Affordable Housing Archives

Planning Commission Considers Changes to Group Housing

February 23, 2022 | Melinda Sarjapur

On February 10th, the San Francisco Planning Commission voted unanimously to recommend its approval (with modifications) of two proposed ordinances that could bring big changes for Group Housing citywide.

In mid-December 2021, Supervisor Peskin introduced two ordinances at the Board of Supervisors. The first (Board File No. 211299, “Planning Code – Group Housing Definition”), which is co-sponsored by Supervisors Walton and Mandelman, proposes to amend the definition of Group Housing under the San Francisco Planning Code (the “Planning Code”).

Under the current Zoning provision of the Planning Code (and pursuant to a previous Zoning Administrator interpretation), Group Housing rooms can include a limited cooking facility, which is defined as having a small counter space, a small under-counter refrigerator, a small sink, a microwave, and a two-ring burner. Further, Group Housing rooms must be rented out for a minimum of seven days, and Group Housing developments do not have minimum square footage requirements for building common spaces and amenities. On-site below-market-rate/inclusionary Group Housing rooms can be offered as either rental or ownership tenure.

However, Supervisor Peskin’s legislation proposes the following changes to the Group Housing definition:

Individual and limited cooking facilities would no longer be allowed in Group Housing rooms.
Group Housing rooms would need to be rented out for at least 30 days, rather than 7.
Group Housing would require at least 0.25 square feet of common space for every square foot of private space (including bedrooms and individual bathrooms). At least half of the required common space would need to be devoted to a communal kitchen, with one kitchen for every 20 Group Housing rooms. Student housing and 100% affordable housing would have an exception to this requirement.
On-site inclusionary Group Housing rooms would no longer be permitted as ownership units.

The second ordinance (Board File No. 211300, “Planning Code, Zoning Map – Group Housing Special Use District”), proposes to create a new Group Housing Special Use District, generally covering the Chinatown and Tenderloin neighborhoods, within which new Group Housing rooms would be prohibited.

After three hours of hearing and deliberations, the Planning Commission voted unanimously to recommend approval of both ordinances to the Board of Supervisors, with the following proposed modifications:

To the Group Housing Definition Legislation:

Increase the common space requirement for Group Housing to 0.5 square feet of common space for every square foot of private space (instead of the proposed 0.25 sf);
Require at least 1 kitchen within 15% of the common space (instead of the proposed 50%);
Revise the minimum number of kitchens to be at least 1 communal kitchen for every 15 Group Housing rooms (instead of the proposed 20);
In addition to Student Housing and 100% Affordable Housing, also exempt units protected under Section 41.3 of the Hotel Conversion Ordinance from common space requirements;
Exempt organizations such as Family House from the common space requirements;
Allow academic institutions to provide limited cooking facilities in Group Housing rooms;
Define the metrics for communal kitchen requirements;
Exclude the single-room occupancy (“SRO”) aspect from this specific legislation with the intent to continue discussions on SRO controls in the future; and
For the Planning Department to consider establishing a Working Group to further discuss Group Housing intent, best practices, and future legislation.

To the Group Housing SUD Legislation:

Revise the proposed SUD to exempt Student Housing and 100% Affordable Housing projects; and
Exclude the SRO aspect from this specific legislation with the intent to continue discussions in the future.

It remains to be seen which, if any, of the Commission’s proposed modifications will be incorporated into these ordinances, which will come before the Board’s Land Use and Transportation Committee at an unknown future date.

Authored by Reuben, Junius & Rose, LLP Attorney Melinda Sarjapur.

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.

Supervisor Safai Introduces Competing Fourplex Legislation

December 8, 2021December 8, 2021 | Sabrina Eshaghi

On November 30, 2021, Supervisor Ahsha Safai introduced legislation that would allow up to four units on lots zoned RH-1(D), RH-1, and RH-2 with the addition of affordable housing for moderate-income families. This competes with Supervisor Rafael Mandelman’s fourplex legislation, which would allow up to four units in all RH zones without any affordability requirement. Supervisor Safai’s legislation takes a different approach that would require at least one deed-restricted middle-income housing unit in order to build a fourplex. Safai’s legislation would also allow exceptions to certain Planning Code requirements, provide priority processing, and eliminate 311 notice and discretionary review.

