​On Tuesday, Supervisor Campos introduced legislation that would place a temporary moratorium on Planning approvals or issuance of permits for all market-rate residential projects with five or more units in the Mission District.  If passed, many multi-unit residential projects in the Mission awaiting Planning Approval would have to wait until the moratorium is lifted to move forward.  The legislation would also apply to permits for demolition, conversion or elimination of PDR uses in the District.  The initial moratorium would last for 45-days, but could later be extended for up to two years under state law. The moratorium legislation, which is co-sponsored by Supervisors Mar, Kim, Avalos, and Yee, is an attempt to curb the displacement of longtime Mission residents.  The idea is to create a development-free period during which Planning and other City agencies could study the potential for updated zoning controls or other policies to combat displacement and develop more affordable housing in the area.  The moratorium would extend over an approximately 1.5 square mile area. (See Map Below) Moratorium Boundary Map The “urgency ordinance” requires 9 of 11 Supervisor votes to pass, and Supervisor Campos may have a difficult time eliciting the four additional votes needed.  As recently reported in SF Gate and the Business Times, Board President Breed, Supervisor Weiner, and Mayor Ed Lee have expressed concerns that a moratorium would actually exacerbate the neighborhood’s housing problems.    The legislation comes on the heels of Monday’s announcement by Edwin Lindo of the San Francisco Latino Democratic Club that a coalition of affordable housing and advocacy groups plan to submit a measure for the November ballot that would halt market-rate housing in the Mission for up to 18 months.   As the Business Times reported earlier this week, a draft of the ballot measure shows that the moratorium would apply to all projects larger than 20 units and would extend to the entire Mission neighborhood.  Early signs point to voter support for such a proposal, as a February poll of likely voters conducted by David Binder Associates found that 65 percent of the 600 people polled would support a ballot measure to halt “new project approvals in the mission District for one year.”  Oakland Protestors Shut Down City Council Vote on Housing Development The housing affordability debate is heating up across the Bay as well. Protestors shut down an Oakland City Council hearing on Tuesday evening, preventing the Council’s anticipated vote to approve sale of public land to developers UrbanCore and Integral Development for construction of market-rate housing in Lake Meritt. A group of approximately 40 protestors stormed into the Council chambers, chanting “Housing is a human right” and disrupting proceedings.  After a 10-minute standoff, the Council went into recess and eventually adjourned before a vote could be taken.  The protestors then occupied the Council chambers, forming a human chain and taking over the City’s tv system to broadcast their own meeting which lasted until 9 p.m.   The protest followed an organized outside of the City Council Chambers prior to the hearing by 18 advocacy groups including Causa Justa, East Bay Housing Organizations and Service Employees International Union Local 1021.   The project at issue, which is one of the few active market-rate housing projects approved in Oakland in recent years, would construct 298 units on a City-owned parcel at 12th Street and 2nd Avenue.  It was approved by the City’s Planning Commission in March, but must obtain approval from the City Council for sale of the land.  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.

​Catching Up with the Central SoMa Plan It has been a few months since we provided an update on the Central SoMa Plan. The Planning Department has issued a number of new policy documents on various aspects of the Plan, some refining proposals it made in November 2014, and some addressing new topics entirely.   As the RJR Update noted last November (Planning Department Issues New Policy Papers for Central SoMa), the final Central SoMa Plan is likely to include a number of controls and restrictions that were not discussed at great length (or at all) in earlier versions of the Plan. As the City gets closer to finalizing the Plan’s environmental review, its policy papers tend to spell out more directly the rules of the game once the Plan’s zoning takes place. These latest policy papers do just that. Here are a few highlights: PDR, Arts, or Community Use Requirement for Office Projects. New office developments will be required to provide PDR or community facility space equal to a floor-area ratio ranging between 0.25 and 1, depending on the zoning district. The Code will encourage this space to be located on the ground-floor and directly accessible to the public.  Notably, the Planning Department is now suggesting that office conversions will only be limited on sites currently zoned SLI or SALI, and not on sites that are currently zoned in a mixed-use district. The TDR Program. The TDR program will indeed be expanded into Central SoMa. The Planning Department has already identified a list of buildings that are expected to be designated under Article 11, which would allow them to sell TDR similar to the current program in downtown. A new feature will be to allow developments that preserve existing historic or contextually-significant buildings to count the square footage maintained in that building against the development’s TDR requirement. New Bulk Requirements in Eastern Neighborhoods Part of Plan Area. Although the Plan will maintain bulk controls in the C-3 portion of the Plan area, new bulk requirements will be implemented in the remainder of the area. The proposed bulk changes are comprehensive, and are designed to balance between supporting sun, light, and air access to the street and allowing dense developments. Above 85 feet in height, 15 foot setbacks will be required on all sides of a building, and a certain amount of access to the sky (called a skyplane) must be maintained.   