San Francisco Entitlement Streamlining Legislation Faces Legislative Hurdles

| Daniel J. Turner
planning

As previously reported in August, San Francisco is currently considering a major overhaul of its Planning Code that would revise, relax, and simplify many of the city’s complex zoning and development controls. The legislation, aptly named the Housing Production – Constraints Reduction Ordinance, would affect over 30 sections of the Planning Code, ranging from reducing required setbacks to relaxing demolition controls and notice requirements.

As part of the legislation process, the City’s Planning Commission reviewed the ordinance in late July and gave its approval 4-2-1 with a few minor modifications. It then came before the Board of Supervisors Land Use and Transportation Committee (LUTC) on September 18th to be reviewed, discussed, and amended, if necessary. This committee review is a necessary hurdle before the legislation can be presented to the full Board of Supervisors and voted on.

Although some were hopeful of the ordinance passing in its current form, it met strong opposition from both supervisors and members of the public. The hearing began with Planning Department staff recommending a number of corrective amendments, including some that re-added various conditional use requirements that the legislation originally proposed to remove. During the over four hours of public comment, members of the public expressed concerns about reduced notice requirements, loss of rent-controlled housing, and a loss of neighborhood character from simplified development controls.

The three supervisors on the committee echoed these sentiments, expressing great concern over many of the proposed changes. Notably, many members of the committee were not convinced that relaxing and making development standards more uniform, such as setbacks and height limits, would produce more housing, and felt that, instead, it would simply lead to a loss of neighborhood character. It was stated multiple times that zoning fixes should focus on large-scale projects, while many of the proposed changes were seen to mostly benefit one and two-unit developments. The supervisors were also critical of the changes to notice requirements and demolitions controls, citing worries over reduced public participation and the loss of rent-controlled housing, respectively.

The hearing ended with Supervisor and LUTC President Melgar stating that she had been planning to introduce numerous amendments based on community feedback. The LUTC also agreed that there was a need to formalize the amendments proposed by Planning and the Mayor, and to incorporate many of the changes discussed during the meeting. The legislation was continued for two weeks, although it remains to be seen if the amendment language will be ready by then. If said amendments are considered substantive, the legislation would need to go back to the Planning Commission, then return to the LUTC before finally going before the full Board of Supervisors. The ordinance is open to further amendment at each step of the way, and it seems that many of the provisions intended to simplify the development process are now at risk of being weakened or removed.

With Planning Commission’s blessing of the legislation and San Francisco’s looming RHNA requirement to build 82,000 new housing units over the next eights years, some were hopeful that the legislation would move quickly through the City’s legislative bodies; however, last week’s hearing proved there’s a long road ahead for the Housing Production – Constraints Reduction Ordinance.

 

Authored by Reuben, Junius & Rose, LLP Attorney Daniel J. Turner.

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

Legislation Aimed at Impact Fee Reform Nears Final Approval

| Kaitlin Sheber
Development

Last month, the San Francisco Board of Supervisors passed on first reading Impact Fee Reform legislation aimed to make development more predictable, easier, and financially feasible. The legislation complements the proposed BMR and impact fee changes our office previously reported on and will:

  1. Reinstate the fee deferral program;
  2. Escalate development impact fees by 2% each January;
  3. Allow projects to lock in the type and rate of impact fees to be paid;
  4. Waive development fees for a narrow category of projects; and
  5. Adopt a nexus analysis that was completed in December 2021.

The Impact Fee Reform legislation is a part of the City’s efforts at recovery from the pandemic and is meant to supplement efforts to accomplish the policy goals outlined in the updated Housing Element that was adopted earlier this year. Inclusionary housing development impact fees are specifically excluded from the scope of the legislation, so would not be affected.

Below is a brief summary of the changes proposed by the legislation:

Fee Deferral Program

The legislation would reinstate and modify a Fee Deferral Program that expired in 2013 to allow project sponsors to defer 80%-85% of total development impact fees, except inclusionary affordable housing fees. For projects that opt to defer fees:

  • Generally, projects subject to a neighborhood infrastructure impact development fee would be required to pay 20% of the total amount of development fees owed prior to issuance of the first construction document;
  • For projects not subject to a neighborhood infrastructure impact development fee, project sponsors would be required to pay 15% of the total amount of development fees owed prior to issuance of the first construction document.

