No Grandfathering and Increased Affordable Housing Rates for Divisadero and Fillmore NCTs

| Chloe Angelis

Back in December 2015, Supervisor Breed introduced legislation that would eliminate the Affordable Housing Program grandfathering provisions of Proposition C and impose increased affordable housing rates for certain properties in the Divisadero and Fillmore Neighborhood Commercial Transit (NCT) Districts. The higher requirements would apply to sites in those two districts that received at least a 50% increase in development potential as a result of the rezoning of those two districts in 2015. After stalling last summer, an updated version of the ordinance was substituted and assigned to the Land Use and Transportation Committee on March 21, 2017.

The legislation follows the August 2015 rezoning of the Divisadero and Fillmore Street corridors. Ordinance No. 127-15 rezoned the area along Divisadero Street between Haight and O’Farrell Streets to become the Divisadero Street NCT, and Ordinance No. 126-15 rezoned the area along Fillmore Street between Bush and McAllister Streets to become the Fillmore Street NCT. The rezoning eliminated any previously applicable residential density limits based on lot area. Meaning that after the rezoning, sites within the new NCTs could add any number of residential dwelling units permitted by the physical envelope controls like height, bulk, and setback requirements—affording greater development potential on certain sites within those districts.

Since the legislation was introduced at the end of 2015, San Francisco voters passed Proposition C in June 2016—which, as everyone knows, made a number of changes to the Affordable Housing Program, including raising the affordable housing requirements for on-site affordable housing, off-site affordable housing, and the in-lieu fee. The current city-wide affordable housing requirements (excluding UMU districts) are as follows:

Affordable Housing Requirements

Ordinances proposed by Supervisors Safai, Breed, and Tang (available here) and by Supervisors Kim and Peskin (available here) would amend these city-wide requirements.

In the meantime, the increased affordable housing requirement proposed by Supervisor Breed’s legislation would apply to any property in either the Divisadero Street NCT or Fillmore Street NCT that received at least a 50% increase in density from the 2015 rezoning of those districts (previously the Divisadero Street Neighborhood Commercial District and Fillmore Street Neighborhood Commercial District, respectively). The density limit in the previously existing Divisadero Street NCD was 1 unit per each 800 square feet of lot area and the density limit in the previously existing Fillmore Street NCD was 1 unit per each 600 square feet of lot area—with a few exceptions for certain parcels previously zoned RH-3, RM-4, and RM-3. The rezoning eliminated those density limits, allowing any number of units to be constructed, with building sizes restricted instead by applicable building envelope controls.

For sites covered by the ordinance, the otherwise applicable citywide affordable housing requirements would apply, except that the grandfathered rates available to projects that submitted an Environmental Evaluation Application by January 12, 2016, would not be available. Instead, the following requirements would apply:

  • Affordable Housing Fee: 30%Off-Site Housing: 30%
  • Off-Site Housing: 30%
  • On-Site Housing: 23%—with 6% of the units affordable to households earning up to 55% AMI, 8% of the units affordable to households earning up to 120% AMI, and 9% of the units affordable to households earning up to 140% AMI.

Notably, the legislation includes a provision stating that if the Board of Supervisors adopts citywide affordable housing requirements higher than those imposed by this ordinance, the higher requirements will apply.

The legislation is scheduled to be heard by the Land Use Committee on Monday, April 3.

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.

Update on Recent California Condo/HOA Laws

| Jay Drake

There are tens of thousands of common interest developments in California, ranging from 2-unit buildings to large condominium towers and planned unit developments.  The Davis-Stirling Common Interest Development Act (“Davis-Stirling Act”) is the primary body of law governing condo projects and homeowners associations (“HOAs”) in the state.

This update summarizes a few recent changes to the Davis-Stirling Act.  The first, Assembly Bill No. 968 (“AB 968”), clears up some confusion regarding condo owner versus HOA responsibility for repair or replacement of exclusive use of common area.  The second, Assembly Bill No. 1963 (“AB 1963”), extends a requirement for HOAs of more than 20 units to follow certain pre-litigation alternative dispute resolution procedures.

Clarification of Maintenance, Repair and Replacement Responsibilities

There has been long-standing uncertainty concerning who has the responsibility to maintain, repair and replace exclusive use common area appurtenant to an owner’s unit – the unit owner or the HOA?  Exclusive use common area generally refers to private decks, patios and balconies appurtenant to an owner’s unit, and can also include other improvements that exclusively serve an owner’s unit.  While a unit owner must maintain such exclusive use common area, it was less certain who must repair and replace such exclusive use common area.  California Civil Code Section 4775 provided a default rule to address this issue, but the wording of the statute was unclear.

