Oakland ADU Updates: Legalization Amnesty Program

Amnesty

As I previously reported, Oakland is in the process of updating its Planning Code regulations pertaining to accessory dwelling units (“ADUs”). On December 21, 2021, the Oakland City Council heard and passed on first reading legislation amending Oakland’s ADU controls (the, “Legislation”). The proposed amendments encourage ADU production by reducing barriers through the adoption of streamlined approval processes consistent with State law. One of the proposed programs by the Legislation is an amnesty program to legalize unpermitted ADUs established and occupied in Oakland prior to January 1, 2021.

The amnesty program consists of two elements that encourage the legalization of existing eligible unpermitted ADUs. First, a property owner may request a waiver from provisions of zoning or development standards, e.g., setbacks, that would preclude the preservation of an eligible unpermitted ADU.

Second, a property owner may request a five year delay in enforcement of Building Code requirements if the unpermitted ADU was built prior to the effective date of the Legislation. The ability to request a five year enforcement delay is available until January 1, 2030. Property owners would be allowed to bring their existing, eligible, unpermitted ADU into compliance with current Building Code standards without incurring any enforcement penalties or fines. This amnesty would last up to five years from the date the enforcement delay is granted, meaning the latest the five-year enforcement delay can be in effect for a specific ADU is December 31, 2034. Amnesty  does not apply to structures that pose an immediate risk to public health and safety.

In addition to creating an amnesty program for legalizing existing unpermitted ADUs, the Legislation makes several changes to the existing ADU development controls, including:

  • Category Three ADU. The Legislation establishes a new attached ADU category that may combine both converted space within an existing envelope of a multifamily building and a newly built addition to a building footprint.
  • Height Increase. Exceeding State law, the Legislation allows two-story ADUs up to a maximum height of 20 feet, as compared to 16 feet, if an ADU complies with the minimum four-foot side and rear setbacks required for detached ADUs.
  • Envelope Expansion. The Legislation permits additional envelope expansion as part of the conversion or replacement of an existing accessory structure on a small lot to allow construction of one internal conversion ADU. The ADU must have a total structural footprint no greater than 800 square feet, with the height of the addition no more than 16 feet. A “small lot” is defined as those no greater than 3,000 square feet or no greater than 35 feet in lot width mean.
  • Trees. The Legislation calls for project sponsors to plant one new tree on the subject lot or within the public right of way fronting the subject lot per every 500 square feet of detached ADU floor area.
  • ADUs in Front Setback. Consistent with State law, the Legislation permits one ADU of a minimum size of 800 square feet, up to 16 feet in height, in the front setback if the lot’s configuration precludes creation of the ADU anywhere else on the lot.
  • Multifamily Internal Conversion ADUs. The Legislation clarifies that multifamily properties are permitted one internal conversion ADU or up to a number equal to 25% of the existing units per multifamily building (not per lot). This clarification addresses situations where more than one multifamily building is located on a single lot. In which case, each multifamily building on the lot would be allowed to add internal conversion ADUs up to a number equal to 25% of existing units.

The Legislation is scheduled to return to the Oakland City Council for the second and final hearing for passage. Having been unanimously passed at the December 2021 Council meeting, it is anticipated that the Legislation will be finally passed by the Council next week. We will continue to monitor the Legislation and keep readers updated.

 

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.

Supervisor Safai Introduces Competing Fourplex Legislation

affordable

On November 30, 2021, Supervisor Ahsha Safai introduced legislation that would allow up to four units on lots zoned RH-1(D), RH-1, and RH-2 with the addition of affordable housing for moderate-income families. This competes with Supervisor Rafael Mandelman’s fourplex legislation, which would allow up to four units in all RH zones without any affordability requirement. Supervisor Safai’s legislation takes a different approach that would require at least one deed-restricted middle-income housing unit in order to build a fourplex. Safai’s legislation would also allow exceptions to certain Planning Code requirements, provide priority processing, and eliminate 311 notice and discretionary review.

Specifically, the legislation would create what it calls the Affordable Housing Incentive Program, which would apply to lots that are (1) located in the RH-1(D), RH-1, or RH-2 districts, (2) within one mile of a major transit stop, and (3) no smaller than 2,500 square feet. In addition, the project cannot be subject to any other density bonus programs and any existing “protected” units, which includes rent controlled or affordable housing units, must be replaced.

