legislation

2024 State Housing Legislation Preview

| Alex Klein and Melinda Sarjapur

During its 2024 legislative session, the California State Legislature again passed a variety of laws aimed at increasing housing production.  As this new housing legislation heads to Governor Newsom’s desk to be either vetoed or signed into law, here is a preview of nine housing bills which could soon become law: Streamlining Laws AB 2243 (Wicks): AB 2011 amendments. This bill would update the Affordable Housing and High Road Jobs Act of 2022 (AB 2011), which allowed for streamlined residential development on parcels abutting commercial corridors where office, retail, or parking are principally permitted uses.  If enacted, this bill would update the Affordable Housing and High Road Jobs Act of 2022 (AB 2011, Cal Gov Code Sec. 65912.100, et. Seq.).  Among other changes, this bill would expand program eligibility to sites up to 100 acres that contain a regional mall; expand the definition of “urban uses” [which must abut 75% of a qualifying site’s perimeter] to include parking lots and public parks surrounded by other urban uses; and revise the definition of “dedicated to industrial use” so that it applies only to sites which currently contain industrial use, were most recently permitted as industrial and occupied with such use within the past three years, or were designated for industrial use in the jurisdiction’s most recent general plan adopted before 2022 (except where residential uses are also principally permitted).  Further, AB 2243 would allow projects within five hundred (500) feet of a freeway, provided they meet certain ventilation and HVAC requirements. AB 1893 (Wicks): Builders Remedy update. This bill would amend what’s known as the Builder’s Remedy: a provision of the Housing Accountability Act (HAA).  As amended, the Builder’s Remedy would generally prohibit local governments that have failed to adopt a compliant Housing Element from disapproving residential projects that provide either one hundred percent (100%) of units affordable to lower-income or moderate-income households; thirteen percent (13%) are affordable to lower-income households; ten percent (10%) are affordable to very-low income households; or seven percent (7%) are affordable to extremely-low income households.  This affordability requirement would not apply to projects with ten (10) or fewer units located on a site smaller than one (1) acre with a minimum density of ten (10) units per acre.  AB 1893 would also set some new site eligibility restrictions; establish maximum and minimum density limits; and allow qualifying developments to use an existing streamlining program such as AB-2011 or SB-423, as well as State Density Bonus Law.  Importantly, projects that are currently seeking Builder’s Remedy relief and filed applications with a local jurisdiction before January 1, 2025 may proceed under the original Builder’s Remedy law. SB 1123 (Caballero): More flexibility for residential subdivisions up to 10 units. This bill would amend the Starter Home Revitalization Act of 2021 (Cal. Gov. Code Sec. 65852.28 & 66499.41), which allows ministerial approval for subdivisions with ten (10) or fewer units on parcels of five (5) acres or less, zoned for multifamily residential use, and surrounded by qualified urban uses.  Among other changes, this bill would extend the Act to vacant sites up to 1.5 acres that are zoned for single-family housing.  It would also provide that ADUs and JADUs (if permitted) would not count toward the 10-unit maximum.  If signed into law, these changes would become effective as of July 1, 2025. Development Fees SB 937 (Weiner): Delaying payment of certain development fees. This bill would amend the Mitigation Fee Act (Cal. Gov. Code 66007, et. seq.).  Among other changes, it would delay assessment of development impact fees on certain housing developments until issuance of a first certificate of occupancy or first temporary certificate of occupancy.  Further, it would limit the amount of utility service fees that can be collected at the time an application is received for a residential project to costs incurred by the utility related to the connection. AB 1820 (Schiavo): Fee estimates for residential development. This bill would allow residential developers to request that a local agency provide a preliminary fee and exaction estimate at the time an SB 330 preliminary application is submitted. If requested, the local agency would be required to provide the estimate within thirty (30) business days.  Within thirty (30) business days of final project approval, the local agency would also be required to provide an itemized list and good faith estimate of all applicable fees and extractions. SB 1210 (Skinner): Greater transparency for utility fees and timeframes. This bill would require certain publicly-owned utilities to post the following information on their websites by January 1, 2026: (1) a schedule of fee estimates for typical service connection fees; and (2) estimated timeframes for completing typical service connections for a variety of residential developments including ADUs, single-family homes, multifamily, and mixed-use developments. Entitlement and Permit Extensions AB 2729 (Patterson): Entitlement extension for certain projects. This bill would extend entitlements for housing developments that were issued prior to and in effect on or before January 1, 2024, and that are set to expire before December 31, 2025, by eighteen (18) months.  AB 2729 would apply to a broad range of entitlements including legislative approvals; administrative approvals; ministerial approvals; and building permits, but would not apply to development agreements, SB-330 preliminary housing applications, or tentative maps that have already been approved for at least twenty-four (24) months under the Government Code.  The area of qualifying housing development projects must be at least two-thirds residential.  AB 2117 (Patterson): Tolling expiration dates. This bill would toll the expiration of certain local entitlements during the time when an action challenging them is pending.  AB 2117 tolling would apply to approvals including variances, conditional use permits, and any other development permits, but not to building permits issued under state or local code, demolition permits, minor or standard excavation and grading permits, or other nondiscretionary permits required post-entitlement prior to construction. ADUs SB 1211 (Skinner): Expanding state ADU law. This bill would increase the number of detached ADUs eligible for a ministerial approval on a lot that has an