The remaining percentage of fees must be paid before issuance of the first certificate of occupancy. To obtain deferral, the project sponsor must submit a deferral request to DBI on a form provided by DBI before issuance of the first construction document. Fee deferral is not available to project sponsors that pay the fee before the effective date of the legislation. Projects subject to a development agreement would be eligible for fee deferral, unless otherwise agreed by the parties.

Development Fee Indexing

The legislation would replace and simplify the current method of annual fee escalation with a 2% escalation rate every January 1st.

Development Fee Assessment

The legislation proposes to freeze the rates of development impact fees as follows:

Additionally, the legislation institutes new procedures for assessing development impact fees when a development project requires a modification, renewal, or extension.

Development Impact Fee Waivers for Certain Projects

The legislation would also waive development impact fees for certain projects. Eligible projects that obtain a final approval before the effective date of the ordinance that have not already paid development impact fees are eligible for waiver. Waiver under the legislation is set to expire on December 31, 2026.

Projects in Production, Distribution, and Repair (“PDR”) Districts:

Within PDR Districts, projects that meet the following requirements are eligible for waiver from development impact fees related to establishing new PDR or retail use:

  • Located in a PDR District;
  • Contain a retail or PDR use and no residential uses;
  • Propose new construction of at least 20,000 square feet of Gross Floor Area (“GFA”) and a maximum of 200,000 square feet of GFA;
  • Located on a vacant site or site improved with buildings with less than a 0.25:1 Floor Area Ratio on the date a development application is submitted; and
  • Submit a complete development application on or before December 31, 2026.

Projects in C-2 and C-3 Districts

Within C-2 and C-3 Districts, projects that meet the following requirements are eligible for waiver from development impact fees related to establishing hotel, restaurant, bar, outdoor activity, or entertainment use:

  • Located in a C-2 or C-3 District;
  • Contain hotel, restaurant, bar, outdoor activity, or entertainment use; and
  • Submit a completed development application on or before December 31, 2026.

 

Authored by Reuben, Junius & Rose, LLP Attorney Kaitlin Sheber.

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

Details on San Francisco’s Proposed Housing Production Ordinance

| Mark Loper
ordinance

Recently, Mayor London Breed and Supervisor Joel Engardio introduced an ordinance removing some of the Planning Code’s regulatory barriers to housing. A major implementing measure of San Francisco’s recent Housing Element, it is rich in detail and nuance and proposes a range of common-sense changes to increase housing production. Below, we summarize some of the major aspects of the proposal captured in the first draft of the ordinance, broken up into two sections: process streamlining, and relief from certain building design and density restrictions.

Process Streamlining

  • Eliminating conditional use requirement for certain developments. Automatic conditional use (“CU”) approvals for developments on certain “large lots” in neighborhood commercial districts would be eliminated. Similarly, CU requirements for buildings taller than 40-50 feet in RH, RM, RC, and Broadway NC districts would be eliminated, as would buildings taller than 50 feet along the Van Ness Special Use District. This would unlock the development potential of many sites where the height limit is comfortably above the 40-50 foot CU threshold.
  • HOME–SF. HOME-SF would be modified to allow projects on sites where a single-family home exists and is proposed to be demolished, and to remove a requirement that the Planning Department’s Environmental Review Officer determine the project will not have any adverse wind, shadow, or preservation impacts.
  • Dwelling unit demolitions. Outside of the “priority equity” areas of San Francisco—which are neighborhoods with a higher density of vulnerable populations; see the map at the bottom of this alert—some residential demolition projects will not require a CU. The project cannot remove more than two residential units; the units to be demolished cannot be tenant occupied or have a history of evictions within the last 5 years; the building cannot be an historic resource; the project needs to add at least one more unit than is proposed for demolition; and the unit needs to comply with the Housing Accountability Act’s protections for replacement units and recent tenants.