Specifically, the legislation would create what it calls the Affordable Housing Incentive Program, which would apply to lots that are (1) located in the RH-1(D), RH-1, or RH-2 districts, (2) within one mile of a major transit stop, and (3) no smaller than 2,500 square feet. In addition, the project cannot be subject to any other density bonus programs and any existing “protected” units, which includes rent controlled or affordable housing units, must be replaced.

Under the Program, one affordable housing unit is required to allow up to three units per lot and two affordable units are required to allow up to four units per lot. The affordable housing units must be provided at 110% of the area median income (“AMI”) for rental units, or 140% AMI for owned units. Currently, these income levels for a single person household translate to $102,600 and $130,550, respectively. At the 110% AMI level, base rent for a one-bedroom unit would be limited to $2,713 and $3,010 for a two-bedroom unit. The affordable units are also subject to certain size requirements.

In exchange for the affordable housing, the Program allows a variety of Code modifications and shorter processing times. For example, lots in the RH-1(D) and RH-1 zoning districts are currently limited to a height of 35 feet, but the Program would generally allow up to 40 feet. In addition, projects under the Program would be entitled to reduced rear yard, dwelling unit exposure, and open space requirements. The Planning Director may also grant minor exceptions from Code requirements to allow building mass to appropriately shift to respond to surrounding context when the proposed modification would not substantially reduce or increase the overall building envelope. Likewise, the provisions of the Residential Design Guidelines related to “building scale and form” and “building scale at the mid-block open space” would not apply.

To provide more certainty in the approval process, the Program requires projects to be approved within 180 days of submittal of a complete project application, unless an environmental impact report is required. It also eliminates 311 neighborhood notification and discretionary review. Instead, the only opportunity to appeal would be through the associated building permit.

The legislation is currently in a mandatory 30-day holding period before any Planning Commission or Board Committee hearings can take place. Meanwhile Supervisor Mandelman’s legislation has already advanced from the Planning Commission and is awaiting a Land Use Committee hearing date. It remains to be seen what version of the fourplex legislation will make it to the full Board.

Authored by Reuben, Junius & Rose, LLP Attorney Sabrina Eshaghi.

State Warns San Francisco Concerning Rejected Housing Projects

December 2, 2021December 2, 2021 | Thomas P. Tunny

The Board of Supervisors (“Board”) recently issued two unusual denials of large housing projects – the projects would have provided over 800 dwelling units, over 130 of which were affordable. In an even more unusual move, last week the California Department of Housing and Community Development (“HCD”) informed San Francisco officials that the City may have violated state housing laws by rejecting the projects. Without getting into the Board politics behind the project denials, the State’s actions are notable. The State rarely takes such a public stance concerning local planning and zoning decisions, indicating the high priority the State is placing on the provision of housing and the concern with these decisions.

The Two Rejected Housing Projects

The two housing projects at issue are located at 469 Stevenson Street and 450-474 O’Farrell Street. The 469 Stevenson Street project is a mixed-use, 27-story high rise with 495 dwelling units, including 89 affordable units. The Board of Supervisors denied the project on CEQA grounds, overturning the Planning Commission’s certification of the project’s Final Environmental Impact Report (“FEIR”). In HCD’s own words, the Board cited “various vague concerns about FEIR deficiencies, including seismic concerns, effects (e.g., shadowing) on historic resources, and gentrification.”

The project at 450-474 O’Farrell Street is a modification of an earlier project. The new project proposes more, smaller units (316 vs. 174) that are “affordable by design”, and included 43 affordable/below market rate units. The Board overturned the Planning Commission’s approval of a Conditional Use Authorization for the project without yet issuing written findings.

HCD Letter

HCD made its concerns known to City officials in a letter last week. The message was pointed. HCD expressed concern that the Board’s decisions “represent[] a larger trend in the City/County,” noting that “California’s housing production does not meet housing need. In the past ten years, housing production has averaged fewer than 80,000 new homes each year, far fewer than the 180,000 new homes needed…. As a result, the cost of housing has skyrocketed, and San Francisco stands amongst the top two most expensive housing markets in the United States.”