HCD

HCD Reverses Course: No Zoning Amendments for Builder’s Remedy Projects

| Chloe Angelis

Back in May, we wrote about a March 28, 2024, Department of Housing and Community Development (“HCD”) Letter of Technical Assistance to the City of Compton, which determined that the Builder’s Remedy does not prohibit a city or county from requiring Builder’s Remedy projects to obtain zoning or general plan amendment approvals.[1]  Since then, HCD has issued a Letter of Technical Assistance and a subsequent Notice of Violation[2] to the City of Beverly Hills, walking back that March determination and confirming that a Builder’s Remedy project cannot be denied based on inconsistency with a jurisdiction’s zoning ordinance or general plan land use designation. The Builder’s Remedy, which is part of the Housing Accountability Act (“HAA”), allows developments that meet certain affordability thresholds to bypass local zoning when a city or county is out of compliance with housing element requirements. In the March letter to the City of Compton, HCD wrote that “the Builder’s Remedy does not expressly prevent the City from requiring discretionary permits and/or legislative actions (e.g., GPAs, Zoning Changes, CUPs, specific plan amendments, etc.) that would be required for similar projects where the Builder’s Remedy does not apply.”  While the March letter focuses on a general plan amendment and zoning change intended “to remedy the inconsistencies between the project and applicable regulatory documents that will result when the project is approved,” the determination cuts to the core of the Builder’s Remedy, which is meant to provide a path for qualifying projects to completely bypass local zoning. Thankfully, the latest pair of HCD letters to the City of Beverly Hills reverses course.  At issue in these letters is a 165-unit project with 20% low-income units.  The applicant had appealed an incompleteness letter, in which the City instructed the applicant to pursue a general plan amendment and zoning change.  Pending the City Council’s decision on the appeal, the applicant sought direction from HCD on whether a general plan amendment and zoning change could legally be required under the HAA. The June 26, 2024, Letter of Technical Assistance acknowledges the earlier City of Compton Letter and walks back the March conclusion, explaining that a requirement to pursue a general plan and/or zoning amendment is, in fact, a violation of the HAA: “While it remains true that the statutory language in the HAA does not expressly prevent the City from requesting or requiring legislative actions (e.g., a GPA/ZC) that would be required for similar projects where the Builder’s Remedy does not apply, requiring such action where the Builder’s Remedy does apply leads to an absurd outcome . . . The HAA is clear that a project protected by the Builder’s Remedy may not be disapproved for inconsistency with a jurisdiction’s general plan and zoning ordinance.  Accordingly, a jurisdiction that refuses to process or approve a project subject to the Builder’s Remedy due to the applicant’s refusal to submit a GPA/ZC requested or required by the jurisdiction to resolve such an inconsistency violates the intent of the HAA. . . . In other words, the requirement for a GPA/ZC is essentially a requirement for consistency, and disapproving the project for failure to resolve that inconsistency is effectively a disapproval on the grounds of inconsistency.  The HAA prohibits such a disapproval.” Following the June letter, HCD issued a Notice of Violation after the Beverly Hills City Council ignored HCD’s prior guidance and denied the applicant’s appeal of the City’s incompleteness letter, based on a finding that a general plan amendment and zoning change are required for the application to be deemed complete. HCD confirms in the Notice of Violation that, irrespective of the HAA, the Permit Streamlining Act prohibits a city from determining that an application is incomplete on the basis that it does not include an item (in this case, a general plan amendment and zoning change application) that was not included in the submittal requirement checklist. The Notice of Violation also offers two important reminders about processing preliminary development applications (pursuant to Government Code section 65941.1) and the rights provided by a vested preliminary development application: (1) The 90-day deadline that an applicant has to respond to a notice of incompleteness resets each time a city issues a notice of incompleteness, such that a project with multiple incompleteness letters and responses could have multiple 90-day response periods without losing the vested right of a preliminary development application. (2) A vested preliminary development application remains vested unless the number of units or the square footage changes by at least 20%. Other project changes do not affect the rights conferred by a vested preliminary development application. [1] HCD RE: 1601 W. El Segundo Blvd., Compton – Letter of Technical Assistance (March 28, 2024); available at https://www.hcd.ca.gov/sites/default/files/docs/planning-and-community/HAU/compton-hau604-ta-03282024.pdf. [2] HCD RE: 125-129 Linden Drive, Beverly Hills – Notice of Violation (August 22, 2024) and HCD RE: 125-129 Linden Drive, Beverly Hills – Letter of Support and Technical Assistance (June 26, 2024); both available at https://www.hcd.ca.gov/sites/default/files/docs/planning-and-community/HAU/beverly-hills-hau-1071-nov-082224.pdf.   Authored by Reuben, Junius & Rose, LLP Partner, Chloe Angelis. 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.

