Holiday Foreshadowing of 2016:  Expect a Challenging Year for San Francisco Development


​Affordable Housing Increase Proposed for November Ballot

Who says the period between Thanksgiving and New Year’s is slow at City Hall? Both the Mayor and the Board of Supervisors are hard at work on a number of land use related issues, directives, and legislation.

Arguably the biggest news is that Mayor Lee and Board of Supervisors President London Breed have called for a Charter amendment to increase the required amount of affordable housing in new market rate projects. First things first: there is a noticeable absence of specifics on numbers, including how high above the current on-site and off-site requirements the initiative would propose going and whether any grandfathering of projects in the pipeline will be included. Mayor Lee and Supervisor Breed are commissioning a housing working group consisting of the usual suspects: market rate and affordable housing developers, housing advocates, community leaders, and other City officials. This group is expected to meet within the month to start laying the groundwork for a consensus proposal to go on the ballot, likely in November 2016.

Reading the tea leaves in press releases and quotes to media outlets, a broad framework of issues may be covered in the initiative. Quotes from Mayor Lee’s office indicate that the affordability component may involve not just low-income housing, but also middle income. There have been references to shortening the timeline for new housing development projects or providing other incentives such as increased density or raising height limits in exchange for higher affordability levels. Larger projects may have higher affordability requirements than smaller ones. (It’s worth noting that 5M and the Mission Rock projects, which voluntarily agreed to exceed the affordability requirements, each also needed significant site-specific upzoning and height increases, unlike most other development projects in San Francisco). And finally, San Francisco voters approved Proposition K in 2014 (by a vote of almost two to one), which established a city policy of having at least 33% of new units be affordable.

There are at least three other proposals related to affordable housing making their way through the City right now. The first is the affordable housing density bonus program, which would bring the City into compliance with state law. The second would add a “dial” feature tying increased affordability to the maximum Area Median Income (AMI) level of the units, allowing higher AMI if a project increased its on-site affordability percentage. The third would loosen location restrictions on the off-site option. We will continue to track these proposals as well, including whether either or both of these are incorporated into the ballot initiative. 

Board of Supervisors Rejects Sale of 30 Van Ness Avenue

On Tuesday, the Board of Supervisors disapproved the $80 million sale of 30 Van Ness, a city-owned site at the corner of Van Ness and Market, to a private developer. The vote was 7-4, with President London Breed siding with Supervisors Kim, Avalos, Mar, Yee, Campos, and recently sworn in Supervisor Peskin to reject the deal negotiated by the Department of Real Estate. There were two primary grounds for denying the project: the City had initially proposed to sell the property for $87 million, and the terms of the agreement apparently did not satisfy some of the Supervisors that the developer would provide increased affordability levels. According to news reports, the property value dipped because the current building on the site requires approximately $60 million in seismic levels to keep it safe for City employees while a new ground-up project is making its way through the entitlement process. We will keep monitoring the progress of this site, both its potential sale and its redevelopment.

All in all, it looks like the land use regulatory environment is going to get more challenging in San Francisco in 2016.  As always, we will keep you posted on the latest.

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.