AB 968, effective January 1, 2017, amended Civil Code Section 4775 to address the uncertainty of who bears the responsibility for repair and replacement of exclusive use common area.  In a nutshell, unless otherwise provided in the condo declaration (CC&Rs), the HOA is responsible for repairing and replacing exclusive use common area, and the unit owner is responsible for maintaining exclusive use common area appurtenant to that owner’s unit.  While this is the default rule, CC&Rs may be drafted to provide an alternative approach for repair and replacement of such areas.  HOAs whose CC&Rs are not clear on the allocation of such responsibility may consider whether some action should be taken to address any uncertainty.

Extension of Requirement for Larger HOAs to Follow Alternative Dispute Resolution Procedures

California Civil Code Section 6000, known as the Calderon Act, establishes dispute resolution procedures that an HOA for a condo project with 20 or more units must satisfy before it can sue a developer for construction defects.  These procedures are known as the “Calderon Process.”  The Calderon Process is separate from the Right to Repair Law (aka “SB 800”), which is another body of law that governs construction defects and required procedures for claims an HOA may have against a developer.

The Calderon Act is generally designed to provide a fair way to resolve construction defect claims in an expeditious and cost effective manner in order to avoid litigation.  It requires the parties to follow a process in an attempt to resolve such disputes before litigation may be commenced.  Much of the Calderon Act was set to expire on July 1, 2017.  AB 1963 amends California Civil Code Section 6000 to extend the Calderon Act to July 1, 2024.  This continued requirement to follow the Calderon Process should help avoid lengthy and costly litigation for construction defect claims.

Special thanks to Antonia Toomey for her assistance with this update.

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.

Planning Department Reviews 30-year Regional Jobs-Housing Trends

| Melinda Sarjapur

Last Thursday, Department staff provided the Planning Commission with an informational update on the City’s jobs-housing balance, providing quantitative data to assist policymakers as they consider the practical impacts of their weekly decision-making on local housing accessibility, economic growth, and transportation infrastructure.

The presentation was the second in an ongoing series intended to brief the Commission on the Department’s data-gathering and research efforts to “unearth and examine how the City’s job, housing, and transportation framework has evolved over the past thirty years,” since the adoption of the Downtown Plan and Proposition M in the 1980s.

Thursday’s discussion was replete with dense statistics and detailed tables, charts and graphics, containing few surprises for those who have been watching to City housing or jobs trends in recent years.  The following are a few of the key takeaways.

San Francisco is producing housing at a rate that meets its goals from the 1980s and is on track to at least slightly lower its jobs-housing ratio by the year 2040 (projecting 1.60 jobs per housing unit in 2040, as compared to 1.73 jobs per unit now).  Over the past 30 years, we’ve exceeded the modest housing production objectives set in the Downtown Plan, with more than 2/3rds of all housing built since 1985 located in downtown and immediately adjacent areas.

However, both the local population and job base have grown at a faster rate than housing production.   Since 1980, the City’s residential population and job base have grown steadily (+27% and +32% respectively) – a much faster rate than the increase in housing (+17%).

San Francisco housing is also increasingly occupied by higher-wage earners.   The percentage of San Francisco workers in all income brackets less than 140% AMI who live in San Francisco has declined since 1990, with the greatest declines at the lowest brackets.  As staff points out, this means that the City’s housing stock “is increasing being occupied by a greater share of its higher wage workforce, and its middle and lower wage workforce is increasingly commuting into the City.”

The Department’s analysis suggests that other Bay Area cities aren’t pulling their weight in regional housing production.  As planner Joshua Switzky explained, San Francisco is the only county in the region that has provided more housing every decade than was provided in the previous decade. Over the past 35 years, every other Bay Area county has provided significantly more job growth than housing units, with San Mateo adding more than three jobs per each added housing unit on average, and Santa Clara County providing approximately 2 new jobs per unit.

And the data-gathering has confirmed some interesting statistics on the total balance of in- and outflow workers in San Francisco.  Over the past three decades, the overall percentage of San Francisco Jobs held by San Francisco residents has been fairly stable at over 50%.  However, San Francisco has seen a slight aggregate net decline in the in-commute into the City from San Mateo, Santa Clara and Marin counties, such that more San Francisco residents are traveling out of the City for work in Santa Clara county than are traveling in.  The Department attributes at least some of this imbalance to lack of housing production in sister cities as compared to their local job growth.

The Jobs-Housing Balance Trends presentation was informational in nature, so no direct action was taken.  Time will tell how the Commission applies this data to their review of future development projects and policies, though some Commissioners expressed concerns that the City’s current jobs-housing ratio reduction goals aren’t sufficient, and urged adoption of a more aggressive strategy.

The Department’s presentation materials and more detailed findings can be found online at Planning Commission – March 2, 2017, Supporting Documents

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, the formation of limited liability companies and other entities, lending/workout assistance, subdivision, and condominium work.

