Legislation introduced by Supervisor Katy Tang would potentially allow a broader range of projects to use San Francisco’s local density bonus program, called HOME-SF. Supervisor Tang—who championed the original program—is proposing a three-tier system that links affordability percentages to the height increase a project seeks, along with other changes meant to speed up the entitlement process and provide more certainty to project sponsors that elect to do a HOME-SF program. It is being considered by the Planning Commission this afternoon, with the Planning Department suggesting a few additional refinements and modifications. The overarching idea behind the modifications is to find a way to make HOME-SF more feasible, while still ensuring the city’s desired number of on-site affordable units. Sponsors considering or currently processing residential projects on sites where HOME-SF is available should pay close attention to the legislation to see if the modified HOME-SF program makes sense for their project. To provide greater flexibility and encourage sponsors to utilize the HOME-SF program, a three-tier system would be put in place that requires between 20% and 30% affordability, depending on the amount of additional height. Cutting through some of the details: a HOME-SF project that proposes 20% on-site affordability (at three AMI levels) would get relief from numerical density limits but no height increase. One additional story of height is allowed in exchange for 25% affordability, or two additional stories with 30% affordability. The three-tier system—illustrated in the table below—is proposed for a trial period through the end of 2019, with the city revisiting the program at that time to assess its effectiveness For background, the HOME-SF program was approved unanimously by the Board of Supervisors about a year ago, in June 2017, along with legislation implementing the state density bonus law and a hybrid program. HOME-SF allows unlimited residential density, in contrast to the state law which only allows a bonus up to 35%. Presumably, the hope was that projects in zoning districts with set numerical density limits would choose HOME-SF instead of the state law so they could have more units. However, since the programs became law, only four residential projects have selected HOME-SF, with many eligible projects using the state program instead. The legislation also proposes a very important procedural change: a 120-day processing period, starting on the day a “complete” HOME-SF application and plan set is submitted. This would be a significant shift from the current processing timeline of HOME-SF projects, which are given priority status but not guaranteed a hearing within 120 days. The Planning Department is recommending removing the strict 120-day limit, on the grounds that it is infeasible given staffing levels and CEQA processing requirements, and instead continuing to give HOME-SF projects priority processing. We have found that staff is indeed doing what it can to process HOME-SF projects quickly, and they are moving faster than other residential projects; priority processing is assuredly not an empty promise. And the Planning Department does have a new policy to “target” hearings for most infill projects within one year of the Department determining it has all information needed to process the project. But a strict deadline enshrined in the Planning Code as opposed to a “target” hearing date—even if it’s not 120 days—would provide a much-needed degree of certainty currently only available to just a few kinds of housing developments, such as SB 35 or AB 73 projects. We will continue to monitor this important piece of legislation as it makes its way through the approval process.   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.

Last Monday, the Board of Supervisors’ Land Use and Transportation Committee voted unanimously to recommend approval of legislation that would increase the Transportation Sustainability Fee (“TSF”) citywide for large, non-residential projects by $5, except within the proposed Central SoMa Plan area, where the associated increase would be $2. The TSF was adopted in November 2015, replacing and expanding upon the former Transportation Impact Development Fee.  TSF requires citywide residential, non-residential, Production, Distribution, and Repair projects to pay a fee towards provisions of transit infrastructure and services necessary to accommodate increased demand generated by development. The pending legislation, sponsored by Supervisor Peskin, would increase the TSF for large non-residential projects (those containing more than 99,999 gsf) citywide from $19.04/gsf to $24.04/gsf, and would increase the rate associated with such projects in the proposed Central SoMa Plan area from $19.04/gsf to $21.04/gsf.  The legislation would not impact TSF rates for residential or smaller-scale development. Proponents argue that this fee increase is needed to address a $22 billion dollar shortfall anticipated by the Transportation Task Force 2045 for transportation projects over the next 27 years.  SFMTA staff estimated that the legislation will generate around $11.4 million in additional fees – approximately 8.2 million of which would come from Central SoMa Plan area projects. Two weeks ago, the San Francisco Planning Commission voted unanimously to recommend approval of the increased TSF fee, contrary to Department staff’s recommendation to explore modifications such as exempting Central SoMa Plan area development.  Staff’s recommendation was based on concerns that imposition of additional TSF fees would impact the financial feasibility of large development in Central SoMa, which will already be subject to a range of new and increased development impact fees.  The Central SoMa Plan is anticipated to generate approximately $2 billion dollars in public benefits ($5 million of which is pegged for local and regional transit improvements). At last week’s Land Use Committee hearing, Committee members voted unanimously to recommend approval of the legislation, but noted a need to take a comprehensive look at impacts of the broader public benefits package for the Central SoMa Plan, which is anticipated to come before them in late June. This isn’t the first attempt to increase the TSF.  In 2016, Supervisors Avalos, Campus, and Marr introduced similar legislation to increase TSF fees by $2/gsf on large non-residential development, but it was ultimately vetoed by Mayor Ed Lee. The TSF legislation is anticipated to come before the full Board within the next few weeks. Authored by Reuben, Junius & Rose, LLP  Attorney, Melinda Sarjapur The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full-service real estate law firm.  We specialize in land use, development, and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision, and condominium work.

