No conversation can be had about the future of San Francisco without including the Central SoMa Plan. The Plan is coming at a time of both unprecedented growth and wealth along with unprecedented housing instability and need. As a result, the Plan is very quickly becoming a vehicle to harness new growth to meet the city’s increasing needs. In this environment, the Planning Commission began a conversation with its staff this afternoon about the financial aspects of the Plan.
Before we get to the new specifics, the big ideas. The Planning Department sees the potential of up to $2B in new public benefits being generated by the Plan, through the capture of 66%-75% of the new value created by the rezoning and height increases proposed by the Plan. This is clearly not a zero-sum process, which means the Plan represents opportunity for both the public and private sectors. Planning Department staff should get credit for heavily emphasizing the need for a “Goldilocks” result here: Too much public benefits will result in no development, too little public benefits will result in lost public benefit potential, so the Plan needs to hit the sweet spot in the middle that generates development along with sufficient public benefits. Planning sees no less than eight different policies competing for public benefits dollars, and not all of them can be maximized in the Plan while actually allowing for new development.
Planning sees the potential for up to 3,600 new units of affordable housing (potentially 31% of all new units created). $100M in new funds for open space and $60M new funds for child care are also expected.
Enough for the high-minded policy. On to the new details:
We finally received some specific proposals for the new fee increases in the Plan. The Plan proposes to extract additional public benefits above current levels only from sites receiving a zoning change or height increase of 15 feet or more. These sites are generally located south of Harrison Street. Proposed fee increases include the following:
- The Jobs-Housing Linkage Fee for office development is proposed to increase by $12/sf.
- The Central SoMa Impact Fee for projects receiving zoning benefits is proposed to increase by up to $10/sf.
The BMR rate for projects receiving zoning benefits is proposed to increase up to 20% for on-site and 30% for off-site or the in-lieu fee.
While the proposed Mello-Roos district results in an increase in property taxes after a new project, Planning Department staff provided per-square-foot estimates of what the fee could be for each type of use. The fee is estimated at $4/sf for office use, $4.50/sf of rental housing, and $5/sf for condominiums. If based on the same methodology as the Transit Center Mello-Roos District, this fee would apply annually for 30 years. Keep in mind that the Mello-Roos District could not be established just through legislation – a vote would be required of the owners of parcels located within the District. There are quite a few additional details and process steps involved with the Mello-Roos District formation.
Planning Department staff proposed the potential for requiring new office developments to provide a floor of non-profit office use (similar to the proposed PDR requirement). This was merely one potential component of the Plan (to be balanced against other requirements put in place), but its highlight in the hearing today suggests it is being considered seriously by staff.
Despite the quite generous public benefits staff estimates it can capture, the general consensus from the Planning Commission (across the narrow SF political spectrum) was that staff should keep pushing the public benefits aggressively. Planning Director John Rahaim was quick to remind the Commission that what was proposed today was only the current proposal, and that a nexus study was still underway to confirm whether these public benefits increases would even be allowed under state law. But the message was pretty clear: the Planning Commission wants to maximize public benefits to the fullest degree possible.
Back when the draft Plan was first made public in 2013, it was a “jobs space” plan (remember Mayor Lee emphasizing the need to lure new jobs to the city?). In just two years, it is very clear that the Plan is being adapted to the changing political environment. Yes, this means more affordable housing, but more fundamentally it appears the Plan is becoming an opportunity to use the recent and rapid growth to benefit the city as a whole. One could say that this is merely another attempt to slow the change coming to the city, but in essence the Plan embraces these changes to ensure the city continues to be a great place to live for another generation. In that sense, the Plan represents a win for smart growth. As always, the devil will be in the details.
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.