Legislation to Overhaul Residential Building & Zoning Standards

| Tara Sullivan
Zoning
  • On June 29th, the San Francisco Planning Commission voted to recommend approval of Mayor Breed’s proposed legislation titled “Housing Production” (BOS File No. 23-0446).  The legislation amends the Planning Code to encourage housing production by focusing on the controls that mainly apply to Residential and Neighborhood-Commercial Districts.  This legislation is proposing significant and far-reaching changes that will greatly change how residential projects are developed, for the better.

First, the legislation proposes to reduce the number and type of projects that require Planning Commission hearings.  The major changes are below:

Eliminate Conditional Use Authorization (“CUA”) / Planning Commission Hearing / Neighbor Notice

The legislation also proposes to modify some of the more basic building standards that apply to most properties in the city: setbacks, open space, and lot area requirements.  If passed, these changes would be the most radical to residential projects in decades.  A summary of the significant changes are below.

Required Rear Yard (Section 134)

Lot Size (Section 121, 121.1)

Front Yard/Setback (Section 132)

Usable Open Space (Section 135)

There are several other changes proposed, but the above are the most far-reaching.  The legislation is currently awaiting a hearing at the Land Use & Transportation Committee, which may happen once the Board of Supervisors returns from their summer recess.  As with any legislation, changes may occur before it is finally passed, but it is expected to pass largely as-is.

Reuben, Junius, & Rose, LLP will continue to monitor this legislation and provide an update once passed.

 

Authored by Reuben, Junius & Rose, LLP Partner Tara Sullivan.

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.

LA Court Weighs In on the Builder’s Remedy

| Sabrina Eshaghi
Builder's Remedy

Until now, the notorious “builder’s remedy” had not been tested in court, leaving developers with serious questions about how it works and whether it’s worth potential legal challenges from unamenable cities. Recently, however, a superior court in Los Angeles referenced the builder’s remedy in a ruling that implied the remedy is available in the City of La Cañada Flintridge. This case, and others that are still in the pipeline, will have significant implications for developers who have filed builder’s remedy projects, or are considering doing so, as well as for cities across the state.

Builder’s Remedy

According to the HCD’s Housing Element Review and Compliance Report (as of 7/24/23), only 33 out of 109 Bay Area jurisdictions have adopted fully compliant Housing Elements. As discussed in our previous e-update, the deadline for Bay Area cities and counties to revise housing elements has passed, and those that remain noncompliant have opened themselves up to builder’s remedy projects.

The builder’s remedy is a mechanism in the Housing Accountability Act that prohibits any city that has not adopted a compliant housing element by the required deadline from applying its general plan and zoning standards to reject certain housing development projects. To qualify for the builder’s remedy, a project must provide either 20% of the units as affordable to 80% AMI households (low-income), or 100% of the units as affordable to 120% AMI households (moderate-income).

Because the builder’s remedy has never been tested in court, there is uncertainty about how the builder’s remedy applies in practice and how cities will process these projects. Many cities that failed to adopt compliant housing elements have openly defied state law by stating that the builder’s remedy doesn’t apply to them or by passing an ordinance banning builder’s remedy projects.

La Cañada Flintridge Case

Southern California jurisdictions were required to adopt their updated Housing Element by October 15, 2021. The City of La Cañada Flintridge adopted its Housing Element on October 4, 2022, which was determined to be inadequate by HCD. On February 21, 2023, the city adopted an amended Housing Element, which HCD again found to not be in substantial compliance with state law.

While stopping short of confirming HCD’s finding and determining whether the substance of the city’s Housing Element complied with state law, the court found that the Housing Element is not in compliance with state law because the city missed mandatory deadlines. Specifically, the city failed to adopt a Housing Element within 120 days of the deadline and was therefore subject to the penalty requiring it to complete its rezoning within one year of the statutory deadline-i.e., by October 15, 2022- instead of the three years otherwise permitted. Because the city’s challenged Housing Element was not adopted until February 21, 2023, and the Housing Element had still not been certified by HCD, the court was required to find that the city’s Housing Element will not be in substantial compliance with the Housing Element Law until the required rezoning is complete. This appears to put to rest the idea that a city can avoid all the consequences of failing to obtain HCD certification by “self-certifying” its own Housing Element.

Although the city argued that the timelines under the Housing Element Law are purely directory, the court disagreed and confirmed that the timelines are mandatory. In making that finding, the court looked to the penalties that apply for missing the deadlines and confirmed “there are at least two significant penalties for failing to timely adopt a housing element. First, there is the rezoning penalty…that is the subject of this litigation…Second, the HAA contains [the] builder’s remedy that limits a city’s ability to deny a development for low-cost housing unless its housing element…is in substantial compliance with the Housing Element Law.” To our knowledge, this is the first time a court has opined on or directly referenced the builder’s remedy by name.

The court did not issue an explicit declaration that the builder’s remedy applies in the city because the organization that filed the lawsuit, Californians for Homeownership, did not have legal standing without a pending project. Nevertheless, the judge seemed to signal that a developer with a pending project may be able to obtain such a declaration.