Lot Merger Prohibition for Historic Buildings Outside of C-3 Area. Lot mergers will be prohibited in the Eastern Neighborhoods portion of the Plan area if one of the lots contains an historic or “neighborhood character-enhancing” building and has street frontage less than 200 feet in length. Exceptions to this rule may be granted by the Planning Commission if certain reductions in the apparent mass are provided. Impact Fees and Assessments. And what about fees? Well, nobody is saying anything on the record, so we imagine the Planning Department is hard at work behind the scenes. At an open house in late March, Planning Director Rahaim alluded to the fact that staff is still working out how impact fees and other assessments will be implemented. We expect the next round of policy papers to contain a summary of proposed fees. As always, we will continue to provide updates as the Central SoMa Plan continues to move forward towards implementation. The Gray Water Ordinance Earlier this month, Supervisor Scott Weiner introduced an important piece of legislation that developers and property owners should keep an eye on. Supervisor Weiner’s ordinance, now co-sponsored by Supervisors London Breed, Julie Christensen, and John Avalos, would require large developments in the “Purple Pipe” district of the City to implement on-site water recycling programs. The “gray water” ordinance, as it is being called, capitalizes on the mandate in place since 1991 that new buildings in the eastern portion of the city (as well as the Presidio, Golden Gate Park, and Lake Merced areas) incorporate a second set of pipes that could theoretically transport non-drinking water, a.k.a. “gray water,” from City piping into these buildings. The idea was that once the City established a large-scale municipal water recycling program, these buildings could tap into the City’s gray water piping relatively easily.  The grey water ordinance would eliminate the City from the equation, and require certain large-scale developments in the Purple Pipe district to include their own water recycling facility on-site (at the developer’s cost), or in partnership with neighboring developments. Specifically, all new developments over 250,000 square feet are required to address toilet, urinal, and irrigation demands through on-site recycled gray water. Projects larger than 40,000 square feet that do not pass the 250,000 square-foot threshold are not required to implement an on-site recycling program. Instead, they will be required to prepare a “water budget” assessing the amount of grey water, rainwater, and foundation drainage that is produced on site, and compare that to the project’s planned restroom and irrigation demands.  Proponents of gray water systems point out that most large-scale recycling systems save their users money. With drought conditions the new normal, the cost of drinking water is not likely to get any lower, and the idea of making productive use of non-potable water is an accepted practice in drought-stricken countries like Australia. Supervisor Weiner’s legislation will probably make its way to the Board of Supervisors’ Land Use and Transportation Committee meeting in early or mid-May, and it is our understanding that in the meantime the Supervisor is reaching out to members of the development community for feedback. We will continue to follow the ordinance as it makes its way through City Hall. 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

​Supervisor Scott Wiener, whose district includes the Castro, Upper Market, Corona Heights, Noe Valley, and Glen Park, among other neighborhoods, is known for his interest and activity in San Francisco housing policy.  Two recent measures sponsored by Supervisor Wiener speak to this interest: one that encourages housing development and will provide some relief to the City’s housing shortfall, and one that is, shall we say, not as encouraging. Legalization of Accessory Dwelling Units Supervisor Wiener’s most recent proposal, introduced last week and now assigned to the Board of Supervisor’s Land Use and Transportation Committee, would broaden the geographic applicability of an existing measure facilitating the legalization of Accessory Dwelling Units (“ADUs”), also known as secondary or in-law units.  The measure is currently applicable only to parts of Supervisor Wiener’s District, but we hope it will ultimately be extended City-wide.   Under the measure, new ADUs may be constructed or existing ADUs may be legalized, even if doing so would exceed the applicable density units.  The following restrictions would apply: (1) an ADU cannot be constructed using space from an existing Dwelling Unit;  (2) an ADU is not permitted in any RH-1(D) zoning district; and  (3) only one ADU is permitted in a building with up to 10 existing Dwelling Units and two ADUs are permitted for buildings with more than 10 existing Dwelling Units (these ADUs are permitted regardless of whether the existing building is at or over the density limit). The measure also authorizes the Zoning Administrator to grant complete or partial exceptions from the Code’s parking, rear yard, dwelling unit exposure and open space requirements of the Planning Code for ADUs.  The ADU would be subject to the City’s Rent Control Ordinance if the building containing the ADU is already subject to the Rent Control Ordinance.  The Planning Department is required to establish a system for monitoring the affordability of the ADUs. Whereas previously this measure applied only in and near the Castro Street Neighborhood Commercial District, Supervisor Wiener’s current proposal would expand its applicability to include the 24th Street – Noe Valley Neighborhood Commercial District or within 1,750 feet of its boundaries, the Glen Park Neighborhood Commercial Transit District within Supervisor Wiener’s district boundaries, and the NC-S Zoning District within Supervisor Wiener’s district boundaries.   This is Supervisor Wiener’s third piece of legislation encouraging construction and legalization of ADUs, clearly seeing it as one tool in increasing housing production in the city. Limiting Residential Development in Corona Heights Supervisor Wiener’s second recent proposal is an interim control (18 months, unless extended or until permanent controls are adopted), which now has been adopted and codified, that places limits on proposed residential development in the Corona Heights neighborhood.  (See map below)  The specific target is so-called “monster homes.” Map – Corona Heights In particular, the measure requires a Conditional Use Authorization from the Planning Commission for: (1) any residential development that will result in total residential square footage exceeding 3,000 gross square feet on a parcel if the residential development will occur on a vacant parcel;  (2) any residential development that will increase the existing gross square footage on a developed parcel in excess of 3,000 square feet and by (a) more than 75% without increasing the existing legal unit count or (b) more than 100% if increasing the existing legal unit count; and  (3) any residential development that results in greater than 55% lot coverage, in which case the Planning Commission must expressly find that “unique or exceptional lot constraints would make development on the lot infeasible without exceeding 55% total lot coverage.” Supervisor Wiener pushed this legislation in response to neighborhood outcry over a number of new housing developments that are currently going the entitlement process.  The legislation essentially shifts the burden to project sponsors to affirmatively file a conditional use application (instead of the neighborhood filing a discretionary review request) and allows for a political resolution to these cases, since a conditional use approval can be appealed to the Board of Supervisors. 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.