Design and Density Regulation Changes

  • Increased residential density in RH districts. The ordinance would eliminate the need for a conditional use (“CU”) to exceed the one- to three-unit base density in RH districts. And, it would principally permit one unit per 3,000 square feet of lot area in the three RH-1 districts; one unit per 1,500 square feet of lot area in RH-2; and 1 unit per 1,000 square feet of lot area in RH-3, exclusive of any ADUs. Also, residential projects in RH zones that meet certain eligibility criteria currently can have up to six units on corner lots, and up to four units on non-corner lots. The ordinance would add group housing to this potential density bonus on RH-1 zoned lots and eliminate an owner occupancy requirement, opening up the number of sites that could qualify for this density increase.
  • Making senior housing easier and more widespread. Currently, senior housing—which generally allows increased residential density—is only permitted within ¼ mile of an NC-2 zoning district or higher. The ordinance would eliminate this restriction, opening a wider area of the city for this much-needed type of housing. It would also eliminate an automatic CU requirement for senior housing in RH and RM districts that are not close to neighborhood commercial districts.
  • Minimum lot width and area. The City’s minimum lot width would be reduced from 25 feet in most districts to 20, and lot area reduced from 2,500 square feet to 1,200. This would allow more residential density on some larger lots.
  • Reducing rear yard requirement. San Francisco’s rear yard requirements are notoriously complicated and a regulation that often requires exceptions or limits the development potential of a property. The ordinance would make the rear yard requirement 25% of lot depth or 15 feet in most zoning districts. In certain “R” districts, the requirement would be 30% or 15 feet. It also includes a common-sense option for corner lot developments to provide an interior corner open area, saving the need for a variance or other entitlement.

We should note that the legislative digest flags a few aspects of the residential streamlining proposal that do not appear to be included in the first draft of the ordinance. These may be added to subsequent versions of the legislation, and it could be amended as it is brought to the Planning Commission and eventually the Board of Supervisors. We will continue to track this important ordinance as it moves forward. We will also track other legislation that seeks to further implement the Housing Element.

 

Authored by Reuben, Junius & Rose, LLP Attorney Mark Loper.

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

 

PDR Protections & Higher Fees for Large Institutions in Housing Element Package

| Melinda Sarjapur and Daniel Frattin
PDR

San Francisco’s Housing Element Update (“Update”) has been in the works since mid-2020, and the City is sprinting to adopt it before a January 2023 deadline that could open the door to Builder’s Remedy Projects and eventually a loss of state funding for affordable housing and transportation. (See Exhibit D to the Planning Department’s Update Initiation Memo).

The Update’s primary focus is to spur residential construction to meet the state-mandated RHNA target of 82,000 new homes over eight years and to shift more housing development – especially affordable housing – to transit corridors on the westside.

However, through “conforming amendments” to other elements of the City’s General Plan, the City sets the stage for new restrictions on the conversion or displacement of existing Production, Distribution, and Repair (“PDR”) or Industrial uses. It also targets large institutions – one of the sectors where in-person activity tends to be higher in the era of hybrid work – for new development impact fees.

Two of these amendments are shown below.  For each item, text from the existing General Plan is shown in plain text; proposed additions to the General Plan are underlined.

Air Quality Element:

Policy 3.3: Continue existing city policies that require housing development in conjunction with office development and expand this requirement to other types of commercial and large institutional developments.

The intent is to require large institutional employers that aren’t currently subject to the City’s Jobs-Housing Linkage Fee to conduct an analysis of the housing demand of their employees and then show how they will meet that demand in their Institutional Master Plans (“IMP”). It could also pave the path for extending the JHLF to large non-institutional uses that are not currently subject to it (hospitals/schools/etc.).

In a bit of revisionist history, the Planning Department notes that the “IMP” caused colleges to realize the housing needs of their students and credit that as causing many private non-profit colleges to build student housing. In fact, IMPs had nothing to do with colleges building housing. The need was obvious; in reality inclusionary housing requirements were too expensive for them to shoulder. It was only when the City exempted student housing from inclusionary requirements that several private schools embarked on ambitious housing construction programs. Non-profit colleges and healthcare providers will find it difficult to grow in San Francisco if the Jobs-Housing Linkage Fee – currently ranging from $26 – $76 per square foot for other uses – is extended to them.