Under the Program, one affordable housing unit is required to allow up to three units per lot and two affordable units are required to allow up to four units per lot. The affordable housing units must be provided at 110% of the area median income (“AMI”) for rental units, or 140% AMI for owned units. Currently, these income levels for a single person household translate to $102,600 and $130,550, respectively. At the 110% AMI level, base rent for a one-bedroom unit would be limited to $2,713 and $3,010 for a two-bedroom unit. The affordable units are also subject to certain size requirements.

In exchange for the affordable housing, the Program allows a variety of Code modifications and shorter processing times. For example, lots in the RH-1(D) and RH-1 zoning districts are currently limited to a height of 35 feet, but the Program would generally allow up to 40 feet. In addition, projects under the Program would be entitled to reduced rear yard, dwelling unit exposure, and open space requirements. The Planning Director may also grant minor exceptions from Code requirements to allow building mass to appropriately shift to respond to surrounding context when the proposed modification would not substantially reduce or increase the overall building envelope. Likewise, the provisions of the Residential Design Guidelines related to “building scale and form” and “building scale at the mid-block open space” would not apply.

To provide more certainty in the approval process, the Program requires projects to be approved within 180 days of submittal of a complete project application, unless an environmental impact report is required. It also eliminates 311 neighborhood notification and discretionary review. Instead, the only opportunity to appeal would be through the associated building permit.

The legislation is currently in a mandatory 30-day holding period before any Planning Commission or Board Committee hearings can take place. Meanwhile Supervisor Mandelman’s legislation has already advanced from the Planning Commission and is awaiting a Land Use Committee hearing date. It remains to be seen what version of the fourplex legislation will make it to the full Board.

 

Authored by Reuben, Junius & Rose, LLP Attorney Sabrina Eshaghi.

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

Supervisor Mandelman’s Fourplex Legislation Clears Planning Commission

legislation

On Thursday, November 18, 2021, the San Francisco Planning Commission unanimously recommended that the Board of Supervisors approve legislation proposed by Supervisor Rafael Mandelman to allow four units on any residential lot, as well as up to six units on corner lots, in “RH” zones.

Supervisor Mandelman’s proposal—actually two pieces of legislation—only proposes minor changes to the Planning Code itself, and is quite simple in its effect: (1) up to four dwelling units per lot would be allowed either on every corner lot or on every lot in an “RH” zoning district, and (2) those sites would be subject to the development controls of the RH-3 zoning district. All other aspects of the SF Planning Code would continue to apply. That includes height, rear yard, setback, and open space requirements, as well as the standard entitlement and environmental review process. The Planning Commission also recommended the Planning Department’s proposed modifications, including that the Board of Supervisors allow six units on corner lots.

Supervisor Mandelman has been pushing for this legislation for nearly a year. He expanded the reach of the ordinance after the state passed SB 10, which allowed moderate upzoning near transit without a cumbersome and years-long CEQA review process that ordinarily would be required (not to mention that each project utilizing the increased density would undergo its own CEQA review). In spite of well publicized denials of major housing projects by the Board of Supervisors, Supervisor Mandelman proposed legislation that can become a key solution to San Francisco’s housing crisis. This is not an easy time to propose pro-housing laws in San Francisco, much less expanding its scope when presented with the opportunity.

The Planning Department’s staff report contains an insightful point that seems to get lost in the debate over adding new units in formerly single-family housing districts. 12,568 residential buildings in San Francisco have more units than would be allowed under current zoning. That represents about 31% of all homes in the city. As the Planning Department’s staff report notes, Supervisor Mandelman’s proposal rectifies policy decisions made in the 1970s which effectively downzoned large swaths of western and southern San Francisco. Multifamily buildings coexist with single-family homes currently and can in the future.

The Planning Department’s recommendations included an increase on corner lot density to six units, amending the residential design guidelines to add objective standards, eliminating the RH-1 zoning district and adopting a local alternative to SB-9, increasing funding for supportive housing programs, and establishing an impact fee on homes over 4,000 square feet. Ensuring all San Franciscans have access to capital in order to benefit from the legislation will be crucial to create new fourplex housing. Development impact fees have become a primary cost consideration for development projects; taxing housing instead of looking for a more generalized funding source might not prove successful. Also, establishing objective residential design guidelines will be critical to ensuring that fourplex projects can actually be approved, and in an orderly fashion without overburdening Planning Department staff or dissuading San Franciscans wary of an overly complicated set of guidelines or process. For example, in spite of the RH-4 zoning, the Residential Design Guidelines could effectively limit some sites to a lower density.