​There have been a lot of signs of the land use times in San Francisco these days.  A brand new neighborhood in Rincon Hill and Transbay is being constructed in front of our eyes.  There are newly-proposed projects galore in the Tenderloin.  The last few remaining “holes” in the Financial District are being filled in after decades of sitting vacant (350 Bush, 500 Pine).  Yes, these are flush times in San Francisco.  From 2005 to 2014, San Francisco’s population has grown from 777,600 to 852,469, an almost 10% increase.  Now this does not match the City’s growth in 1849 (1,000 to 25,000) or post WWII (634,000 to 775,000 from 1940 to 1950), but we can safely say this is a transformational period in the City’s history.  The word of the day is regionalism.  While San Francisco is still the epicenter for development, Oakland, Berkeley and even San Jose are starting to see their own building booms.  As the RJR Update rears its head for the first time in 2015, we will be sure to bring you what we think are the important land use news around the Bay Area. Board of Supervisors Seeks to Close Group Housing-Inclusionary Housing “Loophole” Last week, Supervisor Avalos introduced legislation that would apply the same citywide affordable housing requirements on group housing projects that currently apply to dwelling units.  Group housing is typically a single room, possibly with a small kitchenette and individual or shared bathroom facilities.  For years, group housing was generally used as SRO housing, student dormitories, or other shared living facilities.  But now with younger folks willing to live in smaller and smaller spaces so long as they can step out onto the streets of San Francisco, group housing has seen a resurgence in proposals in recent years.   There are some zoning benefits to group housing:  no rear yard, reduced open space requirements.  But the most significant zoning difference is that group housing is not subject to the City’s affordable housing requirements.  Supervisor Avalos’s legislation would apply the citywide 12%/20% standard requirement to group housing projects.  With the housing crisis ongoing and likely growing in San Francisco, it is likely we will continue to see the debate over affordable housing intensify. Last year, Supervisor Kim threatened to put on the ballot a measure that would have had the effect of sending almost all market-rate residential projects to the Planning Commission for conditional use approval, with the potential for disapproval if 33% of the units were not provided as affordable housing.  She replaced that measure with Prop K, passed by voters last November, which sets as City policy the provision of 33% of all new housing subject to affordable restrictions.  Next week, the Board may pass new legislation creating a housing balance metering program, requiring an annual hearing at the Board of Supervisors, at which the Mayor’s office would need to submit a strategy to reach the 33% affordable housing figure (the first one would be held roughly two months from now).  After the voters passed a major revamping of the City’s affordable housing policies in 2012 (which reduced the on-site affordable housing requirement from 15% to 12%), we could be looking at upward pressure on the affordable housing requirement in the near future.   Another Approach to the Housing Crisis – Increased Density Incentive for Soft-Story Retrofits Last month, legislation sponsored by Supervisor Wiener was enacted that would remove residential density limits from “soft-story” properties undergoing mandatory seismic upgrades and some that undergo voluntary upgrades.  Similar to the other in-law legalization legislation the Supervisor has sponsored, any increase in dwelling units in conjunction with a retrofit project would be able to be approved administratively without public notice.  This represents a completely different approach to the housing crisis.   It turns out that the City has in fact been pretty successful in providing new housing since Mayor Lee set the goal of providing 30,000 new housing units (30% affordable) between 2014 and 2020.  According to the Planning Department’s tracking, 4,263 units have been created since then, 31% of which are permanently affordable.  We may be able to achieve that ambitious (for San Francisco) housing goal, the question is will it do the trick? Oakland Confidently Begins to Pick Up the Slack in Housing Sensing the obligation (and opportunity) that comes with rising housing costs in San Francisco, Oakland, led by Mayor Libby Schaaf and Planning Director Rachel Flynn, are taking steps to entice development across the Bay.  The most recent move has the city initiating a downtown specific planning process with the goal of an area-wide EIR that will expedite environmental review throughout the area.  While specific plans have been enacted in Oakland in recent years on Broadway, West Oakland, Chinatown, and the Central Estuary, the vast majority of potential, significant new development is located in the city center north of I-880 and south of 27th Street.  In fact, we may see a boom-let of development on Telegraph Avenue north of the Fox Theater and the Sears Building in coming years, following the re-activation of those two buildings as well as the resurgence of retail and entertainment along the strip.  The downtown plan may come too late to help those projects out, but it will certainly go a ways to stimulate new development elsewhere in downtown. But let’s of course remember Mayor’s Schaaf’s declaration that project applications should be filed now in order to avoid new impact fees that will go into effect in 2016.  While she has been rather unclear as to whether projects filed now would be expressly grandfathered from the future impact fees, there is some potential for projects to slip through before they go into effect.  This may come to a surprise to many developers in San Francisco, but it’s not unheard of for a project in downtown to make its way through the entitlement process in 9-12 months.   San Francisco Board of Appeals Back to Full Strength with Rick Swig Since August of last year,