Commerce & Industry Element:

Policy 4.5: Control encroachment of incompatible land uses on viable industrial activity. Production, Distribution, and Repair (PDR) areas offer economic opportunity for adjacent neighborhoods, especially for low-income communities and communities of color. PDR businesses can provide stable job opportunities, good wages, and diversity in types of activities and jobs Restrict incompatible land uses, such as housing and office, and the conversion of industrial buildings to other building types in PDR districts and in areas of concentrated PDR, construction, or utility activities.

In mixed-use districts or areas adjacent to PDR districts, avoid the displacement of existing businesses, protect the affordability of PDR space, and, if displacement is unavoidable, replace some or all the PDR use with viable, affordable industrial space on-site or off-site in a PDR district.

This revised language paves the way for the City to adopt additional restrictions on the types of uses permitted in PDR districts – specifically the conversion or new construction of laboratory uses that frequently complement PDR. Engineering labs, for example, often need PDR to supply parts for prototyping, testing, and may well grow into small-scale manufacturing (PDR) uses themselves. This flexibility has served both PDR and lab uses well. How is a policy that replaces synergy with inflexibility good for the City? Why is industrial protection in districts where housing is not even permitted a “conforming” amendment to the General Plan?

Even more ironically, this policy amendment sets the stage to say “no” to housing in the very areas that have been most successful at producing it: rezoned PDR areas accounted for roughly ¾ of housing production by striking a balance between preserving space for industry and allowing much higher residential density. Proposition X made it harder to build housing in certain districts by requiring replacement space. However, this policy could reach much further and set up yet another restriction on housing in favor of preserving industrial space. The Update is supposed to remove barriers to housing. This one fails that test.

A full list of the General Plan updates proposed in connection with the Housing Element Update is available on the Planning Department’s website.

The full Housing Element Update is anticipated for adoption by the Planning Commission on December 15, 2022, and Board of Supervisors in January 2023.

 

Authored by Reuben, Junius & Rose, LLP Attorney Melinda Sarjapur and Daniel Frattin.

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

Downtown Oakland Specific Plan: ZIP Update

| Justin A. Zucker
ZIP

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

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

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

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

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

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

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

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

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

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

 

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

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

HCD Cracks Down on S.F. Housing Practices; S.F. Real Estate Tax Appeal Deadline

| Thomas P. Tunny
HAU

Last month, the State Department of Housing and Community Development (“HCD”) announced that its Housing Accountability Unit (“HAU”) will conduct a first-ever Housing Policy and Practice Review of San Francisco, aimed at identifying and removing barriers to approval and construction of new housing in the City. According to the City’s self-reported data, it has the longest timelines in the state for advancing housing projects to construction, among the highest housing and construction costs, and the HAU has received more complaints about San Francisco than any other local jurisdiction in the state. U.S. Census data shows that Seattle – a city of comparable size – approves housing construction at more than three times the rate of San Francisco.

Over the next nine months and beyond, the HAU, in partnership with the U.C. Berkeley Institute of Urban and Regional Development and others, will conduct a comprehensive analysis of San Francisco’s housing approval policies and practices. The review will examine discretionary decision-making patterns that lead to abnormally long housing delays. The review also intends to identify barriers to the approval and development of housing at all income levels, including housing that is affordable to lower- and moderate-income households.

Separately, in an August 8 letter to Planning Director Rich Hillis, HCD was both critical and encouraging of the City’s Draft Housing Element. California cities are required to update their General Plan Housing Elements by January 2023. HCD praised the City’s “bold and meaningful actions to both reduce barriers to higher-opportunity neighborhoods while simultaneously reinvesting in historically underserved neighborhoods.” Yet HCD also identified a number of revisions that would be necessary for the Housing Element to comply with state law.

In yet another letter on August 11, HCD asked the City to explain itself concerning a specific project approval, expressing concern that the City violated housing law. HCD was concerned with the City’s decision, in granting conditional approval, to downsize a 19-unit group housing project at 3832 18th Street in the Mission District. HCD expressed concern that the downsizing violated the State Density Bonus Law.

