​The California state legislature is constantly tinkering with state condo law, and recently enacted several bills that affect common interest developments (CIDs) such as condominium projects.  The following is a brief summary of some recent changes to the primary state law governing CIDs, the Davis-Stirling Common Interest Development Act (California Civil Code Section 4000 et seq.).  Of particular note are bills related to California’s persisting drought. 

Assembly Bill 2100.  This bill amends Civil Code Section 4735 to prohibit a homeowners association (HOA) from imposing a fine or assessment against a unit owner for reducing or eliminating the watering of plants or lawns, if the Governor or local government has declared a state of emergency due to drought.  

Senate Bill 992.  This bill also amends Civil Code Section 4735 and in this case allows an HOA to impose a fine or assessment against a unit owner for reducing or eliminating the watering of plants or lawns if the project uses recycled water for landscaping, if the Governor or local government has declared a state of emergency due to drought.

Assembly Bill 2104.  And yet another bill to address the drought conditions in our state, this bill further amends Civil Code Section 4735 by prohibiting a project’s governing documents from restricting the replacement of existing turf (lawns) with low-water plants, if the Governor or local government has declared a state of emergency due to drought. 

Assembly Bill 1738.  This bill amends Civil Code Sections 5910 and 5915 to stipulate that a dispute resolution process involving a condo owner and an HOA must have a written resolution signed by both parties, and that written resolution is judicially enforceable so long as it is not in conflict with the law or the project’s governing documents.  The bill also provides that both a unit owner and an HOA have a right, at their own cost, to have an attorney or another person present to explain their position during a dispute resolution procedure. 

Assembly Bill 968.  This bill amends Civil Code Section 4775 to delineate the default responsibility between an HOA and a unit owner for repairing, replacing, and/or maintaining various spaces in a condo project.  Unless otherwise provided in the project’s governing documents, the default rule provided by this bill is as follows: 1) the owner is responsible for repairing, replacing, and maintaining his or her condo unit; 2) the owner is responsible for maintaining the exclusive use common area appurtenant to his or her condo unit; and 3) the HOA is responsible for repairing and replacing the exclusive use common area.  Typical examples of exclusive use common areas are private patios, decks, yards, storage rooms and parking spaces, but would include other portions of the common area that exclusively serve an owner’s unit.  Note that this bill takes effect January 1, 2017.

Assembly Bill 2430.  This bill amends Civil Code Sections 4528 and 4530 regarding disclosures that a condo unit seller is required to provide to a prospective buyer.  An HOA must provide copies of the project’s governing documents and other policies if requested by a unit owner, so the owner can provide the documents to a prospective buyer.  An HOA may charge reasonable fees to produce such documents.  This bill requires the HOA to use a specified form to list the fees charged for the documents.  Such fees must be separately stated and billed from all other fees and costs of the sales transaction, and must be paid by the seller.  If any of the required documents are provided to buyer directly from the seller, then the seller may not charge a fee for such document.  The required documents must be separately provided to a buyer, and not bundled together along with other documents related to the sales transaction.

This Update utilizes legislative information and material obtained from the California Bureau of Real Estate.

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.

​As we reported on May 7, 2015, Supervisor Campos has introduced a legislation that would place a temporary moratorium on Planning approvals or issuance of permits for all market-rate residential projects with five or more units in the Mission District. The proposed 45-day moratorium could be extended for up to two years under state law. A hearing on the legislation before the Board has been scheduled for June 2, 2015 at 3:00 p.m.   Passage requires the votes of 9 of 11 Supervisors, which will be a tough hurdle for the legislation, but given the importance of the measure to a number of proposed development projects, we will continue to monitor this one closely. 

We are also watching development of the impending ballot initiative that would ask voters to weigh in on a Mission moratorium in November. The language of the initiative, which has now been released, covers a larger area than the proposed legislation, adding the area between Guerrero and Valencia Streets and the area between Bryant Street and Potrero Avenue north of 20th Street.

More to follow in future updates, as the battle between advocates for housing development and anti-gentrification forces will likely play out in the Mission for years to come.

Also on November’s Ballot – Mission Rock

Not far from the dust-up in the Mission, in an area once connected to it by Mission Creek, an entirely different development picture is coming into focus for the November election. The Giants have filed paperwork for a ballot measure to permit their proposed Mission Rock project on 28-acres just south of AT&T Park over the Mission Creek Channel. The plan includes 1,500 apartments (33 percent of which are proposed to be affordable), 1.5 million square feet of commercial space, and eight acres of parks, plazas and open space. 

The Project must be approved by the voters because it proposes towers of up to 240 feet for residential development (previously proposed to be as tall as 380 feet) and up to 190 feet for office and retail development, as well as several other slightly lower towers throughout the site. San Francisco Proposition B, passed last year, requires voter approval for any increase in the existing height limits for property currently under control of the Port of San Francisco.

The Mission Rock project also proposes a large new home for the Anchor Brewing Company on Pier 48. Anchor plans to renovate the Pier and install a state of the art brewing facility, as well as restaurant, museum and educational facility. Although Anchor plans to keep its Potrero Hill facility, the new Pier 48 location will allow it to significantly ramp up production.