​Last week, the Planning Department issued policy papers on four aspects of the Central SoMa Plan, clarifying the direction it is headed on these issues.  As surely all readers of the Update know by now, the Central SoMa Plan is an area of South of Market bounded by Mission Street, Townsend Street 2nd Street and 6th Street that has been studied over the past 2+ years for an eventual up-zoning in 2015 with a focus on growing the job sector close to downtown (i.e., office is encouraged over housing).  The Draft Central SoMa Plan was published in April 2013, with detailed information about potential rezoning and height increases.   At this point, the Draft Central SoMa Plan should be seen as a best case scenario.  Or more accurately, it should be seen as a document that presents the most positive vision of a rezoning that promotes growth, with the expectation that it will be pulled in, cut back, watered down when it gets to its final passage.  It should be no surprise that the political environment in San Francisco is very different now than what it was in 2013.  Prop K was just passed by the votes, enshrining in policy the goal of 33% affordable housing for low and moderate income homes in all new development.  The Pintrest deal blew up to such a degree that Supervisor Jane Kim has introduced emergency legislation prohibiting the conversion of industrial buildings to office, and the Planning Commission and Planning Department are both saying they want to see preservation of industrial space in projects that propose to demolish existing PDR uses. In short, the Central SoMa Plan of 2015 won’t just differ from the Central Corridor Plan of 2013 in name only.  Beyond these high-profile issues, we haven’t seen the new impact fee structure, whether TDRs will be incorporated into the plan, and the potential for a new Mello-Roos-type infrastructure financing district.  And these four policy papers are the beginning of a more realistic version of what the Plan will ultimately look like.  You can find the papers at http://sf-planning.org/index.aspx?page=2557. (Scroll down to Draft Policy Papers).  Keep in mind that these document Planning’s thinking on these issues currently, they are not guaranteed to be in the final Plan.  Here is the takeaway from each paper: Affordable Housing As discussed above, recently-passed Prop K establishes as city policy that at least 33% of the 30,000 new housing units Mayor Lee has called for by 2020 should be affordable to low and middle income households.  To that end, the Central SoMa Plan could include increased affordable housing rates above the citywide 12% on-site/20% off-site or in-lieu fee.  This would be similar to the increased rates in the UMU zoning district, where the amount of required affordable housing units is based upon the amount of the height increase granted by the 2009 Eastern Neighborhoods Plan.  These rates ranged from 14.4% to 17.6% for on-site units or 23% to 27% for off-site units or the in-lieu fee.  It should come as no surprise if these identical rates are proposed in Central SoMa, or possibly higher rates are proposed. The policy paper also indicates the potential for creating an Infrastructure Financing District, whereby newly-developed properties would be subject to an increased property tax rate.  The state legislature just amended the IFD statute this summer to allow the additional tax revenue to be put towards affordable housing.   PDR Replacement In recent months, protection of existing PDR (industrial) space has become a major issue in the City.  Supervisor Kim has enacted a moratorium on most conversions of existing PDR buildings in Central SoMa until the Plan passes.  Several Planning Commissioners, as well as Planning Department staff, have indicated that some amount of PDR protection measures should be incorporated in the Central SoMa Plan.  The policy paper suggests limiting the amount of space in existing PDR buildings must be maintained (or replaced in a new project if the existing building is to be demolished).  Protection percentages have been recommended based on the current zoning.  In sites rezoned from SALI, 0% conversion would be allowed.  In the SLI district, only 50% could be converted.  In Eastern Neighborhoods Mixed Use Districts, 75% could be converted.  Finally, no restrictions would be placed on downtown C-3 districts. The other proposal for PDR protection goes to the heart of what the Central SoMa Plan will ultimately be.  The policy paper suggests that SALI-zoned properties located within Harrison, Bryant, 4th and 6th Streets could be left with SALI zoning.  This was something that was discussed when the Western SoMa Plan first rezoned these properties to SALI (basically an industrial protection zone).  However, there was no talk for several years about the potential to not rezone some SALI sites.  The inclusion of this in the policy paper may mean that the Central SoMa Plan does not ultimately impact some blocks west of 4th Street. Privately-Owned Public Open Space Local community groups, and in particular TODCO, have been fighting to provide more public open space in the South of Market area for some time, due to the dearth of space currently available.  One major component of this push is to turn the PUC-owned site in the center of the block bounded by Brannan, Bryant, 4th and 5th Streets into a new public park.  The policy paper also indicates that there could be a requirement that new office developments provide some amount of publicly-accessible open space.  The paper does not suggest increasing the open space requirement for office above the current 1 square foot per 50 square feet of office space.  It does suggest that some amount of the required open space be made open to the public, and at an easily accessible location (which does not include a roof deck). Community Facilities Community facilities include child care centers, recreation centers, job training centers, cultural and arts facilities, community health care clinics, social welfare organizations, and business support organizations.  These are not currently required by the Planning Code to

