• 2020 Housing Legislation Overview: Started with a Bang, Ended with a Whimper

    Like so much of this unprecedented year, the 2019-2020 California Legislative Session ended with unexpected twists and pointed disappointments as the Assembly and Senate wrestled with the coronavirus pandemic, social distancing protocol, and friction between Assembly and Senate leadership in the final hours of the session, ultimately resulting in a number of highly anticipated housing bills failing to pass.  High profile bills that died include SB 995 (extending the former AB 900 expedited CEQA review process for environmental leadership development projects through 2024); SB 1120 (providing ministerial approval and subdivision processes for residential duplexes on single-family zoned lots); and SB 1085 (expanding the Density Bonus Law to include qualifying moderate-income rental projects and student housing projects, among other changes).

    Despite the failure to pass key bills, there were some notable developments regarding housing-related bills, several of which are heading to the Governor’s desk for signature.  The Governor has 30 calendar days, ending on September 30, 2020, to sign these proposals into law.  Key bills include:

    AB 2345 (Gonzalez, Chiu): AB 2345 makes a number of important changes to the state Density Bonus Law, which was originally adopted in 1979 and has recently gained traction as a critical tool for increasing housing production across the state. The existing Density Bonus Law requires local governments to grant additional residential density and to provide relief from certain development standards that would result in project cost savings (referred to as “concessions” or “incentives”) for projects that incorporate qualifying amounts of income-restricted units.

    Among other changes, AB 2345: increases the maximum density bonus from 35% to 50%; reduces the qualifying thresholds of total affordable units to qualify for both two and three incentives or concessions; and reduces the amount of parking a local government can require of a developer requesting a density bonus.  AB 2345 also requires that local governments include information regarding the total number of density bonus applications received and approved that year in their state-mandated annual progress reports to the Department of Housing and Community Development.

    AB 725 (Wicks): AB 725 is intended to make a dent in California’s “Missing-Middle” housing crisis, by requiring that many jurisdictions across the state plan for moderate-density housing (e.g., duplexes, fourplexes, garden apartments, townhomes, etc.) through their state-mandated general plan housing elements.  AB 725 requires that qualifying jurisdictions allocate at least 25% of their state-mandated Regional Housing Needs Allocation for moderate and above-moderate units to housing sites zoned for at least four units, with moderate income sites being capped at a density of 100 units per acre.  These sites must be identified in the housing element inventory of land suitable for residential development.  Accessory dwelling units or junior accessory dwelling units do not count towards the 25% requirement.  AB 725 will apply only to housing elements due after January 1, 2022.

    AB 831 (Grayson): AB 831 provides several important clarifications to SB 35 (Wiener), the housing streamlining bill adopted in 2017 that established a ministerial approval process for qualifying housing projects in jurisdictions that are not meeting their state-mandated goals for above-moderate and lower-income housing production.  Consistent with SB 35, AB 831 clarifies the limits of local government discretion in implementing projects already approved under SB 35.  AB 831 limits local agency discretion regarding its review and approval of public improvements necessary to complete an SB 35 project, such as installation of utilities, pedestrian and bicycle connections, and landscaping.  It also clarifies that SB 35 projects may be modified following SB 35 approval and limits local agency discretion in reviewing such modification requests.

    AB 831 also clarifies the applicability of the SB 35 requirement that two-thirds of a qualifying mixed-use project must be dedicated to residential uses.  In response to a superior court determination, AB 831 clarifies that the two-thirds residential requirement is intended to apply to the proposed project itself, not to the underlying zoning.  AB 831 is urgency legislation that will take effect immediately upon the Governor’s signature.

    AB 168 (Aguiar-Curry): AB 168 establishes a mandatory consultation process with Native American Tribes for projects intending to utilize SB 35 streamlining to determine if the proposed project would impact a tribal cultural resource.  Prior to submitting an SB 35 application, AB 168 requires that developers submit a pre-application that triggers a “scoping consultation” process between the local agency and any California Native American Tribe traditionally and culturally affiliated with the proposed project site.  An SB 35 application may then be submitted under the following circumstances: if no California Native American Tribe seeks to engage in consultation; if no potential tribal cultural resource impact is identified during the scoping consultation period; or if a potential tribal cultural resource impact is identified and the parties can agree to methods, measures, and conditions to treat the resource. However, an SB 35 application may not be submitted if a potential tribal cultural resource impact is identified and the parties cannot agree to such measures, or if a tribal cultural resource is identified that is listed on a designated register.