This project-specific letter follows HCD’s letter to the City last November expressing concern that the City’s denial of two large housing projects, at 450 O’Farrell Street and 469 Stevenson Street, may have violated state law. In those cases, the Planning Commission had approved the projects, but the Board of Supervisors denied them.

The aforementioned Housing Accountability Unit at HCD is part of an unprecedented new initiative to support the production of housing statewide. According to its website, “California’s housing crisis has reached historic proportions despite the passage of numerous laws intended to increase the supply of housing affordable to Californians at all income levels.” As part of the 2021-2022 state budget, HCD received additional staff to grow its accountability efforts and formed the HAU. The HAU holds jurisdictions accountable for meeting their housing element commitments and complying with state housing laws. One of its primary tools is technical assistance to the public and enforcement letters. More information on these powers is available at the HCD website.

San Francisco Real Estate Tax Appeal Deadline

The deadline for San Francisco property owners to appeal their property’s value for the 2022/2023 tax year is September 15, 2022.  Deadlines for other California counties vary.  Please contact Kevin Rose (krose@reubenlaw.com) if you have questions about the tax appeal process.

 

Authored by Reuben, Junius & Rose, LLP Attorney Thomas P. Tunny.

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 Carlos Enacts Northeast Area Development Moratorium

| Matthew Visick
moratorium

Pending Specific Plan Will Streamline CEQA Review of Future Life Science Projects

On April 25th, the City of San Carlos enacted a development moratorium covering approximately 120 acres of land in the north side of the City, and east of Old County Road (see map below).  San Carlos has seen significant life science and R&D development in recent years, and the northeast area is anticipated to see an expansion of those uses.  The moratorium is broad, applying to virtually all development applications other than tenant improvements and projects with complete, filed applications.  It is expected to be in effect for two years while the City prepares a Specific Plan that will guide future development, articulate the public benefits future projects will provide, and streamline CEQA review of projects consistent with the Specific Plan.

State law allows a City Council or County Board of Supervisors to enact a development moratorium of up to two years after it makes findings that approving projects would create an immediate threat to the public health, safety, or welfare.  The moratorium is initially limited to 45 days but can be extended with another vote of the City Council or Board of Supervisors to a maximum of up to two years.  Both the vote to enact the moratorium and the vote to extend must be approved by a supermajority (i.e., 4/5ths) vote.

The San Carlos City Council found development in the northeast area would have health, safety, and welfare impacts unless the Specific Plan considered how it would affect the “supply of land and adequate sites suitable, feasible, and available for the development of housing.”  The findings anticipate that the Specific Plan will “develop policies and strategies to incorporate housing as a part of this new development.”

While not expected, it is possible the City Council will carve out additional projects when it considers whether to extend the moratorium.  Several project sponsors opposed the enactment of the moratorium at the meeting on April 25, urging the Council to exempt projects with applications pending even if those applications were not yet complete.  At least one Council member appeared sympathetic to those arguments during the May 25th meeting (as noted above, at least four of the five Council members would need to vote to extend the moratorium). Planning Department staff will hold a public meeting with stakeholders on May 11th to gather stakeholder input and that input will be shared with the Council.

Planning Department staff emphasized at the April 25th hearing that the Environmental Impact Report (EIR) the City is preparing for the Specific Plan will help streamline the approval of future projects that are consistent with the Plan.  State law provides several CEQA streamlining tools for projects consistent with a specific plan analyzed with an EIR.  Development under Redwood City’s Downtown Precise Plan (DTPP) provides a good example of the advantages of this approach for both the City and the applicable project sponsors.  Projects consistent with the DTPP required little to no additional project-specific CEQA review, allowing them to move through the approval process in a fraction of the time normally required.  In an ideal world, this strategy allows over-stretched Planning Department staff to redirect their time from project-level CEQA review to other priorities, and project sponsors to significantly reduce the often inordinate time and cost associated with CEQA review of individual projects.

 

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.

Cities’ Upcoming Need to Identify Housing Opportunity Sites

| Tuija Catalano
Housing

The next RHNA (Regional Housing Needs Assessment) cycle is quickly approaching, which means that all Bay Area cities will be taking a closer look at their Housing Elements and determining whether they have enough land zoned to accommodate more housing.