Last week, the Board of Supervisors unanimously approved legislation that will revise the City’s formula retail definition and controls.   The new law follows a year-long study of formula retail controls undertaken by the City’s Planning Department and represents a compromise between more aggressive controls proposed by Supervisor Mar in July 2013 and competing recommendations issued by Planning Department last July. San Francisco adopted its first formula retail (a.k.a. chain store) legislation in 2004, which was later expanded in 2007 under legislation commonly known as the “Small Business Protection Act.”  Since that time, formula retail controls have been expanded in a piecemeal fashion.   The Planning Code currently defines formula retail uses as retailers with 11 or more stores in the United States, that also maintain two or more of the following features: (1)  a standardized array of merchandise; (2) a standardized façade; (3) a standardized décor and color scheme; (4), a uniform apparel; (5) standardized signage; or (6) a trademark or a servicemark.    Formula retail controls have applied only to the following categories of use: bars; drive-up facilities; eating and drinking uses; restaurants; liquor stores; retail sales and services; financial services; and movie theaters. In general, the Code requires formula retailers to hold a noticed pre-application neighborhood meeting and obtain Conditional Use (“CU”) authorization prior to setting up show in many areas of the City.   This process typically takes 4-6 months, and can cost tens of thousands of dollars.   Formula retailers are also prohibited from locating in some neighborhoods, including the Hayes-Gough NCD , North Beach NCD and Chinatown Visitor Retail District, and are subject to specific restrictions in others.  So what has changed under the new legislation?  The general requirements stay the same – formula retailers will continue to require CU authorization in many areas, and existing district-specific controls remain in effect.   However, the legislation expands the definition of formula retail uses, and applies some new procedural requirements.   The legislation:   – Amends the geographic definition of formula retail to include all retailers with 11 or more locations worldwide (previously within the United States);  – Expands the types of business subject to formula retail controls to include: personal services; fringe financial services; limited financial services (except for single ATMs at the street front meeting Commission design guidelines, and ATMs within other uses not visible from the street); massage establishments; amusement and game arcades; and tobacco paraphernalia establishments.  Of these, expansion to “personal services” will arguably have the most impact, as now many chain salons, tattoo parlors, health spas, and dance, exercise or martial arts studios will be subject to the controls; – Requires the Planning Commission to consider a project’s compliance with “Performance-Based Design Standards” to be established by the Planning Department; -Specifies the methodology for calculating the existing concentration of formula retail establishments within a certain geographic area; -Requires CU authorization for all formula retail uses within the C-3-G District with frontage on Market Street between 6th Street and the intersection of Market Street, 12th Street and Franklin Street;  -Requires an economic impact study to be prepared with specific findings for approval of “large-scale retail uses” (exceeding 50,000 gsf outside of a C-3 District or 90,000 gsf within a C-3 District) and all formula retail uses occupying 20,000 gsf or more (except for grocery stores); -Codifies the current Planning Department policy requiring a disapproval recommendation be made to the Commission for all formula retail applications in the Upper Market NCD that would bring the concentration of formula retail uses within 300-feet of the subject property to 20% or more;   -Removes the requirement for CU authorization when a formula retail establishment changes an operator but remains the same size and use type, as long as the previous formula retail use obtained CU authorization and the new retail establishment does not have more locations than the previous retail establishment;   -Specifies that a CU hearing for a formula retail use cannot be held less than 30 calendar days after the date of the mailed Section 312 notice (as opposed to 20 days for most CUs); and -Provides specific definitions of “intensification” and “abandonment” for formula retail CUs.  Formula retail uses are now “abandoned” if discontinued for more than 18 months (as opposed to the general 3-year standard). The new legislation is awaiting signature by the Mayor and will take effect 30 days thereafter.  It does not apply to any complete application submitted to the Planning Department on or after October 24, 2014.  A copy of the legislation is available on the Board of Supervisors web site at: http://sfbos.org/index.aspx?page=9681.  Detailed information on the Planning Department’s year-long study of formula retail regulation in San Francisco is available at: http://www.sf-planning.org/index.aspx?page=3762.    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 voters have rejected Prop G, which would have imposed a tax equal to 24% of the sales price (not a typo – the price and not the profit) on the sale of a residential building with up to 30 units that is sold within 5 years from the date of purchase.  Although characterized as a tenant protection measure by its progressive sponsors on the Board of Supervisors, the voters apparently saw the measure as an unfair tax which would not make a significant contribution to addressing the City’s housing shortage. The voters rejection of Prop G comes on the heels of the United States District Court ruling on October 21, 2014 which overturned on constitutional grounds a San Francisco Ordinance that forced a payment of $118,000 by a landlord to a tenant to simply enforce the landlord’s right under the 1985 state law known as the Ellis Act (Cal. Govt. Code Section 7060 et seq.) to exit the rental business. The proposed legislative solutions to the housing shortage have fallen short of passing constitutional muster and from finding voter buy-in.  