While the Mission Rock development will add a significant influx of new housing in an underutilized area of the City, it may take a decade to be completed. In the meantime, expect to see a Giants public relations blitz on behalf of Mission Rock between now and November.

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.

City residents who live in Mixed Use (Commercial – Residential) Zoning Districts have long battled music venues, night clubs and other places of entertainment (“POE”) over noise issues, which are currently regulated primarily by a noise limitation in the Police Code.  Under existing law, neither the Building Code nor the Planning Code specifically addresses conflicts related to noise between POEs and nearby residents.

The Board of Supervisors has stepped in on behalf of the POEs by adopting an ordinance which amends the Building, Administrative, Planning, and Police Codes to protect the POEs against complaints by residential neighbors.

The Ordinance, adopted by the full Board on May 12, 2015, found that POEs are a major source of employment, economic activity, and tax revenue for San Francisco, and would benefit from protection against noise and nuisance complaints.  Subsequent amendments during the Board hearings expanded the reach of the Ordinance to additional noise producing uses and areas of the City.

New residential construction in proximity to noise producing areas, including night time entertainment venues, industrial areas, highways, and rapid transit lines, where noise levels exceed 60 decibels, must be designed to prevent the intrusion of exterior noises beyond levels prescribed by the Municipal Code.  Proper design to accomplish this includes appropriate orientation of the residential structure, setbacks, shielding, and sound insulation of the building such that habitable rooms shall be subject to a maximum day – night average of 45 decibels.  All residential structures in noise producing areas shall require an acoustical analysis showing that the proposed design will limit exterior noise intrusion to the prescribed level.  The Planning Department will produce a map of noise producing areas of the City where the Ordinance will apply, in addition to POE areas.

The Ordinance directs the Planning Commission and Planning Department to take all reasonably available means through the City’s design review and approval processes to ensure that the design of new residential buildings takes into account the needs and interests of both the POEs and the future residents.

Significantly, no POE establishment that has held a permit to operate as a place of entertainment within 300 feet of a building for which construction or conversion for residential use was completed on or after January 1, 2005, shall be or become a public or private nuisance on the basis of noise disturbance for a resident of that building, if the place of entertainment operates in compliance with the municipal code and the terms of its permits.  This section of the Ordinance is an effort to prevent lawsuits against places of entertainment based on neighbor complaints of excessive noise.

Residential builders seeking entitlements for new projects in close proximity to POEs shall be required to notify the Entertainment Commission of its intent to submit such application and provide materials describing the proposed project.  The Entertainment Commission shall determine whether to hold a public hearing on noise issues related to the proposed project and any POE within 300 feet of the proposed project.  The project sponsor will be required to attend a public hearing at the Entertainment Commission and present evidence regarding current noise in the area of the proposed project, including an acoustical analysis; the project’s proposed noise attenuation features; the projected level of interior noise for residential units in the project; and the project sponsor’s engagement or plans for engagement with the POEs.  The Entertainment Commission shall provide written comments and recommendations pertaining to noise issues related to the proposed project to the Planning Department and the Department of Building Inspection for their consideration during the permit process.

Sellers and Landlords of residential property within noise producing areas shall be required to provide a disclosure notice in a prescribed form to all potential purchasers and tenants.  The disclosure includes the following statement:  “If you live near a place of entertainment, you should be prepared to accept such inconveniences or discomforts as a normal and necessary aspect of living in a neighborhood with mixed commercial and residential uses.”  For the full text of the required disclosure, please see Board of Supervisors Ordinance No. 141298.

At the time a residential project is approved, a Notice of Special Restrictions must be recorded with the Assessor – Recorder that states all of the restrictions that are included in the required disclosure, and any other conditions that the Planning Commission or Planning Department places on the property.

The Ordinance will apply to all projects for which a building permit has not been issued, or in the case of a site permit, for which a first addendum has not been issued.  The Ordinance, which passed by a unanimous vote of the Board of Supervisors, will now proceed to the Mayor for signature. 

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.

​On Tuesday, Supervisor Campos introduced legislation that would place a temporary moratorium on Planning approvals or issuance of permits for all market-rate residential projects with five or more units in the Mission District.  If passed, many multi-unit residential projects in the Mission awaiting Planning Approval would have to wait until the moratorium is lifted to move forward.  The legislation would also apply to permits for demolition, conversion or elimination of PDR uses in the District.  The initial moratorium would last for 45-days, but could later be extended for up to two years under state law.

The moratorium legislation, which is co-sponsored by Supervisors Mar, Kim, Avalos, and Yee, is an attempt to curb the displacement of longtime Mission residents.  The idea is to create a development-free period during which Planning and other City agencies could study the potential for updated zoning controls or other policies to combat displacement and develop more affordable housing in the area.  The moratorium would extend over an approximately 1.5 square mile area. (See Map Below)

The “urgency ordinance” requires 9 of 11 Supervisor votes to pass, and Supervisor Campos may have a difficult time eliciting the four additional votes needed.  As recently reported in SF Gate and the Business Times, Board President Breed, Supervisor Weiner, and Mayor Ed Lee have expressed concerns that a moratorium would actually exacerbate the neighborhood’s housing problems.   