HCD raised significant concerns with the City’s compliance with the Housing Accountability Act (“HAA”). Under the HAA, a local government cannot disapprove or reduce the density of a housing development project that complies with applicable, objective general plan, zoning, and subdivision standards and criteria, including design review standards, in effect at the time that the application was deemed complete, unless it makes written findings supported by a preponderance of the evidence on the record that the project would have a specific, adverse impact upon the public health or safety and there is no feasible way to mitigate that impact. The Board did not make such findings for either project.

HCD also expressed “concern[] about the significant delays in the approval of housing generally and in the City/County in particular.” As to the O’Farrell project, HCD expressed concern that the City violated the “5 Hearing Rule” set forth in the Housing Crisis Act of 2019 (SB 330). The Planning Commission had six hearings on the project and the Board appeal was the seventh hearing.

Lastly, HCD warned the City about its implementation of and compliance with its existing Housing Element and its upcoming Housing Element update. The Housing Element update “must … demonstrate local efforts to remove governmental constraints that hinder the locality from meeting its share of the regional housing need and include program actions with metrics and milestones to remove or mitigate identified constraints…. Academic research continues to show that San Francisco’s processing and entitlement timeframes and procedures exceed the norms for other jurisdictions of similar size and complexity and act as a constraint on the development of housing.”

HCD concluded by reminding the City that HCD “has both the authority and duty to review any action or failure to act by a city, county, or city and county that it determines is inconsistent with an adopted housing element… or in violation of the HAA.” HCD’s investigation remains open and they are continuing their review of the City’s practices with respect to housing review and approval generally.

Authored by Reuben, Junius & Rose, LLP Attorney Thomas P. Tunny.

San Francisco Housing Element Update

May 20, 2021May 20, 2021 | Jody Knight

While the Bay Area works to recover from the impacts of COVID-19 on retail and hospitality, and digital nomads slowly return to the office, the pandemic has done nothing to slow escalating home prices. The California Association of Realtors reported this week that the Bay Area’s median single-family home price exceeded $1.3 million in April, with a median price of $1.8 million in San Francisco. The City saw an increase of 5.9% from last year and 2.6% from March.

As single-family homes become increasingly out of reach for many families, the City also continues to experience a shortfall in all housing types, resulting in ongoing debate about uneven development throughout the City and the introduction of legislation at the State and local level that takes aim at single-family zoning.

On March 18, 2021, Reuben, Junius and Rose’s Tuija Catalano updated you about the upcoming RHNA (Regional Housing Needs Assessment) cycle. The update explained how the draft allocation would significantly increase the identified need for housing units in the Bay Area compared with the last RHNA cycle. Under the draft, San Francisco would see an increase from 28,869 to 82,069 units.

San Francisco has begun the process of planning for those housing units. The City’s Housing Element 2022 Update began in May 2020. The Housing Element is a component of the General Plan that is updated every eight years.

The current update focuses on social and racial equity, while it looks at how to accommodate the creation of 82,000 housing units by 2031. The plan focuses on building in State identified High Opportunity Areas, which are mainly in the western part of the City. The Planning Department has a page dedicated to the process which provides information and allows for public input.

The first draft of the Goals, Policies and Actions of the Housing Element have been identified as follows:

recognize the right to housing as a foundation for health and social and economic stability;
repair the harms of historic racial, ethnic, and social discrimination for American Indian, Black, and other People of Color;
foster racially and socially inclusive neighborhoods through distinct community strategies;
increase housing production to improve affordability for the City’s current and future residents;
increase housing choices for the City’s diverse cultural lifestyles, abilities, family structures, and income; and
promote neighborhoods that are well-connected, healthy, and rich with community culture.

On April 22, 2021, the Planning Commission conducted an informational hearing on the Draft Housing Element. Planning Staff will be engaging in outreach to further refine the policies in the plan, with a second draft anticipated by Fall 2021. The Draft Environment Impact Report is anticipated in early 2022.