Property owners are batting 3 for 3 in this week’s update. The U.S. District Court noted that the San Francisco Ordinance violated private property rights guaranteed by the Constitution and unfairly punished landlords for market conditions over which they had no control.  “A monetary exactions taking “does not implicate normative considerations about the wisdom of government decisions,” nor posit whether the exaction is “arbitrary or unfair”…  Th(e) Court’s task is to determine whether the exaction demanded by the City in exchange for an Ellis Act withdrawal bears the “required degree of connection between the exactions imposed by the City and the projected impacts” of the property owner’s proposed change in land use.  (See Dolan, 512 U.S. at 377).  This is because, “[w]hatever the wisdom of such a policy, it would transfer an interest in property from the landowner to the government” and thus “amount[s] to a per se taking similar to the taking of an easement or a lien.” Under the new San Francisco Ordinance adopted in June 2014, landlords had been required to pay their tenants the difference between their old and new rents for two years, as a required condition of going out of business.  (Pre-existing legislation required landlords to pay each tenant only about $5,200.  That legislation has not been challenged.) The City has announced that it will appeal the U.S. District Court ruling limiting the landlord’s required payout to tenants in order to quit the rental business.  (Daniel and Maria Levin, San Francisco Apartment Association Parkland Assoc., LP, and the Coalition for Better Housing v. City and County of San Francisco), U.S. District Court, Northern District of California, October 21, 2014, Case No. 3: cv03352 (October 21, 2014). THE CALIFORNIA COURT OF APPEAL REJECTS A COASTAL ACCESS EASEMENT AS A CONDITION OF OBTAINING A COASTAL DEVELOPMENT PERMIT On October 23, 2014, the California Court of Appeal (Second Appellant District) overturned a permit requirement by the California Coastal Commission that imposed a public access easement one mile long and 25-50 feet in width, parallel to the ocean, as a condition for issuance of a coastal development permit, where a family had sought to repair their farmhouse and rebuild their barn in the Cayucos area of unincorporated San Luis Obispo County.  All proposed work was within the footprint of the existing structures.   The court cited Constitutional restrictions on takings of privately owned property as described by the United States Supreme Court in Nollan v. California Coastal Commission (1987) 483 U.S. 825, and Dolan v. City of Tigard (1994) 512 U.S. 374: a governmental entity may require an uncompensated exaction, such as an easement, as a condition of a development permit only where there is “rough proportionality” between the condition and the burden the development places on a public interest. The court held that there was no rational nexus, and no proportionality, between the work on a private residence located one mile from the coast, and a lateral public access easement along the coast.  Accordingly, the easement requirement was an unconstitutional taking of private property by the Coastal Commission.  The proposed work did not impact the public or public access to neighboring Harmony Headlands State Park.  Work already performed at the residence under a separate over-the-counter permit for removal of dry rot and repairs to the roof and deck did not constitute collateral estoppel (i.e., a bar to reigniting or re-litigating an issue) against the permit applicant, because the repair and maintenance activities were independently exempted from coastal development permit requirements by the San Luis Obispo County Code.  The collateral estoppel doctrine necessarily calls for equitable results.  The court found that the lack of a nexus between the renovations and the access easement precluded it from finding that the equity requirement had been met.  In other words, the completion of some repair work did not confer a benefit on the permit applicant that precluded the applicant from appealing the Commission’s permit condition. The court followed the evidentiary standard set forth in La Costa Beach Homeowners’ Association v. California Coastal Commission (2002) 101 Cal. App. 4th 804, that under the substantial evidence rule (Code of Civ. Proc., § 1094.5, subd. (c)), a court must consider “all relevant evidence even if it detracts from the administrative decision.”  Accordingly, the court based its decision on its own interpretation of the facts. The court thus emphasized that constitutional restrictions on governmental takings of private property, as enumerated in Nollan and Dolan, will be faithfully applied against the government’s imposition of coastal access easements.  Developments that have no conceivable impact on the public or access to public areas should be free of Coastal Commission imposition of access easements.  While the facts of this case are somewhat unique in that the home in question was located one mile away from the coast, the court has signaled that the nexus requirement cannot be minimized or downplayed by the Coastal Commission, or by

​In its continuing effort to maintain the City’s existing rental housing stock and rent-controlled units in particular, the San Francisco Board of Supervisors passed new legislation this week that tightly regulates buyout agreements between landlords and tenants.  When a landlord wants to vacate a rental unit without a cause recognized by the Residential Rent Stabilization and Arbitration Ordinance (the “Rent Ordinance”), the landlord may negotiate a “buyout” agreement with the tenant, whereby the landlord pays the tenant a lump sum in exchange for the tenant voluntarily vacating the rental unit.  Until now, such buyout agreements were unregulated by the Rent Ordinance-presumably because they involve a voluntary negotiation and agreement between a landlord and tenant.   Under the new legislation, such buyout agreements are subject to strict regulation under the Rent Ordinance.  Prior to commencing a buyout negotiation, a landlord must now disclose to the tenant that the tenant (1) has a right not to enter into a buyout agreement, (2) may consult an attorney or the San Francisco Rent Board, and (3) may rescind a buyout agreement for up to 45 days after full execution of the agreement.  