Oakland: Housing Approved & Zoning Updates

Zoning

Golden West Project CEQA Appeal Denied

Yesterday, the Oakland City Council unanimously denied the appeal of a 222-unit State Density Bonus project, including 16 units for very low income households, on a vacant lot next to the West Oakland BART Station, aka the Golden West project (the “Project”). The City Council upheld the Planning Commission’s March 3, 2021, unanimous approval of the Project.

Appellant appealed the Planning Commission’s decision approving the Project and the environmental review performed for the Project. Appellant argued the Project’s environmental review did not comply with the California Environmental Quality Act (“CEQA”), demanding that a focused or infill EIR be prepared alleging hazardous materials impacts.

An EIR was prepared, however, which the Project tiered off of. The Project site is within the West Oakland Specific Plan area and was evaluated by the West Oakland Specific Plan Environmental Impact Report (“EIR”). The City’s independent environmental consultant analyzed and determined there was nothing peculiar about the Project than what was programmatically analyzed in the West Oakland Specific Plan EIR. Upon review, City staff determined that “all hazardous materials concerns were previously addressed in the [West Oakland Specific Plan] EIR” and “conclude[d] that the requirement for any supplemental and/or infill EIR would be inappropriate and not justified.” No further CEQA review was required. Tiering off the West Oakland Specific Plan EIR was found to be proper.

Reuben, Junius & Rose, LLP, led by Justin A. Zucker, is happy to have successfully assisted Project sponsor in navigating this Project from concept and entitlement through appeal.

Downtown Oakland Specific Plan Zoning Incentive Program Released

As previously reported, the Downtown Oakland Specific Plan is working its way to the City Council for adoption. One of the main purposes of the new specific plan is to address issues with existing zoning controls. A key element of the Downtown Oakland Specific Plan is establishment of a Zoning Incentive Program (“ZIP”).

On July 7, 2022, Oakland released the details of the Downtown Oakland Specific Plan ZIP. The ZIP allows developers to elect to provide one or more community benefits or pay an in-lieu fee to the City to fund such benefits, in exchange of increases in allowable building height and/or density. Projects may only participate in the ZIP if they are within one of the three ZIP areas designated in the Zoning Map. The three areas are generally located in:

  • Jack London Square – area along the Embarcadero, including the Victory Court area;
  • Central Downtown Oakland – area extending one to three blocks out from Broadway between 10th and 20th Streets and from 14th Street between Castro Street to Lake Merritt Boulevard; and
  • Koreatown/Northgate – area surrounding Telegraph Avenue along 23rd, 24th, 25th, 26th, 27th and 28th

Under the ZIP, a project providing one of the following will result in allowance for additional density or non-residential floor area:

  • On-site, below market rate ground-floor commercial space – ground floor space provided at fifty percent (50%) of market rate rent for qualified retail, commercial, arts, and non-profit tenants;
  • On-site affordable dwelling units – providing on-site affordable dwelling units allows for increases over base density but not non-residential floor area;
  • Public restroom facility(ies) – provision of ground-floor, gender-neutral restroom facilities open to the public during work hours;
  • Streetscape, open space, and flood control improvements – provision of public streetscape and/or open space improvements includes landscaping, tree planting, and public art installation with flood control improvements including raising public lands, construction of drainage facilities, retaining walls, and other similar improvements;
  • In-Lieu Fees – provision of an in-lieu fee to be used by the City for the above-listed community benefits or for job training programs. The in-lieu fee per square foot of commercial development (non-residential floor area) ranges from $10 to $20 with the residential development in-lieu fee ranging from $12,000 to $22,000.

On July 13, 2022, the Zoning Update Committee held a hearing on the proposed ZIP. At that hearing, no action was taken by the Zoning Update Committee. An economic analysis of the ZIP is being prepared and will be reviewed and analyzed at the next scheduled Zoning Update Committee hearing on August 24, 2022.

Reuben, Junius, & Rose LLP has experience with entitlement projects and land use diligence throughout Oakland, and we are pleased to have worked on some of the largest housing projects approved in the city over the last several years. We will continue to track this significant rezoning and community planning effort as it moves forward.

 

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

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

Legislation Expands CUA Appeal Rights to Tenants

Appeal

On Tuesday June 14th, Supervisor Melgar introduced a new version of legislation (“Appeal Legislation”) that will change, and effectively lower the threshold, for appeals of Conditional Use Authorizations (or denial) by the Planning Commission.

