Density Bonus Program Unveiled


​Last week, the Planning Department unveiled its long-awaited program density bonus program, called the “Affordable Housing Bonus Program.” Details are still being worked out within the City and various stakeholders—including the development community. But a basic framework has been formulated. The new program will allow projects in RM, RC, RH-3, and NCD zoning districts (“Program Area”) to choose from two different streamlined and codified approaches to receiving development incentives—including a possible two-story height bonus—in exchange for providing more on-site affordable units than the existing 12% baseline. In other districts – a large portion of the City that includes the Eastern Neighborhoods, Market Octavia, Central SoMa and downtown – development incentives will not be codified. Instead, they will be scrutinized in a case-by-case negotiation.

For background, San Francisco has effectively ignored California’s mandatory statewide density bonus requirements, a state law since the 1970s. Until recently, the City took the position that required affordable units under the inclusionary housing program did not qualify a project for a density bonus.  In 2013, the California Court of Appeals in Latinos Unidos del Valle de Napa y Solano v. County of Napa ruled decisively against Napa County, which took the same position. The current Affordable Housing Bonus Program is a direct response to bring the City into compliance with Latinos Unidos.

Projects within the Program Area will now have two options: the somewhat complicated state rules, or San Francisco’s own approach. Under state law, a maximum density bonus of up to 35% can be achieved, based on a graduated scale depending on factors like percentage of affordable units, the affordability level of those units, and if the units are rentals or owner-occupied. Some projects will be able to receive a height increase up to a maximum of two stories, but only where needed to achieve the permitted density or the bonus units. 

Projects electing to use the state law will also be eligible to select between 1-3 “concessions” allowing relief from other aspects of the Planning Code. Possible options include a 20% rear yard; no graduated 5-foot expansion under Section 140 for interior-facing units’ exposure requirements; 50% reduction in required parking (yes, there are still areas of the city with minimum parking requirements); 5% reduction in common open space; and relief from off-street loading.

San Francisco’s program is more straightforward, and also appears to be more enticing. It would eliminate residential density limits altogether, with density indirectly controlled by a unit mix requirement (i.e. 40% two bedroom or 30% three bedroom), bulk, height and other building envelope limits. Projects could pick three of the development concessions summarized above. Most importantly, up to two additional stories would be permitted if needed to accommodate the permitted base density and bonus units. In exchange, projects would need to provide 18% “middle income” units (120% AMI for rentals and 140% AMI for owner occupied) in addition to offering 12% of the units as low income under the current Section 415 inclusionary requirement.

It also appears projects participating in either form of the density bonus program that would otherwise qualify for a Class 32 exemption under the California Environmental Quality Act (“CEQA”) will be considered “code compliant” under CEQA. As a result, they would not end up triggering heightened review just by virtue of getting the density bonus, development concessions, or height increase. This is not a guarantee that participating projects will always be able to receive streamlined review: other site-specific CEQA factors such as historic status, shadow, traffic impacts and the like can still draw a project into negative declaration or EIR territory.

As the proposal stands, projects that are not inside the Program Area must negotiate directly with the City on a site-by-site basis, and can only use the state approach to density bonus. They will be required to present two projects for entitlement processing and environmental review, a “base” and a “density bonus” variant. A full site-specific feasibility analysis will be required to justify a density bonus or concession, and they may not be able to tier off of an existing EIR—meaning there is a risk for heightened environmental review, making the entitlement process longer, more expensive, and more uncertain. It remains to be seen how many project sponsors will decide to strike out on their own, given the lack of straightforward procedures and the potential for delays. 

Planning Staff hope to have legislation implementing the program introduced at the end of September, with Board of Supervisors approval before 2016. We will continue to track this program as it is finalized.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben, Junius & Rose, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.