Failure to provide the required disclosure may result in civil actions against a landlord for actual damages and civil penalties, which civil actions may be filed not just by the tenant, but also by the City Attorney or a tenant rights group.  Landlords must also file with the Rent Board copies of executed buyout agreements so that the Rent Board may compile the agreements into a searchable database accessible to the public and provide annual reports to the Board of Supervisors regarding tenant buyouts.  Strict timeframes apply to the required filings.  The public will now have access to information about the number, location, and terms of buyout agreements in the City that was otherwise not disclosed to the public prior to the new legislation.      The new legislation also amends the San Francisco Subdivision Code to restrict or prohibit buildings from entering the condominium conversion lottery if owners have entered into certain buyout agreements.  Prior to the new legislation, landlords could vacate rental units using tenant buyout agreements with no impact on condominium conversion of the building.  Because a tenant buyout is not a regulated no-fault eviction, there was no restriction on conversion in a building in which buyouts had occurred.  Under the new legislation, an owner is prohibited from converting a building into condominiums where seniors, disabled, or catastrophically ill tenants have vacated a unit under a buyout agreement after October 31, 2014, or where two or more tenants entered into a buyout agreement after October 31, 2014 and within 10 years prior to submittal of a condominium conversion application.  These new rules are in addition to existing provisions of the Subdivision Code that restrict conversions of buildings where certain evictions have occurred. The new legislation does not prohibit tenant buyout agreements.  It adds new restrictions to buyouts that were previously unregulated.  Except with respect to condominium conversions, the new regulations are largely procedural in nature.  So long as a landlord follows the rules closely, tenant buyouts remain an option for a landlord wishing to vacate a unit or building. 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.

​Proposed Restrictions on New Office Use along Second Street. Late last month, Supervisor Jane Kim introduced legislation aiming to insulate ground-floor retail businesses on a popular stretch of Second Street in SOMA from displacement by effectively prohibiting most new office use without Planning Commission approval. The interim prohibition applies to most new ground-floor office use for a five-block stretch along Second Street from King Street in front of AT&T Park to Folsom Street, unless the office use is approved by the Planning Commission as a conditional use.  Buildings that reserve at least 1,500 square feet of retail space will be allowed to bring in new office tenants without going through the time-consuming and expensive conditional use process, allowing some flexibility for large-floorplate sites. A similar ground-floor retail requirement already applies to most of Downtown as part of C-3 zoning.  However, ground-floor office is currently permitted without conditional use throughout the Second Street corridor (which is zoned Mixed Use – Office) although new offices over 25,000 square feet still need Planning Commission approval. If the ordinance passes, the control will last for a year and a half.  Supervisor Kim indicated at this week’s Land Use Committee hearing that the upcoming Central SOMA plan’s rezoning will include a similar restriction.  With the Central SOMA plan set for adoption by the City in 2015, Supervisor Kim’s legislation will effectively become a permanent restriction. Another interesting aspect of Supervisor Kim’s ordinance is that it would deem existing ground-floor office use along this corridor that is inactive for 90 days “abandoned,” and prohibit new offices from moving into these spaces without conditional use authorization.  This timeline could prove tricky for new ground-floor office tenants, which would seemingly need to start occupying new space within 90 days of the prior tenant leaving the unit.  For comparison, in parts of the City where new office use is no longer permitted, existing office is considered abandoned only after it is discontinued for three years. It remains to be seen how this control will be implemented in the Central SOMA plan.  Much of Central SOMA is slated to be re-zoned to Mixed Use Office.  Will this restriction be limited to the Second Street corridor?  Could it be extended to all Mixed Use Office zoning, which would include a ten-block area stretching from Second to Sixth Street along Townsend up to Bryant and Harrison Streets?  Will new office tenants be able to take over an existing office space quickly enough to avoid the time-consuming and expensive conditional use process? Encouraging retail uses on the ground-floor is certainly an important aspect of any growing neighborhood, particularly in this part of SOMA where an influx of residents and employees can support a growing number of retail options.  Striking a balance between growth on one hand and preserving neighborhood services can be tricky.  This stretch of Second Street may yet become the pilot program for ground-floor use in a large swath of Central SOMA. Court Throws Out San Francisco’s Two-Year Tenant Buyout Requirement; Is Prop. G Next? In July of this year, the City implemented controversial legislation requiring landlords pay tenants displaced by the Ellis Act a lump sum payment of up to twenty-four (24) times the difference between the unit’s then-current rent and the market rate for a comparable unit.  The legislation was debated and fought over in City Hall for months before it finally had enough support to be enacted into law.  And just like that, on Tuesday a federal judge invalidated the payment program.  In short, the court reasoned that the payment was simply too high on too few landlords to justify its stated purpose of protecting tenants. The effect of the legislation was clear: make life difficult for landlords with longtime tenants that use the Ellis Act to free their building of tenants.  