State Takes Aim at Housing Fees and Permit Delays

| Sabrina Eshaghi
housing fees

After a productive legislative year in 2021, the state legislature is continuing to tackle California’s ongoing challenges related to the housing crisis and lengthy processing times. Two bills would aim to minimize some of the roadblocks facing housing projects by bringing down both direct costs and holding costs. First, AB 2063 proposes to codify the state’s often disregarded stance that affordable housing fees do not apply to density bonus units. This would eliminate a significant cost for density bonus projects, which play a vital role in increasing housing production across the state. Second, AB 2234 proposes to enact time limits on processing and approving post-entitlement permits to create a more efficient and consistent process.  Both of these bills would help address some of the root causes of the high cost of building housing, including increasing impact fees and long-term holding costs associated with permitting.

AB 2063

This bill would update the State Density Bonus Law to clarify that affordable housing fees cannot be applied to density bonus units, except in limited circumstances. Although this is a relatively simple bill, its impact would be huge for housing projects in jurisdictions that have been requiring hundreds of thousands, and sometimes millions, in affordable housing fees on top of the on-site affordable housing units needed to qualify for the density bonus. The Attorney General issued an opinion in 2019 that this practice of applying impact fees on density bonus units was not permitted under the State Density Bonus Law. The Attorney General’s reasoning was that the imposition of these fees on density bonus units disincentivizes what the legislature clearly wished to incentivize—the construction of affordable housing. Despite the Attorney General’s opinion, some cities continue to apply affordable housing fees on density bonus units. This bill would codify the Attorney General’s opinion, putting this practice to rest.

The bill was introduced on February 14, 2022 by Assembly Member Berman and is sponsored by the Housing Action Coalition, a nonprofit that advocates for building more housing for California residents of all income levels. It was unanimously passed by the Assembly Housing and Community Development Committee on April 5th and the Assembly Local Government Committee on April 20th. It is now under review by the Appropriations Committee.

AB 2234

The Permit Streamlining Act sets time limits for the review and approval of entitlements. Its impact has been limited since its time limits run from completion of CEQA review, which is typically the main driver of entitlement schedules. This bill aims to put a similar, but more effective, framework in place for post-entitlement approvals. Due to challenges associated with staffing, permitting backlogs have long been a problem, especially in large cities with high volumes of construction. These delays increase holding costs and slow overall housing production. Given today’s inflationary environment, delays are even more problematic.

The bill would apply limits on the review process for all nondiscretionary permits for projects that are at least two-thirds residential. This would apply to building permits and permits for off-site improvements, demolition, excavation, and grading. Failure to meet any of the time limits would be treated as a violation of the Housing Accountability Act.

Specifically, the bill would require local jurisdictions to:

  • Publish an online checklist of requirements for applications to be deemed complete along with an example of an ideal application that developers can use as a reference. Cities with a population of at least 250,000 will also be required to accept and update the status of applications online, including noting whether anything is required from the applicant.
  • Provide written notice regarding whether the application is complete within 15 days. If a local agency does not make a timely determination, the application will be deemed complete.
  • Approve or deny a post-entitlement permit within 30 days of deeming the application complete for projects with up to 25 units, or within 60 days for projects with 26 or more units. This would not apply if the city makes a written finding that the permit may have a specific adverse impact on public health or safety and additional time is necessary to process the application.
  • Provide a process for applicants to appeal an incomplete determination and denial of a complete application within 60 days for projects with up to 25 units, or 90 days for projects with at least 26 units.

The bill was introduced by Assembly Members Rivas and Grayson on February 15, 2022 and is cosponsored by the Housing Action Coalition and Silicon Valley Leadership Group. It is scheduled to be heard by the Assembly Local Government Committee today.

We will continue to monitor these bills and keep you updated as they move through the legislative process.

 

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.

Monument Referencing Before Construction

| Gillian Allen
Monument

New construction and alteration projects that require a permit for public right of way work often spend a year or more working with San Francisco Public Works (“DPW”) towards an issued permit. It is only upon approval that a parallel group within DPW, the Preservation Monument Team, notifies permit applicants that they must reference all monuments within 20 feet of construction prior to starting work within the public right of way.