The court’s acknowledgment of the builder’s remedy is a positive sign for those with a pending builder’s remedy project. According to the Real Deal, the president of the California Association of Realtors said in a statement, “For far too long, certain cities and counties have treated compliance with state housing laws as optional. This decision sends a clear message: complying with these laws is not optional.”

As discussed in our previous e-update, other housing advocacy groups have also filed lawsuits against jurisdictions that are out of compliance with the Housing Element Law. We will continue to keep you updated as decisions are issued in these cases.

 

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

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.

Proposed Legislation to Expand Allowed Commercial Uses

| Chloe Angelis
legislation

In the latest effort to ease longstanding zoning restrictions and encourage new business activity in San Francisco, Mayor Breed (along with Supervisors Engardio, Dorsey, and Melgar) have introduced legislation to expand the types of uses permitted in Neighborhood Commercial Districts (“NCDs”), streamline the change of use process in Eastern Neighborhood Mixed Use Districts, and incorporate numerous other Planning Code changes aimed at filling retail vacancies throughout the city.

Unlike a number of other recently proposed changes, this legislation would not limit the amendments to Downtown. Instead, it focuses on neighborhood commercial corridors and on expanding permissible uses and streamlining the change of use process for certain use types across the city. With retail vacancies in San Francisco as high as 14.8%,[1] any change that allows more categories of business to occupy empty commercial storefronts in more zoning districts would be a welcome policy change.

The 92-page ordinance has yet to be heard by the Planning Commission or the Land Use and Transportation Committee, so a lot could change between now and final passage, but here is a summary of some of the more meaningful changes proposed:

  • Professional Services Uses: Arguably the most substantive and exciting change is a proposal to eliminate the distinction between Retail Professional Services and Non-Retail Professional Services. Currently, Non-Retail Professional Services include businesses that provide services to other businesses, like accounting, legal, insurance, advertising, and consulting offices. Retail Professional Services cover uses primarily open to the general public—in other words, offices where a member of the public can walk in to talk to a lawyer, travel agent, or accountant. As drafted, the legislation would principally permit all types of Professional Services Use (both retail and non-retail types), within all NCDs and Chinatown mixed use districts. This opens up the possibility of office-type uses operating in ground and upper-level spaces in neighborhood commercial corridors throughout the city.
  • Section 311 Notice: The proposed ordinance would eliminate Section 311 notice for change of use projects in Eastern Neighborhoods Mixed Use Districts—doing away with the possibility of a discretionary review hearing for those projects. 311 notice would still apply to formula retail and substantial construction projects in those districts.
  • Legalization of Existing Outdoor Activity Areas: The proposed ordinance would allow business owners citywide to legalize an Outdoor Activity Area via a building permit, provided the Zoning Administrator or Planning Staff determines that the outdoor space has been operating (mostly continuously) for the last 10 years. No Conditional Use (“CU”) Authorization would be required for these legalizations, but a building permit would need to be filed within one year from when the proposed ordinance becomes effective.
  • Flexible Retail Uses: Previously limited to properties in Districts 1, 4, 5, 10 or 11 and zoned NCD, NCT or NCS, the legislation proposes to allow Flexible Retail Uses citywide. Flexible Retail Uses are defined as the combination of at least two of the following uses: Arts Activities, Limited Restaurant, General Retail Sales and Services, Professional Services, and Trade Shop.
  • Formula Retail in Residential Districts: The legislation would allow Formula Retail uses in RH and RM districts with approval of a CU.
  • Special Use District Controls: A number of proposed amendments ease controls on eating, drinking, and entertainment uses within Special Use Districts (“SUDs”). Here are a few highlights:
    • Allow new Restaurant, Limited Restaurant, and Bar uses on the first story in the Jackson Square SUD, with approval of a CU.
    • Allow a Music Entertainment Facility in the Mission Alcohol SUD to serve alcohol with an ABC Type 90 license.
    • Non-Formula Retail Restaurants and Limited Restaurants would be principally permitted within the Taraval Street Restaurant Subdistrict (i.e., no CU for these uses).
    • Permit Financial Service and Limited Financial Service uses with approval of a CU in the Chestnut Street Financial Service Subdistrict.
    • Allow new Liquor Establishments with approval of a CU in the Haight Street Alcohol Restricted Use Subdistrict.
  • Expedited CU Review: The legislation would allow Nighttime Entertainment and Non-Retail Sales and Services uses (including Professional Services) (that meet other eligibility criteria) to be eligible for the Community Business Priority Processing Program, which aims to schedule eligible projects for a consent calendar Planning Commission hearing within 90 days of the application being deemed complete. Many non-Formula Retail commercial uses are already eligible for this program.
  • Miscellaneous Changes: Other one-off exciting changes include the following:
    • Financial Services would be allowed on the ground floor with approval of a CU in many NCDs.
    • Professional Services and Design Professional uses would be allowed at the ground floor in the North Beach NCD.
    • The Sacramento Street NCD would permit Bars on the first story with a CU, and Gyms and Health Services would be principally permitted on the ground floor.
    • The Union Street NCD and Pacific Avenue NCD would allow Bars on the first story with a CU.
    • The West Portal NCD would permit Financial Services on the ground floor with a CU, and Health Services and Design Professional uses would be principally permitted on the first and second floor.
    • Allow new Restaurants, Limited Restaurants, and Bars within the Mission Street NCT, up to an increased maximum of 197 locations (up from 167). Full-service Restaurants and Bars allowed within the cap would still require a CU.
    • New Bars and Restaurants would be permitted in the 24th Street-Mission NCT with approval of a CU, subject to the limitation of the Calle 24 SUD.