Obviously, preserving San Francisco’s existing rental housing stock—particularly for longtime tenants who cannot afford to relocate within City boundaries—deserves high priority, and the Board of Supervisors should be commended for its many well-meaning efforts to address the City’s housing crisis.  The court’s summary invalidation of the law within five months of its implementation shows that the City should always be mindful of overstepping its constitutional authority. The result may also prove a harbinger of Proposition G on this November’s ballot, should voters enact it into law.  Any San Francisco resident who has checked his or her mailbox in the last month knows Prop. G is being strongly contested by advocates on both sides.  Parallels to the buyout program do not stop there.  Like the tenant buyout legislation—which dramatically increased the existing payment requirement—Prop. G would require many owners of buildings with two to 30 units who sell within five years of purchasing to pay a “surtax” up to 24% of the sale price.  The City’s current transfer tax ranges from 0.5% to 2.5% of the sale price.  Setting aside the possible unintended outcome of incentivizing owners to keep rental properties off the market and thereby exacerbate the housing crisis, Prop. G could be vulnerable to a similar criticism as the buyout program: that the exaction it requires from individual property owners far exceeds the problem it seeks to address. On Wednesday, the City announced it would appeal the buyout decision to the federal appeals court.  For Prop. G, round one will be decided by voters at the ballot box on November 4th.  Round two could be in a courtroom shortly thereafter.  Will there be a knockout punch? 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.

​Legacy Businesses Supervisors Campos and Farrell introduced legislation last week designed to provide for the recognition, study, and promotion of longstanding, community-serving businesses, so-called “Legacy Businesses.”   The proposal is an ordinance that would direct the City’s Small Business Commission to establish and maintain a registry of Legacy Businesses in San Francisco.  A Legacy Business is a business that meets four criteria: It is a bar, restaurant, retail store, arts space, performance venue, or a business primarily engaged in Production, Distribution, and Repair activities; It has operated in San Francisco for 30 or more years, with no break in San Francisco operations exceeding two years.  The business may have operated in more than one location or jurisdiction, but must have been established and currently be based in San Francisco; It has contributed to the neighborhood’s history and/or the identity of a particular neighborhood or community; and It is committed to maintaining the physical features or traditions that define the business, including craft, culinary or art forms. Among other promotional and support measures, the proposal would establish a rebate program for Legacy Businesses that purchase the real property at which they operate their businesses.  The program also would provide rebates to landlords that purchase real property at which Legacy Businesses operate their businesses and extend the term of the Legacy Businesses’ leases by at least an additional ten years.  The amount of the rebate would be equal to the transfer tax paid on the purchase of the property (or portion of the property) at which the Legacy Businesses operate. Surprisingly, the total combined rebates paid to all qualified Legacy Businesses and landlords in any one year would be capped at $400,000.  One wonders how much of an impact this proposal can have on Legacy Businesses with this significant limitation in place. Changes to CEQA Transportation Analysis Many California jurisdictions, including San Francisco, use “level of service” standards in their CEQA analysis to measure potential transportation impacts of development projects and long range plans.  Commonly known as LOS, level of service measures vehicle delay at intersections and on roadways. The use of LOS analysis has been criticized for discouraging infill development and construction of infrastructure for transit, cycling, and walking.  Urban infill projects, for example, often rate poorly in traffic studies because they increase population and potential traffic in a given area.  However, evidence shows that the residents and consumers who live, work, and shop in these areas are less likely to rely on cars for their transportation needs.  In addition, LOS analysis focuses on a social impact (driver delay), not on environmental impacts. Roadway widening is the typical mitigation for projects that lower LOS.  However, wider roads can result in adverse environmental, public health, and fiscal impacts.  Wider roads are more expensive to maintain and enable driving at faster speeds, which leads to more pollution, noise, and higher risks to bicyclists and pedestrians.  And widening roads is not at all possible in dense jurisdictions such as San Francisco, meaning that transportation impacts cannot be mitigated. The Governor’s Office of Planning and Research (“OPR”) recently proposed amendments to the CEQA Guidelines to provide an alternative to LOS for evaluating transportation impacts.  The new analysis focuses on vehicle miles traveled, or “VMT”.  Particularly within areas served by transit, the new analytic criteria must promote the reduction of greenhouse gas emissions, the development of multimodal transportation networks, and a diversity of land uses.  Measurements of transportation impacts may include vehicle miles traveled, vehicle miles traveled per capita, automobile trip generation rates, or automobile trips generated. Once the CEQA Guidelines are amended to include those alternative criteria, vehicle delay will no longer be considered a significant impact under CEQA.  Transportation impacts related to air quality, noise and safety must still be analyzed under CEQA where appropriate. The public comment period for the proposed new Guidelines ends on November 21, 2014.  We will continue to monitor their development and report to readers. 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.