Focus on Housing – Supply, Affordability and Families

| Tuija Catalano

It is no secret that California, including Bay Area, housing supply has not kept up with the demand.  A strong economy and population growth have contributed to an increasing demand for housing.  According to McKinsey’s October 2016 report on California’s Housing Gap, California ranks 49th in the US for housing units per capita (with the addition of 308 new units for every 1,000 new residents since 2005) with the current shortage of approximately two (2) million units.  McKinsey’s report further found that although based on current construction rates one (1) million additional homes are expected to be built in California by 2025, in the same period the population is expected to increase by 3.6 million.  An increased demand for housing combined with insufficient supply is also contributing to housing affordability.  In the City of San Francisco, McKinsey’s report found that those earning 179% of the AMI (Area Median Income), or $140,000 per year, are unable to afford the cost of housing (with affordability threshold defined as 30% of pretax household income).  Housing shortage can have many consequences, from the weakening of the economy via lost economic output to contribution into homelessness.  According to the US Dept. of Housing and Urban Development, in 2015 approx. 25% of the US homeless population lived in California, a state which concurrently has often been deemed to be the 6th largest economy in the world if it were a country.

Pending State legislation regarding housing affordability.

One of the four (4) strategic goals for 2017 by the League of California Cities is to “Improve the Affordability of Workforce Housing and Secure Additional Funds for Affordable Housing.”  During the 2017 legislative session, approx. 170 bills have been introduced in the Assembly and Senate that are directly related to housing.  Some of the pending bills address potential new funding sources for affordable housing, such as SB2 (Atkins), the Building Homes and Jobs Act (which if adopted, could result in an estimated up to $300-$500 million annually due to a $75 recordation fee on certain real estate transactions), the Affordable Housing Bond Act of 2018, or SB3 (Beall) (which could potentially result in up to $3 billion in bond revenue), and AB71 by former San Francisco Supervisor David Chiu (that proposes elimination of mortgage tax deductions for second homes, potentially resulting in $300 million annually in funding allocation to low-income housing).

Other pending State legislation attempt to address housing production and affordability from a regulatory perspective, including SB35, the Housing Accountability and Affordability Act by former San Francisco Supervisor Scott Wiener, a proposal, which in some ways is similar to Governor Brown’s recent “by-right” proposal.  State Senator Wiener’s proposal would require streamlining the project approval processes for certain projects if the local jurisdiction has not met its RHNA (Regional Housing Needs Assessment) goals at all income levels.  The Workforce Housing Opportunity Zone proposal, or SB540 (Roth), would allow local jurisdictions to adopt specific plan(s) for Workforce Housing Opportunity Zone(s), subject to plan-based CEQA review, providing cities potential no-interest loans from OPR (Office of Planning and Research) for the specific plan development and CEQA review processes.  In exchange, during the 5-year period subsequent to the adoption of the said specific plan, the local government would be prohibited from denying housing development within the said zone provided certain development criteria is satisfied, including the provision of a mix of housing at certain affordability levels.

Overall, it appears that Sacramento is increasingly focusing on local governments and their roles in housing production (and affordability), including potential use of tools such as withholding certain state grants to the extent RHNA goals are not met, and requiring for a more streamlined approval processes (especially in relation to CEQA review and public engagement processes).

Proposed changes to San Francisco housing regulations and policies.

San Francisco legislators and policymakers have also been quite busy with housing legislation recently.  Last week Mayor Lee announced the launch of a “Housing Accelerator Fund,” which is a public-private partnership with the objective of preserving and producing affordable housing units.

This week Supervisors Safai, Breed and Tang introduced legislation with proposed changes to existing the Inclusionary Affordable Housing Program requirements.  Among other changes, the Safai-Breed-Tang legislation would change the fee percentage (for projects with 25 or more units) to 23% for rental projects and to 28% for ownership projects, as compared to a 33% requirement pursuant to Prop. C from June 2016.  Further, the on-site option (for projects with 25 or more units) would be changed to 18% for rental projects combined with a requirement whereby the affordable units would need to be affordable to households earning an average of 80% of AMI, with an equal distribution between households at 55%, 80% and 110% AMI levels.  For ownership projects, the on-site option would be based on a 20% requirement, with the units affordable to households earning an average of 120% AMI, with an equal distribution between 90%, 120% and 140% AMI levels.  As of today, and since the passage of Prop. C in June 2016, the on-site requirement for projects with 25 or more units has been 25%.

Family-friendly housing focus.

