• 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.

  • Major Increase to Jobs Housing Linkage Fee Takes Effect

    Effective December 16, costs for many office and laboratory projects in San Francisco are now higher. As we previously reported, the Board of Supervisors unanimously approved the more than doubling of the Citywide Jobs Housing Linkage Fee (JHLF) for such projects in November. The Mayor declined to veto the ordinance but instead returned it unsigned, expressing concern in an accompanying letter that the JHLF increase “must be done in a way that takes into account economic analysis, financial feasibility, and the different impacts experienced by our small businesses.” See our November and September blog posts for more information about the JHLF increase and the related nexus analysis and feasibility assessment.

  • SB 330 Seeks to Speed Up Housing Production

    The Housing Crisis Act of 2019 (Senate Bill No. 330; Senator Skinner) goes into effect on January 1, 2020 and expires on January 1, 2025. It aims to address the statewide housing crisis by limiting the number of public hearings for new housing developments and reducing the timeline for permit review, placing limits on permit processing, limiting fees and exactions, and making it more difficult for local jurisdictions to deny or modify housing projects. To summarize, the Act:

    1. Provides more certainty for housing developers by prohibiting local agencies from:
    • Requiring compliance with an ordinance, policy or standard adopted after a “preliminary application” is submitted, except under limited circumstances, such as where compliance is necessary to avoid or substantially lessen an otherwise significant impact under the California Environmental Quality Act (CEQA).
    • Imposing or enforcing design standards established on or after January 1, 2020, unless they qualify as objective (as defined in the Act).
    • Imposing new or increased development impact fees, unless an automatic annual adjustment based on an independently published cost index referenced in the legislation establishing the fee.
    1. Prohibits caps, moratoriums and density reductions by disallowing agencies from:
    • Reducing permitted housing density to below that allowed on January 1, 2018.
    • Imposing moratoriums (or similar restrictions) on new housing development unless the Department of Housing and Community Development agrees that it is necessary to protect against an imminent public health and safety threat.
    • Limiting the total number of housing units in a local jurisdiction, unless approved by the voters prior to 2005 for a “predominantly agricultural county.”
    1. Shortens the approval process
    • No more than five public hearings may be held on a housing project (if it complies with applicable objective general plan and zoning standards) and the overall timeframe for review and approval (or disapproval) under the Permit Streamlining Act is reduced.

    The Act adds and amends various California Government Code sections, including the Permit Streamlining Act (Cal. Gov’t Code Section 65920 et. seq.) and the Housing Accountability Act (Cal. Gov’t Code Section 65589.5 et. seq.). It applies to “housing developments,” which include mixed-use projects with two-thirds or more of the square footage dedicated to residential use. Protection is limited under the Act. The vesting protections lapse if construction is not commenced within two and a half years from the date of final project approval (which period would be stayed during litigation) and/or the residential square footage or number of units is increased by 20 percent or more after the preliminary application is submitted, exclusive of any increase resulting from a density bonus. See the full text of the Act for additional provisions not summarized here (e.g., relocation assistance requirements).

  • SF Board of Supervisors Approves Major Increase to Jobs Housing Linkage Fee

    Costs for many office and laboratory projects in San Francisco are poised to increase. On November 5, 2019, the Board of Supervisors unanimously approved a proposed ordinance that would more than double the Citywide Jobs Housing Linkage Fee (JHLF) rate for such projects. The ordinance now moves to the Mayor for consideration.

    As amended by the Board on October 29, 2019, the increased fees would be phased in from the current fee of $28.57 to:

    • $52.20 per gross square foot (gsf) where the project was approved on or before September 10, 2019 with a condition of approval requiring payment of any higher JHLF rate in effect prior to issuance of either the certificate of occupancy or final completion for the project. If such certificate of occupancy or completion is not issued as of the effective date of the ordinance, then the project would be required to pay the incremental difference between the fees assessed at building or site permit issuance and $52.20. This provision only applies to “large capital” office projects (50,000 gsf or more).

    This rate would also apply where a complete Preliminary Project Assessment (PPA) application was filed on or before September 10, 2019, except where a building or site permit is issued as of the effective date of the ordinance, in which case the project would be “grandfathered” and the current fee rate would apply, unless the project is a large capital project subject to a special condition as described above. The fee rate for “small capital” office projects (49,999 gsf or less) under this provision would be $46.98 rather than $52.20.

    • $60.90 per gsf ($54.81 for small capital projects) where a complete Development Application (as defined under Planning Code Section 102) is filed between September 11, 2019 and January 1, 2021, except where the project is grandfathered (see above).
    • $69.60 per gsf ($62.64 for small capital projects) where a Development Application is filed after January 1, 2021.