As noted above, Supervisor Mandelman’s ordinances as currently proposed are straightforward and clear to understand and execute. They now move to the Board of Supervisors, which will be able to add the Planning Commission and Planning Department’s suggestions and make proposals of their own. It remains to be seen what final form the legislation could take.

Finally, this update includes two maps from the Planning Department’s staff report. The first shows the areas in San Francisco that are currently zoned RH, where the proposed legislation would allow fourplexes. The second shows where new housing has been built in San Francisco since 2005. The maps generally do not overlap.

 

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.

Planning Commission Recommends Big Changes for Large Residence Legislation

Planning Commission

On September 23, 2021, the Planning Commission unanimously voted to disapprove Supervisor Mandelman’s updated proposed large residence legislation after a robust conversation on the potential sweeping effects it could have on homeowners throughout San Francisco. As we have discussed in prior updates on July 29th and March 31st of this year, the large residence legislation was originally introduced to discourage large residential homes over 2,500 square feet by generally requiring a conditional use authorization for any such new home, with some exceptions. The Planning Commission, in its disapproval, provided seven recommendations to significantly change the legislation ahead of its move to the Board of Supervisors.

The seven recommendations and some of the reasoning discussed by commissioners include:

  1. The legislation should focus on Noe Valley only. The legislation was designed with three particular neighborhoods in mind that are disproportionately affected by construction of large homes: Noe Valley, Dolores Heights, and Glen Park. As the legislation stands, the Planning Commission viewed the scope too broad with massive potential unforeseen effects if enacted citywide as proposed. The Planning Commission was supportive of testing modified regulations in Noe Valley before enacting broader legislation.
  2. Much more community outreach and input is needed in the particular areas of concern that would be affected by the legislation. Given the potential broad effects of the legislation, the City needs to make sure that it creates opportunities and spaces to hear from affected homeowners or future homeowners.
  3. The effective date of the legislation should be changed to the date of enactment with no grandfathering. Though the legislation has yet to take a clear form, the effective date of the current legislation is the date it was introduced, with only people who submitted applications earlier this year grandfathered from the effects.
  4. Appropriate limitations for home sizes should be form based rather than formula based. The formulas created to measure whether a home qualifies as a “monster home” seem arbitrary. Commissioners discussed alternatives, such as height limits, that have effectively limited home sizes.
  5. Tenant issues should be explored to ensure no tenants will be displaced or negatively affected by the legislation.
  6. The legislation should be crafted to ensure that areas within an existing home can be finished without running afoul of the legislation. As the legislation stands, a person could violate the legislation simply by making an area within the home’s existing envelope livable space. Commissioners were concerned with the legislation’s potential unintended effect of discouraging homeowners from making use of unfinished space within homes that are not considered “monster homes.”
  7. The legislation should find ways to encourage density. The current legislation discourages large homes through adding process. However, adding provisions to encourage density would help the City achieve more housing.

In addition to the seven recommendations, commissioners also noted several additional concerns including: life safety issues, lack of demolition discussion in the legislation, large ADU sizing requirements in the legislation, lack of design standards, and what should qualify as a monster home. Ultimately, some Planning Commissioners expressed hope, that with much more work, the legislation could be a starting point for future housing regulation in the City.

 

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.

Legislation Seeks Water Conservation in New Buildings

non-potable

To conserve water in the midst of another extreme drought, Supervisors Rafael Mandelman (District 8), Gordon Mar (District 4), and Myrna Melgar (District 7) proposed legislation (“Legislation”) to strengthen the 2012 Non-potable Water Ordinance (Article 12C of the San Francisco Health Code). The Legislation’s goal is to preserve the City’s water supply by requiring the use of non-potable water, which is water not suitable for drinking, for other productive uses such as toilet flushing, irrigation, decorative fountains, dust control and cooling applications. Across the nation, non-potable water is used to reduce pressure on natural water resources, and the use of onsite non-potable water may also reduce flows into the sewer, reducing strain on the City’s sewer system.

