The Basics: Easements and Their Relocation

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

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.
  • HOMESF. 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?

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

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

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

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

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.

Downtown Oakland Specific Plan: ZIP Update

ZIP

As previously reported, the Downtown Oakland Specific Plan (“DOSP”) is working its way to the City Council for adoption, currently anticipated in late 2022. The DOSP includes Zoning Amendments (which we’ve previously reported on) and a Zoning Incentive Program (“ZIP”). Initial details for the ZIP were released earlier this summer (which we’ve previously reported on). Below are additional details regarding the ZIP based on the economic analysis reports prepared by Hausrath Economics Group, dated August 2022 and September 16, 2022, in addition to recent community meetings on September 13 (presentation slides) and on September 19 (presentation slides).

The ZIP was developed in response to community concerns to allowing development downtown without obtaining community benefits. The ZIP allows developers to voluntarily elect to provide community benefits, in one of four forms, to increase allowed development capacity, either additional market-rate dwelling units or commercial space. The four on-site community benefits options include providing (1) affordable housing, (2) below market-rate ground floor commercial space, (3) public restrooms, or (4) streetscape, open space and flood control improvements exceeding basic city requirements. Alternatively, the ZIP includes the option to provide community benefits through payment of an in-lieu fee instead of providing on-site benefits, or some combination of on-site benefits and an in-lieu fee.

The ZIP is a voluntary program that creates additional value for a development project with the City capturing a portion of the value increase. The increase in value from the additional, higher-intensity development is calculated as the difference in value of development under the maximum intensity zoning compared to the base zoning. The value is expressed in dollars per building square foot of added development for commercial and dollars per dwelling unit added for residential.

As currently analyzed, the ZIP is structured so that a third of the additional value from the more intense development is captured in the form of a community benefit. The remaining two-thirds is split with one-third to the developer to incentivize development at increased intensity and a third to the owner to account for increased resulting land value, which in turn results in increased property taxes. During recent community meetings, there has been discussion of adjusting this formula to increase the City’s value capture share.

In creating the incentive, the ZIP considers the costs and economic variables specific to development types, i.e., change from Type III or V (mid-rise/low-rise) to the more costly Type I (high-rise) construction. Properties with large increases in density supporting high-rise development over mid-rise/low-rise projects can have lower value capture per additional dwelling unit or per additional building square foot due to higher costs involved. To account for this, the ZIP establishes three Zoning Incentive Areas that reflect similar market contexts, development patterns and potentials, parcel sizes, and existing land uses. There are three areas each for residential development (map) and commercial development (map), with R-A, R-B, and R-C zones for residential and C-A, C-B, and C-C for commercial development.

The ZIP incentive areas allow additional density ranging from 11% to 800% more density with 65% of cases more than doubling density. The large density bonus accounts for increased costs associated with change in construction typology to Type I for high-rise development.

Based on location, a commercial development could obtain an additional 100,000 sf of office space with the provision of below market ground floor commercial space totaling 6,828 sf (Zone C-A), 4,655 sf (Zone C-B), or 3,724 sf (Zone C-C).

The ZIP is available to a developer in lieu of or in addition to the State Density Bonus set forth in Government Code Section 65915, et. seq. Meaning, a project could layer the State Density Bonus on top of the ZIP to increase development intensity. In instances when the ZIP and State Density Bonus are used in tandem, the project’s ZIP development intensity is the base density not the underlying base zoning density.

The DOSP and ZIP are slated to return to the Zoning Update Committee (“ZUC”) before advancing to the Planning Commission and City Council. While previously schedule to return to the ZUC on September 29, that hearing has been cancelled to allow additional public meetings. The ZUC hearing has not yet been rescheduled. We will continue to track this significant rezoning and community planning effort as it moves forward.

Reuben, Junius, & Rose LLP has experience with entitlement projects and land use diligence throughout Oakland, and we are pleased to have worked on some of the largest housing projects approved in the city over the last several years.

 

Authored by Reuben, Junius & Rose, LLP Attorney Justin A. Zucker.

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.