At the April 22, 2021 hearing, the Planning Commission also heard the 2020 Housing Inventory and Housing Balance Reports. The City saw a 1% increase in housing stock in 2020, with most new development in SoMa, the Mission and Downtown. While 2020 was a difficult year for development because of the pandemic, the Reports illustrate how far the City has to go to meet its RHNA target, particularly on housing affordable to lower income residents.

Given the already contentious environment surrounding housing equity and the geographic distribution of new units in the City, we expect this Housing Element update to generate significant debate. However, the Plan does not change allowable land uses, heights, or density, so meeting the City’s housing needs will depend on legislative changes. We will follow and report on both as the housing debate continues.

Authored by Reuben, Junius & Rose, LLP Attorney Jody Knight.

Unforeseen Effect of Proposition 19

February 4, 2021 | Daniel J. Turner

Despite San Francisco’s reputation as a high-rent city, it maintains a substantial inventory of older, lower-rent units that primarily cater to working- and middle-class renters. The prevalence of these units arises from a combination of factors: strong rent-control laws and eviction protections, combined with favorable tax treatment under Proposition 13 and subsequent parent-child transfer exemptions passed in the 1980s. These transfer exemptions guaranteed Proposition 13’s low property taxes over multiple generations, creating an incentive to preserve rather than sell, upgrade, or redevelop low-cost rental inventory.

On November 3, 2020, California voters narrowly approved Proposition 19, or The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act, which amends Article XIIIA of the California Constitution and will remove all transfer exemptions for rental properties. Without these exemptions, the coming decades will see increased taxes on inherited rental properties which will likely force many small property owners out of this lower-cost niche and lead to the gradual erosion of this segment of the rental market.

History of Property Tax and Transfer Exemptions (Propositions 13 and 58)

In 1978, Proposition 13 set a uniform property tax in California at a rate of 1% on a property’s assessed value. The value of a property is assessed on the date of transfer and is limited to a 2% yearly increase unless there is another transfer (or substantial rehabilitation). No matter how high a property’s value climbs, the tax rate will grow at a slow, predictable pace. In 1986, Proposition 58 added transfer exemptions, which created an exemption for parent-child transfers and allowed parents to transfer rental properties to their children up to $1,000,000 in assessed value (or $2,000,000 for married couples) before a reassessment was triggered on the overage. This gave families the ability to sustain the advantages of tax rates secured by decades-old purchases.

Effects of Proposition 13 on the Rental Market

In high demand rental markets, lost profit opportunities on older or rent-controlled units generally drive owners to redevelop or sell their properties in order to take advantage of rising demand and rental rates. Proposition 13, however, offers a counterbalance for longstanding owners by assuring a steady tax bill and predictable operating costs which guarantees ongoing stability for these owners.

Even in a market like San Francisco’s, the effects of Proposition 13 can be seen in the durable collection of older and rent-controlled buildings that make up large swaths of the city’s rental offerings. Incremental tax increases and predictable operating costs allow these buildings to generate a consistent level of profit, even when rents are low due to rent control or aged facilities. This consistent income with minimal intervention persuades many owners to forgo chasing the market and risk endangering their investment.

The long-term preservation of these buildings at low rates results in a consistent stock of housing for lower-income renters. Under the parent-child transfer exemption, families could pass down their rental properties without impacting their consistent investment income. This security protects both the owner and the continued availability of these units by disincentivizing drastic changes to these family investments.

Proposition 19 and the Erosion of Affordable Rentals

With Proposition 19 slated to remove transfer exemptions for rental properties, the taxes on inherited rental properties will see an immediate surge as assessments rise to meet market value. In a real estate market that has seen forty years of unprecedented growth, these increases could easily be tenfold or more.

With tax increases cutting deeply into the already below-market profits of these buildings, inheriting owners will see little of the stability that convinced their parents to maintain these properties. Proposition 19’s effects will reveal numerous issues as the situation develops over the coming years. For instance, an inherited older building may be unable to sustain a profit at the market rate for comparable buildings which still retain a low tax basis. These owners would be unable to compete and be forced to upgrade or sell their units, speeding up the loss of vital rental inventory.

Other issues that could arise could be disparate taxes on comparable buildings depending on when in the boom-bust cycle they were reassessed, leading to potentially different tax bills. Further, the recent rental impacts of Covid-19, with high vacancies, rent reductions, and non-paying tenants, alert us to numerous situations where high taxes on historically low-profit units will threaten viability and drive owners to sell or redevelop.