The legislation comes on the heels of Monday’s announcement by Edwin Lindo of the San Francisco Latino Democratic Club that a coalition of affordable housing and advocacy groups plan to submit a measure for the November ballot that would halt market-rate housing in the Mission for up to 18 months.  

As the Business Times reported earlier this week, a draft of the ballot measure shows that the moratorium would apply to all projects larger than 20 units and would extend to the entire Mission neighborhood.  Early signs point to voter support for such a proposal, as a February poll of likely voters conducted by David Binder Associates found that 65 percent of the 600 people polled would support a ballot measure to halt “new project approvals in the mission District for one year.” 

Oakland Protestors Shut Down City Council Vote on Housing Development

The housing affordability debate is heating up across the Bay as well.

Protestors shut down an Oakland City Council hearing on Tuesday evening, preventing the Council’s anticipated vote to approve sale of public land to developers UrbanCore and Integral Development for construction of market-rate housing in Lake Meritt.

A group of approximately 40 protestors stormed into the Council chambers, chanting “Housing is a human right” and disrupting proceedings.  After a 10-minute standoff, the Council went into recess and eventually adjourned before a vote could be taken.  The protestors then occupied the Council chambers, forming a human chain and taking over the City’s tv system to broadcast their own meeting which lasted until 9 p.m.  

The protest followed an organized outside of the City Council Chambers prior to the hearing by 18 advocacy groups including Causa Justa, East Bay Housing Organizations and Service Employees International Union Local 1021.  

The project at issue, which is one of the few active market-rate housing projects approved in Oakland in recent years, would construct 298 units on a City-owned parcel at 12th Street and 2nd Avenue.  It was approved by the City’s Planning Commission in March, but must obtain approval from the City Council for sale of the land. 

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.

​Catching Up with the Central SoMa Plan

It has been a few months since we provided an update on the Central SoMa Plan. The Planning Department has issued a number of new policy documents on various aspects of the Plan, some refining proposals it made in November 2014, and some addressing new topics entirely.  

As the RJR Update noted last November (Planning Department Issues New Policy Papers for Central SoMa), the final Central SoMa Plan is likely to include a number of controls and restrictions that were not discussed at great length (or at all) in earlier versions of the Plan. As the City gets closer to finalizing the Plan’s environmental review, its policy papers tend to spell out more directly the rules of the game once the Plan’s zoning takes place. These latest policy papers do just that. Here are a few highlights:

PDR, Arts, or Community Use Requirement for Office Projects. New office developments will be required to provide PDR or community facility space equal to a floor-area ratio ranging between 0.25 and 1, depending on the zoning district. The Code will encourage this space to be located on the ground-floor and directly accessible to the public.  Notably, the Planning Department is now suggesting that office conversions will only be limited on sites currently zoned SLI or SALI, and not on sites that are currently zoned in a mixed-use district.

The TDR Program. The TDR program will indeed be expanded into Central SoMa. The Planning Department has already identified a list of buildings that are expected to be designated under Article 11, which would allow them to sell TDR similar to the current program in downtown. A new feature will be to allow developments that preserve existing historic or contextually-significant buildings to count the square footage maintained in that building against the development’s TDR requirement.

New Bulk Requirements in Eastern Neighborhoods Part of Plan Area. Although the Plan will maintain bulk controls in the C-3 portion of the Plan area, new bulk requirements will be implemented in the remainder of the area. The proposed bulk changes are comprehensive, and are designed to balance between supporting sun, light, and air access to the street and allowing dense developments. Above 85 feet in height, 15 foot setbacks will be required on all sides of a building, and a certain amount of access to the sky (called a skyplane) must be maintained.  

Lot Merger Prohibition for Historic Buildings Outside of C-3 Area. Lot mergers will be prohibited in the Eastern Neighborhoods portion of the Plan area if one of the lots contains an historic or “neighborhood character-enhancing” building and has street frontage less than 200 feet in length. Exceptions to this rule may be granted by the Planning Commission if certain reductions in the apparent mass are provided.

Impact Fees and Assessments. And what about fees? Well, nobody is saying anything on the record, so we imagine the Planning Department is hard at work behind the scenes. At an open house in late March, Planning Director Rahaim alluded to the fact that staff is still working out how impact fees and other assessments will be implemented. We expect the next round of policy papers to contain a summary of proposed fees.

As always, we will continue to provide updates as the Central SoMa Plan continues to move forward towards implementation.

The Gray Water Ordinance

Earlier this month, Supervisor Scott Weiner introduced an important piece of legislation that developers and property owners should keep an eye on.

Supervisor Weiner’s ordinance, now co-sponsored by Supervisors London Breed, Julie Christensen, and John Avalos, would require large developments in the “Purple Pipe” district of the City to implement on-site water recycling programs. The “gray water” ordinance, as it is being called, capitalizes on the mandate in place since 1991 that new buildings in the eastern portion of the city (as well as the Presidio, Golden Gate Park, and Lake Merced areas) incorporate a second set of pipes that could theoretically transport non-drinking water, a.k.a. “gray water,” from City piping into these buildings. The idea was that once the City established a large-scale municipal water recycling program, these buildings could tap into the City’s gray water piping relatively easily. 