While much of the housing discussion in recent years has focused on overall housing production and affordability, another important perspective is family housing.  Out of major US cities, San Francisco has the lowest number of households with children, at 18%.  At the end of January, Planning Department, with the support of Supervisor Yee, released “Housing for Families with Children” policy paper, and addressed the Department’s initiative to create more family-friendly housing in San Francisco.  The policy paper recognizes that while affordability is a key challenge for families, there are also other factors that impact the likelihood families are going to live in San Francisco, such as bedroom count, unit, and building features, and other amenities from transit options to schools and open space areas.  The Department’s policy paper is one step towards the creation of family-friendly housing policies.  Couple weeks thereafter, in mid-February, the Board of Supervisors unanimously approved a resolution urging the Planning Commission to adopt General Plan amendments for family-friendly housing, including creation of definitions for family-friendly units and buildings.

On February 14, 2017, Mayor Lee and Supervisor Tang introduced HOME-SF program, which is intended to facilitate construction of family-friendly housing for working class families, specifically those households in the 60-150% AMI range, which expands the typical AMI range by exceeding 120% AMI level.  The legislation is expected to amend the 100% Affordable Housing Bonus Ordinance that was adopted in June 2016 under Ordinance No. 143-16 and to address many of the items discussed in the Planning Department’s Housing for Families with Children policy paper.

References:

A Tool Kit to Close California’s Housing Gap: 3.5 Million Homes by 2025, by McKinsey Global Institute, published in October 2016.

Supervisor Safai, Breed and Tang’s proposed legislation was introduced under BOS File No. 170208.

Planning Department’s Housing for Families with Children was released on January 17, 2017.

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, the formation of limited liability companies and other entities, lending/workout assistance, subdivision, and condominium work.

Planning Department Issues Draft Mission Action Plan 2020

| David Silverman

​Extension of Mission District Interim Controls is Expected

For the past three years, the Planning Department, in coordination with a number of community organizations, has been assessing policies and proposals that are intended to preserve socioeconomic diversity in the Mission District. The Department has focused in particular on promoting affordable housing, tenant protections, and retention of production, distribution and repair space. The Department’s efforts have culminated in the recent issuance of the Mission Action Plan 2020, which discusses objectives, policies, and regulations proposed for implementation by several City agencies in order to advance these goals.

The Mission Action Plan 2020 is both an advocacy document and road map for actions to be taken by multiple city agencies, including the Planning Commission, Board of Supervisors, Mayor’s Office of Housing, Rent Board and non-profit housing developers, working in conjunction with community organizations, to promote affordable housing.  Working in concert with the Calle 24 Latino Cultural District Organization, the goal of preservation of Latino cultural identity will be integral to the Planning Department’s process.

In addition to the promotion of affordable housing and various potential measures that seek to control gentrification, the Mission Action Plan 2020 promotes and details the City’s new investment of over $350,000,000.00 to advance tenant protections, homelessness prevention,  mental health subsidies, immigration support, youth and family services and resource centers, education programs, small business development, cultural arts, workforce development, preservation of non-profit organizations, and subsidized healthcare in the Mission District.

The Planning Department will coordinate its efforts with the San Francisco Latino Parity and Equity Coalition to ensure that Latinos are adequately represented and provided with resources, including planning strategies to combat displacement, prevent homelessness, assist immigrants and preserve Latino culture and arts.

The Mission Action Plan 2020 contemplates a phased approach to drafting legislation, including zoning changes, to implement the objectives of the Plan.  In addition to zoning controls, the City intends to seek additional funding for more affordable housing units from City-issued bond funds, federal funds, state funds, private sources, and allocations from the City’s Small Sites Fund.

Phase 2 of the Mission Action Plan 2020, to be developed by the Planning Department in the near future, will include further study of the role of market-rate housing projects that are currently in the Planning Department pipeline, the appropriate pace of market-rate development relative to the pace of affordable housing development, and further examination of specific impacts of development on the community.  Moving forward, City agencies will closely monitor the production of both market-rate and affordable housing, preservation of production distribution and repair space, and retention of small business, non-profits, SROs and space for community organizations.  Community planning efforts with Mission District neighborhood organizations will be ongoing.

Mission District Interim Zoning Controls Are Expected To Be Extended

On January 14, 2016, the Planning Commission adopted Interim Zoning Controls applicable to the Mission District.  The proposed extension of the Interim Controls is intended to allow additional time for Planning Department staff analysis of affordable housing needs, development of affordable housing and preservation of Production, Distribution and Repair capacity.  The Interim Controls require a Large Project Authorization or Conditional Use Authorization in the Mission Street Neighborhood Commercial Transit District (Mission NCT) as well as within the proposed Calle 24 Special Use District, for projects that propose the addition of more than 25, 000 square feet of certain non-residential uses, or the addition of 25 or more residential units.

