Ok, we get it. It’s almost a cliché now to say that San Francisco is in the midst of a housing crisis. For proof, check out this 1984 L.A. Times article on gentrification (dug up by the SF Housing Action Coalition) that you could easily mistake for an article published today (with the exception of $1,000/mo apartments in North Beach): http://articles.latimes.com/1985-04-03/news/mn-28445_1_san-francisco-s-skyline.
But it does seem like we are now in a particularly exacerbated point in the crisis. Take for example two recent data points on the housing sector:
- In 2013, San Francisco rents have increased 10.6%, the largest increase in the country and three times more than the national average of 3%.
- 42,452 jobs have been created in San Francisco since 2011, yet an average of only 1,500 new dwelling units have been constructed per year since then.
It’s no wonder Mayor Lee has heavily pivoted from his early-term emphasis on job creation to housing affordability and production this year. But he’s not alone in searching for solutions to the current crisis. Several members of the Board of Supervisors have been pursuing measures to help. These efforts differ sharply based on members’ ideas of what is causing the problem, but no question, they will all impact how housing is regulated in San Francisco. Just this week, the Board of Supervisors considered two very different ordinances impacting housing.
In-Law Units: It’s Your Turn to Come into the Light
In recent years we have seen an increasing number of ordinances “legalizing” existing development and land uses that were not established through the proper channels. Supervisors Chiu and Wiener have co-sponsored an ordinance that will allow for the legalization of “in-law” dwelling units that were constructed in a building prior to 2013. To be eligible, a unit must (1) be located in a zoning district that permits residential use and (2) be established without the benefit of a permit. The ordinance will allow an owner of such building to legalize the unit, even if it increases the dwelling unit count of the building above what is permitted by the zoning district, without the need for any variances and without neighborhood notice.
The tricky part of this process is that the in-law unit must also be made compliant with current Building, Fire, Electrical, Mechanical and Plumbing codes. This could be either physically impractical or financially infeasible. And how does an owner protect themselves from filing a legalization application with the city, finding out the work necessary to legalize the unit is impractical or infeasible, and then being stuck with a Notice of Violation from the city for an unpermitted unit? The ordinance contains a provision that forbids the Department of Building Inspection (“DBI”) to seek an enforcement action in such situation unless it identifies “an imminent and substantial hazard.” Since this leaves a lot of discretion to DBI inspectors, we recommend that any owner who pursues this process consult a building professional to perform an audit of the unit before any applications are filed with the city.
The ordinance contains protections for tenants as well. Legalization of in-law units are not permitted if a no-fault eviction has occurred in the unit within the past 5 or 10 years (depending on the type of eviction). Costs of legalizing the unit cannot be passed-through to tenants. Legalized in-law units will remain subject to rent and eviction control if they were already subject to it.
The ordinance passed on first reading this Tuesday, and must be passed on second reading next Tuesday before it is sent to the Mayor’s desk for signature.
Ellis Act Evictions: Still Legal, but Pay Up!
Supervisors Campos, Kim, Avalos and Mar have co-sponsored another ordinance that aims to ease the effects of the housing crisis on tenants. This ordinance would increase the amount of relocation expenses a landlord must pay to a tenant upon eviction under the state Ellis Act.
The Ellis Act allows landlords to remove their apartment buildings from the rental market, even if evictions of tenants would result. It also allows local governments to require monetary payments from the landlord to the tenant to mitigate the impacts of the eviction. Currently, a landlord must pay $5,265 per evicted tenant (up to a maximum of $15,795 per unit) and an additional payment of $3,510 for tenants who are over 62 years old or disabled.
The new ordinance would require a landlord evicting a tenant or tenants under the Ellis Act to pay a relocation expense equal to the difference between the monthly rent the tenant(s) is currently paying and the market rental rate for a comparable unit, multiplied over two years. The payment would be split equally among tenants occupying the unit. The ordinance would preserve the additional $3,510 payment for older or disabled tenants. Landlords would have the right to petition the Rent Board for a downward adjustment in the payment due to undue financial hardship.
The ordinance was first heard on Tuesday and instigated significant debate. Consideration of the ordinance was ultimately continued to next Tuesday.
These are just two of the latest ordinances that are intended to help with housing availability and affordability in San Francisco. Other ordinances introduced this year to help the housing situation would:
- Exclude affordable housing units from dwelling unit density restrictions;
- Prohibit increases in rent based on additional occupants; and
- Allow construction of new in-law units exceeding dwelling unit density restrictions.
And no doubt we will see more. No one expects the housing crunch to be solved, but these measures are an indication of the Board’s willingness to at least fight back against this intractable problem.
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.