ordinance

End of Summer Legislative Round Up

| Tara Sullivan

As the summer winds down and with most of the San Francisco’s boards and commissions on break, there is not much activity happening in the local land-use world.  Below are a handful of ordinances that were introduced on July 30th, the last hearing before the Board of Supervisors’ legislative recess and currently winding their way through the review process. Crackdown on Unauthorized Dwelling Units Legislation proposed by Supervisor Melgar (BOS File No. 24-0803) would implement a new, multi-pronged approach to San Francisco’s (the “City’s”) handling of unauthorized dwelling units (“UDUs”).  Under the legislation, the Planning Department’s development application process would be amended to require project sponsors to disclose the presence of UDUs on the subject property, in addition to the number of dwelling units, mailboxes, and utility meters at the property.  Applicants may also be expected to provide information about whether any dwelling units or bedrooms had been rented for the previous ten years.  In addition, this ordinance would also require the Planning Department to conduct property inspections to determine whether UDUs exist before the department may recommend a residential demolition, conversion, or merger under Section 317. To ensure compliance, Supervisor Melgar’s ordinance would also add specific penalties for misrepresentations on development applications and building permit applications.  If, after receiving a planning application, the Planning Department reasonably believed that an applicant did not disclose a UDU, this legislation would authorize Planning to further investigate and potentially cancel the development application.  Should the Zoning Administrator cancel a development application, applicants may need to start over by re-filing their application with a potential six-month penalty waiting period imposed for willful violations. Under the proposed legislation, the City may also penalize parties other than the project sponsor for violating the ordinance.  In addition to allowing (and sometimes requiring) the Zoning Administrator to cancel planning applications featuring misrepresentations, the ordinance would also give the Planning Department authority to refer design professionals and authorized agents who signed off on those planning applications to the applicable licensing agency or regulatory body. Increasing Income Limits for Certain BMR Units The City’s Below Market Rate (“BMR”) homeownership and rental programs currently requires a percentage of newly developed housing units be made available to households earning a certain percentage of the Area Median Income (“AMI”), with limited exceptions or opportunities to adjust affordability levels. Under legislation proposed by Supervisor Melgar (BOS File No. 24-0802), an owner who purchases a BMR owned unit at above the current affordable price may seek a permanent adjustment of the unit’s AMI threshold by petitioning the Mayor’s Office of Housing and Community Development (MOHCD).  If the city accepted the owner’s petition, MOHCD would be authorized to increase the BMR unit’s AMI levels up to a maximum of 150%.  Projects whose affordability levels were originally set by either the Planning Commission or the Planning Department, however, would also need that body to approve the adjustment. This ordinance would also grant MOHCD the authority to grant a one-time exception for certain properties, setting the qualifying income level to 20% above the required AMI.  In addition, MOHCD would also be empowered to grant an exception to affordability limits for BMR rental units converted to owned units up to a maximum of 150% AMI. Expanding Downtown Entertainment Zones This ordinance (BOS File No. 24-0804) comes in response to Senate Bill 76 (the “Entertainment Zones Act”), which authorized San Francisco to create “Entertainment Zones” in public places where brick and mortar establishments could sell alcohol for off-premises consumption.  Since Governor Newsom signed the statute into law last year, however, the City’s only proposed entertainment zone had consisted solely of a segment of Front Street between California and Sacramento Streets. Under this ordinance proposed by Supervisor Peskin, the City’s entertainment zone would be expanded to also include: (1) the segment of Annie Street between Market and Stevenson, (2) Claude Lane between Bush and Sutter, (3) segments of Jessie Street between Mission and Fifth and between Mission and Fourth, (4) Leidesdorff Street between Sacramento and Clay and Commercial and Montgomery, and other locations in and around the Financial District. The legislation also creates a permitting scheme for businesses hoping to participate in the City’s Entertainment Zones.  If adopted, Supervisor Peskin’s legislation would task the Department of Public Works with issuing permits to sell alcoholic beverages for off-site consumption in entertainment zones on a discretionary basis under a new process, subject to certain conditions. In addition to allowing outdoor alcohol consumption, the ordinance would also exempt businesses in entertainment zones from obtaining limited live performance permits, entertainment permits, and fixed place outdoor amplified sound permits for sound generated between 7 a.m. and 10 p.m. New Interim CU Requirements for Change of Use in Certain Mid-Market Districts This resolution (BOS File No. 24-0817), if passed, will create interim controls that will require a Conditional Use Authorization for any change of use from either an Entertainment, Arts and Recreation, or Retail Sales and Service use for certain mid-Market zoning districts for eighteen (18) months.  Citing high vacancy rates and public safety concerns, businesses wishing to change uses from one of the above uses would, in addition to making the required findings under the Planning Code, also be required to make certain findings showing that the use would detract from the area’s function as a commercial corridor nor its nearby entertainment, arts, or tourism uses.  The interim controls, proposed by Supervisor Dorsey, would give the City time to reevaluate current zoning controls for mid-Market as the area recovers from the impacts of the COVID-19 pandemic to determine whether changes are needed to encourage and retain entertainment and retail businesses.   Authored by Reuben, Junius & Rose, LLP Partner, 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