In June 2020, the California Housing and Community Development (“HCD”) provided the Bay Area its Regional Housing Needs Determination for the next RHNA cycle (2023-2031), identifying a need for 441,176 new housing units.  The overall figure is further categorized into very low (26%), low (15%), moderate (16%), and above moderate (43%) housing and income levels.  This figure represents a significant increase when compared to the prior RHNA cycle (2015-2023) when the Bay Area was allocated 187,990 units.  In the Bay Area, the Association of Bay Area Governments (“ABAG”) is responsible for allocating the overall figure among cities and counties, and its Housing Methodology Committee spent much of 2020 in meetings to discuss and decide on different methodology options.  Regardless of which allocation methodology was going to be chosen, most Bay Area cities and counties are seeing a significant increase in their RHNA allocations.

ABAG’s Executive Board approved the Draft RHNA Methodology and Final RHNA Subregional Shares (“Draft Allocation”) for the Bay Area on January 21, 2021.  The Draft Allocation is subject to HCD approval on or before April 11, 2021, and thereafter an appeal opportunity by individual cities and counties during Summer/Fall 2021.  Historically, very few appeals by individual cities or counties have been successful, and thus most of the Draft Allocation figures are anticipated to be adopted as final allocations by late 2021.

Once the allocations have been finalized, individual cities and counties will need to amend their Housing Elements and identify sufficient number of vacant or underdeveloped sites that can accommodate the RHNA figure allocated to each city.  Many cities are currently starting the process by engaging consultants to work on their next Housing Element update.  The updated housing elements must be submitted to the State by each city and county no later than January 2023, and if applicable, cities and counties will thereafter need to rezone properties consistent with the updated Housing Elements and site identifications.

To understand the magnitude of the increases cities and counties are facing for the next RHNA cycle, it is helpful to look at some of the Draft Allocation figures.  The following represents a sampling of Bay Area cities, comparing their final 2015-2023 RHNA figure to those proposed in the Draft Allocation for the next, 2023-2031 cycle.  For a complete list of cities/counties, see the Draft Allocation.

City2015-2023 cycle2023-2031 cycle
San Francisco28,86982,069
Oakland14,76526,251
San Jose35,08062,200
Berkeley2,9598,934
Fremont5,45512,897
Concord3,4785,073
Lafayette4002,114
Walnut Creek2,2355,805
Novato4152,090
Tiburon78639
Daly City1,3504,838
Menlo Park6552,946
San Bruno1,1553,165
Cupertino1,0644,588
Los Gatos6191,993
Sunnyvale5,45211,966

Cities and counties are not required to build new housing, but they are required to plan for it and specifically plan for enough housing that satisfies their assigned RHNA figure.  Since most Bay Area cities and counties are subject to significant increases, local city councils and board of supervisors, along with their Planning Departments, will be taking a comprehensive look at zoning and development in their jurisdictions over the next year and a half.  This may also represent opportunities in the near-term for property owners of currently vacant or underutilized properties and/or those that lack the zoning necessary for residential development.

 

Authored by Reuben, Junius & Rose, LLP Attorney Tuija Catalano.

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

Task Force Recommends Fee and Permit Changes

| Tara Sullivan
Task Force

There are few cities that have not been negatively impacted by COVID-19.  Since March, San Francisco and the surrounding cities have been largely shut down, with businesses opening in a staggered manner based on infection and death rates.  Nonessential office workers remain at home.  Seven months into this “new normal”, a number of studies and reports have been issued, analyzing the impact the virus has had on the local economy.  Without a doubt, San Francisco appears to have been hit particularly hard, as more and more companies are allowing employees to work remotely, many through July 2021.  The result is an empty business district and what appears to be an exodus of residents from the City.  The lack of office employees working and residing in the City has had a drastic effect on the economy.  A few key statistics:[1]

  • 1% office vacancy rate in Q3
  • 43% decline in sales tax receipts from April to June as compared to 2019
  • 65% decrease in sales at restaurants and bars and consumer goods stores
  • 50%+ storefronts are not operating as of August 2020
  • 1% increase in online sales tax receipts

Recognizing that the City was facing a looming financial crisis, Mayor Breed and Board President Yee convened a task force – the Economic Recovery Task Force – in the spring to advise the City and provide recommendations to support the recovery efforts from COVID-19.  Consisting of over 100 members, the Task Force received 1000 surveys and conducted an additional 900 interviews with residents and business owners in San Francisco.  The Task Force issued its final report on October 8th, listing 41 recommendations ranging from economic stimulus to safe reopening guidelines.