    For laboratory uses, the same phasing requirements would apply (with the exception of the special condition provision described above), with increases from $19.04 per gsf to $31.43, $34.90 and $38.37 per gsf, respectively.

    See our September blog post for information about the related nexus analysis and feasibility assessment for the proposed fee increase.

  • California Passes Rent Cap and Eviction Protections with AB 1482

    In September, the California Legislature approved AB 1482, the Tenant Protection Act of 2019. Governor Newsom signed the bill on October 8, making California the third state this year to impose statewide residential rent control, behind Oregon and New York. The legislation also includes “just cause” eviction provisions.

    Until its repeal date of January 1, 2030, AB 1482 limits rent increases for many residential buildings. For covered buildings, during any 12-month period, the bill prohibits a landlord from increasing a tenant’s rent by an amount that is the lesser of: (a) 5% plus the percentage increase in the cost of living based on the regional CPI (for the Bay Area, roughly 4% or a total of about a 9% increase based on the 2019 CPI), or (b) 10%. The cap applies to rent increases imposed after March 15, 2019, and for existing tenants, a landlord may not increase the rent more than twice in a 12-month period.

    In an effort to address the impacts of the rent cap on new construction, the Legislature included an exemption for housing constructed in the past 15 years. AB 1482 also exempts certain affordable housing, college dormitories, single-family homes, and owner-occupied duplexes and condominiums (except where the owner is a REIT, corporation or limited liability company where at least one member is a corporation). The bill does not apply to housing that is already subject to local rent control measures. The City of San Francisco currently imposes rent control on buildings constructed before June 13, 1979. The San Francisco Rent Ordinance caps annual increases in residential rents based on a specific formula tied to the regional CPI. Since the 1980s, the effective rate cap has ranged from 0.1% to 7.0%, and the current cap in effect through February 29, 2020 is 2.6%. These protections will continue to apply. The AB 1482 rent cap provisions will apply to buildings that received certificates of occupancy between June 13, 1979 and December 31, 2004. A building constructed in or after 2005 will not be subject to the new AB 1482 rent caps until the building is at least 15 years old.

    The legislation also imposes “just cause” eviction procedures, which apply to tenants who have continuously and lawfully occupied a residential property for at least 12 months (or at least 24 months in the case of one or more new adult tenants), unless the eviction results from an “at-fault” or “no-fault” just cause, as defined in the bill. For a “no-fault” eviction, such as an owner move-in or substantial renovation, the landlord must provide tenants with relocation assistance or a rent waiver in the amount of one month’s rent. The exemptions are similar to those for rent caps, and also include dormitories for K-12 schools, housing associated with a nonprofit hospital, religious facilities, extended care or licensed residential care facilities, hotels, and individual rooms or accessory dwelling units rented out by a homeowner. Local just cause ordinances such as San Francisco’s prevail, provided they were either in effect on or before September 1, 2019, or are adopted thereafter but are more protective than the state legislation.

    The bill faced substantial opposition, led by the California Apartment Association – which ultimately dropped its opposition – and the California Association of Realtors. Opponents raised concerns that the bill would chill housing production, curtail economic development, and complicate the eviction process.

    While many tenants’ rights groups supported the legislation, others remain critical of certain provisions, including the lack of vacancy control and longer-term tenant protections. Bay Area Mayors London Breed, Libby Schaaf and Sam Liccardo endorsed the measure.

  • SF Planning Commission Approves Major Increase to Jobs Housing Linkage Fee

    Costs for many non-residential developments in San Francisco are poised to increase. On September 19, 2019, the Planning Commission approved a proposed ordinance that would more than double the City-wide Jobs Housing Linkage Fee (JHLF) rate for office and laboratory development. The ordinance now moves to the Board of Supervisors for consideration.

    The key provision is a substantial hike in fees for office and laboratory development. The ordinance would increase the JHLF rate per gross square foot (gsf) for office uses from $28.57 to $69.90 and for laboratory uses from $19.04 to $46.43. With the proposed changes, a 100,000 gsf office building would be required to pay a nearly $7 million JHLF.

    The proposed ordinance does not include a grandfathering clause so pipeline projects and certain approved projects would be subject to the JHLF changes. The JHLF is normally calculated and due at the time of issuance of the first construction document for a project, which is typically a site or building permit. The proposed ordinance provides that certain projects approved by the Planning Commission (or Planning Department, if applicable) on or before the end of the year (December 31, 2019) will be subject to the higher fee. This applies only if the proposed ordinance is in effect when the JHLF is normally due or a condition of approval is imposed requiring payment of any higher JHLF rate in effect prior to issuance of either the certificate of occupancy or final completion for the project. Such a condition was imposed on at least one already approved Central SoMa project in anticipation of the proposed ordinance.