Oakland

Downtown Oakland Specific Plan Approved

| Justin A. Zucker

Last month, the Downtown Oakland Specific Plan (“DOSP”) was adopted by the Oakland City Council, with the DOSP environmental impact report being certified July 16 and the implementing Planning Code, Zoning Map, and Municipal Code amendments passing on second read July 30.  The DOSP is intended to guide development over the next twenty years, to meet the projected housing and employment needs in Oakland’s downtown.  The plan encompasses approximately 850 acres, and is generally bounded by 27th Street to the north, I-980, Brush and Market Streets to the west, Embarcadero and Jack London estuary waterfront to the south, and Lake Merritt and Channel to the east. Approval of the DOSP is the culmination of a near decade-long process.  As previously reported, the preliminary draft DOSP was released in 2019 with the draft zoning amendments released in April 2022 and the Zoning Incentive Program released in July 2022.  The delay in adoption of the DOSP was to allow for enhanced community engagement, adapting to the evolving social and economic conditions stemming from the COVID-19 pandemic.  The DOSP has been designed to help prevent displacement of both people and culture, while encouraging development of downtown. The DOSP projects the addition of approximately 18.3 million square feet of new commercial space, 1.3 million square feet of new institutional space, and 500,000 square feet of new industrial space, resulting in approximately 57,000 jobs and $41 million in impact fees to fund affordable housing and transportation improvements.  In addition, 29,000 new housing units are planned for by the DOSP, including approximately 4,000-7,000 income-restricted affordable units, that would generate approximately $480-544 million in one-time impact fees to fund affordable housing. Some changes to the DOSP since publication of the draft include: Preservation of industrial land uses closest to the West Oakland industrial area, removing the “Green Loop” and other non-industrial improvements from Howard Terminal now that the Howard Ballpark is no longer going forward. Development intensity changes clustered in five small areas, including portions of the West of San Pablo Planning sub-area, specifically from Grand Avenue to 20th Street and east to Martin Luther King Jr. Way (height increases from 85 feet to 175 feet in the Final Draft Plan, 7.5 FAR to 12.0, and from 200 square feet of lot area per unit for residential density to 110 square feet of lot area per unit), as well as between 14th and 15th Street between Martin Luther King Jr. Way and Jefferson Street (height increases from 175 feet to 275 feet in the Final Draft Plan, 12.0 FAR to 12.0/17.0, and from 110 square feet of lot area per unit for residential density to 90 square feet of lot area per unit). Prohibiting demolition of the principal building at the sending site leveraged for the transfer of development rights program. Requiring ten percent of the affordable housing Zoning Incentive Program benefit to be provided as an in-lieu fee rather than allowing entirely on-site benefits where projects propose at least 125 units above the base. Creation of a new alcohol use special permit, relaxing controls in the non-residential districts within the plan area, removing the need for a major conditional use permit for alcohol permits. There are too many specifics of the DOSP to include in an email update. Please contact us if you have any questions.   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.