    Please contact a member of the Coblentz Real Estate team for additional information and any questions related to the impact of these new bills on land use and real estate development.

     

  • Land Use Litigation Statute of Limitations Tolling Period to End on August 3, 2020

    On May 29, 2020, the Judicial Council of California amended Rule No. 9 of its COVID-19 emergency regulations to add certainty and to shorten the tolling period for civil causes of action subject to statutes of limitation of 180 days or less, such as CEQA (California Environmental Quality Act) lawsuits.

    Previously, Rule No. 9 tolled all statutes of limitation from April 6, 2020 to the date 90 days after the Governor declares that the COVID-19 state of emergency is lifted.

    The new Rule establishes a date certain when all statutes of limitation for civil causes of action will commence to run, but the date is different for statutes of limitation of 180 days or less and those of more than 180 days. For actions with statutes of limitation of 180 days or less (including for CEQA actions and many other land use challenges), the tolling period will end on August 3, 2020. For all other actions, the tolling period will end on October 1, 2020.

    The new Rule recognizes the reality that courts are beginning to resume operations, though the COVID-19 state of emergency may remain in place for some time. The Judicial Council also recognized, as many local agencies and representatives of the development community had urged, that the extended tolling period had a disproportionate impact on actions subject to short statute of limitation periods under otherwise applicable state law, which evidences “the Legislature’s intent that such causes of action be brought expeditiously.”

    The new Rule is good news for developers of approved and soon-to-be approved projects. The tolling period now ends on a set and relatively near-term date, providing renewed certainty.

    Posted on: June 1, 2020 Tags: Categories: Blogs

  • Bay Area Construction Resumes Under New Orders

    On April 29, 2020, six Bay Area counties – Alameda, Contra Costa, Marin, San Francisco, San Mateo, and Santa Clara – as well as the City of Berkeley, each issued substantially similar updates to their extended local shelter-in-place orders, with welcome implications for construction projects. The new local orders will go into effect on May 4, 2020 and extend through May 31, 2020.

    In contrast with the earlier March 31 local orders detailed in our prior post, which notably restricted construction activities, the new local orders permit all construction to proceed, consistent with Governor Newsom’s “Safer at Home” Order issued on March 19, 2020, so long as construction activities comply with specific safety protocols.

    It is critical that contractors comply with the specific Construction Project Safety Protocols applicable to their projects.  In particular, the new local orders distinguish between protocols for small projects, which mean projects of ten (10) or fewer residential units or commercial projects with less than 20,000 square feet, and separate protocols for larger projects. While the protocols for small and larger projects are each designed to encourage social distancing and establish procedures to minimize the spread of COVID-19, the protocols for larger projects are generally more detailed and restrictive.

    Other Bay Area counties – Napa, Solano, and Sonoma – have issued their own orders generally permitting construction to continue. Napa County’s April 22 order permits construction (including housing construction) to proceed, so long as contractors follow its specific “Construction Site Requirements.” Solano County’s April 24 order is consistent with the State’s Order regarding construction activities. Last, as of the date of this alert, Sonoma County has not updated its March 31 order but is expected to issue guidance ahead of its expiration on May 3, 2020. Regardless of location, all construction activities in California should comply with the Cal/OSHA guidance for COVID-19 Infection Prevention in Construction, in addition to the specific protocols in each local order.

    As a practical consideration, since the new local orders will jump start a large volume of construction projects across the Bay Area, the availability of public agency staff to perform permit reviews and inspections may constrain construction progress in the short term.

    While the new local orders assert that they seek regional clarity and a better alignment with the State’s Order, clients should recognize that different project and local considerations could impact how each jurisdiction interprets and regulates its respective order. Where a conflict exists between any of the local orders and the State’s Order, the most restrictive provision controls.

    Local health officers are carefully monitoring the evolving COVID-19 status in their respective jurisdictions and could change local restrictions as necessary. The State may also issue additional guidance. The current State Order and local orders for Bay Area jurisdictions are linked to the left.

    The Coblentz Real Estate team and authors of our real estate and land use blog, Unfamiliar Terrain, will continue to monitor these developments. Visit our COVID-19 Business Resource Center for additional information, or contact Real Estate attorneys Tay Via at tvia@coblentzlaw.com.