The boundaries of the area that will be subject to the Mission District zoning controls will be expanded to include the Mission NCT boundaries as defined in Planning Code Section 736, as well as the district encompassed by the proposed Calle 24 Special Use District, within boundaries to be determined by the Board of Supervisors.  The Interim Zoning Controls are proposed to be extended for a period of nine months.  The Interim Zoning Controls remain largely the same as those adopted in 2016, with minor changes in wording.  The Planning Department is targeting March 2017 for adoption of the Interim Zoning Controls extension by the Planning Commission.

We will continue to monitor the Interim Zoning Controls and keep readers apprised of further developments.

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.

Recent Developments in Land Use:  Affordable Housing, PDR Districts, and Residential Expansion

| Thomas P. Tunny

​Controller’s Office Releases Inclusionary Housing Final Report

In June 2016, San Francisco voters passed Proposition C, a Charter Amendment which made significant changes to the City’s established Inclusionary Housing program. Proposition C made a number of changes to the program, including raising the affordable housing required for on-site affordable housing, off-site affordable housing, and the in-lieu fee.  Following the passage of the Charter Amendment, the Board of Supervisors charged the Controller’s Office with preparing a report on the economic feasibility of increased inclusionary housing requirements.

The Controller’s Office convened a Technical Advisory Committee (TAC), with representatives appointed by the Mayor and Board of Supervisors, to assist with the report.  The report was issued this week.  The general thrust of the report’s recommendations is to treat rental and for-sale housing differently, and to reduce the affordable housing requirements.  The report recognizes that increased inclusionary housing requirements result in reductions in the supply of market rate housing, and increases in housing prices.  A summary of the report’s recommendations is as follows:

  • The City should impose different inclusionary housing requirements on rental and for-sale (ownership) properties.
  • The City should set the initial onsite requirements from 14%-18% for rental projects and 17%-20% for ownership projects.
  • The City should set the inclusionary fee option at 18-23% for rental and 25-28% for ownership to maintain equivalence with previous on-site recommendations.
  • The City should commit to a 15-year schedule of increases to the inclusionary housing rate of 0.5% per year.
  • The City should impose additional affordability requirements for any 80/20 project financed through the City’s financing approval process.
  • Consistent with current practice for any project to which inclusionary requirements apply, the City should allow projects that are utilizing the State Density Bonus to combine provision of on-site units for the base portion of the project with payment of the fee for bonus portion of the project.
  • The Controller and TAC should reconvene in 3 years to reconsider feasibility, density bonus, and other issues, and produce an updated report.

Two members of the TAC submitted a dissent to the report’s recommendations.  A copy of the report, including the dissent, is available here:  Final Inclusionary Housing Report February 2017

Prohibition of gym and massage uses in PDR Districts

City policy makers are considering yet another restriction on uses in Production, Distribution and Repair (PDR) zoning districts.  The Mayor and Supervisor Ronen have introduced legislation amending the Planning Code to prohibit gym and massage uses in the PDR districts.  Existing law allows gym and massage (foot/chair) uses in these districts, and permits with a conditional use authorization massage establishment uses.

Planning Code Section 210.3C currently allows the Planning Commission to permit certain otherwise prohibited uses (specifically office and institutional uses) within the PDR-1-D (Design) and PDR-1-G (General) zoning districts, if the proposed project also includes new PDR uses, covering at least 1/3 of the total gross floor area developed.  The proposed legislation would allow new gym uses within the PDR districts as provided in Planning Code Section 210.3C.

Residential Expansions

Planning Code Section 317 controls the loss of residential units through merger, conversion and demolition.  The demolition provisions of Section 317 have been problematic.  If a residential unit is being demolished, a conditional use authorization from the Planning Commission is required (with certain exceptions in the RH-1 Districts), even if the unit is being replaced with one or more dwelling units.  Trying to avoid this conditional use requirement has led to problems determining whether a dwelling unit is actually being demolished, or is “tantamount” to demolition.

To address this problem, the Planning Department is considering doing away with the tantamount to demolition standards, and instead linking the conditional use requirement to the floor area of the proposed dwelling unit.  The Department originally had set the floor area requirement at 3,000 square feet, but that proved to be problematic City-wide, with the varying sizes of residences and properties.  Now, the Planning Department is considering an FAR-based standard.  A new standard such as this should be helpful in simplifying the Section 317 conditional use requirements and, hopefully, helping avoid unnecessary conditional use hearings.

The Planning Department is targeting this summer for adoption of the new controls.  We will continue to monitor the proposals, and keep readers apprised of developments.

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.