San Francisco has a large population dependent on older units, with more than 62% of renters living in rent-controlled buildings. Many of these buildings are only profitable because Proposition 13 has protected owners and their tenants from market forces for decades and allowed them to stay afloat. With the loss of these protections, Proposition 19 will accelerate the loss of this housing as desperate owners seek ways to maintain viability.

Authored by Reuben, Junius & Rose, LLP Attorney Daniel J. Turner.

Impact Fee Update

January 28, 2021January 28, 2021 | Jody Knight

San Francisco School Fees Expanded

On January 11, 2021, San Francisco issued the 2021 Impact Fee Schedule. One change of note is the calculation of the San Francisco Unified School District Fee (“School Fee”) as applied to multi-unit residential developments. The change would increase the fee on such developments by increasing the space in the building subject to the fee.

The School Fee applies to new residential developments and additions to existing residential properties of greater than 500 square feet. Although the School Fee is collected upon issuance of the first construction document along with the fees paid to the City and County of San Francisco, the School Fee is subject to its own calculation rules under California Government Code Section 65995(b)(1).

Currently, San Francisco applies the School Fee to “total habitable space,” defined as space in a structure used for living, sleeping, eating or cooking. The calculation excludes bathrooms, toilet compartments, closets, halls, storage or utility space, and similar areas.

Effective February 1, 2021, the assessable space for calculation of the School Fee for any new residential development will include all of the square footage within the perimeter of the structure. Space still excluded from the Fee calculation includes any carport, covered or uncovered walkway, garage, overhang, patio, enclosed patio, detached accessory structure, or similar area.

The change is based on a 2018 appeals court decision that settled the long-contested question of whether school district fees should be assessed on interior common areas. 901 First Street Owner, LLC v. Tustin Unified School District held that interior space outside of individual units, such as interior hallways, storage rooms, mechanical rooms, fitness centers, lounges, and other interior common areas should be included in the fee calculation under the language of Government Code Section 65995(b)(1). Based on this, the School Fee was expanded, which could lead to a significant increase in fees for projects anticipating paying the fee on the square-footage of the units only.

Oakland Eyes Increased Affordable Housing Fees

Oakland is currently undertaking a mandatory five-year review of its impact fee program. The focus of the review for many is impact fees for affordable housing. Currently, affordable housing fees are tiered depending on the type of housing proposed and the location of the property in one of three regions of the city based on the level of demand for development in that region. There is debate about whether the tiered system should be eliminated, as well as whether fees should be increased over the tiers.

Affordable housing advocates believe that fees should already have been increased to fund construction of affordable housing during the last several years of strong development. Developers have expressed concern that higher impact fees could stifle further development.

Officials and advocates are also looking at other aspects of the implementation of affordable housing requirements. Discussion is underway about how affordable housing is best produced, whether through construction of on-site affordable units or through funding construction of affordable units with impact fees. Also under review is the policy of collecting 50% of the affordable housing fee at permit issuance and 50% only after a certificate of occupancy is issued.

We will continue to watch the Oakland impact fee review process as it unfolds in 2021. We will also watch for earlier changes to fees spurred by the current debate.

Authored by Reuben, Junius & Rose, LLP Attorney Jody Knight.

California Increases Density Bonus to 50%

November 19, 2020November 19, 2020 | Mark Loper

Starting in 2021, residential projects in California with on-site affordable housing can get a density bonus of up to 50%. Currently, under Government Code Section 65915—commonly known as the Density Bonus Law—the maximum bonus is 35%. It is available for projects that include 11% very low income below market rate (“BMR”) units, 20% low income BMRs, or 40% moderate income BMRs. Under a new law that flew somewhat under the radar during the last legislative session in Sacramento, a 50% bonus is available with increased affordability. Specifically, 15% very low income, 24% low income, or 44% moderate income allow the full 50% bonus.