On May 1st, Mayor Farrell and Supervisor Kim introduced San Francisco’s first “Housing Sustainability District”.  This legislation was made possible by California State Assembly Bill (“AB”) 73, which was sponsored by Assemblymember David Chiu and signed into law in September 2017.  The new “Central South of Market Housing Sustainability District” (“Central SoMa HSD”) will allow residential projects that meet certain standards and requirements to take advantage of a 120-day streamlined review and approval process. Housing Sustainability Districts (“HSD”) are meant to facilitate the construction of housing in areas that are served by existing infrastructure.  They function as an overlay zoning district and provide additional controls and standardized processes for qualifying residential projects.  The intent of the HSDs are to allow project sponsors of residential projects to receive ministerial permits in return for including at least 10% of dwelling units on-site as affordable to lower income households and to pay prevailing wages or use skilled labor for the construction of the project.  In return for creating HSDs, municipalities are entitled to receive a ‘zoning incentive payment’ from the California Department of Housing and Community Development. The new Central SoMa HSD includes all parcels within the Central SoMa Special Use District and does not change any of the height, bulk, land use, or density controls in the proposed Central SoMa Plan.  Instead, it will allow a streamlined ministerial approval.  This approval would be issued by the Planning Department within 120 days from receipt of a complete application for qualifying housing projects.  Individual projects must meet all of the following eligibility requirements below in order to qualify for entitlement under the Central SoMa HSD: 1. Projects with a height of 160 feet or less (note that 100% affordable projects qualify regardless of height); 2. The project is located in a zoning district that principally permits residential uses and does not propose less than 50 units/acre or more than 750 units/acre; 3. A majority of the project’s gross square footage must be designated for residential uses.  A project is not deemed to be for residential uses if it is infeasible for actual use as a single or multifamily residences; 4. The project must provide no less than 10% of its affordable dwelling units on-site and designate them as affordable to very low or low-income families, as defined in Section 415. Projects not subject to Section 415 must enter into a regulatory agreement with the City agreeing to provide the units on-site and restricted to very low or low-income families for at least 55 years; 5. All nonresidential uses must be principally permitted in the underlying zoning district. Therefore, if a nonresidential use requires a Conditional Use Authorization then the project is not eligible; 6. Projects that propose more than 24,999 gross square feet of office use are not eligible; 7. Projects containing a building that is designated under Article 10 or Article 11 of the Planning Code are not eligible; 8. No existing residential units can be removed, demolished, or converted to another use; 9. If the project is seeking a density bonus pursuant to California Government Code Section 65915 et. seq., it must demonstrate that it will not result in a significant shadow impact; 10. The project must comply with all Mitigation Measures in the Central SoMa Environmental Impact Report; and 11. The project must comply with all applicable zoning and adopted design review standards, including the San Francisco Urban Design Guidelines and Central SoMa Plan’s Guide to Urban Design. In addition, if a project is proposing 75 units or more, then it must use a skilled and trained workforce to construct the project.  This threshold drops to projects of 50 or more on January 1, 2022.  If the project proposes less than 75 units, it must pay prevailing wages to all workers involved in the construction project.  This threshold drops to 49 or few units on January 1, 2022. Projects meeting all of the above criteria are eligible for ministerial approval by the Planning Department within 120 days from receipt of a complete application.  No hearings are required for approval.  If a project would normally trigger a Large Project Authorization under Section 329 (in the Central SoMa Special Use District, those projects greater than 85 feet or involving a net addition/new construction of more than 50,000 gross square feet), those processes do not apply (i.e., no Planning Commission hearing).  