Appeal

Key Tax Appeal and Exclusion Request Deadlines

| Kaitlin Sheber

Property owners in San Francisco have a right to appeal the assessed value of their properties within a certain window of time and may request tax exclusions when performing certain work.  Typically, the Assessor determines the increased base year value for the portion of any taxable real property that is newly constructed.  The value of the land would remain unchanged when there is new construction.  However, the cost of some types of improvements, including seismic safety improvements and accessibility improvements, may be excluded from reassessment if a timely request is submitted. Below is an overview of key deadlines and time frames to keep in mind, especially as the Regular Assessment Appeal Period is open now through September 16, 2024. Key Appeal Deadlines for San Francisco: Regular Assessment Appeal Period Opened July 2 The open filing period for appealing 2024/2025 assessed property values began on July 2, 2024 and expires on September 16, 2024.  No appeals may be filed after September 16, 2024.  Note that the Assessment Appeals Board has 2 years from the date of a timely filed application to schedule, hear, and render a decision. Supplemental and Escape Assessment Roll Supplemental and Roll Correction assessment appeals are only accepted within 60 days after the date of the supplemental notice issued by the Assessor, and Escape assessment appeals are only accepted within 60 days of the issuance of the tax bill. Exclusion Deadlines: Seismic Safety Improvements Under the Revenue and Taxation Code Section 74.5, a new construction exclusion may be requested for (1) seismic retrofitting improvements and (2) improvements utilizing earthquake mitigation technologies that are constructed or installed in existing buildings.  To obtain the exclusion, the property owner must submit a completed BOE-64 form to the Assessor before or within 30 days after completion of the project. Additionally, all documents necessary to support the exclusion must be filed by the property owner within 6 months after completion of the project.  Failure to timely file the form and all necessary documents constitutes a waiver of the exclusion for that year.  The exclusion expires upon a change in ownership of the property. Accessibility Improvements Section 74.6 of the Revenue and Taxation Code generally allows an exclusion for construction, installation, removal, or modification of a portion or structural component of an existing building or structure to the extent that it is done for the purpose of making the building more accessible to, or more usable by, a disabled person.  To receive the exclusion, the property owner must notify the Assessor of its intent to use the exclusion before or within 30 days after completion of the project.  All documents necessary to support the exclusion must be filed with the Assessor within 6 months after completion of the project.   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.

rates

Proposed Legislation Could Slash Transfer Tax Rates – For Some

| Michael Corbett

Looking to kick-start housing production in San Francisco, Supervisor Ahsha Safaí recently introduced legislation that would significantly reduce the city’s transfer tax rate – a fee imposed by the city on real estate transactions – for certain residential projects that satisfy a detailed set of preconditions. Specifically, the proposed tax cuts would apply to rental residential projects (including those subject to a recorded condominium map) that meet the following criteria: Include no less than 12% affordable on-site units, calculated by excluding any permitted density bonus units. Receive a Certificate of Final Completion and Occupancy (“CFCO”) on or after June 3, 2014. Used/Use 100% union labor. At least one year before and through the date of the transfer, collectively have a minimum of $25 million in investment from union pension fund(s). If passed, the legislation would lower transfer taxes from 5.5% to 3% for qualifying properties valued between $10 million and $25 million, and from 6% to 3% for properties worth more than $25 million. For qualifying properties that received a CFCO prior to the ordinance’s passage, the reduced transfer tax rate would expire on June 30, 2029. Applicable projects that are issued a CFCO after the passage of the ordinance would be able to capitalize on the reduced rate through December 31, 2033. The value brackets that the ordinance targets likely mean the tax cuts will primarily apply to mid- to large-scale residential projects. Projects such as 100 Van Ness Avenue, 99 Ocean Avenue and 101 Polk Street would appear to be within the qualifying group of projects that could avail themselves of the tax benefit if the ordinance were to pass and those properties brought to market. Notably, Supervisor Safaí’s proposed legislation is only made possible through the passage in March of Prop. C. In addition to allowing a one-time transfer tax exemption for owners of properties converted from commercial to residential use the first time they are sold following conversion, that tax measure also authorized the Board of Supervisors to amend, reduce, suspend or repeal (but not increase) the transfer tax without voter approval. Supervisor Safaí, who is running for mayor, looks to capitalize on this authority, saying that reducing the tax rate could create an incentive for owners that have been on the sideline, waiting for a more favorable economic environment before bringing their properties to market. San Francisco’s transfer tax rates shifted mightily at the turn of the decade and has since been a hot-button issue for owners and investors alike.  In 2020, San Francisco voters approved Prop. I, which doubled the transfer tax from 3% to 6% on the sale of properties over $25 million, and from 2.75% to 5.5% on deals worth between $10 million and $25 million. The city’s Controller’s Office at the time projected that the measure could increase city revenue by $196 million per year on average. While the tax generated $520 million in fiscal year 2021-22, transfer tax revenue plummeted in fiscal year 2022-23 to $186 million. With historically high vacancy rates for commercial properties, dramatically higher interest rates, and a general decline in deal volume and aggregate sales prices across all property types in the city since 2021, the gross revenue from transfer taxes for fiscal year 2023-24 may yet fall further. It is unclear if the proposed legislation would materially swing the tide in increasing transfer tax revenues for the city. On balance, the ordinance would be a step in the right direction towards promoting new residential deals and investment to help generate much-needed housing production. It will certainly make it easier to finance qualifying projects. Yet, with tens of thousands of residential units currently approved but not financeable, it can be argued that the ordinance – with its narrow scope and 5- to 10-year sunset provisions – does not go far enough to provide the spark that will begin the thaw of an otherwise frozen housing pipeline. If you have any questions or would like to discuss this proposed legislation or existing transfer tax rates, please contact Michael Corbett from Reuben, Junius & Rose, LLP, at (415) 567-9000 or mcorbett@reubenlaw.com.   Authored by Reuben, Junius & Rose, LLP Attorney, Michael Corbett. 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 Francisco Now a 10% City Under SB 423 / SB 35