Several of the recommendations focus on the real estate and construction industry.  Construction is a revenue-generator for San Francisco: in addition to bringing in permit and impact fees, statistics show that each $1 million spending in construction translates into approximately 5.93 jobs.  While a recession often leads to a significant slowdown in construction, San Francisco has not seen the resulting stoppage, largely due to projects that were already underway.  However, falling rents and sales prices, high construction costs, and broad economic uncertainty have resulted in developers unable to secure financing for their projects and a slowdown in development projects breaking ground.

The Task Force makes the following recommendations relating to development in San Francisco:

  1. Focus on the major development projects and public infrastructure investments

The Task Force recognizes that there are already many projects that could boost construction – ones that have already received approvals and/or been identified by the City.  The City recently underwent a major rezoning in Central SoMa, with several large projects approved.  In addition, there are several significant long-term projects underway on SF Port property.  Further, the City’s last 10-year Capital plan allocated $39 billion in investments from 2020-2029.

The Task Force calls for the City to continue focusing on its major developments, such as the Shipyard, Mission Rock, Pier 70, Treasure Island, and Central SoMa, as these projects bring with them thousands of jobs and support for local business.  They also call for an update to the City’s Capital plan, focusing on projects that promote good state of repair for its buildings, right-of-way, public spaces, and other infrastructure assets.  If these projects can begin (or continue) construction within the next year, then it would provide needed jobs for the construction industry while developing spaces for the eventual reopening of the City.

  1. “Redesign” the building permit processes and consider an application fee “holiday” or reduction to incentivize permits

The Task Force calls for the overhaul of the City’s permit processes – not a new idea but one that has gained traction over the past months.  The Task Force calls out DBI, Fire Department, SFPUC, and Planning, as agencies that should implement programmatic and regulatory changes to redesign the permitting process, increase transparency, make the permitting process as easy and affordable as possible, and to remove permitting and process requirements not directly related to health and safety.

The Task Force also calls for an application fee “holiday” – a temporary reduction or elimination of fees – that would incentivize owners (both business and residential) and developers to pull permits and undertake construction projects.

  1. Allow for the deferral of Development Impact Fees

Development Impact Fees are imposed on certain projects that will cause an increase in demand of public services, infrastructure, and housing.  Impact fees are imposed at project approval and collected at the issuance of the first construction document, often several years before a development receives its certificate of occupancy.  The City has implemented fee deferral programs before, most notably in 2010-2013 during the Great Recession, as well as 2019’s fee waiver for 100% affordable housing projects and Accessory Dwelling Units (ADUs).

The Task Force recommends that the Planning Department develop another fee deferral program for a limited time that would allow developers to defer paying impact fees until each project receives the first certificate of occupancy, at the end of construction, rather than at issuance of first construction document.  This would help developers secure financing on projects that would likely not be able to break ground and pay impact fees otherwise.

These three recommendations are a few of the 41 that address the financial impacts of COVID-19.  Any application fee reductions, impact fee deferrals, or other fee “holidays” will require legislation by the Board of Supervisors.  Application fees are imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections and audits, and the administrative enforcement and adjudication.  Simply put, the application fees charged go back into the City’s General Fund and are used to maintain City services and agency functions and for employee salaries.  According to the 2020-2021 City Budget, Planning experienced a decrease in application and permit volume of 10% – numbers that have likely increased due to COVID-19.  Reduction in applications results in a budget shortfall, impacting the City’s ability to review projects and permits.  Impact fees are used to create new affordable housing, build infrastructure projects such as parks, bike lanes, and street improvements, and fund new childcare facilities, to name a few areas where the fees are allocated.  These fees are integral to the City’s major improvement projects outlined in the first recommendation above.  The Board of Supervisors will have to balance these concerns when considering whether and how to implement the Task Force’s recommendations.