In 2018, under DPW Order 187,592, the City and County of San Francisco (“CCSF”) Bureau of Street Use and Mapping (“BSM”) established clear guidelines for this process, however it is not identified on the DPW applications as being a step required for issuance. Because of the delayed notice of the monument referencing requirement some projects and contractors incur significant postponement to their schedules because they cannot activate a street improvement permit until this process is completed.

Monuments are essential to establishing and maintaining horizontal and vertical survey control for subdivisions, tracts, boundaries, roads, streets or highways and are further protected under California state law under Penal Code § 605, Streets and Highways Code §§ 732, 732.5, 1492.5, 1810.5, as well as Business and Professions Code §§ 8725, 8771 and 8773.3.

Due to the potential for movement or disturbance of survey monument during construction, all monuments within 20 feet of any proposed construction must be located and referenced through a field survey and the filing of a Corner Record, or Record of Survey, prior to any construction taking place. This is to allow for positional verification or replacement should a monument be disturbed or removed by the construction. Referencing can be conducted by a licensed Land Surveyor or CCSF BSM.

Currently, when a street improvement, minor sidewalk encroachment, or excavation permit is approved, the known monuments are referenced on the permit, however there are monuments that are not of record. Not of record means the monument does not appear on any maps or documentation that has been duly noticed by recordation with the City and County of San Francisco. DPW Order 187,592 requires that an onsite field review is performed to determine if such non-record monuments exist.

As described in CCSF BSM’s guidelines, non-record monuments are “old original subdivision marks that typically do not appear on any record maps. Within the City and County of San Francisco, not of record monuments typically are “L”, “T” and “+” cuts and lead plugs with brass tacks. ““L”, “T”, “+” cuts, lead plugs with brass tacks and or 1-inch disks are typically located in curbs and additionally can reside anywhere along property lines extending from street curb to the back of sidewalk.” Projects will need to submit a letter from a licensed surveyor indicating that they performed a field survey and no monuments were found. The CCSF BSM guidelines have detailed pictures and examples of what to survey for in the field.

While it is the responsibility CCSF BSM to preserve these survey monuments and to maintain their exact positions, it is the project sponsor’s responsibility to survey for the monuments both through the monumental map and in the field. Performing this survey when you file street improvement applications rather than waiting until they are issued will save your project time.

Extended Referencing is required where construction proceeded prior to standard monument referencing having been performed. This can happen when due to the backlog and delays in DPW permits being issued, a project decides to proceed with work “at risk” and/or was unfamiliar with the DPW order. In these situations, a comprehensive field survey and office analysis shall be required to determine if the construction activity caused any potential movement of the monument or to reestablish the monument position if a monument was destroyed. To perform this Extended Referencing, additional fees shall be assessed and are estimated to be $10,000 or more. If any monuments are covered, disturbed, destroyed, or removed, any costs incurred to re-establish the monument will be in addition to the initial application fee and may vary due to time and methods required. If you elect to have CCSF DPW BSM conduct research, please contact monument.preservation@sfdpw.org to request a proposal of these services.

Project teams who wish for BSM to perform the field survey and referencing should apply six to eight weeks ahead of construction to allow for payment to clear and crews to be scheduled. CCSF BSM Standard Referencing Fee is $3,876 and CCSF BSM Monument Referencing Fee for 2020-2021 is $3,876 per monument and covers the field and office-related costs for the standard monument referencing process. The Monument Referencing Fee is adjusted each year to reflect changes in the relevant Consumer Price Index. Before contacting BSM to do the monument referencing, please fill out and submit an application.

 

Authored by Reuben, Junius & Rose, LLP Manager, Post Entitlement Division Gillian Allen.

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.

DBI Changes to Permit Submittals and Process

| Gillian Allen
online permits

The Department of Building Inspection (DBI) and the Permit Center are temporarily limiting the types of permits that may be submitted online through the digital permit submission process to new 100% affordable housing projects, new permits for Development Agreement projects, and addenda and revisions for already submitted digital in-house review permits.

They are working to retool the digital system and make workflow and process improvements to increase efficiency and integrate the system with DBI’s Permit Tracking System (PTS).  Trades permits will still be offered online—see details below.