| Daniel Turner

On June 28, 2024, the California Department of Housing and Community Development released its annual determinations under SB 423 (formerly SB 35). Enacted in 2018 (as SB 35), SB 423 requires streamlined, ministerial approval for qualifying housing projects in jurisdictions that are not meeting their Regional Housing Needs Allocation (RHNA) goals, in exchange for providing a certain level of affordability in the project. Each June, the Department reviews permitting data from jurisdictions across the state and determines whether a jurisdiction has made sufficient progress toward producing housing for households at various income levels (i.e. lower, moderate, above moderate, etc.). Jurisdictions that have made sufficient progress toward their goals are not subject to SB 423; however, only 47 of California’s nearly 540 local jurisdictions fall into this category. Jurisdictions that have not approved enough above-moderate income units (i.e. market rate units) are required to ministerially approve code-compliant projects that offer 10% of their units as affordable to 50% AMI for rentals or 80% AMI for ownership units. These are commonly known as “10%-jurisdictions.” Jurisdictions that have not permitted enough very low or lower income housing units are required to approve code-compliant projects that offer 50% of their units as affordable to 80% AMI. These are commonly known as “50%-jurisdictions.” A jurisdiction that fails to produce housing in multiple income categories can be both a 10%-jurisdiction and a 50%-jurisdiction, and a project proponent may choose which affordability scheme to follow in such cases. Under HCD’s June 28 determinations, a majority of the Bay Area’s cities and counties have been deemed 50%-jurisdictions. Notably, San Francisco has been deemed a 10%-jurisdiction for the first time, and it is now subject to the lower affordability thresholds for projects wanting to utilize SB 423. If you would like to learn more about qualifying for SB 423’s streamlined review and approval process, please reach out to our office.   Authored by Reuben, Junius & Rose, LLP Attorney, Daniel 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.

