saying is if you actually go to a place like Union Square, there’s other action.

Breed: Yeah, let’s talk about that. Because the fact is, Nordstrom didn’t just close its store in San Francisco. It closed stores in Canada and all over the U.S. And retail is moving in a different direction. It was before the pandemic. So many of our retail businesses were struggling. And it’s a combination of things. It’s not just about concerns around safety. It’s our tax structure, it’s the ability to find workers, it’s a combination of things. And also just people are ordering things to be delivered a lot more than they have. However, many of our luxury brands, like the Chanel store, they’re expanding; Yves Saint Laurent, they’re expanding. A lot of our luxury brands in San Francisco have had record sales. And it’s why they haven’t decided to go anywhere, because they’re making a lot of money, regardless of the challenges around tourism or conventions. People are still coming here, to Union Square, to shop. We made a lot of changes to the area. We make sure that we have sufficient law enforcement, we have retired police officers who serve as ambassadors and they are a part of the eyes and ears on the streets. We are making sure that the streets and the areas around parking garages and other places are clean. So we really put in a lot of effort. And I think that the hotels and a lot of the retailers are really noticing it.

Brancaccio: Now, homelessness: A federal appeals court panel is sticking with rulings that give people the right to camp out if there are not available places for them to live in many situations. It was tested again just a few weeks ago, and this seems to be the law of the land. Is this a problem for you and your effort to make San Francisco a place where people come back with their money?

Breed: Well, it’s definitely a problem in our city as it relates to a lot of neighborhoods where we have people who set up encampments. And, there are certain laws about the distance between where the tent can be and the sidewalk, and so on and so forth. So we have run into a lot of problems with trying to clear encampments. And what we do when we go into these encampment areas, we make it clear to folks that we want to provide shelter as an alternative. And some people take us up on our offer and some people don’t. We run into problems because there’s one judge in a case with UC Hastings ruled that — UC Hastings Law School, which is located near City Hall — that we needed to clear encampments. And this order contradicts that. And so we’re in the process of not only trying to make sure we have clarification, but we’re appealing this case because of the impacts and the conflict that it has with some of our other laws and other cases.

But the bigger issue here is, we’re offering a place for the particular individual whose encampment area that we’re trying to resolve for, but the judge is saying that we have to have it for everyone who’s homeless. It’s really a complex, challenging issue. But at the end of the day, when we have a place for people to go, they should not be able to continue to be on the streets where, unfortunately, you have trash, you have feces, you have public health-related issues, you have a number of these folks who unfortunately have other issues around addiction and substance use disorder and mental illness. So we need to be able to do our jobs to keep the streets clean and to keep the streets clear so that people can use the sidewalks as they were intended to be used.

Brancaccio: Surely there must be a lot of people who are unsheltered because of how much it costs to find a place in San Francisco. It’s still very expensive.

Breed: Yeah, it is very expensive. But let’s talk about that, because it’s not just about San Francisco. It’s about the entire Bay Area, the entire region. And it is very expensive, but, in 2018, we had about 10,000 units of housing that we provided it for people who had been formerly homeless, with supportive services. And since then, we’ve increased that by over 50%. So we’re now over 15,000 units. We saw last year a reduction in our homeless numbers. Our point in time count showed a 15.5% reduction in unsheltered homelessness in San Francisco. So I think that we are working toward trying to resolve it. But from conversations and information that we have, oftentimes, many of the people that we encounter are not people who lived physically with an address in San Francisco before they became homeless. Many of them had a number of reasons why they’re here. But at the end of the day, they’re still homeless on our streets, and we have to deal with it.

Brancaccio: You’ve talked, with characteristic bluntness, about San Francisco’s bloated bureaucracy and that it gets in the way of solutions. As mayor — the way a mayor is set up there — do you have the power to actually change that?

Breed: In a lot of cases, we’d have to go to the voters to ask for changes to our city charter. But let me give you an example to understand the difference in allowing a mayor to run a city and to push forward the kinds of solutions that are going to make a difference. When the pandemic hit, I was able to declare a state of emergency, and move quickly to set up testing sites, to set up purchases so that we had PPE. All the things that people were talking about, nervous about, rambling about, San Francisco was able to move quickly. And as a result, what we saw in the city is even though we’re one of the densest cities in the country, we saw one of the lowest death rates anywhere. During the height of the pandemic, barely 1,000 people lost their lives in San Francisco and our city was considered a model for how COVID was handled. And it had a lot to do with cutting the red tape and the bureaucracy so that we could make the kinds of decisions that really do save lives. And I think that that needs to be the case when you are mayor. It’s not that there shouldn’t be checks and balances, but some of the layers that exist with commissions, with boards, with my inability to even hire or fire a department head directly, or make a simple decision about clearing an encampment, or the fact that the police, for a lot of the folks who are doing illegal vending, they can’t cite them and an administrative citation has to happen before they can take any kind of action — some of these layered laws that have impacted our city make it so difficult. And at the end of the day, people, they don’t want to hear excuses, right, they want to see results. And what I have tried to do consistently with policies either through the Board of Supervisors, or things that we proposed on the ballot, is to try and break down the bureaucracy so that we can move the city forward. And it’s definitely been a bit of an uphill battle. But I’m not giving up.