  • San Francisco Commercial Eviction Moratorium Applies to Security Deposits

    As previously reported on the Unfamiliar Terrain blog, San Francisco Mayor London Breed declared a moratorium on evictions of small and medium-sized businesses (those having worldwide receipts of $25 million or less) impacted by COVID-19 for non-payment of rent. By supplemental declaration on April 1, Mayor Breed ordered that the moratorium also applies to non-replenishment of security deposits. The April 1 supplemental declaration is the eighth of ten supplemental declarations (as of April 21, 2020) to the Mayor’s Proclamation of Local Emergency.

    Although this supplement to the Mayor’s Proclamation discourages landlords from deducting delinquent rent from existing security deposits during the moratorium, landlords are not prohibited from doing so. Landlords may not, however, require small and medium-sized business tenants to increase their security deposits during the moratorium or evict such tenants based on failure to replenish security deposits, if such failure is caused by the financial impacts of COVID-19. Instead, landlords and tenants must follow the same notice and cure process for replenishment of security deposits as required for non-payment of rent pursuant to the original order for a commercial eviction moratorium. Landlords are barred from evicting such tenants due to failure to replenish security deposits until 6 months after the moratorium expires (currently scheduled to expire on May 17).

    The Coblentz Real Estate team and authors of our real estate and land use blog, Unfamiliar Terrain, will continue to monitor these developments. Visit our COVID-19 Business Resource Center for additional information, or contact Real Estate attorneys Barbara Milanovich at bmilanovich@coblentzlaw.com or Caitlin Connell at cconnell@coblentzlaw.com.

  • California Judicial Council Postpones Residential and Commercial Evictions

    We last reported on the Unfamiliar Terrain blog that California Governor Gavin Newsom banned the enforcement of residential evictions against qualified California tenants who fail to pay rent. Less than two weeks later, on April 6, the California Judicial Council substantially expanded statewide tenant protections and eliminated the qualifications for protection. With the Council’s action, residential and commercial tenant eviction lawsuits cannot be initiated during the state of emergency and for 90 days after, regardless of the cause and regardless of the financial condition of the tenant. Eviction actions already in process will be postponed by at least 60 days. The only exceptions are evictions that are necessary for the public health or safety.

    Governor Newsom’s March 27 Executive Order N-38-20 granted authority to the Council and its Chairperson to issue emergency orders or statewide rules to maintain the safe and orderly operation of the courts in response to the COVID-19 pandemic. The Council’s sweeping action relies on the March 27 Executive Order, amending the California Rules of Court to address overwhelmed caseloads and calendars during the COVID-19 pandemic. The Council’s amended rules relating to eviction lawsuits and foreclosure actions are summarized below.

    Residential and Commercial Eviction Lawsuits Postponed

    For the period of the state of emergency and for 90 days thereafter:

    1. State courts are prohibited from issuing an unlawful detainer summons, which is the document required to initiate an eviction lawsuit, unless the court finds the action necessary to protect the health and safety of the public. This rule temporarily prevents any new eviction actions, other than for the public health and safety exception.
    2. State courts may not enter a default or default judgment against a defendant for failure to appear, unless the court finds action necessary to protect public health and safety and the defendant has not appeared in the action within the time provided by law.
    3. If a defendant has appeared in an eviction action, trial dates must be set at least 60 days after a request for trial is made (instead of the statutory 20 days), unless the court finds that an earlier trial date is necessary to protect the health and safety of the public.
    4. Any eviction trial date already set as of April 6, 2020 must be continued at least 60 days from the initial trial date.

    As it is very unlikely that the state of emergency will be lifted before April 30, no new eviction lawsuits may be initiated statewide through, at a minimum, July (other than for the public health and safety exception). The rules do not provide guidance on what might qualify under the public health and safety exception.

    The Council’s rules result in broader limitations on eviction actions than earlier State orders and most local ordinances. Where a local ordinance provides greater or additional protections to tenants, those protections will continue to be available.

    Judicial Foreclosure Actions Stayed

    The Council’s emergency rules also provide that all actions for judicial foreclosure are stayed during the state of emergency and for 90 days after, unless the court finds that action is required to further the public health and safety. The statute of limitations for filing foreclosure actions is tolled for the same period of time.