A Conditional Use Authorization (“CUA”) refers to the use or development of a parcel that is not permitted as-of-right but requires additional scrutiny by the Planning Commission. These land uses have special characteristics or a unique nature that may be suitable only in certain locations or operated and arranged in a particular manner. As such, they have a higher threshold for approval. The San Francisco Planning Code states that a CUA can be approved if they are “necessary or desirable for, and compatible with, the neighborhood or the community” (Section 303(c)(1)), along with other specific findings. CUA appeals are acted upon by the Board of Supervisors.

Because the standard for granting CUA’s are highly subjective, public opinion and political pressures often come into play in determining the “necessity or desirability, and compatibility” of a project. While land use justifications are given for classifying certain uses as conditional, other motives are often in play: to protect existing, local businesses from competition by formula retail or an overconcentration of similar businesses; to preserve the amenity and value of existing buildings by making height above 40 or 50 feet a conditional use, even in high-density districts where height limits allow for taller buildings and tall buildings are prevalent. With subjective standards for both approvals and appeals at the Board of Supervisors, some decisions may effectively become a popularity contest and create a great deal of uncertainty for applicants, property owners, and tenants. This is particularly true for businesses requiring a conditional use. Prior to new state laws setting stricter standards for disapproving or reducing the density of housing developments, new residential construction was downsized more frequently for compatibility with adjacent buildings.

Currently, a decision by the Planning Commission on a CUA may only be appealed within 30 days by either 1) five members of the Board of Supervisors; or 2) the owners of at least 20% of the property within 300 feet of the exterior boundaries of the subject property. Where a property has joint ownership, the signature of each owner is calculated as representing the affected property in “direct proportion to the amount of total ownership of that property attributable to the owners subscribing to the notice of appeal” (Section 308.1(b)(4)). A CUA may only be overturned or modified by a 2/3 vote of the Board.

The primary substantive change in the Appeal Legislation would count the signature of “Verified Tenants” as well as those of property owners toward meeting the 20% threshold for filing an appeal (currently, only owners are eligible). After receiving the signatures, the Department of Public Works (“DPW”) would have five days to verify whether the 20% requirement had been fulfilled.

In a city where the vast majority of owners and businesses rent or lease, and many owners do not live or operate businesses on their property, the policy motivations of the Appeal Legislation are self-evident: to give the people living or running a business in a building who may be most affected by a CUA decision standing to file an appeal regardless of whether they own the affected property.

With some narrow exceptions (e.g., property owners voting to tax themselves for community benefit districts that provide additional services), conditioning public participation or voting on property ownership is an anachronism. (North Carolina, the last state to make property ownership a prerequisite to voting in presidential elections, abolished its requirement in 1856.) With that said, the Appeal Legislation does raise several questions about the relative weight given to verification of tenant signatures, tenant votes, and the potential for double-counting votes in some instances:

  • Verified Tenants or Honor System? Only a “Verified Tenant” may subscribe to an appeal. A Verified Tenant is a commercial or residential tenant who declares under penalty of perjury that they lease an entire property or a unit on the property with a lease term exceeding 32 days. A Verified Tenant must maintain proof of tenancy (lease or other government document showing residency/occupancy) and have occupancy longer than 32 days as of the date of signing the appeal.

However, the Department of Public Works is not required to verify tenant documentation; it “may” request documentation at its discretion. It also does not specify that the signature from a business must be an authorized signatory for the business. For example, during the installation of street seating under COVID emergency orders, there were instances of unauthorized employees granting permission for structures with seating for adjacent restaurants to encroach on another store’s frontage without the business owner’s knowledge or consent. Given that DPW only has five days to determine the validity of an appeal, the verification process seems more like an honor system with a bare minimum of time for DPW to calculate the percentages based on self-reporting by signatories.

Five days does not provide a reasonable amount of time for requesting and verifying even a random sample of documentation from Verified Tenants. Further, defining a Verified Tenant as one occupying a unit pursuant to a lease should require a tenant to provide a copy of the lease. Other documents (DMV records, federal income tax records, and utility bills) may demonstrate that a tenant lives somewhere, but not that they are an authorized occupant with a lease. Verifying property ownership, the current requirement for CUA appeals, is an easier process since ownership is a matter of public record. Under the Appeal Legislation, the relevant documents to prove up occupancy for Verified Tenants are not a matter of public record and an applicant has no right to demand an audit by DPW. At minimum, a random audit of a percentage of tenant signatories should be included and the overall total counted toward the appeal discounted accordingly. This could be accomplished without extending overall timelines for a 5-day preliminary acceptance of the appeal, subject to an additional period for DPW to conduct a random audit to determine the percentage of invalid signatures. If the rate of valid signatures in the sample would cause the overall number of signatures to fall below the 20% threshold, the appeal would be rejected. (This is similar to the approach used for a preliminary evaluation and rejection of signatures in support of ballot measures.)