The grey water ordinance would eliminate the City from the equation, and require certain large-scale developments in the Purple Pipe district to include their own water recycling facility on-site (at the developer’s cost), or in partnership with neighboring developments. Specifically, all new developments over 250,000 square feet are required to address toilet, urinal, and irrigation demands through on-site recycled gray water. Projects larger than 40,000 square feet that do not pass the 250,000 square-foot threshold are not required to implement an on-site recycling program. Instead, they will be required to prepare a “water budget” assessing the amount of grey water, rainwater, and foundation drainage that is produced on site, and compare that to the project’s planned restroom and irrigation demands. 

Proponents of gray water systems point out that most large-scale recycling systems save their users money. With drought conditions the new normal, the cost of drinking water is not likely to get any lower, and the idea of making productive use of non-potable water is an accepted practice in drought-stricken countries like Australia. Supervisor Weiner’s legislation will probably make its way to the Board of Supervisors’ Land Use and Transportation Committee meeting in early or mid-May, and it is our understanding that in the meantime the Supervisor is reaching out to members of the development community for feedback. We will continue to follow the ordinance as it makes its way through City Hall.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

​Supervisor Scott Wiener, whose district includes the Castro, Upper Market, Corona Heights, Noe Valley, and Glen Park, among other neighborhoods, is known for his interest and activity in San Francisco housing policy.  Two recent measures sponsored by Supervisor Wiener speak to this interest: one that encourages housing development and will provide some relief to the City’s housing shortfall, and one that is, shall we say, not as encouraging.

Legalization of Accessory Dwelling Units

Supervisor Wiener’s most recent proposal, introduced last week and now assigned to the Board of Supervisor’s Land Use and Transportation Committee, would broaden the geographic applicability of an existing measure facilitating the legalization of Accessory Dwelling Units (“ADUs”), also known as secondary or in-law units.  The measure is currently applicable only to parts of Supervisor Wiener’s District, but we hope it will ultimately be extended City-wide.  

Under the measure, new ADUs may be constructed or existing ADUs may be legalized, even if doing so would exceed the applicable density units.  The following restrictions would apply:

(1) an ADU cannot be constructed using space from an existing Dwelling Unit; 

(2) an ADU is not permitted in any RH-1(D) zoning district; and 

(3) only one ADU is permitted in a building with up to 10 existing Dwelling Units and two ADUs are permitted for buildings with more than 10 existing Dwelling Units (these ADUs are permitted regardless of whether the existing building is at or over the density limit).

The measure also authorizes the Zoning Administrator to grant complete or partial exceptions from the Code’s parking, rear yard, dwelling unit exposure and open space requirements of the Planning Code for ADUs.  The ADU would be subject to the City’s Rent Control Ordinance if the building containing the ADU is already subject to the Rent Control Ordinance.  The Planning Department is required to establish a system for monitoring the affordability of the ADUs.

Whereas previously this measure applied only in and near the Castro Street Neighborhood Commercial District, Supervisor Wiener’s current proposal would expand its applicability to include the 24th Street – Noe Valley Neighborhood Commercial District or within 1,750 feet of its boundaries, the Glen Park Neighborhood Commercial Transit District within Supervisor Wiener’s district boundaries, and the NC-S Zoning District within Supervisor Wiener’s district boundaries.  

This is Supervisor Wiener’s third piece of legislation encouraging construction and legalization of ADUs, clearly seeing it as one tool in increasing housing production in the city.

Limiting Residential Development in Corona Heights

Supervisor Wiener’s second recent proposal is an interim control (18 months, unless extended or until permanent controls are adopted), which now has been adopted and codified, that places limits on proposed residential development in the Corona Heights neighborhood.  (See map below)  The specific target is so-called “monster homes.”

In particular, the measure requires a Conditional Use Authorization from the Planning Commission for:

(1) any residential development that will result in total residential square footage exceeding 3,000 gross square feet on a parcel if the residential development will occur on a vacant parcel; 

(2) any residential development that will increase the existing gross square footage on a developed parcel in excess of 3,000 square feet and by (a) more than 75% without increasing the existing legal unit count or (b) more than 100% if increasing the existing legal unit count; and 

(3) any residential development that results in greater than 55% lot coverage, in which case the Planning Commission must expressly find that “unique or exceptional lot constraints would make development on the lot infeasible without exceeding 55% total lot coverage.”

Supervisor Wiener pushed this legislation in response to neighborhood outcry over a number of new housing developments that are currently going the entitlement process.  The legislation essentially shifts the burden to project sponsors to affirmatively file a conditional use application (instead of the neighborhood filing a discretionary review request) and allows for a political resolution to these cases, since a conditional use approval can be appealed to the Board of Supervisors.

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.

​There have been a lot of signs of the land use times in San Francisco these days.  A brand new neighborhood in Rincon Hill and Transbay is being constructed in front of our eyes.  There are newly-proposed projects galore in the Tenderloin.  The last few remaining “holes” in the Financial District are being filled in after decades of sitting vacant (350 Bush, 500 Pine).  Yes, these are flush times in San Francisco.  From 2005 to 2014, San Francisco’s population has grown from 777,600 to 852,469, an almost 10% increase.  Now this does not match the City’s growth in 1849 (1,000 to 25,000) or post WWII (634,000 to 775,000 from 1940 to 1950), but we can safely say this is a transformational period in the City’s history. 