    The Coblentz Real Estate team and authors of our real estate and land use blog, Unfamiliar Terrain, will continue to monitor these developments. Visit our COVID-19 Business Resource Center for additional information, or contact Real Estate attorneys Tay Via at tvia@coblentzlaw.com or Caitlin Connell at cconnell@coblentzlaw.com.

  • Bay Area Further Restricts Construction in Response to COVID-19

    UPDATED ON APRIL 22, 2020

    On March 19, 2020, Governor Newsom issued a “Safer at Home” Order, which generally permits construction, including housing, to continue statewide. On March 31, 2020, six Bay Area counties – Alameda, Contra Costa, Marin, San Francisco, San Mateo, and Santa Clara – as well as the City of Berkeley, coordinated on and each issued updated local shelter-in-place orders extending and further restricting non-essential activities through May 3, 2020. Among other things, the local orders notably limit the types of construction permitted beyond the State’s Order and require those permissible construction activities to create and implement a “Social Distancing Protocol.”

    Most construction, commercial and residential, is restricted under the new local orders. While previous county orders permitted residential construction to continue, the new local orders further limit construction, particularly residential construction, and generally permit only the following types of construction to continue:

    1. Projects immediately necessary to the maintenance, operation, or repair of Essential Infrastructure;
    2. Projects associated with Healthcare Operations, including creating or expanding Healthcare Operations, provided that such construction is directly related to the COVID-19 response;
    3. Affordable housing that is or will be income-restricted, including multi-unit or mixed-use developments containing at least 10% income-restricted units;
    4. Public works projects if specifically designated as an Essential Governmental Function by the City Administrator in consultation with the Health Officer;
    5. Shelters and temporary housing, but not including hotels or motels;
    6. Projects immediately necessary to provide critical noncommercial services to individuals experiencing homelessness, elderly persons, persons who are economically disadvantaged, and persons with special needs;
    7. Construction necessary to ensure that existing construction sites that must be shut down under this Order are left in a safe and secure manner, but only to the extent necessary to do so; and
    8. Construction or repair necessary to ensure that residences and buildings containing Essential Businesses are safe, sanitary, or habitable to the extent such construction or repair cannot reasonably be delayed.

    While the seven local orders place virtually identical restrictions on construction, other Bay Area counties – Napa, Solano, and Sonoma – impose varying limitations. Sonoma County’s March 31 order is substantially similar to the other local orders, but includes an exemption for construction and debris removal on fire damaged or destroyed properties. Solano County’s March 30 order is generally consistent with the State’s Order. Most recently, Napa County issued a modified order on April 22, 2020 that permits construction (including housing construction) to proceed, so long as contractors follow specific “Construction Site Requirements.”

    Different circumstances and considerations could impact how each jurisdiction interprets and regulates its respective order. As an example, San Francisco issued new requirements on April 2, 2020 for contractors to create and implement a Site Specific Health and Safety Plan consistent with designated Best Practices COVID-19 Construction Field Safety Guidelines (in addition to the Social Distancing Protocol), and released further guidance on April 3, 2020 regarding the interpretation of its order. Similarly, Santa Clara County’s FAQ’s state that all construction sites must comply with its COVID-19 Construction Field Safety Guidelines.

    Governor Newsom stated at his press conference on April 2, 2020 that he does not intend to apply the more stringent restrictions in the Bay Area’s local orders across the rest of the state at this time. He confirmed that the Bay Area and other counties have the legal right to impose additional restrictions beyond the State’s Order.

    Local health officers are carefully monitoring the evolving situations in their respective districts and could change local restrictions as necessary. The State may also issue additional guidance. The current statewide Order and orders for Bay Area jurisdictions are linked in the chart to the left. The Coblentz Real Estate Team and authors of Unfamiliar Terrain will continue to monitor these developments. Visit our COVID-19 Business Resource Center for additional information.

     

  • Update: Emergency Protections in Place for Tenants and Homeowners in Response to COVID-19 Pandemic

    As we previously reported, in the past two weeks, the federal government, the state of California, and many local governments have taken action to provide tenant and homeowner protections in response to the COVID-19 pandemic.

    Federal Homeowner Protections

    On March 18, President Trump announced a suspension of foreclosures and evictions by the Department of Housing and Urban Development through April 30. The moratorium will apply only to homeowners with mortgages insured by the Federal Housing Administration.  Also on March 18, the Federal Housing Finance Agency directed Fannie Mae and Freddie Mac to suspend foreclosures and evictions for at least 60 days.