AB 2011 & SB 6: Pro-Growth or Slow Growth for Construction Workforce

SB 6

AB 2011, along with SB 6 (Cabellero, Eggman and Rubio), were passed by the California Legislature this week with large majorities in both houses. The two bills will create 10-year housing programs with similar aims: increasing housing production and increasing the skill level, wages, and number of residential construction workers. However, the bills differ in important ways—their approach to density, allowances for ministerial approvals, and the degree of deference to local zoning rules. They also take markedly different approaches to growing, training, and better compensating the residential construction workforce. The bills were the product of a political compromise between the State Building & Construction Trades Council and the Carpenters Union. They effectively set up an experiment to test the relative efficacy of the SB 6 labor rules favored by the State Building & Construction Trades Council—basically requiring union labor on any SB 6 project and the rules preferred by the Carpenters Union – requiring payment of prevailing wages and benefits to all workers on an AB 2011 project.

A good deal of attention has been given to improving the regulatory conditions for getting new housing approved, expanding access to sites, and requiring cities to upzone. However, less attention has been paid to the fact that—even if there were shovel-ready projects for the Governor’s declared goal of 3.5 million new homes over ten years—the current residential construction workforce could only build about a third of that number without significant increases in the number and productivity of workers, who currently build housing at a rate of one home per worker per year. By comparison, average productivity per worker was 1.4 units per year from 1990-2005. Put simply, the state cannot meet its housing targets without an increase in the number of workers and productivity.

However, attracting new workers has proven difficult. Median residential construction worker pay in California ranks 46th in the country when adjusted for the high cost of living. On average, residential construction workers income is 2/3 of their commercial counterparts and they get about 1/3 the amount of fringe benefits. Less than half have insurance through employers. This is a dramatic shift since the 1970s and 1980s, when average pay in both sectors was roughly equal.

AB 2011, which we discussed in greater detail last week, provides for time-limited ministerial approvals for properties on commercial corridors that meet certain criteria for affordable housing and overrides local zoning rules that conflict with its minimum standards for density and height. It also mandates payment of prevailing wage to all construction workers, or at least the prevailing apprentice wages for apprentices enrolled in state-approved apprentice programs. Family healthcare benefits are required for projects with qualified construction craft workers on projects with more than 50 units, while those without such workers can credit qualifying expenditures toward the prevailing wage requirements. Essentially, AB 2011 bets that rapid approvals under more liberal standards will entice employers to pay higher wages and create a strong, near-term incentive for developers to invest in apprenticeship programs to elevate worker productivity.

A final version of SB 6 has yet to be published, but takes a less aggressive approach than AB 2011 with lower minimum density requirements, greater deference to local zoning, and no mandatory ministerial approval process unless a project otherwise qualifies under SB 35. Thus, many SB 6 projects would be subject to lengthy CEQA reviews and modified discretionary approvals. It would require lower amounts of affordable housing subsidies by than AB 2011, but would effectively require the use of union labor if two qualified bids are received from union contractors. While SB 6 expands potential building sites, most projects would not realize the cost savings associated with quick ministerial approvals or the elimination of most entitlement/CEQA risk. Without these incentives in place, it may be years before the state sees its first SB 6 project, or additional demand for workers.

AB 2011 passed the Assembly 67-4 with 9 abstentions and the Senate 33-0 with 7 abstentions. While the 4 Noes in the Assembly were from rural and suburban districts leaning more conservative (3 Rs & 1 D), notably 7 of the 9 abstentions were from urban and suburban districts along the coast between Ventura and San Diego with a high number of Democratic representatives (6 Ds & 3 Rs). Conversely, SB 6 passed the Assembly 67-0 with 13 abstentions and the Senate 34-0 with 6 abstentions. Of the 4 Noes for AB 2011, 3 abstained in SB 6 and 1 voted yes (a democrat representative from District 29, encompassing Santa Cruz and the surrounding area). The Assembly abstentions followed a similar pattern as AB 2011, with those abstaining coming from both parties and primarily representing rural districts or coastal urban and suburban districts in Southern California. For both AB 2011 and SB 6, the Senate abstentions followed a similar geographic pattern as in the Assembly.

While union support was split between the two bills, with both construction and other unions on either side, pro-housing and business organizations tended to support both. Most affordable housing developers supported AB 2011 and opposed SB 6, presumably because the latter would tend to increase cost and time for approval without offsetting benefits. San Francisco’s Council of Community Housing Organizations, which frequently opposes market-rate development, was a notable outlier, supporting SB 6 and opposing AB 2011 in spite of its clear benefits to affordable housing developers.