The new state law, AB 2345, requires cities and counties to comply even if they have not yet updated local implementing ordinances. This means starting January 1, 2021, all jurisdictions in California are required to process projects proposing up to 50% additional density as long as those projects provide the additional BMRs in the “base” portion of the project, unless the locality already allows a bonus above 35%.

AB 2345 also lowered the BMR thresholds for concessions and incentives for projects with low income BMRs. For background, in addition to waivers from development controls that preclude a project from achieving the density bonus it is guaranteed (with some narrow exceptions) in exchange for on-site BMRs, the Density Bonus Law allows sponsors to ask for “concessions and incentives” from zoning and development regulations that would make the project more expensive to construct. Starting in 2021, projects with 17% low income BMRs can qualify for two concessions or incentives, and projects with 24% low income BMRs can qualify for three.

Finally, density bonus projects within one-half mile of a major transit stop and with direct access to the stop may be able to avoid minimum parking requirements.

All-Electric New Construction in San Francisco Starting in June 2021

On Tuesday, the San Francisco Board of Supervisors passed a law mandating new construction projects be all-electric. The building or project will need to use a permanent supply of electricity as the source of energy for all space conditioning including heating and cooling, water heating, pools and spas, cooking appliances, and clothes drying appliances. Gas or propane piping systems are not permitted from the point of delivery at the gas meter.

The all-electric requirement takes effect on June 1, 2021. Starting then, all new building or site permit applications will need to comply. Sponsors should keep in mind there is currently a multi-month delay to file permits at the Department of Building Inspection (“DBI”), and should not wait until the last minute to get their building or site permits on file.

There are two minor exceptions. If it would be physically or technically infeasible to construct an all-electric building, DBI can grant modifications, but only to those portions of the building where infeasibility can be demonstrated, and the alternative design provides equivalent health, safety, and fire protection. Importantly, financial considerations cannot be used to show infeasibility.

Also, a restaurant is allowed to have gas facilities used exclusively for cooking equipment. For permits filed through December 31, 2021, permits identifying a restaurant use will be allowed to have gas facilities. After 2021, the exception is narrowed and DBI has to determine that the gas system is necessary for the specific restaurant using the space. Identifying a specific restaurant tenant that early in the process will likely be a challenge for many new construction projects.

Authored by Reuben, Junius & Rose, LLP Attorney Mark Loper.

Prop. 21 – Another Attempted Costa-Hawkins Takedown

September 16, 2020September 16, 2020 | Michael Corbett

This November, California voters will be asked for the second time in as many years to overturn statewide restrictions on rent control in the Costa-Hawkins Rental Housing Act (“Costa Hawkins”). The following provides a summary of Proposition 21, named by its proponents as the Rent Affordability Act (“Prop. 21”), and its potential implications for residential landlords and tenants in California.

Prop. 10 and Costa-Hawkins

Its predecessor, Proposition 10, was rejected by nearly 60% of voters in 2018. It would have repealed Costa-Hawkins and allowed local governments to adopt rent control on any type of rental housing. Costa-Hawkins, passed in 1995, allows local governments to enact and use rent control, except on (a) housing that was first occupied after February 1, 1995, and (b) certain classes of housing units, such as condominiums, townhouses, and single-family homes. Landlords protected by Costa-Hawkins are currently allowed to increase rent to market rates when a tenant vacates a unit.

Prop. 21

If approved by voters, Prop. 21 would allow local governments to adopt rent control on housing units, except for (a) housing first occupied within the last fifteen (15) years and (b) units owned by natural persons who own no more than two (2) housing units with separate titles, such as single-family homes, condominiums, and certain duplexes, or subdivided interests, such as community apartment projects and stock cooperatives. Prop. 21 would continue to allow local limits on annual rent increases to be more restrictive than the current statewide limit. For vacancies where the previous tenant voluntarily vacated, abandoned or was lawfully evicted from a dwelling unit, Prop. 21 would impose, over the first three (3) years of a new tenancy, a combined rent increase cap of fifteen percent (15%) from the rental rate in effect for the immediately preceding tenancy. This three-year rent increase cap would be in addition to any rent increases otherwise authorized by local law.