Effective since 2015, most new projects of 40,000 square feet or more are required to utilize the San Francisco Public Utilities Commission’s (“SFPUC”) Water Budget Calculator to assess the available supply of onsite alternate water sources and determine the demand for toilet and urinal flushing and irrigation. Large new projects of 250,000 square feet or more of gross floor area are required to construct, operate, and maintain an onsite non-potable water system to treat and reuse the identified available sources of rainwater, graywater, and foundation drainage to meet the planned demand for non-potable water uses.

In the Legislation introduced on June 29, 2021, the threshold for new projects that must construct, operate, and maintain an onsite non-potable system to treat and reuse available sources of water is reduced to 100,000 gross square feet for projects receiving a site permit after January 1, 2022. The systems required and sources of water to be used are also expanded and will be determined based on building type. For commercial buildings, most available sources, such as rainwater, graywater, blackwater, and foundation drainage, must be used if needed to satisfy as much toilet and urinal flushing and irrigation as possible. For systems providing water to residential and mixed-use projects, available sources of rainwater, greywater, and foundation drainage must be used for toilets, irrigation, and other end uses like clothes washing.

In analyzing the Legislation’s impact on pipeline projects, SFPUC staff determined that the lower threshold would result in a 20,000 gallons per day of potable water savings. This represents just 2% of the total savings anticipated by the Legislation. However, the cost burdens are not linear. For example, the SFPUC’s analysis found that the cost of a graywater system would only be 15% less for a 100,000 square foot building than a 250,000 square foot building. The SFPUC found that there is not sufficient data at this time to say conclusively whether the Legislation would be a net benefit or cost to smaller buildings. Additional cost-benefit analysis by SFPUC staff is expect before the next hearing.

Appreciating the costs for installation of onsite water reuse systems, the SFPUC has in place an Onsite Water Reuse Grant Program to encourage water users to voluntarily reduce SFPUC water supply usage through use of alternate water sources for non-potable application. To incentivize building owners to install alternate water source systems, SFPUC recently lowered the threshold of eligibility for the grant program.

The Legislation has been continued to the call of the Board of Supervisors’ chair and no hearing date has been set for consideration by the Board of Supervisors Public Safety and Neighborhood Services Committee. We will continue to monitor and keep readers updated.

 

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.

Planning Commission Considers Two New Pieces of Legislation

SUD

The Planning Commission considered two pieces of proposed legislation at its regular meeting last week.  One was the elimination of the Life Science and Medical Special Use District (to which staff added a proposal to eliminate the Industrial Protection Zone (IPZ) Special Use District), and the second was Supervisor Mandelman’s so-called “Large Residence” legislation (which we have discussed in a previous update).

Life Science and Medical and IPZ Special Use Districts

The Life Science and Medical Special Use District (SUD) is generally bounded by Mariposa Street to the north, 3rd Street to the east, 23rd Street to the south, and Iowa Street to the west. The SUD was adopted as part of the Central Waterfront Plan in 2009, and was established in the northern part of the Plan Area to support the creation and expansion of life science and medical uses, given the proximity to the UCSF campus at Mission Bay. The Dogpatch Historic District and Neighborhood Commercial District are generally excluded from the boundaries of the SUD. Almost all parcels in the SUD are classified as Urban Mixed Use (UMU) zoning.

The SUD principally permits medical services, life science offices, and life science laboratories. Among other controls facilitating the development of these uses in the SUD, the uses are exempt from PDR replacement requirements. The Planning Department’s broader concern with the loss of PDR uses was one of the reasons driving the elimination of the SUD.

The other reasons behind the legislation are the Planning Department’s view that the City has enough supply of life science and laboratory space (including projects at Pier 70, Potrero Power Station, Mission Rock, and in SoMa, Central SoMa, and Mission Bay), and concerns with some of the ambiguities in the Planning Code concerning life science and laboratory uses. These ambiguities have contributed to uncertainty for project sponsors, an increased need for letters of determination, and the departure of businesses. The Department is studying a more comprehensive code update to clarify controls related to laboratory uses.

The IPZ SUD consists of a large area in the Bayshore and Bayview neighborhoods now classified as PDR-2. Staff recommended eliminating the IPZ SUD to close what it considered a loophole allowing self-storage, big box retail, and heavy industrial uses in PDR neighborhoods.