Further, no requests for Discretionary Review can be accepted or heard by the Planning Commission or Board of Appeals. The Central SoMa HSD does require that eligible projects file a Preliminary Project Assessment (“PPA”) before an application will be accepted (which is not included in the 120-day review and approval timeframe).  The purpose of the PPA process is for applicants to provide detailed evidence of eligibility compliance and to provide feedback on compliance with applicable design guidelines.  Further, all eligible projects must have an “informational hearing” before the Planning Commission within 100 days of receipt of a complete application.   Once the project is found to comply with the Central SoMa HSD requirements, the Planning Department approves the permit(s). The Planning Department may deny a project within the Central SoMa HSD if it finds that it does not fully comply with all adopted design review standards, or that, based on substantial evidence in the record, that the project will have a specific adverse impact on the public health or safety and there is no feasible method to mitigate or avoid the impact.  Failure to meet all of the requirements of the Central SoMa HSD are also grounds for denial.  Decisions made pursuant to the Central SoMa HSD are appealable directly to the Board of Appeals within 10 days, which must decide the issue no later than 30 days after filing.  There are no opportunities for rehearings of the Board of Appeal decisions. Projects that receive approval under the Central SoMa HSD must obtain the first site or building permit within 36 months of the Department’s issuance of a written decision.  The Planning Director

Currently under review by the San Francisco Board of Supervisors is 171284 – an ordinance to amend and clarify the City’s Slope Protection Act (SPA).  The ordinance would expand the existing SPA to include construction projects proposed on properties whose average slope exceeds 25% grade (excluding properties already subject to the Edgehill Mountain Slope Protection Area or the Northwest Mt. Sutro Slope Protection Area), the properties within SPA are presently identified by the Earthquake Induced Landslide Zone. The proposed amendments create a heightened layer of review by a Structural Review Committee; include additional mapped areas of the City, update map references, augment the title to be The Slope and Seismic Hazard Zone Protection Act; and implement a Structural Advisory Committee to review written reports from representatives of the Department of Planning and Public Works, and the Fire Department –  each of whom would perform a site visit and then submit their reports to the building official regarding the safety and integrity of the proposed design and construction in relation to slope instability mitigation and drainage as well as other geotechnical issues. The enhanced peer review by committee would apply to permit applications seeking to perform construction of new buildings or structures with over 1,000 square feet of new projected roof area and horizontal or vertical additions having over 500 square feet of new projected roof area and would be implemented for any permits related to the proposed project including: shoring, underpinning, excavation, or retaining wall work; grading; excavation or fill, of over 50 cubic yards of earth materials; “or any other construction activity that in the opinion of the Building Official, may have a substantial impact on the slope stability of any property.” The impact on properties within the vicinity of the proposed project will be considered as part of the review. As drafted, these amendments would have a substantial effect on small residential project timelines for permitting. Given the extensive documentation by structural and geotechnical engineers already required for these projects at the Planning review phase; and then again at the peer review currently in place and required by the Building Department Director– the revisions proposed to this ordinance are important issues for consideration and further discussion before adoption. With the potential to critically overburden an already robust review cycle, the public should have more clarity on the level of authority that the Structural Advisory Committee would be given to impact design and scope of a proposed project and at what stage in the permitting phase. Broad steps towards multi-agency site visits and additional written reports without recognizing the established measures in place should have a further assessment to account for the seemingly ever lengthening road to entitlement and final construction.   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.