  • One Tenant Speaks for All Tenants in a Unit & All Units Are Equal. Where a rental unit is occupied by more than one tenant, the signature of one tenant in a unit effectively speaks for all tenants in the space. Similarly, all rental units are counted equally toward the 20% threshold. For example, in a multi-unit property, a 10,000 square foot commercial rental unit would be given equal weight as a 500 square foot studio unit. Compare this to the treatment of jointly owned property, where only the portion of the property attributable to a single signatory is counted.
  • Potential for Double-Counting. Where a joint owner and a tenant sign on to an appeal, each signatory is counted according to the method laid out for each. As an example, if an owner of one unit in a 2-unit condo building has a 50% interest in the property and rents that unit out, their two signatures would be added together such that they would effectively represent 100% of the property for appeal purposes. If the other owner or tenant joined, the percentage counted toward the appeal would not increase beyond 100%. On the other hand, if the other owner also rented and both that owner and tenant opposed the appeal, they would effectively be disenfranchised in determining the appeal threshold.

Depending on the number of rental units and ownership structure of buildings near the project, the Appeal Legislation could significantly reduce the 20% threshold, effectively negate the voice of supportive property owners and tenants, and, without any mandatory verification mechanisms for tenants, undermine transparency and trust in the validity of an appeal.

With that said, the Appeal Legislation does include other terms that reduce confusion and promotes administrative efficiency. For example, it requires the Planning Commission’s final, signed approval to be transmitted to the Clerk of the Board within 10 days of the Planning Commission’s action. No such reporting is currently required, and final decisions are not always issued within 10 days. Thus, the 10-day limit should broadly benefit all recipients of CUA approvals and reduce the burden on the Clerk of verifying the Planning Commission’s action. Appeals may not be filed “earlier than ten business days” or later than 30 days from the date of action by the Planning Commission. Although this technically shortens the appeal window to 20 days, the overall 30-day time period remains unchanged and there is no tolling of the appeal period if the final Planning Commission decision is not transmitted to the Clerk within 10 days.

Since most CUA appeals are filed towards the end of the 30-day appeal period, the change should have minimal, if any, effect on the length of the CUA appeal process. It does, however, lower the bar for appeals and increases the risk of delay and cost overruns, particularly for small businesses.

Given San Francisco’s slower-than-average recovery from COVID-19 job losses, the broader question the Appeal Legislation raises is one of priorities and goals for the city’s future. Is this the time to introduce more uncertainty and procedural hurdles into the business and housing environment?

Or should policymakers be focused on bigger questions facing our city: the revival of downtown and Union Square, restoring the tourism sector, and creating space for more flexible models for living, working, and doing business in a post-pandemic (or COVID endemic) world. Is a CUA really necessary for banks, architect’s offices, or small-scale hotels in Neighborhood Commercial Districts? Or for enlarging a successful business into an adjacent storefront? Are minor changes like these worth the time and attention of San Francisco’s elected officials? On balance, does the extent of regulatory oversight strike the right balance between public participation, public policy goals, and the costs, both in time and money, to applicants.

Public participation in the Planning process should be—and is—a given. But right now, shouldn’t that participation be focused on how to fill vacant spaces and addressing a persistent housing shortage and widespread homelessness, rather than adding time, cost, and risk for businesses and projects that fulfill those goals? By making big moves to provide flexibility and fast, by right-approvals for new housing and new/expanding businesses, San Francisco can send a strong signal that it is still the adaptable, dynamic, creative city that will continue to be an economic and cultural powerhouse—and not the dystopia the national press has portrayed it as of late. Tenants—both residential and commercial—should of course have a place at the table when major changes are proposed. But that participation should be focused on major changes in zoning rules and large-scale projects that need exceptions from standard regulations. At a bare minimum, an expansion of the right to bring a CUA appeal should be accompanied with the elimination of CUA requirements that stand in the way of important public policy goals.

Regardless of where one stands on these amendments, if approved, they will change the CUA Appeal landscape. The legislation was introduced at the June 14th Board of Supervisors hearing and requires review and comment by the Planning Commission before it is taken up by the Supervisors. Stay tuned for updates on this legislation.

 

Authored by Reuben, Junius & Rose, LLP.

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.