Three New Housing Bills To Keep An Eye On

| Mark Loper

This week’s client alert discusses three pro-housing bills sponsored by Bay Area legislators that are pending in Sacramento: Buffy Wicks’ AB 2011 cleanup bill; a bill adding a new streamlining option for converting commercial buildings to residential authored by Matt Haney; and Scott Wiener’s proposal to extend the performance period of certain entitled but not built housing projects by two years, and allow those projects to defer certain impact fees until their certificate of occupancy. For background, according to UC Berkeley’s Terner Center for Housing Innovation, over 215 housing-related bills were introduced in California’s 2024 legislative session, representing almost 10% of all new bills. Topics include streamlining, tenant protections, potential solutions to construction cost issues, and addressing impediments to housing production in the Coastal Zone, among other topics. It should come as no surprise that the Bay Area caucus is at the forefront of legislation to increase housing production. Assemblymember Wicks’ AB 2011 cleanup bill, AB 2243, would make several technical amendments that help clarify the scope and applicability of this streamlined ministerial program for housing on sites that principally permit commercial uses. It also loosens a few eligibility criteria, potentially opening up more sites for the program, and changes some AB 2011-specific zoning controls. The bill would: Allow sites facing a road 50 feet or wider to use AB 2011, if the height limit at the site is 65 feet or higher (currently, the minimum street width is 75 feet). Remove the prohibition on AB 2011 projects within 500 feet of a freeway and 3,200 feet of a refinery if the project provides enhanced air filtration systems. Allow AB 2011 on: sites where parking is allowed with a Conditional Use permit; qualifying regional malls; office buildings converted to residential; and sites near public parks and parking lots or structures. Prohibit cities from imposing higher local inclusionary requirements unless they can demonstrate that the project is economically feasible. Otherwise, the project will be subject to AB 2011’s own on-site inclusionary requirements of 8-15% for rental projects and 15-30% for condos (with a sliding scale based on AMI levels). Increase minimum residential density for ground-up construction and eliminate density limits for conversion projects. Clarify that the residential density limits for an AB 2011 project can be increased using the Density Bonus Law (“DBL”), and that AB 2011 projects in the Coastal Zone can use the DBL’s additional density, waivers, and concessions even though they would need to get a coastal development permit. Assemblymember Haney’s adaptive reuse program (AB 3068) makes the approval process for converting qualifying buildings streamlined and ministerial. It borrows many concepts from AB 2011 and SB 35/423 including imposing the same processing timelines and requiring prevailing wages, apprenticeship programs, and health care expenditures for construction workers. Sites need to be in urbanized areas and surrounded by other urban uses and cannot propose the conversion of light industrial buildings. A minimum of 50% of an existing building must be converted, allowing buildings to retain non-residential uses. The project would also need to comply with either a local jurisdiction’s inclusionary housing program or the bill’s own requirements, whichever is higher. Interestingly, the adaptive reuse program would also allow the development of new buildings on undeveloped areas and parking adjacent to the commercial building proposed to be converted, if certain criteria are met. It would also allow the new construction aspect of the project to use the Density Bonus Law. Also, AB 3068 would allow but does not require cities and counties to offer financial incentives for up to 15 years to subsidize affordable units that are part of an adaptive reuse project. The annual payments to property owners would be equal to the amount of property tax revenue that the local government receives, less the assessed valuation when the sponsor applied for the payment program. Finally, Senator Wiener’s bill—SB 937—would grant a two-year extension to the performance periods of certain residential projects. Projects entitled under any of the following programs would be eligible for the automatic extension: AB 2011, SB 35/423, the Density Bonus Law, Yes in God’s Backyard (SB 4), 100% affordable projects, and projects with 10 or fewer units. The project needs to have at least 2/3 residential square footage, and the entitlement needs to be issued prior to and still be in effect as of January 1, 2024. Senator Wiener’s bill also would delay the payment of development fees used to construct public facilities or improvements until a certificate of occupancy is issued. And it would not allow a city to charge interest on deferred fees. These changes could increase the financial feasibility for housing developments by allowing project sponsors to defer payment until after construction is complete. We will continue to track these and other notable bills as they navigate the legislative process.   Authored by Reuben, Junius & Rose, LLP Partner, 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.

San Francisco Housing Element Rezoning Program – Status

| Thomas Tunny

As previously discussed in a February 2024 Update, the Planning Commission has been holding informational hearings concerning its state-mandated implementation actions and zoning amendments identified in the certified 2022 Housing Element. The Housing Element was adopted in January 2023.  Beginning in Spring 2023, the Department began working on four key Housing Element implementation areas: Affordable Housing Funding and Strategies Activating Community Priorities Housing Production and Process Improvements Expanding Housing Choice (Housing Element Rezoning Program) On June 6, the Planning Department updated the Commission and public on the Expanding Housing Choice program and coordinating with the Mayor’s Executive Directive on “Housing for All”. Expanding Housing Choice Expanding Housing Choice will amend zoning policies in Housing Opportunity Areas (“Well-Resourced Neighborhoods”) to increase capacity for multi-family housing to satisfy the City’s Regional Housing Needs Allocation (RHNA) gap of 36,200 housing units.  Within the broad geography covered by the Housing Opportunity Areas, the rezoning program is focused on transit corridors, commercial corridors, and key opportunity sites, as these locations leverage existing infrastructure and feature the types of sites more likely to be developed and expected to yield the greatest amount of new housing.  Most rezoned areas will allow midrise housing (65’-85’ tall, or 6-8 stories), with higher height limits considered in selected locations.  In the areas surrounding these transit corridors and key sites, parcels will be permitted to build 4-plexes and 6-plexes under recently adopted legislation.  The Planning Department has set a target of building 25-50% of the City’s new permanently affordable housing units in the Housing Opportunity Areas. Objective Design Standards As discussed in previous Commission hearings, the Planning Department is developing Objective Design Standards (ODS) in parallel with Expanding Housing Choice that will complement the Planning Code and provide objective development standards. Under the California Housing Accountability Act (HAA), local jurisdictions cannot use subjectivity in determining whether a project can be approved or denied. They may only evaluate projects against objective standards, defined as rules which: “…Involve no personal or subjective judgment by a public official and are uniformly verifiable by reference to an external and uniform benchmark or criterion available and knowable by both the development applicant or proponent and the public official before submittal.” A copy of the draft ODS is available here:  SF Objective Design Guidelines Ultimately, the Planning Department will create Objective Design Standards for every scale and typical residential project type subject to the HAA.  Subsequent updates will expand these standards to apply to other residential project types, sizes, and geographies.  As an initial step, the ODS will be primarily applicable to housing projects in the Housing Opportunity Areas. Specifically, the draft standards were created to apply to midrise housing developments (e.g., 65’ to 85’ tall, or 6-8 stories), large sites (e.g., greater than 1 acre), and sites allowing tall buildings (>85’). These standards were scoped as a companion to the rezoning and focus on the Housing Opportunity Areas and rezoned parcels. The Planning Department is continuing to meet with community organizations to solicit feedback to refine the draft zoning proposal and will schedule additional informational hearings to provide updates and delve into additional topics related to the rezoning.  We will continue to keep readers apprised.   Authored by Reuben, Junius & Rose, LLP Attorney Thomas 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.