Yesterday the much-debated Senate Bill 827 (SB 827) authored by Senator Scott Wiener failed to make its way out of its first policy committee hearing, effectively dooming its chance of passing this year.  SB 827 would have provided a “transit rich housing bonus” to qualifying urban, infill projects on transit corridors that provided required percentages of affordable housing.  That bonus would override local zoning restrictions, providing substantially increased heights and density and reducing parking requirements.  Our prior update on SB 827 can be found here. As SB 827 goes down, Senator Wiener’s Senate Bill 35 (SB 35) from last year’s legislative session is starting to bear fruit.  SB 35 created a “by right” approval process for multi-family, infill housing projects in urbanized areas that provide affordable housing.  The “by right” approval process applies in areas that fail to issue sufficient building permits to meet their State-mandated affordable housing goals (the vast majority of cities and counties in California fail to do so).  In a city or county that does not issue sufficient building permits for above moderate income units, a project that dedicates at least 10% of its units to households earning below 80% of the area median income (AMI) qualifies for ministerial review.  If a city or county does not issue sufficient building permits for households earning below 80% of AMI, a project that dedicates at least 50% of its units to such households qualifies for ministerial review.  SB 35 projects are generally required to pay prevailing wage, and restrictions apply to avoid displacement of existing tenants.  A city or county is required to approve an SB 35 project within 180 days.  Our prior update on SB 35 can be found here. Three SB 35 Projects Now Underway in the Bay Area SB 35 was part of a package of fifteen housing bills signed by Governor Brown in September 2017 that sought to tackle a wide range of issues, from streamlining of project approvals to funding for local planning and affordable housing to strengthening the Housing Accountability Act.  SB 35 went into effect on January 1, 2018.  On January 31, 2018, the Department of Housing and Community Development released its analysis of cities and counties subject to SB 35 streamlining for failing to meet their affordable housing goals (378 failed to meet their above moderate income goals, and 148 failed to meet their 80% AMI goals).  As of today, there are three projects that are seeking approval under SB 35.  Based on the timeline for approval under SB 35, all three expect to receive their approval within 180 days. 1900 Fourth Street, Berkeley The project sponsor had sought approval of a development at this site for approximately 5 years.  The site, currently a parking lot, is designated for housing in the city’s general plan and zoning and is located near the Amtrak Capitol Corridor Train and buses.  However, vigorous opponents argued that the development of the site would harm cultural resources and have other deleterious impacts.  In March 2018, after years of negotiating with the opponents and a prolonged environmental review process, the project sponsors changed tack and sought a denser development of the site using SB 35 and the State Density Bonus Law.  The project now proposes 260 units, 50% of which will be affordable to households making less than 80% AMI, 27,500 square feet of retail and restaurant space, a community park area, and a community center. Vallco Town Center, Cupertino The owner of the nearly-vacant Vallco Shopping Mall had sought approval of a development at the site for nearly 6 years.  Several years of vigorous opposition had stalled the specific plan that would have allowed for the renovation of the property.  In April 2018, the project sponsors took a different approach and revamped the project to utilize SB 35 streamlining.  The revised project reduces the office area from 2.4 million to 1.8 million square feet, reduces retail from 640,000 square feet to 400,000 square feet, and increases housing units from 800 units to 2,402 units, of which 50% will be affordable to households earning less than 80% AMI. 681 Florida Street, San Francisco As a result of a market-rate housing development next door, the city became the owner of this parcel which it would develop into a 100% affordable housing development.  The city chose two affordable housing groups to develop the project, one of whom actively opposed passage of SB 35 before it became law.  However, as the two groups moved forward with the project it became apparent that the normal approval process would be time consuming and uncertain, preventing them from bringing the project to market as quickly as they hoped.  