    California Homeowner Protections

    At the state level, on March 25, California Governor Gavin Newsom announced that Wells Fargo, US Bank, Citigroup, JP Morgan Chase, and almost 200 state-chartered banks and credit unions will provide mortgage relief to California property owners.  Newsom announced during a news conference that they “have all agreed to 90 day waiver of payments for those that have been impacted by COVID-19.” The waivers will apply to single-family homes and properties with 1-4 units. Californians struggling with the COVID-19 crisis may be eligible for relief upon contacting their financial institution.

    California State and Local Tenant Protections

    On March 27, Governor Newsom issued Executive Order N-37-20 banning the enforcement of evictions statewide against qualified California residential tenants who fail to pay rent between the date of the Order and May 31, 2020. To qualify, residential tenants must give notice to the landlord of inability to pay all or part of their rent as a result of COVID-19 within seven days after the rent is due. The tenant would then have 60 days (instead of the statutory 5 days) to respond to an eviction lawsuit, and law enforcement would be prohibited from enforcing an eviction against such tenant while the Order is in effect. Tenants would remain obligated to repay full rent in a timely manner after the moratorium is lifted.

    The March 27 Order builds on Governor Newsom’s prior Executive Order N-28-20, which authorizes local governments to pass their own stricter bans on residential or commercial evictions. The prior Order also makes it unlawful through May 31 to evict a residential tenant and subsequently rent or offer to rent to another person at a rental price greater than the evicted tenant could be charged.

    Under the authority granted by Executive Order N-28-20, a number of local governments have passed broader eviction moratoriums, including moratoriums that aim to protect commercial tenants. The statewide eviction moratorium does not override stricter measures that local governments have already enacted or may enact going forward.

    Locally, San Francisco Mayor London Breed issued a 30-day moratorium on residential and commercial evictions related to financial impacts caused by the COVID-19 pandemic that is more expansive than the statewide moratorium. Residential tenants will have up to six months after the end of the emergency declaration period to pay the total of their missed rent. The moratorium on commercial tenants is limited to small and medium-sized businesses (those with worldwide gross receipts in 2019 of $25 million or less). Landlords must provide such business tenants at least one month to cure a failure to pay rent. If the business tenant provides documentation of a financial difficulty related to COVID-19, the cure period is automatically extended for successive periods of one month, up to a total of six months. During the applicable cure period, landlords must negotiate a payment plan in good faith. Landlords may proceed with eviction after a tenant fails to pay all outstanding rent within the applicable cure period.

    Legislation passed by other Cities and Counties in California is summarized in the chart to the left. The chart is a summary only, and legislation must be consulted for details. It is illustrative as the situation is fluid and other jurisdictions may have enacted, considered, or are in the process of considering legislation. In some cases the local restrictions are more stringent that the Governor’s Order, and in those cases the more restrictive local provisions apply. A common thread through the various jurisdictions is that tenants are not relieved of their duty to (eventually) pay rent. Click on the image to the left to view the full chart.

    The situation and responses continue to evolve quickly, and other local jurisdictions are considering similar controls. The Governor’s Office may also provide further guidance on these issues. The Coblentz Real Estate team and authors of Unfamiliar Terrain will continue to monitor these developments.

     

  • Emergency Protections in Place for Tenants and Homeowners in Response to COVID-19 Pandemic

    In recent days, the federal government, the state of California, and many local governments have taken action to provide tenant and homeowner protections in response to the COVID-19 pandemic.

    On March 18, President Trump announced a suspension of foreclosures and evictions by the Department of Housing and Urban Development through April 30. The moratorium will apply only to homeowners with mortgages insured by the Federal Housing Administration.

    Also on March 18, the Federal Housing Finance Agency directed Fannie Mae and Freddie Mac to suspend foreclosures and evictions for at least 60 days.