It is unclear at the date of this writing whether the Mayor’s Office or Board of Supervisors will seek legislation to reduce, eliminate, or defer application and impact fees.  Reuben, Junius, & Rose, LLP will continue to monitor these recommendations.

[1] Recovery Task Force Report, October 2020, City and County of San Francisco/OneSF, pgs. 16 – 19.

 

Authored by Reuben, Junius & Rose, LLP Attorney Tara Sullivan.

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.

Central SoMa Clean Up Legislation Moves Forward

| Melinda Sarjapur
SoMa

Last week, the San Francisco Planning Commission unanimously recommended approval of legislation that would “clean up” parts of the Administrative and Planning Code that were previously amended in connection with the Central SoMa Area Plan.

The Central SoMa Area Plan was the result of a multi-year planning effort which rezoned much of a 230-acre area adjacent to downtown and surrounding the future Central Subway extension along 4th Street, which is scheduled to begin operating in 2021.  The Plan is anticipated to generate nearly 16 million square feet of new housing and commercial space, and over $2 billion dollars in public benefits.

As described in the Planning Department’s staff report, this “clean up” legislation would correct “grammatical and syntactical errors, un-intentional cross-references and accidental additions and deletions,” associated with the original Plan legislation adopted in 2018.  However, there are also a few substantive amendments proposed, along with clean-up items that have the potential to affect pending and future development throughout the Plan area.

Among other things, the legislation would:

  • Require an operations and maintenance strategy for all required Privately Owned Public Open Spaces (POPOS) in the Plan area. This strategy would need to be approved by the Director of Planning prior to approval of a site or building permit for the associated project;
  • Provide that the Central SoMa PDR requirement applies to projects that increase a building’s square footage by 20% and result in 50,000 gsf of office space along with new construction projects that result in 50,000 gsf of office space;
  • Revise lot coverage requirements for residential uses in the Central SoMa SUD to reflect that all floor levels with residential space (including accessory residential spaces such as common rooms) would be limited to 80% lot coverage, except for floors whose only “residential” space is common lobbies and circulation. 100% lot coverage would be permitted at floors where residential units are located within 40 feet of a street-facing property line.  Further, projects with applications submitted on or prior to July 1, 2020 would be grandfathered from the proposed lot coverage amendments;
  • Clarify and correct which sides of narrow streets in Central SoMa are subject to solar plane setback and bulk reduction sky plane requirements;
  • Provide that buildings that are taller than would otherwise be allowed in a given height district are to follow the sky plane bulk reduction requirements of the height district that is most aligned with the height of the building;
  • Require that funds collected through the BMR in-lieu fee from Central SoMa projects be spent in the greater SoMa area;
  • Clarify that payment of an in-lieu fee for modifications or exceptions from open space requirements is only applicable where the exception or modification is granted to reduce the amount of open space provided, but not in cases where the exception is only related to design standards of the open space;
  • Provide that funds collected through the Central SoMa Community Facilities fee can be spent in the greater SoMa area, and not limited to the Central SoMa Special Use District;
  • Expand the types of infrastructure projects that can be funded through the Central SoMa Infrastructure Fee;
  • Allow project sponsors to meet part of their usable open space requirements off-site at a greater distance from the principal projects than initially proposed, particularly by enabling projects to build open space under and around the I-80 freeway within the Central SoMa Special Use District; and
  • Provide an exception allowing for certain retail to be provided in lieu of a portion of the PDR requirement in connection with development of a Key Site at the northeast corner of 5th and Brannan Streets.

An additional amendment was initially proposed that would have expanded application of certain development impact fees in Central SoMa.  However, that amendment was removed from the legislation at the request of the Commission.

This Central SoMa legislation will be introduced to the Board of Supervisors within the next few weeks.  It will then be held for 30 days before assignment to the Board’s Land Use and Transportation Committee for review and possible amendments, before it’s presented to the full Board for approval.

 

Authored by Reuben, Junius & Rose, LLP Attorney Melinda Sarjapur.

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