In April 2018, the groups chose to reformulate their proposed development at the site to proceed under SB 35 and the State Density Bonus Law, which they expect will allow a 130-unit project where normally only 86-units would have been possible. The Future of SB 35 In a statement following yesterday’s committee vote on SB 827, Senator Wiener stated his intention to keep working on the bill and suggested that perhaps it would take more than one legislative session to get the necessary support.  He compared the bill to Governor Brown’s 2016 budget trailer bill that would have streamlined approvals by creating “by right” land use approvals for multifamily, infill housing developments within “transit priority areas” that also include affordable housing.  The Governor’s trailer bill failed when environmental and labor groups walked away from negotiations, but some have speculated that the trailer bill may have paved the way for SB 35 the following year.  Perhaps the ambitious changes that SB 827 proposes will take another legislative session to enact.  However, if SB 827 is coming back next year, the Senator will not only need to persuade the Legislature to pass it, he will also have to persuade a new governor to sign it. Authored by Reuben, Junius & Rose, LLP  Attorney, Matthew Visick The issues discussed in this update are not intended to be

Two new laws became effective on January 1st, 2018 that impact condo projects and other common interest developments (“CIDs”) and homeowners associations (“HOAs”) in California.  The first expands homeowners’ free speech rights and limits an HOA’s ability to restrict political expression and related activities.  The second limits the ability of an HOA to prevent a homeowner from installing a solar energy system (i.e., solar panels) in a CID. Expansion of Assembly and Free Speech Rights Senate Bill 407 added Civil Code Section 4515 to the Davis-Stirling Common Interest Development Act (“Act”), which is the primary state law governing CIDs.  SB 407 was intended by its author to prevent HOAs from denying basic rights of political expression to its residents.  Civil Code Section 4515 strengthens existing rights of homeowners in a CID to engage in non-commercial political expression and related activities within a CID community.  Under the new law, a CID project’s governing documents cannot prohibit a homeowner from assembling peacefully or inviting public officials or candidates for public office.  Further, the governing documents may not prevent homeowners from meeting with HOA members or guests in their home or in the project common area for meeting, and may not stop a homeowner from canvassing, petitioning or distributing information to other owners in the project, about matters of public concern or that relate to the subject project or its HOA.  A homeowner also cannot be required to pay a fee, make a deposit, or obtain insurance in order to use the common area of the project.  A homeowner who is prevented by an HOA from engaging in such activities may bring a civil or small claims action to enforce his/her rights.  A court is authorized to assess a civil penalty of not more than $500 per violation. Civil Code Section 4515 represents a fairly significant expansion of homeowners’ rights to engage in political activities related to the project and HOA, as well as issues of general public concern. Homeowner’s Right to Install Solar Energy System Assembly Bill 634 amended Sections 714.1 and 4600 of the Civil Code, and added Section 4746, to strengthen a homeowner’s right to install a solar energy system (solar panels) on a building, garage or carport roof in a CID.  An HOA cannot establish a general policy prohibiting the installation or use of such solar energy systems, and cannot require the approval of the other HOA members.  An HOA can adopt certain controls and requirements for a homeowner to install a solar energy system, and the HOA has the right to reasonably approve the system and its installation.  A homeowner may be obligated to maintain, repair and replace building roofs and components affected or damaged by the system, and obtain liability insurance for any damage caused by the system.  A homeowner must notify all other homeowners in the building in which the system will be installed.  As each homeowner in the building also has the right to install a solar energy system, a single homeowner may only use his/her equitable allocation of such the roof area.  This last requirement could effectively preclude installation of a system in condominium projects, especially large projects with many units or projects with minimal roof areas, as the roof area equitably allocated to a particular homeowner may not be practically large enough to install a usable system. HOAs should adopt guidelines providing clear rules and procedures concerning installation and use of solar energy systems in their projects. 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.