    The proposed ordinance would also change the options for developers to satisfy the JHLF requirement. Compliance through payment to a residential developer would no longer be allowed, but land could still be dedicated in lieu of payment of the JHLF (or in combination therewith) if specified requirements are met. That option would be expanded under the proposed ordinance to all projects, not just Central SoMa projects.

    Under state law, the development impact fee must bear a reasonable relationship or “nexus” to the actual impacts of new development and the costs of mitigating those impacts. The City retained consultants to prepare a May 2019 Jobs Housing Nexus Analysis (“Nexus Analysis”) and a June 2019 Jobs Housing Linkage Fee Update Development Feasibility Assessment (“Feasibility Assessment”). The Nexus Analysis examined the connection between employment growth and affordable housing demand in the City and concluded that for each job created, the demand for housing and cost of producing it is substantially higher than what was identified in the original 1997 nexus analysis. It did not include a maximum recommended rate. The Feasibility Assessment examined various office development prototypes and concluded that for some product types and under certain conditions, a JHLF increase of up to $10 per gsf would be feasible. The Feasibility Assessment did not address laboratory space.

    The staff report to the Planning Commission recommended approval of the proposed ordinance with modifications to conform to the Feasibility Assessment: a $10 per gsf increase for office uses, and no increase for laboratory uses. The Planning Commission considered testimony regarding the proposed rates and analysis and, in deliberations, generally expressed support for the ordinance while acknowledging that additional work needed to be done to confirm the appropriate maximum increase. The approval was in support of the ordinance without modifications.

    We will continue to track this proposed ordinance. It has not yet been scheduled at the Land Use and Transportation Committee of the Board of Supervisors, which is the next step before final consideration by the full Board.

  • COPA Update: Compliance Not Required Until September 3, 2019

    San Francisco’s Community Opportunity to Purchase Act (COPA) became effective earlier this month but the Mayor’s Office of Housing and Community Development (MOHCD) has clarified that sellers of multi-family residential rental properties and certain vacant lots in San Francisco will not be required to comply until September 3, 2019 (90 days after the effective date). That date is the deadline for MOHCD to release a formal implementation program, including a list of “Qualified Nonprofits” that have been granted certain rights of first offer and first refusal under COPA.

    MOHCD has also confirmed that it will not require COPA compliance if a property owner has entered into a “binding contract for sale” prior to September 3, 2019. That term is not defined, but appears from the COPA legislation to include not only a binding purchase and sale agreement but possibly also other forms of contract, e.g., an option to purchase.

    Although not addressed in the legislation, MOHCD has also provided guidance for property owners that list property subject to COPA for sale prior to September 3, 2019, but have not entered into a “binding contract for sale” prior to that date. Under that scenario, the yet-to-be-identified Qualified Nonprofits must be given a right of first refusal (ROFR), but not a right of first offer. Because the ROFR would be the seller’s first contact with “Qualified Nonprofits” they would presumably have 30 days (rather than five days) to respond; however, that wasn’t specified by MOHCD. The ROFR process is summarized in our March blog post and this graphic.

    As reported in our May blog post, the San Francisco Apartment Association has stated that it believes the legislation is “illegal and unconstitutional,” and has indicated it plans to bring litigation against the City this year. We will be monitoring any legal developments surrounding the legislation.

  • Two Affordable Housing Measures Proposed for November Ballot

    Two affordable housing measures are currently proposed for the November 5, 2019 ballot: (i) City Charter and Code amendments to encourage certain 100% affordable and teacher housing projects by providing for a streamlined ministerial — i.e., no CEQA — approval process for qualified projects and (ii) an up-to $500 million affordable housing bond.

    Ministerial Review of 100% Affordable Housing and Teacher Housing Projects

    This measure, which is sponsored by Mayor Breed and Supervisors Brown, Safai, and Stefani, would effectively eliminate CEQA requirements and Planning Commission, Historic Preservation Commission, Board of Supervisors, and Board of Appeals review for qualified 100% affordable housing and teacher housing projects.