The Commission voted unanimously to recommend to the Board of Supervisors that both SUD’s be eliminated, with a grandfathering clause for the Life Science and Medical SUD that exempted any projects with submitted applications as of July 22, 2021.

Large Residence Legislation

As we have reported previously, Supervisor Mandelman’s proposed large residence legislation would discourage residential units over 2,500 square feet by requiring, with some limited exceptions, a conditional use for them in RH zoning districts. Last week, the Planning Commission had a lengthy discussion of the merits of the legislation, before voting to continue the matter until September 23, 2021.

Ranging from some support to some pointed concerns, here are the highlights of the discussion:

  • There was some consensus that the legislation, while perhaps identifying a problem for Supervisor Mandelman’s District 8, was not appropriate as a City-wide control where other areas might not have the same issues.
  • More than one Commissioner questioned the 2,500 square-foot number, calling it arbitrary. The Commissioners discussed FAR as a more accurate measure, but identified concerns with that approach as well.
  • At least one Commissioner questioned the lack of data concerning how many projects this was designed to address, and the lack of research supporting the legislation generally.
  • One Commissioner questioned the wisdom of telling homeowners how big their bedrooms and other rooms should be, and how many bedrooms they should have.
  • Commissioners also expressed some support for the intent of the legislation, due to ongoing concerns with the lack of affordable and moderately-priced housing. One Commissioner suggested that the proposed controls should not be enforced as a conditional use authorization, but rather as legislated Planning Code controls, from which property owners could seek variances.

Following the discussion, the Commissioners agreed there were too many unresolved issues and voted to continue the matter until September 23, 2021.  They wanted to consider it at the same time as Supervisor’s Mandelman’s proposed “fourplex” legislation for corner lots in RH districts (which we have discussed in a previous update). The Commission also discussed possibly delaying the legislation so it could be considered with the planned Housing Element update.

 

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.

Updates to the Proposed Intermediate Length Rental Regulations

units and intermediate length rentals

Medium-term, furnished rentals have been a part of San Francisco’s housing stock for many years. According to the Corporate Housing Providers Association, roughly 3,000 dwelling units in San Francisco – less than one percent of the City’s total housing – are used as intermediate length rentals. These types of rentals serve workers in higher education, healthcare, theater, and other industries, who are in town too long to stay in a traditional hotel but don’t need a full one-year lease. They also provide housing for long-term family visitors – grandparents helping with a newborn or relatives caring for a sick family member.

However, many affordable housing advocates, who view these rentals as competing with long-term housing for San Francisco residents, lined up at the Planning Commission last fall to protest them. Shortly after, Supervisor Aaron Peskin introduced legislation targeted at  rental properties that require tenants to stay for at least 30 days in order to avoid short term rental regulations (See our prior coverage, New Legislation Aims to Limit “Intermediate Length” Rentals).

The legislation would amend the Planning Code to create a new Intermediate Length Occupancy (“ILO”) Residential Use Characteristic for dwelling units offered for occupancy of greater than 30 days but less than one year. It would also add a new Planning Code Section 202.10 to regulate those units. On January 14, 2020, substitute legislation was introduced which makes several changes to the original proposal. The substitute ordinance is available here.

While the original legislation allowed ILO units only in new construction of projects with at least 10 dwelling units, the substitute legislation would allow existing units to be eligible to be classified as ILO units unless the units are below market rate units built under the City’s Inclusionary Housing regulations or are subject to the Rent Control Ordinance. For buildings with nine or fewer units, requests to establish ILO use would be principally permitted so long as no more than 25% of the units in the building are classified as ILO. For buildings with 10 or more dwelling units, ILO units would require conditional use authorization, and no more than 20% of the units could be classified as ILO.

The substitute legislation further clarified that while ILO units could be offered for occupancy of one year or greater without losing the ILO use characteristic, ILO status would be considered abandoned if otherwise defined as abandoned under the Planning Code.

Finally, the revised legislation provides owners and operators of ILO units 24 months from the effective date of the ordinance to submit a complete application to establish the ILO use. The total number of ILO units Citywide would be capped at 1,000 – an increase above the 500-unit cap in the earlier legislation. While not labeled as interim controls, the intent of the legislation is to put in place a policy to regulate corporate housing while the data to be collected under the program is evaluated by the Controller’s Office. The legislation does not address grandfathering of existing ILO units, of which there are approximately 2,000 more than would be permitted by the 1,000 unit cap, but the 24 month compliance period established by the Ordinance indicates that existing units may not be grandfathered or exempt from the new ILO controls.”.