In the current market, any kind of storefront activation is good for the health of commercial corridors, and it seems that the prevailing political opinion finally agrees. This piece of legislation is just at square one of the process, and you can track its progress here.

[1] See Cushman & Wakefield San Francisco North Bay Metro Retail Q1 2023 Report; available at https://www.cushmanwakefield.com/en/united-states/insights/us-marketbeats/san-francisco-north-bay-marketbeats (accessed June 21, 2023.)

 

Authored by Reuben, Junius & Rose, LLP Attorney Chloe Angelis.

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.

The Basics: Easements and Their Relocation

| Corie A. Edwards
relocation

When an easement is granted, a property owner gives another person an interest in and right to use the land which is burdened by the easement.  Easements are often conveyed, for example, to give an adjacent property owner a right to cross over the land, install utilities below the surface of the land, or otherwise use the land in a way that does not prevent the landowner from continuing to use its land.  In most cases, an easement runs to the benefit of an adjacent property, rather than benefitting a particular person.  Accordingly, easements are generally recorded in the official records of the county where the land is located, and are valid for an extended or unlimited period of time.

A well-drafted easement agreement typically includes terms that identify the land which is burdened by and benefits from the easement, describes the location of the easement, outlines how the easement may be used (and any limitations on its use), states how long the easement will remain in place, and explains how and under what circumstances it may be terminated.  The agreement may also include terms about how the easement will be maintained and at whose cost, establish indemnity and insurance obligations, and provide for dispute resolution.  But the property owner who grants the easement should also consider how its property may be used going forward, and whether it may wish to relocate the easement in the future.  Unless relocation rights are reserved, the owner of the burdened property may be unable to relocate the easement in the future, unless it obtains consent from the owner of the easement.  That gives the easement owner considerable power to, for example, prevent development or otherwise interfere with the burdened property owner’s ability to use its land.

In an effort to address this inequity, in July of 2020, the Uniform Easement Relocation Act (“Act”) was adopted by the Uniform Law Commission, also known as the National Conference of Commissions on Uniform State Laws.  Generally speaking, in jurisdictions where the Act is enacted, the owner of land burdened by an easement is allowed to relocate the easement without the consent of the easement owner.  The Act applies to easements conveyed before, on, or after the date when the Act is adopted.  And the Act does not allow the owner of the burdened property to waive or otherwise restrict by agreement its right to relocate the easement.

The relocation rights established by the Act are not unlimited.  For example, the Act does not apply to public utility, conservation, or negative easements (i.e., an easement that restricts the use of property).  If an easement is of a type which may be relocated, the proposed relocation may not hinder the utility of the easement, increase the burden on the owner of the easement, impair the purpose for which the easement was created, or impair the physical condition of value of the easement owner’s property, among other requirements.  The owner of the land burdened by the easement is not permitted to disrupt the use of the easement during relocation, unless the nature and disruption of the disruption is “substantially” mitigated.

A property owner who wishes to relocate an easement using the Act is required to file a lawsuit to obtain a court order to allow the proposed relocation.  The lawsuit must be filed against the owner of the easement, any lender that holds a security interest in the property, and any lessee of the easement owner’s property, at a minimum.  Assuming that the court makes the factual determinations required by the Act – i.e., that the easement is of a type that may be relocated and that the Act’s conditions on relocation are satisfied – it may issue an order approving the relocation.  A certified copy of the order must be recorded in the official records of the county in which the burdened land is located.

When an easement is relocated pursuant to a court order issued under the Act, the owner of the burdened property is obligated to pay all reasonable expenses associated with the relocation.  The easement owner has a duty to cooperate with the relocation in good faith.  When the relocation is complete, the burdened property owner must record and serve a certification that the easement has been relocated.  But, if no improvements must be constructed in connection with the relocation, the recorded court order – alone – is sufficient to constitute the completed relocation.

Thus far, only Nebraska, Utah, Washington and Arkansas have enacted the Act.  It is not clear whether the Act will be adopted in California or when.  But until such adoption, property owners who elect to convey easements to others should consider expressly reserving the ability to relocate the easement if circumstances warrant.

 

Authored by Reuben, Junius & Rose, LLP Attorney Corie A. Edwards.

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.

Details on San Francisco’s Proposed Housing Production Ordinance

| Mark Loper
ordinance

Recently, Mayor London Breed and Supervisor Joel Engardio introduced an ordinance removing some of the Planning Code’s regulatory barriers to housing. A major implementing measure of San Francisco’s recent Housing Element, it is rich in detail and nuance and proposes a range of common-sense changes to increase housing production. Below, we summarize some of the major aspects of the proposal captured in the first draft of the ordinance, broken up into two sections: process streamlining, and relief from certain building design and density restrictions.