New ADU Law and Peskin’s Implementing Ordinance

| Mark Loper

​State Law Making ADUs Easier Takes Effect

This week’s update summarizes a new law requiring cities and counties to approve some accessory dwelling units (“ADUs”) in residential districts without requiring public hearings. The new law mandates “ministerial” approval so long as the ADUs meet a number of standards; grants relief from numerical density limits for qualifying ADUs; and also attempts to lower the costs of construction. Sponsors and advocates hope the bill, which took effect on January 1, 2017, can help ease California’s housing shortage by incentivizing this important type of housing.

In San Francisco, Supervisor Peskin has wasted little time trying to use this new tool to add smart housing, already proposing an ordinance implementing the law.

California Eases Restrictions on Infill ADUs

One of the more celebrated pieces of legislation passed by the California legislature last year in pro-housing circles was SB 1069, which among other provisions is aimed at easing restrictions on the costs and uncertainty of adding ADUs on infill sites. It includes a number of common sense approaches to removing barriers on production of ADUs. At the same time, its standards attempt to limit impacts on surrounding homes and ensure that the ADUs are not added in incompatible locations

SB 1069 requires all local agencies to “ministerially” approve qualifying ADUs that comply with a host of standards. The location for the ADU must be on a property zoned for single-family or multifamily use that already contains an existing single-family home. The ADU unit cannot be sold separately, but it can be rented. The size of the new unit cannot exceed 50% of the existing single-family home or 1,200 square feet, whichever is larger. But it can be located within the “living area” of the existing dwelling, within an attached secondary structure, or in an existing or new detached structure.

In denser residential parts of the state, the most challenging standard is complying with all requirements relating to height, setback, lot coverage, “and other zoning requirements” generally applicable to residential construction. Setback and lot coverage requirements often combine to significantly limit the buildable area in residentially-zoned districts, so it might be challenging for many lots with single family homes to find a location where a detached ADU structure would meet all existing Planning Code or Zoning Code requirements.

A few other notable aspects of SB 1069 include exempting qualifying ADU from density restrictions, waiving separate parking requirements for ADUs within ½ mile of public transit, and waiving utility connection fees in most situations.

Tackling Implementation: Supervisor Peskin’s Ordinance

Supervisor Aaron Peskin, who since returning to the Board of Supervisors has been very active on ADU-related legislation, just last week introduced an ordinance implementing SB 1069 in San Francisco.

Supervisor Peskin’s ordinance contains a few fairly important implementations, taking advantage of SB 1069’s invitation for cities to adopt less restrictive requirements than the state law’s standards. Most important is a requirement that the Planning Department approve a qualifying ADU pursuant to SB 1069 within 120 days from receipt of the application without modification or disapproval, cutting down on an approval process that due to low staffing levels and a (still) unprecedented workload can take far longer in some cases. It reiterates that no additional parking would be required for a qualifying ADU, and that if an existing parking space is eliminated a replacement space can be located anywhere on the lot, including uncovered and tandem spaces. It exempts garages converted into ADUs from otherwise-applicable setback requirements. It also prohibits the use of these ADUs as short-term rentals, not at all surprising considering one overarching purpose of SB 1069 is to add rental housing.

The ordinance does appear to have a few ambiguities and potential inconsistencies with SB 1069, at least in its initial version, which can be easily clarified. For example, SB 1069 applies in all single-family and multifamily residential districts, but the proposed ordinance only applies in single-family zoning districts (RH-1). It would seem the ordinance should also be extended to RH-2, RH-3, RM, and RTO districts, and that Subsection (4) of San Francisco Planning Code § 207 should either be amended accordingly or refined to provide the same relief that the ordinance would extend to single-family districts. In addition, SB 1069 allows ADUs in new detached structures to be placed on a lot, but the proposed legislation only contemplates ADUs constructed entirely within the built envelopes of existing structures.

We will continue to track this 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.

2016 End of the Year Legislation Round-Up

| Melinda Sarjapur

Mayor Vetoes Proposed Short-Term Rental Restrictions

Mayor Ed Lee vetoed legislation last week that proposed additional restrictions on the short-term rentals in the City.  The legislation, which was introduced by Supervisors Breed and Peskin and approved 7-3 by the Board of Supervisors on November 29th, would have restricted short term rentals not already registered with the City to 60 days per year, regardless of whether the host was present.  The legislation would also have narrowed the group of people that are allowed to bring a private right of action against owners violating the City’s short-term rental laws.

The Mayor’s veto means that the City’s current short term rental law will likely remain intact for now, as the Board would need a vote of eight supervisors within 30 days to override it.

The City’s current short-term rental law, which was passed in 2014, restricts rentals of residential units for less than a 30-day period unless done by a permanent resident of the unit, who registers it with the Office of Short Term Rentals.  Short term rentals are currently capped at 90 days a year for un-hosted rentals (where the owner is not in the unit when it is rented), and are unlimited for hosted rentals.  The legislation also provides that a permanent resident must reside in the unit for at least 275 days per year.