The neighborhood known as “the Hub” has long been a target for development by the Planning Department. Initially included in the Market and Octavia Area Plan in 2008, the area defined by Market Street and Van Ness Avenue was envisioned as a vibrant mixed-use neighborhood. For various reasons, the redevelopment of the neighborhood never came to fruition. Now, 10 years later, the Planning Department is reevaluating its vision for the Hub and is proposing to modify its existing zoning controls. Specifically, the Planning Department is proposing to modify the piecemealed zoning within the Hub area by creating one cohesive zoning district with consistent land use controls. The changes will be centered on flexibility for non-residential uses, more community-serving uses, lower parking requirements, and increased affordable housing. Currently, the Hub includes two zoning districts: (1) the Downtown General Commercial District where all parcels are also within the Van Ness & Market Downtown Residential Special Use District; and (2) the Neighborhood Commercial District. Planning proposes replacing the current scheme with one zoning district comprised of consistent land use controls. The Hub’s key land use changes would include: Providing flexibility for non-residential uses by exempting institutions, arts uses, public uses, and replacement of existing commercial uses from the required ratio of residential and non-residential uses; and allowing non-residential uses above the 4th floor Supporting local, affordable, community-serving retail by having certain micro retail unit requirements Supporting arts uses by requiring public art for projects involving new buildings or the addition of 25,000 square feet; allowing projects to waive the public art fee and instead provide reduced rent for arts uses with a development agreement; and allowing FAR exemptions for developments that provide reduced rent for arts uses with development agreements Providing consistent and lower parking requirements Increasing production of affordable housing by raising height limits In addition to modifying land use controls, the Hub’s proposed changes affect urban form and the public realm requirements. As noted, a proposed goal is to increase the amount of affordable housing. To address this, the City is exploring raising heights on select parcels to increase their development potential. Overall, the proposed height limits will allow an addition of approximately 1,750 new units, of which about 550 are affordable, to the housing stock. In doing so, the City hopes to highlight the Hub as a center of activity and transit. The skyline heights will then be tapered to meet smaller-scaled adjacent neighborhoods. The Hub is the high-density core of the current Market and Octavia Area Plan. Because of this, Planning has built on its initial ideas laid out in the Market and Octavia Area Plan with improvements in the Hub on select streets, alleys, and open spaces. With the recommended changes, the number of people crossing Market at Van Ness is expected to be increased by 50% at peak hour. Around 8,800 people are expected to enter and exit the Van Ness Station at peak hour. Currently, the Hub is undergoing environmental review and the EIR draft is expected to be released in spring 2019, with final adoption anticipated for fall 2019. The Notice of Preparation is expected to be released in early May 2018. More finalized details of the Hub will be confirmed then. Stay tuned.   Authored by Reuben, Junius & Rose, LLP  Attorney, Antonia Toomey 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.

This Thursday, March 22nd, the Planning Commission will hear an informational presentation on an economic feasibility study regarding the potential for increasing the on-site inclusionary housing requirement in the Divisadero Street and Fillmore Street Neighborhood Commercial Transit Districts (NCTs).  The report on the study concludes that in the Fillmore NCT the new inclusionary housing program’s affordability levels coupled with construction costs make a typical development project infeasible.  And on the flip side, minor increases could be possible in Divisadero NCT, but not up to the total “ramping up” required by the Planning Code.  The study may pave the way for the City to ultimately adjust the affordable housing requirements in these two districts.  It provides an interesting case study. By way of background, the City rezoned the Divisadero Street and Fillmore Street Neighborhood Commercial Districts (NCDs) to the Divisadero Street and Fillmore Street NCTs in 2015, which eliminated density limits.  The rezoning legislation pointed to an unprecedented demand for housing and rising housing costs as the catalyst for getting rid of residential density.  The goal was to find new ways to accommodate more housing units into the existing urban fabric to meet current and future demand without negatively impacting neighborhood character.  Removing density limits while keeping other development standards intact allows more housing to be put into the same size buildings, and thus enables the City to increase the potential number of units permitted without increasing the scale of the district. As part of the inclusionary housing overhaul in July 2017, the Board of Supervisors included a provision in Section 415.6(a)(8) that requires the Planning Department and Office of the Controller to study whether a higher on-site inclusionary housing requirement is feasible in rezoned areas that meet certain criteria.  Of all the rezoning activities since January 1, 2015, only the rezoning of the Divisadero and Fillmore NCTs met the criteria for the mandatory feasibility study. The economic feasibility study for the two districts estimated the maximum potential on-site inclusionary housing requirement that would be “economically feasible” for a typical development under current economic conditions.  The “maximum” was calculated based on the assumption that any increase in property value attributable to the rezoning would be absorbed by the on-site inclusionary requirement.  