Process Streamlining

  • Eliminating conditional use requirement for certain developments. Automatic conditional use (“CU”) approvals for developments on certain “large lots” in neighborhood commercial districts would be eliminated. Similarly, CU requirements for buildings taller than 40-50 feet in RH, RM, RC, and Broadway NC districts would be eliminated, as would buildings taller than 50 feet along the Van Ness Special Use District. This would unlock the development potential of many sites where the height limit is comfortably above the 40-50 foot CU threshold.
  • HOME–SF. HOME-SF would be modified to allow projects on sites where a single-family home exists and is proposed to be demolished, and to remove a requirement that the Planning Department’s Environmental Review Officer determine the project will not have any adverse wind, shadow, or preservation impacts.
  • Dwelling unit demolitions. Outside of the “priority equity” areas of San Francisco—which are neighborhoods with a higher density of vulnerable populations; see the map at the bottom of this alert—some residential demolition projects will not require a CU. The project cannot remove more than two residential units; the units to be demolished cannot be tenant occupied or have a history of evictions within the last 5 years; the building cannot be an historic resource; the project needs to add at least one more unit than is proposed for demolition; and the unit needs to comply with the Housing Accountability Act’s protections for replacement units and recent tenants.

Design and Density Regulation Changes

  • Increased residential density in RH districts. The ordinance would eliminate the need for a conditional use (“CU”) to exceed the one- to three-unit base density in RH districts. And, it would principally permit one unit per 3,000 square feet of lot area in the three RH-1 districts; one unit per 1,500 square feet of lot area in RH-2; and 1 unit per 1,000 square feet of lot area in RH-3, exclusive of any ADUs. Also, residential projects in RH zones that meet certain eligibility criteria currently can have up to six units on corner lots, and up to four units on non-corner lots. The ordinance would add group housing to this potential density bonus on RH-1 zoned lots and eliminate an owner occupancy requirement, opening up the number of sites that could qualify for this density increase.
  • Making senior housing easier and more widespread. Currently, senior housing—which generally allows increased residential density—is only permitted within ¼ mile of an NC-2 zoning district or higher. The ordinance would eliminate this restriction, opening a wider area of the city for this much-needed type of housing. It would also eliminate an automatic CU requirement for senior housing in RH and RM districts that are not close to neighborhood commercial districts.
  • Minimum lot width and area. The City’s minimum lot width would be reduced from 25 feet in most districts to 20, and lot area reduced from 2,500 square feet to 1,200. This would allow more residential density on some larger lots.
  • Reducing rear yard requirement. San Francisco’s rear yard requirements are notoriously complicated and a regulation that often requires exceptions or limits the development potential of a property. The ordinance would make the rear yard requirement 25% of lot depth or 15 feet in most zoning districts. In certain “R” districts, the requirement would be 30% or 15 feet. It also includes a common-sense option for corner lot developments to provide an interior corner open area, saving the need for a variance or other entitlement.

We should note that the legislative digest flags a few aspects of the residential streamlining proposal that do not appear to be included in the first draft of the ordinance. These may be added to subsequent versions of the legislation, and it could be amended as it is brought to the Planning Commission and eventually the Board of Supervisors. We will continue to track this important ordinance as it moves forward. We will also track other legislation that seeks to further implement the Housing Element.

 

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

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.

 

Can New Rules Jumpstart Downtown?

| Melinda Sarjapur
ordinances

Last week, two new ordinances were introduced, both seeking to encourage residential conversion projects downtown, which have been recently touted by the media and policy advocates as one potential solution to address San Francisco’s office vacancy; combat the housing crisis; and draw retail foot traffic back to the City’s core.

The “Commercial to Residential Adaptive Reuse and Downtown Economic Revitalization” ordinance, sponsored by Supervisor Aaron Peskin and Mayor London Breed, proposes an expansive list of Planning, Building and Fire Code amendments that share a common goal of encouraging downtown residential conversions and revitalizing the downtown core.

The “Development Impact Fees for Commercial to Residential Adaptive Reuse Projects” ordinance, sponsored by Supervisors Asha Safai and Matt Dorsey, is limited in scope but also seeks to incentivize residential conversions by exempting them from development impact fees.

The Breed/Peskin ordinance proposes the following Code modifications, which, if adopted, would not only encourage downtown residential conversions but would also broaden the types of uses allowed downtown, streamline process, and reduce costs for new businesses:

  • Creates a new definition for “Adaptive Reuse” project, which would apply to downtown projects that change existing GFA from non-residential to residential. Qualifying “Adaptive Reuse” projects must be located in a C (commercial) zoning district that is east of or fronting on Van Ness/South Van Ness Avenue and north of Harrison Street; can’t utilize California State Density Bonus Law; can’t propose an addition to the building envelope that exceeds 20% of the existing building’s GFA; can’t propose an addition of more than one vertical story; and must submit an application on or before December 31, 2028.
  • Relaxes zoning controls for qualifying “Adaptive Reuse” projects. Such projects would be exempt from zoning requirements that often trigger discretionary exceptions through a Downtown Project Authorization entitlement and/or drive-up development costs, such as lot coverage (which the ordinance substitutes for rear yard setback in C districts); usable open space; streetscape and pedestrian improvements; bike parking; dwelling unit mix.  “Adaptive Reuse” projects would also be subject to reduced dwelling unit exposure, and Intermediate Length Occupancies would be principally permitted regardless of the number of units in the project.  In addition, eligible “Adaptive Reuse” projects would not be subject to public hearing requirements for Downtown Project Authorization entitlements, unless seeking Planning Code exceptions beyond those listed above.
  • Raises the thresholds for public hearings of permits in Downtown Residential Districts and C-3 Districts so that public hearings are only triggered by proposed construction of new buildings or vertical additions greater than 120 feet in height (its currently triggered for any project of 75 feet in height or that adds 50,000 gsf of floor area).
  • Changes dimensional limits on exemptions to height restrictions for mechanical equipment, elevator, stair, and mechanical penthouses on existing buildings;
  • Proposes a range of zoning code tweaks intended to draw business back to the downtown core. These include creating a new definition for “Flexible Workspace” and allowing it as active ground floor commercial uses along certain street frontages in the C-3 District; authorizing large-scale retail uses (> 50,000 gsf) in the C-3 District; allowing window displays to be at least four-feet deep in the C-3 District; allowing accessory storage in the C-3 Districts; allowing temporary signs for 60 days in the C-3-R district; allowing temporary “pop-up” non-residential uses in vacant spaces for up to a year in certain C, NC, NCT, or Mixed-Use districts; principally permitting Lab, Life Science, Agricultural and Beverage Processing, and Animal Hospitals in C-2 Districts; principally permitting office and design professional uses on the second floor and above for C-3-R districts; and requiring consideration of office vacancy rates in consideration for granting code exceptions in the Transit Center Commercial Special Use District.
  • Streamlines sign permit requirement in the C-3 District and Citywide by exempting existing business sings in the C-3 District from certain requirements and allowing non-conforming neon signs to be physically detached from a building for repairs or maintenance, under certain conditions.
  • Streamlines Historic Preservation Review for administrative certificates of appropriateness and minor permits to alter for awnings.
  • Allows for In Lieu Fee payment to satisfy POPOS requirements in certain C-3 Districts.
  • Amends the Building Code by directing the Building Official and Fire Code Official to develop an alternative building standards manual, providing building standards specific to “Adaptive Reuse” projects.

The Safai/Dorsey ordinance is focused solely on economic incentive.  It would exempt certain downtown residential conversion projects from all development impact fees except for Inclusionary Housing Program requirements.

To qualify for these fee waivers, an “Adaptive Reuse” project would need to be located in a C zoning district that is east of or fronting on Van Ness/South Van Ness Avenue north of Harrison Street; can’t utilize California State Density Bonus Law; can’t expand an existing building envelope by more than 20% of the existing buildings GFA; and can’t add more than one vertical story.  Fee waiver would not apply to the area of any non-residential use proposed within a broader conversion project.

The above ordinances clearly aim to incentivize downtown residential conversions, but it’s unclear whether they go far enough to trigger a significant up-tick in “Adaptive Reuse” projects.

On April 3, 2023, the Board’s Land Use and Transportation Committee held a public hearing to review a Policy Analysis Report drafted by the Board’s Budget and Legislative Analyst’s Office on feasibility of repurposing existing commercial real estate for residential use in San Francisco.  While the Analysts report identified that zoning and policy changes in line with those under review could help to incentivize residential conversions, it also noted that “converting commercial properties to residential use is not a panacea for solving California’s housing shortage” because such conversions face a number of challenges “including architectural and building design limitations, municipal development approval processes that add time, cost, and uncertainty to conversions…”  Likewise, a recent policy paper issued by the San Francisco Policy and Urban Research organization (“SPUR”) found that given current economic conditions and development costs, most conversions of underperforming office buildings would not pencil.

The Breed/Peskin and Safai/Dorsey ordinances were both introduced on April 4, 2023 and assigned to the Board’s Land Use and Transportation Committee under the Board’s 30-Day Rule, which means they cannot be heard by Committee until at least early May 2023.

 

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.

West Side Story: Proposed Legislation May Remove Barriers for Small Projects

| Chloe Angelis
legislation

Supervisor Myrna Melgar has introduced legislation that aims to incentivize much-needed family-sized housing on the west side of the city. While clearly in line with the City’s housing production goals, it includes some requirements that could make it inapplicable to most of the west side properties it aims to cover.

The draft legislation would create the Family Housing Opportunity Special Use District, which shares a boundary with the Well-Resourced Neighborhoods Map included in the draft 2023-2031 Housing Element. The map covers the entire west side of the city, plus the Marina, Cow Hollow, and parts of North Beach. As drafted, the ordinance would expire eight years after it becomes effective.

The proposed ordinance encourages the construction of two-to-four-unit projects that provide at least two 2-bedroom units within the new special use district. Qualifying projects would be exempt from an otherwise-required conditional use authorization (“CU”), including CUs that typically apply to the demolition of an existing residential unit. Eligible projects would also be exempt from Section 311 notice and the discretionary review process. Obtaining approval of a CU or having a project sent to the Planning Commission by a neighbor via discretionary review creates uncertainty and can add many months to a project’s approval timeline. Taking both CU requirements and Section 311/discretionary review off the table are meaningful incentives.