Residential hotels and student housing would still be exempt from Section 202.10 under the substitute legislation. Furthermore, the Rent Ordinance Amendments proposed in the original legislation would remain, except that the prohibition on non-tenant use, including use for a corporate entity’s own employees or licensees, and the requirement that online listings for units disclose that they are subject to the Rent Ordinance, would be effective April 1, 2020 instead of February 1, 2020.

The Planning Commission voted to recommend adoption of the substitute ordinance on January 30, 2020. We will continue to follow the evolution of these regulations as they move towards adoption by the Board of Supervisors and implementation by the Planning Department and Planning Commission.

 

Authored by Reuben, Junius & Rose, LLP Attorney Jody Knight.

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.

California Adds Incentives for Developers and Homeowners

California Incentives

Governor Gavin Newsom announced this month that he has signed 18 bills into law that will boost housing production in California. Many of these bills fall into two categories: first, bills that reduce barriers for developers to build large-scale housing (more than four units), and second, bills that reduce barriers for homeowners to build accessory dwelling units (“ADUs”) in single-family homes. Of the bills the Governor signed, we find the following to be the most promising and impactful to larger-scale housing development at a statewide level.

AB 1763 – Chiu (San Francisco)

AB 1763 expands the state’s Density Bonus Law for 100% affordable housing projects. As the law exists currently, a local jurisdiction must allow an increase in density and provide up to three incentives or concessions to a development with certain levels of affordable units. Two new features this bill adds to existing Density Bonus Law include:

  • If a developer provides 80% or more units to lower income households and up to 20% of units to moderate-income households, the development may increase its otherwise allowed height by three stories or 33 feet and the jurisdiction must grant the developer four incentives or concessions. In addition,
    • if the development is more than ½ mile from a major transit stop, the density may be increased by 80% of the number of units dedicated to lower income households, or
    • if the development is within ½ mile of a major transit stop, unlimited density is allowed within the building envelope.
  • For a special needs housing or supportive housing project that is 100% lower income housing, no parking is required. Such a development can increase its density to 180% of the number of units otherwise allowed, will receive four incentives or concessions, and can increase its height by three stories or 33 feet. Special needs relates to mental health needs, physical disabilities, developmental disabilities, person at risk of homelessness, and veterans.

This is a promising change in state law because many projects we see in urban infill locations take advantage of the Density Bonus Law, but the bonus is not always enough. Now, these projects can further increase their height and density, eliminate parking, and apply four incentives to make the development more affordable. These bonuses will help increase unit count, increase affordability, and reduce the per-unit cost of development. Another promising aspect of this legislation is that it incentivizes housing for middle class. Moderate income families have been an overlooked segment of the California population.

For a state that wants to encourage mass transit, this legislation should be a strong incentive. A “major transit stop” means a rail station, a ferry terminal with bus or rail service, the intersection of two or more major bus routes with service every 15 minutes during commute periods, or a high-quality transit corridor included in a regional transportation plan. To put it differently, these incentivized development locations will include sites near Caltrain stations, SMART train stations, AMTRAK stations, BART stops, bus stops, ferry terminals, and more. According to Metropolitan Transportation Commission data, there are more than 6,000 major transit stops in the San Francisco Bay Area. According to the Southern California Association of Governments, there are thousands more major transit stops in the greater Los Angeles area.

AB 1485 – Wicks (Oakland)

AB 1485 is another new law focused on increasing density and increasing moderate-income housing production at urban infill locations. The Density Bonus Law currently allows jurisdictions to include underground space, such as basements and underground parking garages, toward the square footage of a development. In other words, this underground space, sometimes required by a jurisdiction to meet parking requirements, is included in floor area calculations and puts a limit on the intensity of development. This new law eliminates underground space as part of the floor area calculation and, as a result, gives a boost to developable space on a site.

This bill also enhances the streamlining process for infill developments created by SB 35 in 2017 because it adds permit streamlining for moderate-income development projects within the San Francisco Bay Area. Assembly staff analysis points to Cupertino, Berkeley, and San Francisco as cities where the streamlining of affordable housing development is set to make an impact.