While they are improving the digital permitting system, DBI will continue to offer limited in-person services for paper applications and will continue to process digital permit applications that have already been submitted online.  If you submitted a permit application online, you will remain in the queue for permit processing or be asked to resubmit your permit application in paper.  Below are details on how they are handling specific permits.

Over-the-Counter Permits

Starting on Monday, August 17, 2020, DBI will no longer offer online permit submission for Over-the-Counter (OTC) projects.  All OTC projects will be processed in paper.  Below is a breakdown of how to submit in accordance with the type of project:

  • OTC without plans: Starting August 17, 2020, they will no longer accept online permit applications for OTC without plans permits.  Customers can register through Eventbrite for drop-in permit services Monday through Friday from 7:30 a.m. to 9:30 a.m.  DBI currently offers 40 tickets per day for customers to drop in to get an OTC permit without plans.  This service is limited to two permits per customer per day.
  • OTC with plans previously submitted online: Starting August 17, 2020, DBI will no longer accept online permit applications for OTC with plans permits.  Many customers have already applied online for an OTC permit with plans.  If you applied online for an OTC with plans permit, the Permit Center will contact you next week to offer you an appointment to submit your permit application in paper.  Appointments to drop off OTC with plans permit applications in paper are scheduled Monday through Friday from 9:30 a.m. and 3:30 p.m.  This service is limited to two permits per customer per appointment.
  • Submitting new OTC with plans: If you have a new permit application for an OTC with plans permit, you will have the opportunity to make an appointment to drop off your permit application.  Calendar the appointment here.

In-House Review Permits

Larger and more complicated projects that are not eligible for OTC review are brought in house for review.

  • If you previously submitted an in-house review permit application online, you will remain in the queue for permit processing.
  • New 100% affordable housing projects, new permits for Development Agreement projects, and addenda and revisions for existing digital in-house permits can be submitted online here.
  • Commercial projects: If you have a new permit application for an in-house review project, please email dbicustomerservice@sfgov.org with the following information about your project:
    1. Contact Information (applicant name, phone number and email)
    2. Property Address (block and lot or Assessor’s Parcel Number)
    3. Short description of the scope of work

DBI will contact customers to begin the pre-screening process in the order received.  Note that DBI has received a large number of in-house review permit applications, so the queue for this is several weeks.

Fire-Only Permits

Starting August 17, 2020, DBI will no longer accept online permit applications for OTC fire-only permits.  If you are applying for a permit that requires Fire Department review only, you can drop off your fire-only permit application (Form 3 or 8) Monday through Friday from 7:30 a.m. to 9:30 a.m.  Customers can register through Eventbrite for fire-only permit drop-off.  SFFD/DBI currently offer 40 tickets per day for customers to drop in to get an OTC permit without plans or to drop off a fire-only permit application.

  • Fire-Only Permits previously submitted on-line: If you submitted online for a fire-only permit prior to August 17, 2020, the Permit Center should have contacted you to offer you an appointment to submit your permit application in paper.

Other Emergency Projects

DBI will continue to accept permit applications for emergency projects.  Examples of emergency projects include damage to a building from a fire or flooding, compromised gas lines or sewers, foundation or structural issues or other serious issues affecting the habitability of a building.  If the permit you’re filing is in response to an emergency event at your property, please contact DBI at dbi.emergencyresponse@sfgov.org for assistance.

Permit Pick-Up and Issuance

Customers can drop in between 9:30 a.m. and 3:30 p.m. to pick up permits after DBI contacts you that your permit is ready for pick-up.  To complete the permit issuance process, payment is required and can be made online or you can forward a check to DBI.  When your permit is ready for issuance, you will receive an email invoice with information on how to pay online.  If you have questions or need help, please contact dbicustomerservice@sfgov.org for assistance.

Trades Permits

Trades permits (electrical, plumbing, mechanical and boiler-to-operate) are offered online using a contractor account or by emailing dbi.iprrequest@sfgov.org and are not available during drop-in times.