The legislation does not automatically exempt these projects from CEQA—but small new construction projects should be eligible for Class 3 (new construction of small structures) categorical exemptions.

Specifically, the new rules would apply to projects that construct two-unit buildings (including a two unit building with a third standalone unit outside the proposed building envelope) and three-unit buildings (including a three unit building with a fourth standalone unit outside the proposed building envelope). At least two of the units in a qualifying project must have at least two bedrooms.

Projects must consist of ground-up new construction, and while they would be exempt from the otherwise-applicable density limit (up to four units per lot and not including any permitted accessory dwelling units), projects would not be exempt from the otherwise-applicable height limit for the property in question.

As drafted, the legislation includes several other restrictions that will limit its potential impact:

Qualifying projects cannot demolish a historic resource and must comply with the Residential Design Guidelines and the Planning Code, except for lot-based dwelling unit density limits. While requiring Code compliance in exchange for bypassing Planning Commission review is reasonable, the Residential Design Guidelines are not entirely objective, which will make it difficult for sponsors to assess whether Planning Staff will deem a particular project in compliance with the guidelines. It’s also difficult to imagine how a third or fourth unit constructed outside the main building envelope could comply with the Planning Code’s rear yard and obstruction controls.

Additionally, projects cannot propose the demolition of any of the following:

  • Units that are or were subject to a recorded covenant, ordinance, or law that restricts rents to levels affordable to persons and families of lower or very low income within the past five years;
  • Units that are or were subject to the Residential Rent Stabilization and Arbitration Ordinance (Chapter 37 of the Administrative Code) within the past five years;
  • Units that are or were occupied by lower or very low income households within the past five years; or
  • Units that were withdrawn from the rental market pursuant to the Ellis Act within the past 10 years.

The requirement related to the Rent Stabilization and Arbitration Ordinance (i.e., the “Rent Ordinance”) is very limiting as drafted. Most residential units in San Francisco are subject to the Rent Ordinance, which has a rent control component and an eviction protection component.

Units built after June 13, 1979, most single-family homes and condos, and units that have undergone substantial rehabilitation are subject to the Rent Ordinance, but only to the eviction controls (not the rent increase limitations that apply to other units). If the legislation intends to exclude these units and older units subject to rent control limits, there will be nothing left for redevelopment pursuant to the proposed Family Housing Opportunity Special Use District. Protecting affordable units from demolition is a logical policy choice, but hopefully the legislation will be amended to limit this restriction only to units subject to the Rent Ordinance’s rent control protections.

Supervisor Melgar’s proposal has the potential to be an impactful piece of legislation to spur development on the west side of the city and we’ll be keeping an eye on its progress through the legislative process.

 

Authored by Reuben, Junius & Rose, LLP Attorney Chloe Angelis.

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.

Cars to Casas Nearing Adoption

| Tuija Catalano
housing

Approximately a year ago we reported on Mayor London Breed’s introduction of the “Cars to Casas” legislation which proposed to make it easier to build housing on existing parking lots, gas stations and properties improved with certain other automotive uses.  The legislation has now been rebranded as “Automotive Uses to Housing Uses” and made significant progress in the last two weeks with a positive recommendation from the Land Use and Transportation Committee on Monday, December 5th, and unanimous votes at the full Board of Supervisors on first reading on Tuesday, December 6th and on second and final reading on Tuesday, December 13th.  The legislation will be forwarded next to the Mayor for her signature, and if signed, will become effective 30 days thereafter.

The legislation has been pending since October 2021, in part due to the Land Use and Transportation Committee’s request for an economic analysis.  If adopted, the legislation will eliminate a conditional use authorization requirement that currently applies to conversion of existing gas station uses, and would create an exception to the permitted residential density at eligible sites.  Sites that are eligible under the legislation are those that are currently used for auto-oriented uses, allow residential uses as a principally permitted use but do not currently contain any residential uses, and have not had a Legacy Business on the site within four years prior to the application submittal date.

As proposed, including amendments by the Land Use and Transportation Committee, the legislation will not apply to any properties that are zoned for the RM (Residential-Mixed) or RC (Residential-Commercial) district, or to properties that are located in a historic district.

The permitted residential density for RH (Residential-House) districts is up to four units per lot, and for all other eligible sites density is unlimited provided the project complies with applicable height, bulk, setback and other Planning Code requirements.  That said, eligible sites can also utilize the state density bonus program, which can allow waivers and concessions from otherwise applicable Planning Code requirements.

The legislation is one example of efforts by Mayor Breed and the City to make it easier to build more housing and to get entitlements and permits for development proposals, and as such, a welcome proposal.  If the legislation is signed by the Mayor in the next 10 days, it will become effective in approximately mid-January 2023.

 

Authored by Reuben, Junius & Rose, LLP Attorney Tuija Catalano.

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.

PDR Protections & Higher Fees for Large Institutions in Housing Element Package

| Melinda Sarjapur and Daniel Frattin
PDR

San Francisco’s Housing Element Update (“Update”) has been in the works since mid-2020, and the City is sprinting to adopt it before a January 2023 deadline that could open the door to Builder’s Remedy Projects and eventually a loss of state funding for affordable housing and transportation. (See Exhibit D to the Planning Department’s Update Initiation Memo).