According to a San Francisco Chronicle article dated December 9th, the Mayor wrote in his veto letter that the proposed legislation would make enforcement of the current law more difficult and less effective, and would drive even more people to illegally rent units.  The move may also reflect the will of the electorate, as San Francisco voters rejected a less-severe 75-day cap on short-term rentals proposed in November 2015.

It’s likely that we’ll see alternative measures proposed to increase regulation of the City’s short-term rentals in the future, as they’ve been the subject of considerable controversy over the past few years.  As reported by the Chronicle, only about 1,700 out of an estimated 8,000 to 10,000 hosts in the city are currently registered as required by the legislation, complicating enforcement.

Small Sites Program Adopted by the Board of Supervisors

This Board of Supervisors passed legislation this week amending the City’s Inclusionary Housing Program to allow sponsors of small projects (those comprised of 24 or fewer units) to meet their Program requirements by designating their Fee payment into a Small Sites Program overseen by the Mayor’s Office of Housing and Community Development (“MOHCD”).  The designated funds would then be used to acquire or rehabilitate “Small Sites” located in the same neighborhood as the development project.

Qualifying “Small Sites” eligible to receive designated funds under this program must meet the existing requirements for the City’s Small Sites Program under the Planning Code, including that they be:  (1) rental properties that will be maintained as rental properties; (2) vacant properties that were formerly rental properties as long as those properties have been vacant for a minimum of two years prior to the effective date of this legislation; (3) properties that have been the subject of foreclosure; or (4) a Limited Equity Housing Cooperative as defined in City’s Subdivision Code or a property owned or leased by a non-profit entity modeled as a Community Land Trust.

As noted by the Planning Department, these Small Sites are typically rental properties subject to the City’s Rent Ordinance that are occupied by long-term tenants at risk of eviction and displacement.  Some Small Sites also have street-level retail or commercial uses.  When acquired by the MOHCD, they become permanently affordable housing.

The legislation also provides that if the MOHCD is unable to identify and apply the fee to a qualifying Small Sites project within the same neighborhood within two years of the fee payment, the fee would then be released into the City’s Affordable Housing Fund for use on Small Sites projects elsewhere in the City.

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.

Around City Hall: A Winter Update on Appeals and New Land Use Related Programs

| Mark Loper

​This week’s email provides a bit of color on two land use related topics that have made their way to City Hall in the past few weeks. We analyze if the Board of Supervisors actually “overturned” the approvals for 1515 South Van Ness or just kicked the can down the road a few months, and discuss the Transportation Demand Management program’s second hearing at the Board’s Land Use Committee.

1515 S. Van Ness

One of the more under-reported angles of the Board of Supervisors’ action on the project at 1515 South Van Ness is what exactly the Board voted to do. Some articles implied that the Board rejected the 1515 South Van Ness project outright, tossing out its CEQA review and sending that sponsor back to square one. While undoubtedly a surprising blow to the project, the Board’s decision was actually a bit more nuanced.

This project received a Community Plan Exemption under CEQA, which entails a detailed analysis comparing the project against the Eastern Neighborhoods EIR, and usually includes a number of project-specific background technical environmental studies. It is a common misconception that projects which receive a “CPE” did not undergo any environmental review; that couldn’t be further from the truth, as many sponsors know all too well. In fact, this project’s environmental review began in late 2014, more than a year and a half before its CPE was issued.

In any event, the Planning Department’s determination was appealed to the Board of Supervisors, which initially adopted a motion reversing the Planning Department’s CPE determination. But crucially, the Board clarified in a subsequent motion adopted three weeks later that it did not intend to overturn the CPE itself, but instead to direct that further study be undertaken to determine if the project would result in social or economic change that could lead to physical impacts on the environment “with regard to traffic or air quality” within the Calle 24 Latino Cultural District. The Board formally rescinded its initial motion, and directed Planning Department staff to provide additional information and analysis on this topic before the Board would render a final decision.

So the project is still pending and requires one more study before it can get back to the Board. Traffic and air quality are both topics that needed to be studied in the project’s original CPE, so it will be interesting to track what kind of new information and analysis is prepared on this issue.

A pro-mixed income housing optimist would point to the significant negotiations that went on before the Project’s initial approvals which led to a robust affordable housing component, and unfortunately heated public comment language on the heels of a profoundly disappointing election, and conclude that the project should move forward—pending, of course, the results of the study.

The TDM Program Stalls at Land Use

This past Monday marked the second hearing for the Transportation Demand Management (“TDM”) Program at the Board of Supervisors’ Land Use Committee, and for a second time Land Use did not forward it on to the full Board for final authorization. A little background: the Planning Department has been working on the TDM Program for a few years, and the Planning Commission recommended approval to the Board in early August. Supervisor John Avalos became the ordinance’s sponsor late in the fall, presumably intending to get the ordinance passed before he is termed out in January.