The word of the day is regionalism.  While San Francisco is still the epicenter for development, Oakland, Berkeley and even San Jose are starting to see their own building booms.  As the RJR Update rears its head for the first time in 2015, we will be sure to bring you what we think are the important land use news around the Bay Area.

Board of Supervisors Seeks to Close Group Housing-Inclusionary Housing “Loophole”

Last week, Supervisor Avalos introduced legislation that would apply the same citywide affordable housing requirements on group housing projects that currently apply to dwelling units.  Group housing is typically a single room, possibly with a small kitchenette and individual or shared bathroom facilities.  For years, group housing was generally used as SRO housing, student dormitories, or other shared living facilities.  But now with younger folks willing to live in smaller and smaller spaces so long as they can step out onto the streets of San Francisco, group housing has seen a resurgence in proposals in recent years.  

There are some zoning benefits to group housing:  no rear yard, reduced open space requirements.  But the most significant zoning difference is that group housing is not subject to the City’s affordable housing requirements.  Supervisor Avalos’s legislation would apply the citywide 12%/20% standard requirement to group housing projects. 

With the housing crisis ongoing and likely growing in San Francisco, it is likely we will continue to see the debate over affordable housing intensify. Last year, Supervisor Kim threatened to put on the ballot a measure that would have had the effect of sending almost all market-rate residential projects to the Planning Commission for conditional use approval, with the potential for disapproval if 33% of the units were not provided as affordable housing.  She replaced that measure with Prop K, passed by voters last November, which sets as City policy the provision of 33% of all new housing subject to affordable restrictions.  Next week, the Board may pass new legislation creating a housing balance metering program, requiring an annual hearing at the Board of Supervisors, at which the Mayor’s office would need to submit a strategy to reach the 33% affordable housing figure (the first one would be held roughly two months from now).  After the voters passed a major revamping of the City’s affordable housing policies in 2012 (which reduced the on-site affordable housing requirement from 15% to 12%), we could be looking at upward pressure on the affordable housing requirement in the near future.  

Another Approach to the Housing Crisis – Increased Density Incentive for Soft-Story Retrofits

Last month, legislation sponsored by Supervisor Wiener was enacted that would remove residential density limits from “soft-story” properties undergoing mandatory seismic upgrades and some that undergo voluntary upgrades.  Similar to the other in-law legalization legislation the Supervisor has sponsored, any increase in dwelling units in conjunction with a retrofit project would be able to be approved administratively without public notice.  This represents a completely different approach to the housing crisis.  

It turns out that the City has in fact been pretty successful in providing new housing since Mayor Lee set the goal of providing 30,000 new housing units (30% affordable) between 2014 and 2020.  According to the Planning Department’s tracking, 4,263 units have been created since then, 31% of which are permanently affordable.  We may be able to achieve that ambitious (for San Francisco) housing goal, the question is will it do the trick?

Oakland Confidently Begins to Pick Up the Slack in Housing

Sensing the obligation (and opportunity) that comes with rising housing costs in San Francisco, Oakland, led by Mayor Libby Schaaf and Planning Director Rachel Flynn, are taking steps to entice development across the Bay.  The most recent move has the city initiating a downtown specific planning process with the goal of an area-wide EIR that will expedite environmental review throughout the area.  While specific plans have been enacted in Oakland in recent years on Broadway, West Oakland, Chinatown, and the Central Estuary, the vast majority of potential, significant new development is located in the city center north of I-880 and south of 27th Street.  In fact, we may see a boom-let of development on Telegraph Avenue north of the Fox Theater and the Sears Building in coming years, following the re-activation of those two buildings as well as the resurgence of retail and entertainment along the strip.  The downtown plan may come too late to help those projects out, but it will certainly go a ways to stimulate new development elsewhere in downtown.

But let’s of course remember Mayor’s Schaaf’s declaration that project applications should be filed now in order to avoid new impact fees that will go into effect in 2016.  While she has been rather unclear as to whether projects filed now would be expressly grandfathered from the future impact fees, there is some potential for projects to slip through before they go into effect.  This may come to a surprise to many developers in San Francisco, but it’s not unheard of for a project in downtown to make its way through the entitlement process in 9-12 months.  

San Francisco Board of Appeals Back to Full Strength with Rick Swig

Since August of last year, the Board of Appeals has quietly been operating with a vacancy.  Chris Hwang left the Board in July (replaced by Bobbie Wilson in October) only to be followed by Arcelia Hurtado’s departure in November.  On the five-member Board of Appeals, this vacancy is felt more than it would be on other Commissions.  Fortunately, Supervisor Breed-appointee Rick Swig sat for his first hearing at the Board of Appeals last Wednesday.  Mr. Swig, a San Francisco native, has significant experience in the tourism and hospitality industry, and has previously served on the San Francisco Redevelopment Commission.  We hope Mr. Swig’s appointment signals at least a few years of stability at the Board of Appeals – where each member really makes a difference!