  • If you have a DBI contractor account online, visit here to start the online permit process.
  • If you don’t have an online contractors account, you can email DBI staff to file your trades permit. B license contractors filing trades permits and homeowners needing to file a permit can also email
  • If you are a licensed contractor qualifying for online permit submission and would like to set up an online account, visit here to start the registration process.
  • Trades Permits Forms:
    1. Permit to Operate Boiler Application
    2. Electrical Application
    3. Mechanical Application

The Post Entitlement Team with RJR is available to answer any questions or help facilitate the steps above for your projects.

 

Authored by Reuben, Junius & Rose, LLP Manager – Permit Consulting Division Gillian Allen.

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.

Streamlining Construction Permits

| Gillian Allen

Meeting the needs of commercial projects after entitlement can be difficult when City agencies are tasked with solving a housing crisis. The Small Business Permit Streamlining Ordinance seeks to update several areas of code that affect various agency processes and may contribute to an elegant solution for commercial property owners exploring options with tenants for shared space.

The ordinance proposes to align regulation of restaurant enclosures for outdoor food service and restroom requirements with state standards; amend the Planning Code to clarify that a Type 23 liquor license may be used in conjunction with a Bar or Restaurant use;  amend the definition of a Bar to provide for consistent treatment of Type 64 liquor licenses; to reduce the distance measured for Retail Sales and Services uses in Neighborhood Commercial zoning districts to any neighborhood commercial district; to reduce the distance measured for nonconforming uses in RH (Residential, House), RM (Residential, Mixed), and RTO (Residential, Transit-Oriented) districts to any neighborhood commercial district; and importantly, to allow Limited Restaurant use as an Accessory Use which would enable more flex use spaces in neighborhoods who want to encourage and maximize a thriving local scene. For more information on this, read the legislation here:  File No. 181211.

These are times that keep the City focused on a healthy socio-economic future requiring balance between housing and the associated commercial infrastructure needed to sustain the inhabitants, pursue cultural growth and allow neighborhood flavor to emerge in partnership with neighborhood community groups questing to influence use of their local spaces.

Commercial property owners may also be interested in following the crafting of recently proposed legislation which would amend the Building Code to require the assessment of a fee within the first 30 days of vacancy for any storefront that is not tenanted regardless of whether it is offered for rent or lease; and require annual safety inspections within sixty days of the annual registration renewal and the issuance of a Notice of Violation with a penalty of four times the registration fee for failure to register within thirty days. If passed without reform, this legislation has the potential to over-burden the property owner and require them to navigate substantively bureaucratic code enforcement issues especially if their potential tenants meet with delay working through after entitlement permitting for their tenant improvements. For more information on this, read the legislation here: File No. 181213.

The Small Business Permit Streamlining Ordinance may offer some relief, but it does not provide additional staff to assist with the increased review times for commercial projects due to ADU and housing being given priority. In a City that lacks housing, prioritizing these projects without increasing staff or allocating paid overtime for in-house review can critically impact commercial alteration projects and contribute to costly and seemingly ever moving targets for start of construction.

San Francisco entitlement and permitting processes offer unique challenges to estimating project timelines. Stakeholders need to more carefully assess what to include in the initial permit set being supplied for Planning review when construction timelines, which are dependent on the after entitlement issuance of building permits, are a factor. The Planning Department can review an architectural set – best known as a “Site” permit set for entitlement; however that same permit set does not and cannot be converted to a “Full” building permit set automatically after planning review.  Filing with a design plan as a Site permit locks the project sponsor into a two-phase review process and may contribute to a property owner realizing excessive, financial impact, if the afore-mentioned vacant storefront legislation does not include a provision giving deferral for fees, enforcement and penalties while a tenant improvement is under permit review. The Land Use Committee should be encouraged to expand the vacant storefront legislation to include alternative paths for property owners who can demonstrate that a potential tenant is in process of entitlement and subsequent permitting.

While projects requiring more than an hour of review, do not qualify for over the counter processing at the building department, in house review of a full permit can cut permitting time in half and is one way design professionals and property owners can help guide a prospective tenant toward a more rapid occupancy of their buildings.

 

Authored by Reuben, Junius & Rose, LLP  Permit Consulting Manager Gillian Allen

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.