Tenant Protection Act of 2019

Prop. 21 follows the January 2020 roll-out of the Tenant Protection Act of 2019, which enacted a statewide rent control cap on annual rent increases of five percent (5%) plus the percentage change in the Consumer Price Index or ten percent (10%), whichever is lower. The Tenant Protection Act of 2019, while considered to provide among the strongest state-implemented rent increase caps and renter protections in the country, does not affect vacancy decontrol, meaning landlords are currently able to set initial rents for new tenancies. If passed, Prop. 21 would effectively foreclose the ability of landlords now protected by Costa-Hawkins to set initial rents at market rates if it would result in more than a fifteen percent (15%) increase from the prior tenant’s rental rate.

Support of Prop. 21

Proponents of Prop. 21 contend that the measure would provide more financial security for renters, reduce homelessness, and help alleviate a statewide housing affordability crisis. The Prop. 21 campaign is sponsored by the Aids Healthcare Foundation, and notable supporters include Senator Bernie Sanders, House Representative Maxine Waters, the California Democratic Party, and the ACLU of southern California.

Opposition to Prop. 21

Opponents of Prop. 21 posit the proposed statutory changes would hurt renters by discouraging private sector builders from bringing more affordable housing units to market and diminish property values, resulting in less revenue for communities. Californians for Responsible Housing is leading the campaign in opposition to this initiative, with other opponents including Governor Gavin Newsom, the Howard Jarvis Taxpayer Association, California NAACP State Conference, and Congress of California Seniors.

Votes Needed to Pass

For Prop. 21 to pass and become state law, greater than fifty percent (50%) of the votes cast for this proposition must vote “yes”.

Authored by Reuben, Junius & Rose, LLP Attorney Michael Corbett.

SB 1085 Emerges from Crucial Committee Vote

August 5, 2020August 5, 2020 | Matthew D. Visick

SB 1085 Clarifies that Affordable Housing Fees Do Not Apply to Affordable or Density Bonus Units

When Senator Nancy Skinner introduced Senate Bill 1085 (SB 1085) in February, the bill proposed numerous revisions to the state Density Bonus Law. Many were geared toward incentivizing the development of moderate-income rental housing, including a 35% density bonus for projects that provide at least 20% of the units affordable to moderate-income families, concessions, and reduced parking requirements. The bill also limited cities’ ability to deny requested concessions, limited parking ratios for certain senior housing projects, and allowed concessions for student housing projects. Of particular interest to developers with projects in San Francisco, SB 1085 clarified that “[a]ffordable housing impact fees, including inclusionary zoning fees, in-lieu fees, and public benefit fees, shall not be imposed on a housing development’s affordable units or bonus units.”

SB 1085 was passed by the full Senate in late June, after which it moved to the Assembly.

On July 30, the Assembly Committee on Housing and Community Development approved SB 1085 conditioned on Senator Skinner amending the bill to remove the incentives for development of moderate-income rental units. These amendments were encouraged by affordable housing advocacy groups that argued the incentives would cause a reduction in the supply of low-income and very-low income units. The prohibition on imposing Affordable Housing fees on affordable or Density Bonus units remains in the bill.

The City of San Francisco imposes an Affordable Housing Fee on Density Bonus units. Many practitioners believe that the imposition of these fees on Density Bonus units is fundamentally incompatible with the Density Bonus Law. In April 2019, Attorney General Xavier Becerra issued an Opinion that bolstered this view, concluding that the imposition of a “public benefit fee” on Density Bonus units reduced the benefits that the Density Bonus Law is intended to promote, and was therefore invalid. While the Attorney General’s Opinion addressed fees imposed only on the Density Bonus units, most practitioners understood its reasoning would also preclude generally-applicable Affordable Housing fees that were being applied to Density Bonus units. SB 1085 would make it explicit that Affordable Housing fees cannot be applied to Density Bonus or affordable units.

The Committee’s approval of SB 1085 with the language limiting fees could be interpreted as a promising sign, given that Assembly Member David Chiu, a former San Francisco Supervisor, chairs the Committee. The bill must be approved by the full Assembly and the full Senate by August 31 to make it to the Governor’s desk in 2020. The San Francisco Board of Supervisors remains opposed to the bill.

Authored by Reuben, Junius & Rose, LLP Attorney Matthew D. Visick.