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.

​Last week, the Planning Department issued policy papers on four aspects of the Central SoMa Plan, clarifying the direction it is headed on these issues.  As surely all readers of the Update know by now, the Central SoMa Plan is an area of South of Market bounded by Mission Street, Townsend Street 2nd Street and 6th Street that has been studied over the past 2+ years for an eventual up-zoning in 2015 with a focus on growing the job sector close to downtown (i.e., office is encouraged over housing).  The Draft Central SoMa Plan was published in April 2013, with detailed information about potential rezoning and height increases.  

At this point, the Draft Central SoMa Plan should be seen as a best case scenario.  Or more accurately, it should be seen as a document that presents the most positive vision of a rezoning that promotes growth, with the expectation that it will be pulled in, cut back, watered down when it gets to its final passage.  It should be no surprise that the political environment in San Francisco is very different now than what it was in 2013.  Prop K was just passed by the votes, enshrining in policy the goal of 33% affordable housing for low and moderate income homes in all new development.  The Pintrest deal blew up to such a degree that Supervisor Jane Kim has introduced emergency legislation prohibiting the conversion of industrial buildings to office, and the Planning Commission and Planning Department are both saying they want to see preservation of industrial space in projects that propose to demolish existing PDR uses.

In short, the Central SoMa Plan of 2015 won’t just differ from the Central Corridor Plan of 2013 in name only.  Beyond these high-profile issues, we haven’t seen the new impact fee structure, whether TDRs will be incorporated into the plan, and the potential for a new Mello-Roos-type infrastructure financing district.  And these four policy papers are the beginning of a more realistic version of what the Plan will ultimately look like.  You can find the papers at http://sf-planning.org/index.aspx?page=2557. (Scroll down to Draft Policy Papers).  Keep in mind that these document Planning’s thinking on these issues currently, they are not guaranteed to be in the final Plan.  Here is the takeaway from each paper:

Affordable Housing

As discussed above, recently-passed Prop K establishes as city policy that at least 33% of the 30,000 new housing units Mayor Lee has called for by 2020 should be affordable to low and middle income households.  To that end, the Central SoMa Plan could include increased affordable housing rates above the citywide 12% on-site/20% off-site or in-lieu fee.  This would be similar to the increased rates in the UMU zoning district, where the amount of required affordable housing units is based upon the amount of the height increase granted by the 2009 Eastern Neighborhoods Plan.  These rates ranged from 14.4% to 17.6% for on-site units or 23% to 27% for off-site units or the in-lieu fee.  It should come as no surprise if these identical rates are proposed in Central SoMa, or possibly higher rates are proposed.

The policy paper also indicates the potential for creating an Infrastructure Financing District, whereby newly-developed properties would be subject to an increased property tax rate.  The state legislature just amended the IFD statute this summer to allow the additional tax revenue to be put towards affordable housing.  

PDR Replacement

In recent months, protection of existing PDR (industrial) space has become a major issue in the City.  Supervisor Kim has enacted a moratorium on most conversions of existing PDR buildings in Central SoMa until the Plan passes.  Several Planning Commissioners, as well as Planning Department staff, have indicated that some amount of PDR protection measures should be incorporated in the Central SoMa Plan.  The policy paper suggests limiting the amount of space in existing PDR buildings must be maintained (or replaced in a new project if the existing building is to be demolished).  Protection percentages have been recommended based on the current zoning.  In sites rezoned from SALI, 0% conversion would be allowed.  In the SLI district, only 50% could be converted.  In Eastern Neighborhoods Mixed Use Districts, 75% could be converted.  Finally, no restrictions would be placed on downtown C-3 districts.

The other proposal for PDR protection goes to the heart of what the Central SoMa Plan will ultimately be.  The policy paper suggests that SALI-zoned properties located within Harrison, Bryant, 4th and 6th Streets could be left with SALI zoning.  This was something that was discussed when the Western SoMa Plan first rezoned these properties to SALI (basically an industrial protection zone).  However, there was no talk for several years about the potential to not rezone some SALI sites.  The inclusion of this in the policy paper may mean that the Central SoMa Plan does not ultimately impact some blocks west of 4th Street.

Privately-Owned Public Open Space

Local community groups, and in particular TODCO, have been fighting to provide more public open space in the South of Market area for some time, due to the dearth of space currently available.  One major component of this push is to turn the PUC-owned site in the center of the block bounded by Brannan, Bryant, 4th and 5th Streets into a new public park.  The policy paper also indicates that there could be a requirement that new office developments provide some amount of publicly-accessible open space.  The paper does not suggest increasing the open space requirement for office above the current 1 square foot per 50 square feet of office space.  It does suggest that some amount of the required open space be made open to the public, and at an easily accessible location (which does not include a roof deck).

Community Facilities

Community facilities include child care centers, recreation centers, job training centers, cultural and arts facilities, community health care clinics, social welfare organizations, and business support organizations.  These are not currently required by the Planning Code to be provided in new projects.  However, understanding the need for these types of services in a South of Market area that does not currently provide them, the Planning Department intends to encourage the production of these types of spaces.  This could be done through a new impact fee or providing density bonuses to new developments in exchange for new community facility space.