The Update’s primary focus is to spur residential construction to meet the state-mandated RHNA target of 82,000 new homes over eight years and to shift more housing development – especially affordable housing – to transit corridors on the westside.

However, through “conforming amendments” to other elements of the City’s General Plan, the City sets the stage for new restrictions on the conversion or displacement of existing Production, Distribution, and Repair (“PDR”) or Industrial uses. It also targets large institutions – one of the sectors where in-person activity tends to be higher in the era of hybrid work – for new development impact fees.

Two of these amendments are shown below.  For each item, text from the existing General Plan is shown in plain text; proposed additions to the General Plan are underlined.

Air Quality Element:

Policy 3.3: Continue existing city policies that require housing development in conjunction with office development and expand this requirement to other types of commercial and large institutional developments.

The intent is to require large institutional employers that aren’t currently subject to the City’s Jobs-Housing Linkage Fee to conduct an analysis of the housing demand of their employees and then show how they will meet that demand in their Institutional Master Plans (“IMP”). It could also pave the path for extending the JHLF to large non-institutional uses that are not currently subject to it (hospitals/schools/etc.).

In a bit of revisionist history, the Planning Department notes that the “IMP” caused colleges to realize the housing needs of their students and credit that as causing many private non-profit colleges to build student housing. In fact, IMPs had nothing to do with colleges building housing. The need was obvious; in reality inclusionary housing requirements were too expensive for them to shoulder. It was only when the City exempted student housing from inclusionary requirements that several private schools embarked on ambitious housing construction programs. Non-profit colleges and healthcare providers will find it difficult to grow in San Francisco if the Jobs-Housing Linkage Fee – currently ranging from $26 – $76 per square foot for other uses – is extended to them.

Commerce & Industry Element:

Policy 4.5: Control encroachment of incompatible land uses on viable industrial activity. Production, Distribution, and Repair (PDR) areas offer economic opportunity for adjacent neighborhoods, especially for low-income communities and communities of color. PDR businesses can provide stable job opportunities, good wages, and diversity in types of activities and jobs Restrict incompatible land uses, such as housing and office, and the conversion of industrial buildings to other building types in PDR districts and in areas of concentrated PDR, construction, or utility activities.

In mixed-use districts or areas adjacent to PDR districts, avoid the displacement of existing businesses, protect the affordability of PDR space, and, if displacement is unavoidable, replace some or all the PDR use with viable, affordable industrial space on-site or off-site in a PDR district.

This revised language paves the way for the City to adopt additional restrictions on the types of uses permitted in PDR districts – specifically the conversion or new construction of laboratory uses that frequently complement PDR. Engineering labs, for example, often need PDR to supply parts for prototyping, testing, and may well grow into small-scale manufacturing (PDR) uses themselves. This flexibility has served both PDR and lab uses well. How is a policy that replaces synergy with inflexibility good for the City? Why is industrial protection in districts where housing is not even permitted a “conforming” amendment to the General Plan?

Even more ironically, this policy amendment sets the stage to say “no” to housing in the very areas that have been most successful at producing it: rezoned PDR areas accounted for roughly ¾ of housing production by striking a balance between preserving space for industry and allowing much higher residential density. Proposition X made it harder to build housing in certain districts by requiring replacement space. However, this policy could reach much further and set up yet another restriction on housing in favor of preserving industrial space. The Update is supposed to remove barriers to housing. This one fails that test.

A full list of the General Plan updates proposed in connection with the Housing Element Update is available on the Planning Department’s website.

The full Housing Element Update is anticipated for adoption by the Planning Commission on December 15, 2022, and Board of Supervisors in January 2023.

 

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

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.

2022 Housing Legislation Round-Up

| Justin A. Zucker and Daniel J. Turner
bills

This year was a blockbuster year for housing legislation coming from Sacramento. Last week, Governor Gavin Newsom signed into law more than three dozen bills related to housing and housing production. Below please find a brief overview of twelve housing bills signed by the Governor that become effective next year.

AB 682. Density Bonus for “Shared Housing” Buildings

AB 682 amends the State Density Bonus Law to create a density bonus for “Shared Housing” developments. Shared housing, or group housing as it is commonly known, is characterized by single-room units with shared access to common kitchen and dining facilities. Each unit is typically intended for one or two occupants and features a small kitchenette. This new density bonus will allow shared housing developments to build at greater densities in exchange for dedicating a percentage of units to affordable housing, with the same affordability requirements and bonus amounts as is currently available to standard-unit developments. Notably, shared housing developments can provide up to 25% of their floor area as standard-unit housing and still qualify for a density bonus.

AB 916. No Public Hearing to Increase Bedroom Count

AB 916 prohibits cities from requiring a public hearing for a permit to add up to two bedrooms by reconfiguring existing space within an existing dwelling unit.

AB 1551. Commercial Development Bonuses for Providing Affordable Housing

AB 1551 creates a density bonus for commercial developers who partner with housing developers and support the provision of affordable housing through land donation, cash payment, or by directly building units. A commercial developer is eligible for up to a 20% density bonus. To qualify, the housing development supported by the commercial developer must provide either 30% of units as affordable for low income (<80% AMI) or 15% of units as affordable for very-low income (<50% AMI).