Both bills still need to be signed by the governor and will not take effect until July 2023. Annual reports of projects approved under both bills are required from cities and the Department of Housing & Community Development is to provide two reports on the use of each during the ten year period prior to their sunset date.

 

Authored by Reuben, Junius & Rose, LLP Attorneys Daniel Frattin 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.

AB 2011 Could Unlock Mixed-Income Housing

AB 2011

East Bay state representative Buffy Wicks, along with other co-sponsors including Senator Scott Wiener, proposed a compelling bill that aims to bridge a long-sought gap between pro-housing advocates’ desire for streamlining code-compliant multi-family residential projects with on-site affordability (both mixed-income and 100% affordable), and construction labor unions’ desire to ensure fair wages and future training for its members.

Known as the High Road Jobs Act of 2022, AB 2011 would allow ministerial, by-right approval for certain multi-family affordable housing. A development project in a zoning district where office, retail, and parking are principally permitted would be subject to streamlined, ministerial review if it meets many of the requirements for SB 35 eligibility, as well as additional locational and affordability requirements. AB 2011 projects would not need to obtain discretionary entitlements and would not be subject to CEQA.

To qualify for AB 2011 streamlining, housing development projects must either provide 100% affordability, or provide on-site affordable units, aka BMRs, in a primarily market rate project. As amended in the Senate on August 11, the on-site BMR requirement is somewhat complicated for rental units, but essentially requires between 12-15% BMRs unless a local requirement is higher, in which case the local program applies and additional AMI restrictions could be required. For condos, 30% could be offered at moderate income or 15% at lower income, and the same caveat about higher local requirements applies.

These projects would be subject to objective development standards, and additional qualifying criteria. As of August 11, the criteria for mixed-income projects include, but are not limited to:

  • proposing a multi-family housing development project;
  • abutting a commercial corridor and having a frontage at least 50 feet in width, on a site 20 acres or less in size;
  • not demolishing rent controlled or deed-restricted affordable units, or listed historic resources;
  • replacing no more than four existing units;
  • located no closer than 500 feet from a freeway;
  • providing relocation assistance to certain commercial tenants; and
  • vacant properties that are not zoned for multifamily residential use cannot qualify for streamlined ministerial processing.

Once an AB 2011 development application is submitted, several streamlining provisions apply. The local government must determine whether the project complies with objective planning standards within 60-90 days depending on unit count. If a local government determines that a project does not comply with objective planning standards, it must provide a written explanation to the proponent within this timeframe. Further, any design review must be completed within 90-180 days. Projects using the streamlined approval process would also be eligible for density bonuses, incentives, concessions, waivers, reductions in development standards, and potentially reduced parking ratios, under California’s density bonus law.

AB 2011 projects would also be required to pay construction workers at least the prevailing rate of wages and certify their compliance with this provision with the local government. As part of the developer’s obligation to pay prevailing wages, developers building 50 or more units of housing must submit monthly compliance reports to the local government.

Importantly, projects utilizing AB 2011 would not be a project for the purposes of CEQA (i.e. no environmental review) and the approval procedures the municipality would be permitted to use would solely be ministerial in nature.

In May of 2022, AB 2011 passed out of the California State Assembly, and is currently with the Senate, where it was voted out of committee on August 11. The bill has received several key union endorsements, including from the California Conference of Carpenters and SEIU. However, other unions, such as the State Building and Construction Trades Council of California, the San Francisco Building and Construction Trades Council, and the California Labor Federation have opposed the bill claiming it would “eliminate[] the mandate that a skilled-and-trained workforce be a part of… [project] construction crews.” Unions such as the Building Trades Council oppose the bill because the bill would not require developers to use a “skilled and trained workforce,” which has the effect of eliminating the requirement that a certain percentage of workers on a project are unionized. The bill provides instead that for developments streamlined under AB 2011 that workers be paid a “prevailing wage” with some additional benefits such as healthcare coverage.

We will continue to track this potential game-changer of a bill as it makes its way through Sacramento.

 

Authored by Reuben, Junius & Rose, LLP Attorneys Mark Loper and Daniel J. Turner, and Law Clerk Alex Klein.

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.