In calculating this value, the study found that there has been a significant increase in costs, and only a limited increase in prices and rents, if at all, since 2016 – an unexpected acknowledgment by the City that increased costs are making it harder to capture value from rezoning. The study assumed that under the prior density limits, only projects under 25 units would be feasible in most cases, thus a 12% inclusionary housing requirement was applied.  Based on the study’s prototypical development projects, the number of units in the Divisadero NCT was projected to rise from 16 to 47 units for condo projects, and 53 units for apartment projects.  The Fillmore NCT was projected to grow from 21 units to 37 unit for condos and 43 units for apartments.  This would bump each of the prototypical projects into the higher inclusionary housing requirement for 25 or more units. The study ultimately found that the Divisadero NCT could support a maximum on-site inclusionary housing requirement of 23% for ownership units and 20% to 22% for rentals, slightly higher than the current citywide inclusionary requirements of 21% for ownership units and 19% for rentals.  But most importantly, these maximums are still lower than the final citywide inclusionary housing percentages, which will ramp up annually until reaching 26% for ownership units and 24% for rentals in 2027.  The study assumed an AMI breakdown of 50% low-income, 25% moderate-income, and 25% middle-income for ownership units and 56% low-income, 22% moderate-income, and 22% middle-income for rentals.  This assumption was based on the pre-2018 AMI breakdown, which has since changed and will continue to shift annually until 2027. Interestingly, the study concluded that the Fillmore NCT could not support additional inclusionary housing requirements.  In fact, under current market conditions, the prototypical development project in the Fillmore NCT would not be feasible even with the current citywide inclusionary requirements for projects over 25 units. The report is clear that the study was done solely for “illustrative purposes” and that the results are only applicable to the specific prototypes and projected unit counts.  Nevertheless, the City may ultimately use the study’s findings to raise the affordable housing requirements in the Divisadero NCT District.  The report also sheds light on the fact that the study’s typical development project would not be feasible in the Fillmore NCT under current inclusionary requirements.  The practical implications of these findings are still up in the air. Stay tuned to see how this all shakes out.   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.

California’s recent passage of sweeping housing legislation has been widely reported.  Yet before the development community and public agencies have the opportunity to fully appreciate the impact of the fifteen housing measures that took effect on January 1, 2018, a second wave of legislation is already in the works. In early January 2018, Senator Scott Wiener introduced Senate Bill No. 827 (“SB 827”).  On March 1, 2018, a revised – largely re-written – version of SB 827 was referred to the Committee on Transportation and Housing.  In its current form, SB 827 would entitle a project sponsor to a “Transit-Rich Housing Bonus” if the proposed project is within a ½ mile radius of a major transit stop or within ¼ mile of a stop on a high-quality transit corridor (i.e., a fixed-route bus service with service intervals of no more than fifteen minutes during peak commute hours), provided that it also complies with “objective” zoning standards and local inclusionary housing/unit mix requirements, among other requirements.  The Transit-Rich Housing Bonus would exempt projects from local land use controls that include: residential density limits; floor area ratios that are lower than the legislation specifies; parking minimums; height limitations that are less than those provided by SB 827; and zoning and design standards that limit additions onto existing structures. The project sponsor would be required to demonstrate its entitlement to the Transit-Rich Housing Bonus by submitting a relocation assistance plan for approval by the local jurisdiction and agreeing to provide certain benefits to displaced individuals. The most controversial aspect of SB 827 is its proposal to increase maximum height limits around transit corridors.  Parcels within ¼ mile of a qualified transit stop or transit corridor would have a height limit of not less than 85 feet unless the street width – measured from property line-to-property line – is less than 70 feet.  In that case, the height limits would be not less than 55 feet.  Where the project is within ½ mile of a qualified transit stop or corridor, the maximum height limit would be not less than 55 feet, reduced to 45 feet if the 70-foot minimum street width is not met. Projects would continue to be eligible for a density bonus, increasing potential project heights up to 105 feet. As originally proposed, SB 827 created quite a stir.  A February 5, 2018 analysis by the San Francisco Planning Department commented that SB 827 would increase the height limits for “virtually the entire city,” because approximately 96% of parcels in the City are within ½ mile of a major transit stop or within ¼ mile of a transit corridor, as defined in SB 827 (see the Metropolitan Transportation Commission’s map of Transit Priority Project Eligible Areas (2017)).   Although most of Planning Staff’s concerns appear to have been addressed by the amendments to SB 827, the current iteration of SB 827 leaves unresolved concerns that the legislation will introduce uncertainty into zoning requirements, as changes are made – over time – to public transit routes and schedules. We will continue to follow SB 827, as it makes its way through the legislative process.  And we will monitor other housing-related legislation that is on the horizon, including one proposal to bring back Redevelopment. Stay tuned.   Authored by Reuben, Junius & Rose, LLP  Attorney, Corie A. Edwards 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.