Berkeley SB 35 Project Wins Appeal

SB 35

Court of Appeal Rejects City’s Bases for Denying the Project

After more than two years of legal wrangling in the courts, a 260-unit mixed-use project at 1900 Fourth Street in Berkeley (the Spenger’s parking lot) will soon be able to move forward under the streamlined approval process set forth in Senate Bill 35 (“SB 35”).  This week, the Court of Appeal determined—in a published decision that will have precedential value in other cases throughout the state—that the City’s rationale for denying the project had no merit.  The Court’s opinion reversed the decision of the trial court, which had upheld the City’s denial of the project.

Background

The project was originally proposed to include 135 apartments over 33,000 square feet of retail.  The project site is within a three-block area that the Berkeley Landmarks Preservation Commission (“Commission”) designated as a City landmark based on its proximity to the West Berkeley Shellmound.  The Shellmound is considered to have been a significant cultural resource and is listed on the California Register of Historical Resources.  However, as the Court noted in its opinion, nothing remains of the Shellmound above ground and decades of development had “systematically demolished” most of the Shellmound.

The draft Environmental Impact Report (“EIR”) for the original project exhaustively reviewed the potential impacts of the project on the Shellmound and concluded that there was very little chance, if any, that part of the Shellmound had been located on the project site.  The draft EIR nonetheless recommended mitigation measures to ensure that, if any of the Shellmound was discovered during construction, the project would not disturb it.  However, despite the robust analysis and mitigation measures in the draft EIR, the Commission took the position that the draft EIR was “seriously deficient” in its analysis of cultural resources.

In response to the Commission’s position, the project sponsor reformulated the project to take advantage of SB 35, which would allow the project to move forward without CEQA review.  The SB 35 project would include 260 apartments (nearly double the original number) over 27,500 square feet of retail space and parking.  To take advantage of SB 35, the project would make 50% of the units affordable to low-income households (we note that in some cases, only 10% of the units need to be affordable to low-income households).

The City Denies the Project

The City denied the revised application on several bases: (1) SB 35 does not apply to projects that require demolition of an “historic structure”; (2) SB 35 does not apply to the City because it is a Charter City; and (3) the project conflicts with the City’s affordable housing fee and traffic impact requirements.  After denying the revised application, the City offered that the project sponsor could restart the processing of the earlier application or revise it to conform to the SB 35 project.  The project sponsor sued.

Trial Court Upholds the City’s Denial of the Project

As described in a prior update, the trial court upheld the City’s denial of the revised application on two bases.  First, the trial court concluded that it was bound to uphold the City’s determination that the project might require demolition of an “historic structure” (i.e., the Shellmound) if there was any evidence to support it, however thin the evidence might be.  Second, the trial court concluded, after parsing the language of SB 35, that SB 35 did not apply to mixed use projects except in the very limited circumstance when the zoning specifically required at least 2/3 of the square footage to be residential.

Court of Appeal Rejects City’s Arguments and Reverses the Trial Court Decision

The Court of Appeal took a less deferential approach to its review of the City’s decision, concluding that the Legislature had intended to restrict cities’ discretion when it enacted SB 35.  The Court saw no evidence that the Legislature intended the term “historic structure” to include an historic site (like the Shellmound) and no evidence of a structure that could be demolished by the project.  The Court also rejected the City’s arguments that the revised project would conflict with its affordable housing fee and traffic impact requirements.

Significantly, the Court confirmed that the housing crisis is a matter of statewide concern and that the Legislature can therefore impinge upon a Charter City’s normally broad authority over its municipal affairs so long as the restriction of local authority is not overly broad.  In this case, the Court found that the extent to which SB 35 limited the City’s authority over historic preservation was not overly broad, and thus allowable.  This aspect of the Court’s opinion augurs well for the raft of recent state housing legislation, much of which restricts local discretion.

Finally, the Court rejected the notion that SB 35 does not apply to mixed-use projects except where the zoning requires at least 2/3 of the square footage to be residential.  The Court saw this interpretation of SB 35 as “strained and unreasonable” and concluded it “makes no sense in light of the statute’s purpose” to facilitate housing.  The Court affirmed that SB 35 is available so long as the project itself designates at least 2/3 of its square footage for residential use.

We expect the project sponsor will recover its attorney fees associated with the litigation given that the lawsuit ensured that the City would follow state housing law.  The Court’s opinion already provides for the sponsor to recover its costs (exclusive of attorney fees) related to the appeal.

 

Authored by Reuben, Junius & Rose, LLP Attorney Matthew Visick.

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.