Brancaccio: I mean, you can’t sort of declare in perpetuity emergency powers. But I’ve seen accounts that you’re interested in reforming the mayor’s powers.

Breed: I think it’s the ability to be an executive and govern the city. I’m not going to be mayor forever. And I’m thinking about the future of the city and how you allow the executive of the city to be an executive and to manage the city appropriately, so that we can actually do the things in San Francisco that the public wants to see. And that requires making some significant changes, especially around the boards and the commissions and that process, as well as the departments. Today I’ve been dealing with a lot of folks who have been reaching out to me about a project in their neighborhood that they weren’t even aware of, and just all the layers that you have to go through, to facilitate or to do anything, are very much problematic. Not that emergency powers are the answer. Of course, in the case of COVID, it was necessary, but we had more people die from fentanyl overdoses during that time, than we did from COVID. And so, as a result, we have to look at this differently, and treat it somewhat like an emergency in order to be more effective with setting up the resources and the support necessary to combat it.

Brancaccio: There have been mass layoffs for tech workers across the country, but also in the Bay Area. Yet, the big topic fueling the stock market this year is artificial intelligence. You could have another boom of a different kind in your region emerging here. But how do you keep it from happening 45 miles south of you in, I don’t know, Santa Clara instead of San Francisco?

Breed: Well, I’m glad you brought that up. Because during the pandemic, again, we saw companies, you know, many of our tech companies, they started hiring workers like crazy. I mean, the numbers increased significantly. And so now, they are adjusting to that here in San Francisco, although people are unfortunately still working from home in large numbers. But I’m excited about artificial intelligence, although it is definitely an industry that needs to be regulated appropriately so. Of the top 20 AI companies in the world, 16 are in the Bay Area, and 11 in San Francisco. All of the investments, all of the folks and the talent, they want to be here. So in our conversations with many folks in that particular world, they want to be in San Francisco. They want to develop this new industry in San Francisco. And so just recently, we declared it the AI capital of the world, we had a big conference, and there have been others. And people are still motivated to be here and to develop this new technology. So we’re going to continue to work with them very closely, and make sure that San Francisco is a place that they want to stay.

Brancaccio: So you’re feeling that some of the tycoons of the tech industry are really bought in on San Francisco city’s success? A lot of them live somewhere else.

Breed: Well, they want to be here. I don’t know if I would say that they live somewhere else. Because the people that I’ve been in contact with, they live here, their companies are based here and I’m meeting many of their employees who are moving here, who are moving to San Francisco to be a part of this industry. And one of the things that they talk about as to why they’re choosing San Francisco — of course, many of the investments and the angel investors and the folks who are located in this area — but also they say this is the densest population of engineering talent anywhere in the world. This is the person who is at Astranis, who started that company, where they’re developing this new satellite technology. I can compare it to what the cellphones used to be: the big old box that you carried around a cellphone in, and to all of a sudden a handheld. This is what satellites are going to be. And the changing of this technology is happening right here in San Francisco. And it’s happening because the talent is here, the investments are here. And so I think ultimately, you’re hearing one thing, and people are saying one thing, but I think if you dig deeper, and you have conversations with these companies, it’s something else that’s happening that I think people aren’t completely aware of. And that message needs to get out a lot more than it has been.

Brancaccio: So in a perverse way, I think this supports what you’re just saying — although I doubt you would phrase it the way I’m about to phrase it. I was looking it up: The median, that is typical, listing price for a place to buy a home in San Francisco is still $1.3 million. And average rent is $3,600 a month. I mean, it’s clearly strong demand.

Breed: Yeah, there is a strong demand. And it is very expensive to live here, which is one of the biggest challenges we have. But I will say that, under the state, they required us through the housing element in the next eight years to build at least 82,000 units. We have over 50,000 units that have been approved to be built in our city. And we, again, with process, policy, procedure, we need to get out of our own way. And a perfect example is, the state has a density bonus. The city has no say over whether or not this density bonus could be used when a project is approved to be built in a city. Yet, we have a lengthy process to talk about the state’s density bonus, and developers have to go through this process which actually has no authority to do anything. This is just an example of some of the bureaucratic burden that exists that delay housing and delay other things that we need to happen in our city.