    At the state level, on March 16, 2020, California Governor Gavin Newsom issued Executive Order N-28-20 prohibiting rent hike evictions, authorizing local governments to implement further protections against evictions, delaying foreclosures by mortgage lenders, and monitoring customer service protections delivered by utility providers. Unless extended, the protections under the order are in effect until May 31, 2020 and are intended to address the challenges for many Californians to pay rent, mortgages, and utility bills as a result of the COVID-19 pandemic. A summary of protections included in the order is as follows:

    • It is unlawful to evict any residential tenant through May 31, 2020 (as may be extended) and subsequently rent or offer to rent to another person at a rental price greater than the evicted tenant could be charged. Landlords may continue an eviction process that was lawfully initiated prior to March 4, 2020.
    • Local governments may impose substantive limitations on residential or commercial evictions through May 31, 2020 (as may be extended) where the basis of the eviction is nonpayment of rent or a foreclosure, and the tenant or homeowner can demonstrate economic hardship caused by the COVID-19 pandemic.
    • Public housing authorities are requested to extend deadlines for housing assistance recipients and applicants to deliver documents.
    • Home and commercial mortgage lenders are requested to immediately place a moratorium on foreclosures and evictions that arise out of economic hardship caused by the COVID-19 pandemic.
    • The California Public Utilities Commission (CPUC) is requested to monitor and report the customer service protections provided by utility providers for electric, gas, water, internet, landline telephone, cell phone service, and other critical utilities, in response to COVID-19.

    The order contemplates that a quarantine or similar public health measure could also prohibit an eviction if it compels an individual to remain physically present in a particular residential property.

    The order does not relieve a tenant from its obligation to pay rent, nor does it restrict a landlord’s ability to recover rent.

    On March 17, 2020, the CPUC confirmed that, retroactive to March 4, 2020, utility companies under CPUC’s jurisdiction (including PG&E, AT&T and Comcast) will not be allowed to suspend service for customers who cannot pay their bills during the COVID-19 state of emergency.

    Cities in California that have moved to impose temporary moratoriums on evictions include San Francisco, Oakland, San Jose, Los Angeles, Santa Monica, San Diego, Santa Barbara, South Pasadena, and Suisun.

    • On March 13, San Francisco Mayor London Breed issued a 30-day moratorium on residential evictions related to financial impacts caused by the COVID-19 pandemic. Tenants will have up to six months after the end of the emergency declaration period to pay the total of their missed rent. Guidance for tenants and landlords, including tenant obligations to provide notice of inability to pay rent, can be viewed here.
    • On March 14, Santa Monica issued a temporary moratorium on evictions for non-payment of rent by residential tenants financially impacted by COVID-19 during the period of local emergency. A landlord also cannot pursue a no-fault eviction during the period of local emergency unless necessary for the health and safety of tenants, neighbors, or the landlord. On March 18, Santa Monica added a moratorium on commercial tenant evictions through April 30, 2020.
    • On March 15, Los Angeles Mayor Eric Garcetti issued a moratorium on residential evictions through March 31, 2020 where the tenant can demonstrate economic hardship caused by the COVID-19 pandemic. Tenants will have up to six months following the expiration of the local emergency period to repay any back due rent. The Mayor is considering a halt to commercial evictions as well.
    • A proposed ordinance for a residential eviction moratorium in Oakland will be considered at the Oakland City Council’s next meeting on April 7.
    • San Jose City Council is moving forward with a temporary ban on COVID-19-related residential evictions, which is expected to receive final approval in the next week. Council members will consider adding small businesses under commercial leases to the moratorium.
    • San Diego city leaders voted on March 17 to draft an emergency ordinance aimed at preventing residential rental evictions triggered by the COVID-19 pandemic.
    • Santa Barbara City Council will vote on a draft ordinance pausing evictions on March 24, 2020. It is undetermined whether the pause will extend to both residential and commercial evictions, or one or the other.
    • On March 18, South Pasadena considered a resolution that would establish special protections for residential and commercial tenants and property owners.
    • Suisun City Council is poised to pass a resolution that would prohibit any new residential or commercial evictions due to financial impacts caused by the COVID-19 pandemic.

    The situation and responses are evolving quickly, and other local jurisdictions are considering similar controls. The Governor’s Office may also provide additional guidance on this issue. We will continue to monitor these developments.

     

  • SF’s Proposition E Links Office Allocation to Housing Production

    On March 3, San Francisco voters will consider Proposition E (“San Francisco Balanced Development Act”)[1], which links the City’s “Proposition M” office allocation scheme, originally approved by voters in 1986, to affordable housing production. Proposition M currently limits the amount of office space that the City may approve annually, with 875,000 square feet added to the allocation for large office projects (50,000 square feet or more) each year in October. When a large office project is approved, its square footage is deducted from the available allocation. The Planning Department’s most recent Proposition M report identifies 786,993 square feet of large project office allocation available, as compared to a large office entitlements pipeline of over 6 million square feet, plus additional demand from other projects that were approved with allocation priority. Proposition E would change both the method for calculating how much annual office square footage is available and how that space is allocated.