NEW STATE LAWS AIM TO SIMPLIFY HOA GOVERNANCE

| Jay Drake

Assembly Bill 648 – HOA Meetings by Teleconference. In an effort to enable greater access to homeowners association (“HOA”) meetings, and enhance HOA members’ ability to participate and comment on matters of interest, the Davis-Stirling Common Interest Development Act, the primary body of law governing HOAs in California, was amended to allow HOA meetings to be held by teleconference. Assembly Bill 648 was signed into law and became effective on January 1, 2024.  AB 648 adds Civil Code Section 4926 to the Davis-Stirling Act.  Prior to passage of AB 648, Civil Code Section 4090 required meetings of an HOA board of directors (“Board”) to be held in-person at a physical location, or by teleconference only in certain situations. Newly added Civil Code Section 4926 allows a meeting of the HOA members or meeting of the Board to be conducted entirely by teleconference (including video conference), without any physical location being held open for the attendance of any HOA member or director on the Board (“Director”) if specified conditions are satisfied. These conditions include, among others, a requirement that the notice for the meeting provide clear instructions on how to participate by teleconference, and each HOA member and Director must have the same ability to participate that would exist if the meeting were held in person.  Also, the telephone number and email address of a person who can provide technical assistance with the teleconference process, both before and during the meeting, must be provided in the meeting notice. These teleconference provisions do not apply to an HOA meeting at which ballots are counted and tabulated pursuant to Civil Code Section 5120. Assembly Bill 1458 – Reduced Quorum for HOA Board Elections. In order to streamline the process for election of Directors to HOA Boards, the Davis-Stirling Act was amended to allow for reduced quorums in certain situations. HOAs are required to periodically hold elections for the Board of Directors.  The governing documents of many HOAs include a quorum requirement for any election of Directors.  A quorum is the minimum number of HOA members that must be “present” – either in person or via mailed ballots – in order to make the election valid.  An HOA’s governing documents may require a majority (at least 51%) of HOA members to participate for the election to be valid. A number of HOAs report having trouble meeting quorum requirements for Board elections due to lack of participation by the HOA members.  This inability to reach a quorum can prevent an HOA from electing Directors to its Board in a timely manner.  An HOA may have to hold multiple elections in an attempt to reach the required quorum of its members. Assembly Bill 1458 was signed into law and became effective on January 1, 2024.  AB 1458 amends Civil Code Section 5115 of the Davis-Stirling Act and Section 7512 of the Government Code. Civil Code Section 5115 as amended provides that if an HOA fails to reach a quorum required by its governing documents for an election of Directors, then unless a lower quorum is authorized by the HOA’s governing documents, the HOA may at a subsequent election reduce the required quorum to 20% of the HOA members voting in person, by proxy, or by secret ballot.  This means that only 20% of the HOA members will have to participate in an election of Directors for the election to be valid.  This reduced quorum requirement should allow Directors to be elected in a timely manner notwithstanding a lack of participation by many HOA members.  The HOA must provide specified notices to its members before reducing the quorum.  Similar amendments were made to Section 7512 of the Government Code. Managing an HOA can be challenging given that HOA members and Directors often lead busy lives and may find it difficult to fully participate in the HOA.  These new State laws should facilitate greater participation in and efficient operation of HOAs for the benefit of all members.   Authored by Reuben, Junius & Rose, LLP Attorney Jay Drake. 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.

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