A few weeks back, RJR’s Melinda Sarjapur wrote about the pending decision in the lawsuit between the State Lands Commission and the City of San Francisco over Prop. B, which requires voter approval for any waterfront project that would exceed the applicable height limit. You can read her update here. Since then, State Lands and the City have reached a settlement. The State Lands Commission approved the settlement agreement in closed session on February 27 and published a draft of the agreement, which has yet to be formally approved by the Port Commission or the Board of Supervisors. Under the agreement, the State Lands Commission will allow Prop. B to stand—mandating that developers win voter approval in order to exceed waterfront height limits. In exchange, the City must ensure that waterfront projects comply with the public trust doctrine. By way of background, the common law public trust stems from ancient Roman doctrine that was adopted by the United States in its early years as a nation. The foundational premise of the doctrine is that navigable waterways and their shorelines are held in trust by a state for the people of that state. Historically, the people’s basic right to the shoreline and waterways was limited to the use of waterways for commerce, navigation, and fisheries, but it has expanded to include recreation and the preservation of lands in their natural state. In San Francisco, trust lands from the Hyde Street Pier in the north to India Basin in the south were transferred from the State to the City in 1968 through the Burton Act, and are now held in trust by the Port Commission. Together with the Port, the Bay Conservation and Development Commission (BCDC) and the State Lands Commission ensure that use of and development upon these lands is consistent with the public trust doctrine. Practically, the public trust serves to ensure that the public is not excluded from its waterfront—meaning that any new development along the water must facilitate waterfront commerce, navigation, and/or public enjoyment and recreation. That said, the courts have found that the public trust is flexible enough to accommodate changing public needs, and ultimately “the use of public lands for non-traditional trust purposes that are ancillary or incidental to trust uses that directly promote, do not interfere with, and are necessary for a trust use to be feasible, are generally permitted (e.g., hotels, restaurants, parking lots, and restrooms).”[1] The State Legislature and the State Lands Commission have sometimes authorized the use of public trust lands for uses not traditionally considered trust uses, “if the project taken as a whole contains major elements that are found to be consistent with trust purposes.”[2] All that said, the settlement agreement between State Lands and the City works to prevent the public trust doctrine from getting lost in the Prop. B ballot measure process. To that end, the agreement requires that before the Board of Supervisors or the Port Commission approve any development project or substantial land use or zoning change on or affecting trust lands, such approval must include findings that the approval is consistent with the public trust. The agreement also requires the City to propose an ordinance amending the Elections Code to require that the ballot pamphlet for a measure to approve a waterfront project, or a land use or zoning change, include the following language: the measure “involves the San Francisco waterfront, which includes sovereign lands that the state of California has legislatively granted to the City. These waterfront lands and their resources are protected by the common law public trust doctrine and the City holds them in trust on behalf of all the People of California.” That ordinance and the settlement agreement are pending introduction and approval by the Board of Supervisors, which we expect to occur in the coming weeks.   Authored by Reuben, Junius & Rose, LLP  Attorney, 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. [1] BCDC Staff Recommendation on AB 1273, pg. 2. [2] Id.