One major takeaway from these policies is that those eyeing new development in the Central SoMa Plan area should assume that there will be some public benefit required above and beyond what currently exists in the Planning Code.  This could be increased affordable housing, increased impact fees, requirements that PDR or non-profit space be provided or a combination of these and other benefits.  

It should be noted here that San Francisco is blazing new trails once again with the previous Eastern Neighborhoods Plan and the Central SoMa Plan.  A recent white paper, prepared with a grant from the Association of Bay Area Governments (ABAG), has conducted an analysis of what it calls “Public Benefit Zoning,” which can be understood as the public and private sectors capturing part of the value of an upzoning.  The paper can be found here: http://ebho.org/images/Research_and_Reports/LVR-White-Paper-Full_141113.pdf. The goal over the next months and year is to ensure a balance in the Central SoMa Plan rezoning that continues to incentivize new development that will allow the public to capture some of the value created by the rezoning, and maximize the benefits to all.  Stay tuned, as there will certainly be many more steps in the process before we have a final rezoning plan that everyone can rely on.

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.

Last week, the Board of Supervisors unanimously approved legislation that will revise the City’s formula retail definition and controls.   The new law follows a year-long study of formula retail controls undertaken by the City’s Planning Department and represents a compromise between more aggressive controls proposed by Supervisor Mar in July 2013 and competing recommendations issued by Planning Department last July.

San Francisco adopted its first formula retail (a.k.a. chain store) legislation in 2004, which was later expanded in 2007 under legislation commonly known as the “Small Business Protection Act.”  Since that time, formula retail controls have been expanded in a piecemeal fashion.  

The Planning Code currently defines formula retail uses as retailers with 11 or more stores in the United States, that also maintain two or more of the following features: (1)  a standardized array of merchandise; (2) a standardized façade; (3) a standardized décor and color scheme; (4), a uniform apparel; (5) standardized signage; or (6) a trademark or a servicemark.    Formula retail controls have applied only to the following categories of use: bars; drive-up facilities; eating and drinking uses; restaurants; liquor stores; retail sales and services; financial services; and movie theaters.

In general, the Code requires formula retailers to hold a noticed pre-application neighborhood meeting and obtain Conditional Use (“CU”) authorization prior to setting up show in many areas of the City.   This process typically takes 4-6 months, and can cost tens of thousands of dollars.   Formula retailers are also prohibited from locating in some neighborhoods, including the Hayes-Gough NCD , North Beach NCD and Chinatown Visitor Retail District, and are subject to specific restrictions in others. 

So what has changed under the new legislation?  The general requirements stay the same – formula retailers will continue to require CU authorization in many areas, and existing district-specific controls remain in effect.   However, the legislation expands the definition of formula retail uses, and applies some new procedural requirements.  

The legislation:  

– Amends the geographic definition of formula retail to include all retailers with 11 or more locations worldwide (previously within the United States); 

– Expands the types of business subject to formula retail controls to include: personal services; fringe financial services; limited financial services (except for single ATMs at the street front meeting Commission design guidelines, and ATMs within other uses not visible from the street); massage establishments; amusement and game arcades; and tobacco paraphernalia establishments.  Of these, expansion to “personal services” will arguably have the most impact, as now many chain salons, tattoo parlors, health spas, and dance, exercise or martial arts studios will be subject to the controls;

– Requires the Planning Commission to consider a project’s compliance with “Performance-Based Design Standards” to be established by the Planning Department;

-Specifies the methodology for calculating the existing concentration of formula retail establishments within a certain geographic area;

-Requires CU authorization for all formula retail uses within the C-3-G District with frontage on Market Street between 6th Street and the intersection of Market Street, 12th Street and Franklin Street; 

-Requires an economic impact study to be prepared with specific findings for approval of “large-scale retail uses” (exceeding 50,000 gsf outside of a C-3 District or 90,000 gsf within a C-3 District) and all formula retail uses occupying 20,000 gsf or more (except for grocery stores);

-Codifies the current Planning Department policy requiring a disapproval recommendation be made to the Commission for all formula retail applications in the Upper Market NCD that would bring the concentration of formula retail uses within 300-feet of the subject property to 20% or more;  

-Removes the requirement for CU authorization when a formula retail establishment changes an operator but remains the same size and use type, as long as the previous formula retail use obtained CU authorization and the new retail establishment does not have more locations than the previous retail establishment;  

-Specifies that a CU hearing for a formula retail use cannot be held less than 30 calendar days after the date of the mailed Section 312 notice (as opposed to 20 days for most CUs); and

-Provides specific definitions of “intensification” and “abandonment” for formula retail CUs.  Formula retail uses are now “abandoned” if discontinued for more than 18 months (as opposed to the general 3-year standard).

The new legislation is awaiting signature by the Mayor and will take effect 30 days thereafter.  It does not apply to any complete application submitted to the Planning Department on or after October 24, 2014.  A copy of the legislation is available on the Board of Supervisors web site at: http://sfbos.org/index.aspx?page=9681.  Detailed information on the Planning Department’s year-long study of formula retail regulation in San Francisco is available at: http://www.sf-planning.org/index.aspx?page=3762.   