AB 2011. Affordable Housing and High Road Jobs Act

AB 2011 provides streamlined, ministerial approval of multifamily housing developments that contain affordable housing units located in commercial zones. Two tiers of development are available, depending on the amount of affordable housing provided. A project dedicating 100% of units as affordable for lower income households can be developed by right on most parcels zoned for retail, office, or parking uses. A project with market-rate units that provides a specific percentage of rental or ownership units as affordable for either lower income or very-low income households can be developed by right on parcels zoned for retail, office, or parking if the site has at least 50 feet of frontage on a commercial corridor (a street between 70 and 150 feet wide). AB 2011 projects are also subject to certain prevailing wage and skilled workforce requirements. We have discussed AB 2011 in greater detail in previous updates on August 24, 2022, and September 1, 2022.

SB 6. Middle Class Housing Act

SB 6 is intended to increase the development potential for middle-income housing by principally permitting housing developments that meet specific criteria in areas zoned for office, retail, or parking uses. Eligible developments are required to meet or exceed certain density thresholds established in the state’s Housing Element law, such as 30 units per acre in metropolitan settings or 20 units per acre in suburban settings. SB 6 projects must also meet certain prevailing wage and skilled and trained workforce requirements, although a development can be exempted from these in certain circumstances.

AB 2334. Density Bonus in Very Low Vehicle Travel Area

AB 2334 expands the available density bonus for 100% affordable housing developments in very low vehicle travel areas. A “very low vehicle travel area” is a transit analysis zone where existing residential development generates 85% or fewer vehicle miles traveled per capita than the regional area in which it is located. Qualifying density bonus projects are not subject to maximum density controls, are entitled to up to 4 development incentives, and may receive an additional three-stories of height. This additional density bonus is only available in the counties of the Bay Area, Sacramento, the Southern Coast, and Inland Empire. AB 2334 also clears up the grey area for application of the state density bonus in a form-based zoning district, requiring calculation of an “average unit size” multiplied by the density bonus amount to determine increase in floor area allowed.

AB 2653. Housing Element Reporting

AB 2653 alters some of the requirements for annual housing element reports cities must submit to the state. Cities must include greater detail, including the numbers of all new and demolished housing units in the jurisdiction, as well as data on all approved density bonus projects. AB 2653 also provides a mechanism for the state to request corrections and make referrals for enforcement.

AB 2668. SB 35 Streamlining Updates

AB 2668 amends SB 35 clarifying streamlined SB 35 projects are not subject to any non-legislative discretionary approval and that density bonus units are not considered when calculating whether a project satisfies SB 35’s affordability requirements. Further, the bill prohibits cities from denying an application for missing materials if there is enough information to allow a reasonable person to conclude the development is consistent with the applicable objective standards. AB 2668 also brings important change to how the Cortese List affects SB 35 eligibility. Placement on the Cortese List, which is the aggregate of the state’s decentralized hazardous waste sites databases, disqualifies a site from SB 35, until it is cleared for residential use by the authority having jurisdiction. However, longstanding confusion over the mechanism of clearing a site meant that once a site was listed, it was effectively barred from SB 35 permanently, even if it had undergone extensive remediation. AB 2668 establishes specific criteria, documentation, and agency determinations that allow a “listed” site to qualify for SB 35.

AB 2221 & SB 897. ADU Law Updates

AB 2221 and SB 897 make a number of changes to existing ADU law to provide for greater development flexibility and ensure consistent and efficient project review. Under these bills, a city that denies an ADU application will be required to provide a full set of written comments that includes a list of all deficient items and details how the application can be remedied. These comments must be provided within the existing 60-day review period. Additionally, a city will be prohibited from denying an ADU application based on nonconforming zoning conditions, building code violations, or unpermitted structures that are not affected by the ADU construction and do not pose a threat to safety.

The bills also increase ADU development potential by restricting setbacks that prevent ADUs below a minimum floor area, increasing the minimum height limit for ADUs located near transit stops or attached to primary dwellings, and prohibiting owner-occupancy requirements until January 1, 2025.  Importantly, the addition of an ADU will no longer constitute a change of R occupancy under the building code such as from an R3 (single-family or duplex) to an R2 (multi-family), and will not trigger a requirement for fire sprinklers if not previously required.

AB 2234. Post-Entitlement Permit Processing

AB 2234 focuses on post-entitlement non-discretionary building permit processes after the planning process has concluded and environmental review is complete. AB 2234 requires local agencies to compile a list of information need to approve or deny a post-entitlement permit, a checklist and post an example of a completed, approved application. AB 2234 also sets timelines for review of post-entitlement applications for housing projects: (a) for projects with 25 units or fewer, a local agency shall complete first review and comment within 30 days of an application completion; and (b) for projects with 26 or more units, a local agency shall complete first review and comment within 60 days of an application completion. These time limits are tolled if a local agency requires review of an application by an outside third-party reviewer. Failure to meet these timelines is a violation of the Housing Accountability Act.

 

Authored by Reuben, Junius & Rose, LLP Attorneys Justin A. Zucker and Daniel J. Turner.

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.