    California state law requires that cities and counties plan for housing needs at varying income levels through a Regional Housing Needs Allocation (RHNA) process. As part of the RHNA, the State determines the total amount of new housing that is needed by income level and assigns a share of that need to each local entity. Proposition E would tie Proposition M’s annual limit on large office projects to the City’s affordable housing production—if the City falls short in meeting its combined affordable housing goals for the very low, low and moderate income categories, then the available annual allocation would go down by the same percentage as the RHNA shortfall. The 2015-2023 RHNA eight-year need allocation in the specified categories is 16,333 units, or 2,042 units per year. If the City produced, for example, about 1,021 qualifying units in a given year, then the Proposition M allocation for the coming year would be reduced by 50% to 437,500 square feet. The October 2020 allocation would be reduced to reflect the entire 2015-2019 RHNA shortfall (total qualifying units produced during the period calculated against a need of 10,210 units), and thereafter the allocation would be adjusted annually.

    The Planning Commission would have the authority to grant two new exceptions from the large office limit. The first is for projects subject to a development agreement that includes affordable housing, either on-site or off-site within a designated economically disadvantaged community, at a ratio of at least 809 units per 1 million square feet of new office space. The second is for large office projects in Central SoMa (defined as the boundaries of the Central SoMa Special Use District in Planning Code Section 249.78) for which a Preliminary Project Application was submitted before September 11, 2019, where the project includes qualifying space as follows: SoMa property to be conveyed to the City for affordable housing, a space of at least 10,000 square feet for community arts or neighborhood-serving retail at reduced rents, or a public safety facility. The Central SoMa exception would be limited to a total of 1.7 million square feet, and until 15,000 new housing units are produced (approved and first construction document issued) in the broader SoMa neighborhood, it could only be granted if the project would not cause the total amount of large office projects approved in Central SoMa after January 1, 2019 to exceed 6 million square feet. Office space approved using these exceptions could cause the allocation to effectively “go negative” and would be deducted from any available allocation evenly over the 10-year period following approval of each exempted project.

    Finally, Proposition E would revise the criteria for evaluating office development projects to delete references to General Plan objectives, policies, and design quality, and add provisions regarding affordable housing (for projects subject to a development agreement) and other specified community improvements.

    On January 27, the City’s Chief Economist published a report concluding that if past economic trends continue, Proposition E will put upward pressure on office rents, reduce employment, and result in less funding for affordable housing through the Jobs-Housing Linkage Fee.

    Proposition E’s proponents dispute the Chief Economist’s report. They assert that creating a link between office development and affordable housing may incentivize affordable housing production, and that in any event, slowing the pace of office development will help to reduce pressure on housing supply and home prices. Proposition E’s critics believe that the measure will adversely impact job creation and business retention and that the City’s path to reducing housing costs must focus on dramatically increasing housing production.

    [1] In December, Mayor Breed withdrew a competing ballot proposal that would have added converted office space back to annual space allocations, prioritized office space that also provides sites for affordable housing or other specified community benefits, and increased the square footage threshold for small office projects.

  • SB 50 Defeated in State Senate

    SB 50, Senator Scott Wiener’s bill to boost housing production near transit and job centers, has been defeated. The bill fell three votes short on Wednesday, and Wiener was unsuccessful in his reconsideration request today.

    The bill was stalled in the Senate last May when the Chair of the Appropriations Committee deferred action on the bill until 2020. On January 24, Senate President Pro Tempore Toni Atkins moved it to the Rules Committee, which she chairs, and Senator Wiener introduced amendments designed to address certain concerns regarding local control and potential impacts on low-income residents. The amendments included a “local flexibility plan” that would allow local agencies to create alternative housing plans that are designed to produce the same number of units as SB 50 compliance would. The amendments also added a neighborhood preference for 40% of new low, very low and extremely low income units developed under SB 50.

    Both Governor Newsom and Senator Atkins have indicated that regardless of the fate of SB 50, some form of legislation to increase housing production will be passed this year.