Finally, this bill eliminates California Environmental Quality Act (“CEQA”) review for certain projects located on Bay Area Rapid Transit (“BART”) owned property. It also eliminates CEQA review for the sale of BART-owned property. This will impact sites where BART itself is planning projects, including possible projects in Berkeley, Concord, Oakland, and San Francisco, for example. It will also impact land BART may sell. According to BART, the agency is considering the sale of agency-owned land in El Cerrito, Hayward, Oakland, Walnut Creek, Richmond, San Leandro, San Lorenzo, and Union City. This law has the potential to streamline housing development on significant amounts of Bay Area land.

ADUs

This year, a package of new ADU laws will encourage housing development at an individual scale. In particular, AB 68, AB 881, and SB 13 will encourage the development of ADUs and junior ADUs. These new laws address the ways local governments indirectly discourage the development of ADUs. Features of the new laws include capping setback requirements, prohibiting lot coverage and floor area ratio calculations for ADUs, prohibiting replacement parking requirements when a garage is converted to an ADU, and restricting owner-occupancy requirements. These new ADU laws will encourage smaller increases in density in residential neighborhoods, outside of the types of large developments discussed above, but will nonetheless increase the affordable housing stock in California.

Please keep in mind that there are many subtleties to both new and existing law. Please contact Reuben, Junius & Rose, LLP for more information.

 

Authored by Reuben, Junius & Rose, LLP Attorney Jonathan Kathrein.

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.

Statewide Rent Control & Eviction Protections Signed into Law

Rent protections

For over 20 years, Costa Hawkins has set the parameters for rent control in California by limiting a city’s ability to enact rent control regulations that apply to units built after 1995. Many local rent control ordinances provide a much earlier cutoff than what is permitted under State law. For example, San Francisco’s rent control ordinance applies to housing built before June 1979. And although cities are allowed to enact rent control ordinances within the limits set forth under Costa Hawkins, many have not.

AB 1482, which was authored by Assemblymember David Chiu and signed into law by Governor Gavin Newson last week, upends the current system by mandating a statewide rent cap for housing built more than 15 years ago, which will apply on a rolling basis. The legislation will also provide statewide eviction protections in cities that do not already provide their own just cause eviction ordinance. According to the California State Assembly’s analysis, AB 1482 will affect nearly three million households across California.

Rent Cap

Beginning on January 1, 2020, AB 1482 will apply a cap on annual rent increases of 5% plus the percentage change in the Consumer Price Index or 10%, whichever is lower. The legislation does not affect vacancy decontrol, meaning owners are able to set initial rents for new tenancies. After the initial rent is set, the cap will apply to any subsequent increases.

This legislation applies to all units that have been issued a certificate of occupancy more than 15 years ago. This 15-year exemption applies on a rolling basis. That means starting in 2020, units built in 2005 will be subject to the rent cap. In 2021, units built in 2006 will be subject to the rent cap, and so on until 2030 when the legislation expires.

AB 1482 will not apply to units in cities that are already subject to lower rent caps. Therefore, it will not preempt San Francisco’s existing rent control provisions for housing constructed prior to June 1979. However, housing units built after June 1979 that have received a certificate of occupancy more than 15 years ago will be subject to the rent cap.

Aside from exempting units built within the last 15 years, AB 1482 also exempts:

  • Duplexes if one of the units is owner-occupied;
  • Dorms;
  • Affordable housing units; and
  • Single-family homes or condos that are not owned by a real estate investment trust, a corporation, or an LLC where one member is a corporation, if the tenants were provided notice of the exemption.

Just Cause Eviction

The just cause eviction protections set forth under AB 1482 only apply to cities that have not enacted their own just cause eviction ordinance prior to September 2019, so the legislation will not apply in San Francisco. AB 1482’s eviction protections will apply in all other cities unless new local ordinances enacted after September 2019 are more protective than AB 1482.

In cities where AB 1482’s eviction protections apply, tenants that have legally occupied a unit for more than 12 months cannot be evicted without just cause. The legislation provides two categories for just cause evictions—at-fault and no-fault. An at-fault eviction applies in the following circumstances:

  • Nonpayment of rent;
  • Breach of a material term of the lease;
  • Nuisance, waste, criminal activity, use of the unit for an unlawful purpose;
  • Failure to sign a written extension or renewal of the lease;
  • Assigning or subletting in violation of the lease;
  • Refusal to allow the owner to enter the unit; or
  • Failure to vacate after terminating the lease.