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.

San Francisco voters have rejected Prop G, which would have imposed a tax equal to 24% of the sales price (not a typo – the price and not the profit) on the sale of a residential building with up to 30 units that is sold within 5 years from the date of purchase.  Although characterized as a tenant protection measure by its progressive sponsors on the Board of Supervisors, the voters apparently saw the measure as an unfair tax which would not make a significant contribution to addressing the City’s housing shortage.

The voters rejection of Prop G comes on the heels of the United States District Court ruling on October 21, 2014 which overturned on constitutional grounds a San Francisco Ordinance that forced a payment of $118,000 by a landlord to a tenant to simply enforce the landlord’s right under the 1985 state law known as the Ellis Act (Cal. Govt. Code Section 7060 et seq.) to exit the rental business. The proposed legislative solutions to the housing shortage have fallen short of passing constitutional muster and from finding voter buy-in.  Property owners are batting 3 for 3 in this week’s update.

The U.S. District Court noted that the San Francisco Ordinance violated private property rights guaranteed by the Constitution and unfairly punished landlords for market conditions over which they had no control. 

“A monetary exactions taking “does not implicate normative considerations about the wisdom of government decisions,” nor posit whether the exaction is “arbitrary or unfair”…  Th(e) Court’s task is to determine whether the exaction demanded by the City in exchange for an Ellis Act withdrawal bears the “required degree of connection between the exactions imposed by the City and the projected impacts” of the property owner’s proposed change in land use.  (See Dolan, 512 U.S. at 377).  This is because, “[w]hatever the wisdom of such a policy, it would transfer an interest in property from the landowner to the government” and thus “amount[s] to a per se taking similar to the taking of an easement or a lien.”

Under the new San Francisco Ordinance adopted in June 2014, landlords had been required to pay their tenants the difference between their old and new rents for two years, as a required condition of going out of business.  (Pre-existing legislation required landlords to pay each tenant only about $5,200.  That legislation has not been challenged.)

The City has announced that it will appeal the U.S. District Court ruling limiting the landlord’s required payout to tenants in order to quit the rental business.  (Daniel and Maria Levin, San Francisco Apartment Association Parkland Assoc., LP, and the Coalition for Better Housing v. City and County of San Francisco), U.S. District Court, Northern District of California, October 21, 2014, Case No. 3: cv03352 (October 21, 2014).

THE CALIFORNIA COURT OF APPEAL REJECTS A COASTAL ACCESS EASEMENT AS A CONDITION OF OBTAINING A COASTAL DEVELOPMENT PERMIT

On October 23, 2014, the California Court of Appeal (Second Appellant District) overturned a permit requirement by the California Coastal Commission that imposed a public access easement one mile long and 25-50 feet in width, parallel to the ocean, as a condition for issuance of a coastal development permit, where a family had sought to repair their farmhouse and rebuild their barn in the Cayucos area of unincorporated San Luis Obispo County.  All proposed work was within the footprint of the existing structures.  

The court cited Constitutional restrictions on takings of privately owned property as described by the United States Supreme Court in Nollan v. California Coastal Commission (1987) 483 U.S. 825, and Dolan v. City of Tigard (1994) 512 U.S. 374: a governmental entity may require an uncompensated exaction, such as an easement, as a condition of a development permit only where there is “rough proportionality” between the condition and the burden the development places on a public interest.

The court held that there was no rational nexus, and no proportionality, between the work on a private residence located one mile from the coast, and a lateral public access easement along the coast.  Accordingly, the easement requirement was an unconstitutional taking of private property by the Coastal Commission.  The proposed work did not impact the public or public access to neighboring Harmony Headlands State Park.  Work already performed at the residence under a separate over-the-counter permit for removal of dry rot and repairs to the roof and deck did not constitute collateral estoppel (i.e., a bar to reigniting or re-litigating an issue) against the permit applicant, because the repair and maintenance activities were independently exempted from coastal development permit requirements by the San Luis Obispo County Code.  The collateral estoppel doctrine necessarily calls for equitable results.  The court found that the lack of a nexus between the renovations and the access easement precluded it from finding that the equity requirement had been met.  In other words, the completion of some repair work did not confer a benefit on the permit applicant that precluded the applicant from appealing the Commission’s permit condition.

The court followed the evidentiary standard set forth in La Costa Beach Homeowners’ Association v. California Coastal Commission (2002) 101 Cal. App. 4th 804, that under the substantial evidence rule (Code of Civ. Proc., § 1094.5, subd. (c)), a court must consider “all relevant evidence even if it detracts from the administrative decision.”  Accordingly, the court based its decision on its own interpretation of the facts.

The court thus emphasized that constitutional restrictions on governmental takings of private property, as enumerated in Nollan and Dolan, will be faithfully applied against the government’s imposition of coastal access easements.  Developments that have no conceivable impact on the public or access to public areas should be free of Coastal Commission imposition of access easements.  While the facts of this case are somewhat unique in that the home in question was located one mile away from the coast, the court has signaled that the nexus requirement cannot be minimized or downplayed by the Coastal Commission, or by any public agency.

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.