Real Estate Development Stimulus Plan Moves Forward

The Mayor’s Stimulus Plan – which we first reported on in our October 2nd R&J update – was introduced to the Board of Supervisors on October 27th and November 3rd.

Development Fee Simplification and Deferral

The first part of the Plan simplifies the administration of development fees and allows for their deferral. A Development Fee Collection Unit would be established at the Department of Building Inspection that would administer all fees – including those charged by the Planning Department, DBI, the MTA (i.e., the transit fee, or TIDF), the San Francisco Unified School District, and the San Francisco Public Utilities Commission. All of these city agencies would have to agree to participate once the Plan is enacted.

The Collection Unit will publish an annual Citywide Development Fee Register, which will combine all current development fees charged by all the various city agencies in one place. In addition, the Collection Unit will issue a fee report for each individual project, itemizing the various fees charged to the project. If a project sponsor disputes any of the fees in this report, they can appeal it to the Board of Appeals.

Most significantly, the Plan would make all development fees due prior to issuance of the first construction document – normally a building permit or site permit addendum. Demolition permits or other site preparation permits would not trigger the fee payment. This at first seems like it is going in the wrong direction, as some of the fees (TIDF, school fee) are currently due at the end of the project, not prior to getting your building permit. The relief is that a project sponsor could defer the payment of all development fees until the issuance of the first certificate of occupancy (temporary or final). An annual deferral fee would be charged that would be equal to the City’s cost of funds. Specifically, this fee is “calculated monthly by the San Francisco Treasurer’s Office as 60% of the Two-Year U.S. FNMA Sovereign Agency Note Yield-to-Maturity and 40% of the Current Two-Year U.S. Treasury Note Yield-to-Maturity as quoted from the close of business on the last open market day of the month previous to the date when a project sponsor elects to defer the development fees owed on a development project.”

Affordable Housing Transfer Fee Restriction Alternative

The Plan would also allow project sponsors to defer 33% of their upfront inclusionary housing (below market-rate) requirements (for residential projects) or Jobs Housing Linkage Fee requirements (for office projects) requirements. The trade off is that the owner must record a Notice of Special Restrictions on the development property that requires a fee equal to 1% of the value of the property be paid on all future transfers of the property. If no transfer is made within the first 10 years of the issuance of the first certificate of occupancy, a one-time 1% of value fee must be paid; however, the transfer fee will continue to apply to all future transfers. The fee may be paid by the buyer or seller as negotiated by the parties. So in essence, the “deferral” is permanent, as portion of this major fee would be paid over time through property transfers rather than as one lump sum up front.

A transfer would include a subdivision and sale of a condo unit (including the first sale by the developer), as well as a ground lease lasting more than 35 years. There are a number of transfers that are exempt from the transfer fee. Once the transfer fee restriction is recorded on the development property, it can be lifted at any future date if the “present value of the restriction to the city” is paid.

The Transfer Fee Restriction alternative is not available to project sponsors who wish to fulfill their BMR obligations through land dedication.

Schedule of Public Hearings

Tentatively, the Stimulus Plan will be discussed at the following public hearings:

December 3 – Planning Commission
December 19 – Building Inspection Commission
January – Board of Supervisors Land Use and Economic Development Committee

For those of you who would like to see these measures enacted, or would like to comment on them as to their potential effectiveness, we urge you to attend one or more of these hearings and make yourself heard.

Email John Kevlin at “” if you would like the text of any of the ordinances.