A no-fault just cause eviction applies when the owner withdraws the unit from the rental market, intends to demolish or substantially renovate the unit, moves into the unit (also applies to the owner’s family members), or when the unit is required to be vacated under a local ordinance or due to a court order. For no-fault evictions, the owner must either provide relocation assistance in the amount of one month’s rent or waive the final month’s rent.

Written notice of these protections must be provided for all new tenancies and to all existing tenants by August 2020. Like the rent cap provisions, the eviction protections are set to expire on January 1, 2030.

The just cause eviction protections do not apply to housing that was issued a certificate of occupancy within the last 15 years, owner-occupied units, ADUs in owner-occupied single family homes, duplexes if the owner occupies one of the units, affordable housing units, dorms, hotels, and certain residential care facilities. The legislation also exempts single-family homes and condos that are not owned by a real estate investment trust, a corporation, or an LLC where one member is a corporation, if the tenants were provided notice of the exemption.

 

Authored by Reuben, Junius & Rose, LLP Attorney Sabrina Eshaghi.

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.

 

COPA is Here – Now What?

COPA

The Community Opportunity to Purchase Act (COPA) was approved unanimously earlier this year.  COPA legislation became effective on June 3, 2019, however, the COPA program rules were not published until September 3, 2019 by the Mayor’s Office of Housing and Community Development (MOHCD).  The COPA program applies to the sale of all San Francisco multi-family rental housing developments with three (3) or more units, and all vacant lots that could be constructed with three (3) or more residential units by right.  COPA essentially changes the way in which multi-family rental projects (and certain vacant lots) can be sold by providing certain nonprofit organizations a right of first offer and in some instances a right of first refusal.

Before a multi-family residential building (or vacant lot) with three (3) or more units can be offered for sale, the owner is required to notify certain nonprofit organizations that are on a “Qualified Nonprofit” list maintained by the City.  The Qualified Nonprofit list at this time contains six (6) nonprofits.  The initial “Notice of Sale” must be made via email, and should be sent to all Qualified Nonprofits at the same time.  The Notice of Sale must include statements indicating: (a) seller’s intent to sell the building, (b) the number of residential rental units, (c) the address for each rental unit, and (d) the rental rate for each unit.  Qualified Nonprofits then have five (5) days to notify the owner if they are interested in making an offer.  If a Qualified Nonprofit expresses interest in buying the building, the owner must provide further disclosures to the interested nonprofit, including the name and contact info for each tenant, which triggers an additional 25-day period during which the Qualified Nonprofit may submit an actual offer.  If none of the Qualified Nonprofits expresses an interest in making an offer within the initial 5-day period, the owner may proceed in offering the building for sale and may solicit officers for purchase.

If a Qualified Nonprofit expresses interest during the initial 5-day period, and thereafter during the 25-day period makes an offer, an owner is not required to accept an offer, however, any Qualified Nonprofit that made an offer that was rejected maintains a Right of First Refusal.  Under the Right of First Refusal, the owner is required to provide notice to the Qualified Nonprofit(s) that includes the same terms and conditions that were received from the 3rd party purchase offer.

Similarly, in the event the owner fails to provide the initial 5-day Notice of Sale before offering the building for sale, the Qualified Nonprofits are entitled to receive notification of their Right of First Refusal, followed by a 30-day offer submittal period.

If a building is purchased by a Qualified Nonprofit, the existing tenants are entitled to displacement protection and the building would be restricted as rent-restricted affordable housing in perpetuity, at 80% AMI level.  A sale to a Qualified Nonprofit is also subject to a partial transfer-tax exemption.

Under COPA, all multi-family building (and vacant lot) sellers are required to provide a signed declaration to the City, under penalty of perjury, within 15 days after the sale, affirming that the seller complied with the COPA requirements.  Seller’s failure to comply with COPA could result in damages in an amount sufficient to remedy the harm to the Qualified Nonprofits and e.g. in penalties in the amount of 10% of the sales price for the first willful or knowing violation, 20% for the second willful or knowing violation, and 30% for any subsequent willful or knowing violation.

 

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.