As we detailed in our email alert last week, the TDM Program is ambitious in its scope and fairly complicated in its implementation. There was agreement among the Land Use Committee members that the ultimate policy goals of the Program—weaning San Francisco’s residents and people working in the city from dependence on private cars—were commendable. And to Planning Department staff’s credit, it has worked very diligently in the last few weeks to refine the program and engage with all interested parties, including updating methodology leading to increased neighborhood parking rates and phasing in implementation of the Program for projects in the pipeline.

But the feedback from a wide range of interest groups, including non-profits and community housing organizations as well as the development community, gave the Supervisors pause. Ultimately, the Committee directed Planning Department staff to continue the hard work of refining the Program to make sure it addressed a few different categories of concerns, and to come back in late January with a refined program. Areas for further study included application to smaller residential projects; the proportional impact on very large projects; refining some of the existing Program measures; and considering adopting new measures to increase the utility of the Program and feasibility of compliance.

The most interesting aspect of the TDM Program is its flexibility, and ultimately that may have been one reason it is still at Land Use. The Planning Commission will have discretion to change the details of the Program by motion without returning to the Board of Supervisors as it sees fit. On the one hand, providing flexibility to ensure that the Program can be successfully implemented by the wide range of projects that will be subject to it is vital to its ongoing utility over time. But Supervisors heard testimony that compliance may indirectly hinder a diverse range of projects from moving forward, or at least create an uncomfortable degree of uncertainty. Despite staff’s assurances that it could incorporate changes addressing these concerns after the Board approved the Program, the Land Use Committee members ultimately decided they wanted to see as close to a final product as possible before passing it on.

We’ll provide an update on TDM in late January.

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.

Proposition W:  Increase in Real Property Transfer Tax

| Thomas P. Tunny

In our last update, we reported on two of the ballot measures presented to the voters on the November 8 ballot.  An additional measure was Proposition W, which was approved by the voters and authorized an increase in the Real Property Transfer Tax on properties sold for at least $5 million. The Real Property Transfer Tax is imposed on any transaction that results in a “transfer” of real property in the City. The definition of a “transfer” is broad and includes certain transfers of corporate stock, partnership shares, or limited liability company interests, if the transfer would constitute a “change of ownership” under California law.

Proposition W increased the Real Property Transfer Tax rate from 2% to 2.25% on properties with a value of at least $5 million and less than $10 million; from 2.5% to 2.75% on properties with a value of at least $10 million to less than $25 million; and 2.5% to 3% on properties with a value of at least $25 million.

Measure W did not include an effective date for the Transfer Tax increase, and thus the increase will become effective 10 days after the election results are certified, which likely will correspond with an effective date in early December.

TDM Update

On August 4, 2016 the Planning Commission approved the proposed Planning Code Amendment for the City’s new Transportation Demand Management (TDM) Ordinance.  The Ordinance is now scheduled to be heard at the Board of Supervisor’s Land Use and Transportation Committee on Monday, November 28.  If approved, it will then go to a hearing before the full Board of Supervisors for adoption.

TDM is a transportation policy measure that seeks to reduce automobile use.  The new TDM Ordinance will apply to most new development projects as well as some changes of use to existing property.  Smaller residential projects – those with nine units or less – would not be subject to the legislation.  Residential projects that are 100 percent affordable housing would be exempt.

Project sponsors will be required to submit a TDM Plan with their first development application. The TDM Plan is required to document the project’s compliance with the TDM Program Standards.  Some projects will be able to meet the Program Standards by complying with TDM measures already required by the Planning Code.  Those projects that need to go beyond Code requirements to meet their targets will choose from a menu of TDM options. These TDM options include:

  • subsidize transit passes;
  • subsidize bike share and/or car share membership;
  • increased on-site car share supply;
  • increased bicycle parking;
  • reducing on-site parking supply;
  • real-time transportation information displays; and
  • family-specific benefits like round-the-clock access to car seats for car share vehicles.

The proposed TDM Program has raised some concerns in the development community.  Although the goal of reducing automobile use is laudable, the TDM Program will impose yet another significant cost on development, including projects providing much-needed housing.  In addition, the Program may require some projects to reduce the amount of parking in order to satisfy the assigned TDM measure value, which will be based primarily on the number of parking spaces provided by the project regardless of its location or overall parking efficiency.  Some of the TDM measures are relatively easy to incorporate into a project, however, certain larger projects with an overall higher parking count may be required to make significant adjustments, which may also include reduction of overall parking count to not exceed existing neighborhood parking rates.

We will continue to monitor the TDM Ordinance as it proceeds through the legislative process.

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.