So I think, ultimately, yes, it’s expensive and my hope is that we will do a better job with housing production, so that we can get our city to a better, more reasonably affordable place. So it’s not just about the people who make a lot of money that can afford to live here, or the people who are lucky enough to hit the lottery and get an affordable unit. We need to think about, what about those people in between? What about the blue-collar workers or the people I grew up with in San Francisco? I mean, many of them have already had to leave the city. So we definitely need to be a lot more aggressive with housing production.

Brancaccio: Just really quick for people listening somewhere else: the density bonus, what’s that?

Breed: So if you’re building a certain percentage of affordable housing that is included in your market-rate housing development, you are allowed to increase your density — meaning add more units, which adds height to a building. If you were eight stories, you could potentially add another two stories if you’re adding more affordable housing. And so as long as it fits within the state law of the requirements, you you can do that without going through local approvals. But here in the city, we still have a process that exists, even though we have no say directly as to whether or not a developer can do that when their project is approved.

Brancaccio: A lot of people working from home want to stay working from home. That has contributed to soaring vacancy rates in commercial real estate offices in many cities. But this includes San Francisco. What about your yawning vacancy rate for offices there?

Breed: Well, I see this as an opportunity because of a couple of things. We have a close to 30% vacancy rate in our city for office space, but for the life sciences, biotech — all of these different industries that need lab space that are growing in San Francisco — we’re at about 3.7% in that vacancy rate. And so we are making it a lot more convenient through our policies to convert office space to be used for these purposes, as well as housing and other things. We’re cutting some of the bureaucracy to allow for these conversions where they never existed before. San Francisco has had a history of putting limitations on certain properties, certain areas, what you can do here, what you can’t do there, but we are breaking down a lot of those barriers to allow for mixed-use developments, which did not exist before, where we are turning retail buildings into retail office and housing. Where we are looking at places where we didn’t allow for lab space, and we’re growing that industry so that it’s more easily accessible. So I think that things are going to definitely change in our city. One of the exciting proposals that’s been talked about a little bit is why not look at Westfield, which is a mall, which, when I was growing up, there was really nothing there other than the Emporium-Capwell. And this huge mall is there and retail as we know it has changed. And what about the possibility of a soccer stadium? What about the possibility of University of California, San Francisco, using it as lab space and increasing its footprint to do more research or providing a downtown campus option? So I think we have to start thinking differently about how we propose a downtown retail or financial district, and we start to focus on mixed-use, different opportunities and put everything on the table.

Brancaccio: You’ve got a bunch of world leaders headed your way later this year. I think the Asia-Pacific Economic Cooperation summit is in San Francisco, right? And you’ve got to put on a good show. It’s got to be smooth, I think.

Breed: Yes. And I am so excited. We’ve been working on this this day one since we found out that we were selected as the host city. Because we have not had an international event of this magnitude since 1945 when the United Nations was established right here in San Francisco. This is going to be big with over 21 heads of state, over 400 foreign press, over 1,200 CEOs for a CEO summit. And not to mention … the street closures, I mean because we’re talking about the president of the United States and other countries and they’re gonna be here in San Francisco and there’s gonna be a lot of security. Our hotels, many of them are already booked to capacity. And we are making plans around the logistics and how to manage all this, the events, the activities, the community, how this is going to play itself out. And our hope is that many of the press that are visiting, they get to see see for their themselves what San Francisco is. Because I think many people in the press, they take a video or they hear about something, and that becomes the headline or that becomes the story. But for people who live here, it’s a completely different experience. And I think, although not perfect, I mean, like any major city, it’s challenging. But I think it’s going to be important for the press to see for themselves, here on the ground, exactly what San Francisco is about and what San Francisco is made of. So I think this is gonna be a great opportunity to put our city on the global stage like never before, and really play host. And we are really excited about it. And a lot of our businesses are already engaged.

I think this also provides an opportunity for our economy, because we’re talking about over 1,200 CEOs for a CEO summit. And to try and get more investments and people to commit to San Francisco from various industries is going to be really important because right now, information technology and the financial businesses and other things exist here. But artificial intelligence is growing. But there are a lot of other industries out there. And my hope is that there’s interest expressed from these particular CEOs to do business in our city. So there’s so much at stake. And we’re excited about it. And I’m looking forward to it.

Brancaccio: Yeah, but it does need to run smooth. The city needs to show itself off well during that period of the summit for it to have the effects that you hope.

Breed: One of the things that I have seen this city do is put on a good show. We know how, whether it’s our parade was when the Golden State Warriors won the national championship in the NBA, whether it’s Dreamforce, which happens here every year, we’ve hosted U.S. Conference of Mayors and other major conferences and events, and the Super Bowl, and it’s coming again. So we’ve had major events in the city where we’ve had to deal with logistics in a way that we manage large numbers of people. And it’s something that the city does quite well. So we’re excited about it. I think we’re going to do a great job, and I’m looking forward to it. And so we’re prepared to address the challenge.