    This measure would:

    • Establish new definitions for 100% Affordable Housing and Teacher Housing projects that would include the following criteria: (i) at least two-thirds of a mixed-use project must be set aside for qualified housing; (ii) 140% of the Area Median Income (AMI) income maximum; (iii) priced for sale or rented at 80% of the median market price for the neighborhood; and (iv) for Teacher Housing, at least two-thirds of the units must be deed restricted for occupancy by at least one employee of the Unified School District or Community College District.
    • Create a streamlined ministerial approval process for qualified projects that comply with Zoning, Height, and Bulk Maps and objective standards of the Planning Code, including but not limited to permitted modifications under the City’s 100% Affordable Housing Bonus Program and State Density Bonus Law.
    • Eliminate the following for qualified projects (as applicable): (i) General Plan referral requirement; (ii) potential appeal to the Board of Appeals; (iii) Historic Preservation Commission (HPC) approval of building alterations (with the apparent exception of individually landmarked buildings and provided that the Planning Department develops and applies similar objective criteria for review) and HPC review of project-related ordinances and resolutions; (iv) Arts Commission design review; (v) Board of Supervisors approval where otherwise required for certain City contracts, including ground leases, if between 55 and 99 years; (vi) potential Discretionary Review by the Planning Commission; (vii) Conditional Use authorization requirement (although not specified, presumably only for the residential component of the project); (viii) Inclusionary Affordable Housing requirements; and (ix) Priority Policy consistency findings requirements.
    • Limit Planning Department review to: (i) design review (aesthetic aspects only), which must be completed within 60 days, and (ii) implementation of to-be-adopted objective measures for the reduction of potential environmental impacts related to archeology, air quality, greenhouse gas emissions, noise, historic resources, water supply, and/or wind and shadow, as applicable to the project.
    • Disqualify otherwise eligible projects that would be: (i) on designated open space under the jurisdiction of the City Recreation and Park Department; (ii) in a zoning district that prohibits dwelling units; (iii) in a RH-1, RH-1(D), or RH-2 zoning district; or (iv) on the site of a designated historic building or building in a designated historic district if the project would require “any removal or demolition” of that building.
    • Authorize the Board of Supervisors to expand the scope of the streamlined ministerial approval process (by ordinance) to include “additional forms of housing”.

    Affordable Housing Bond

    This measure, which is sponsored by Mayor Breed and Supervisors Yee, Brown, Safai, Walton, and Stefani, would authorize the City to incur up to $500 million in bonded indebtedness to finance the development and improvement/preservation of affordable housing (and related costs) and to levy taxes to pay for the principal and interest on these bonds. Landlords would be permitted to pass through up to 50% of the resulting property tax increase to residential tenants. The related affordable housing programs would prioritize working families, veterans, seniors, and persons with disabilities (including but not limited to down payment assistance for San Francisco Unified School District educators and other middle-income working households).

    This measure is currently scheduled to be heard by the Budget and Finance Committee on June 6, 2019, during which a motion to refer the measure to the full Board for consideration on June 11, 2019, will be considered.

    We will continue to track these measures, which have not yet been submitted to the Department of Elections.

  • SB 50 Update: Vote Postponed to 2020

    The Chair of the Senate Appropriations Committee announced that Senator Wiener’s SB 50 is now a two-year bill, which means that it will not be eligible for vote until January.   We will continue to track the status of SB 50 and any future amendments or successor legislation that may be introduced.

  • Senator Wiener’s SB 50 Moves Forward with Compromise Amendments

    On April 24, Senator Scott Wiener’s SB 50 passed the Senate Governance and Finance Committee with bipartisan support, incorporating amendments that limit the bill’s scope. It is scheduled to be heard by the Senate Appropriations Committee on May 13. As previously reported, SB 50 mandates a combination of “equitable communities incentives” and a streamlined, ministerial approval process designed to promote housing production for qualifying projects on eligible sites. The amendments are part of a compromise agreement with Senator Mike McGuire and incorporate provisions from his previously competing measure, SB 4.

    As amended, SB 50 continues to require that local agencies grant certain “equitable communities incentives” when a project sponsor seeks to construct a residential development that meets specified criteria such as being a “transit-rich” or “jobs-rich” housing project, as defined in the legislation, and complies with tenant protection and other requirements. The incentives limit local agencies’ ability to impose density limits and minimum parking requirements on qualifying projects. For projects within 1/2 or 1/4 mile of a major transit stop, the legislation would also impose minimum height limits of 45′ and 55′ (four to five stories), respectively. The amendments to SB 50 would mandate these incentives only for the state’s largest 15 counties, all with a population of over 600,000. The legislation also exempts certain sites, including those with certain historic designations or that contain existing rental housing, or that are located in a very high fire severity zone or in a coastal zone and in a city with a population of under 50,000.

    For counties with populations of 600,000 or less, a qualifying project in a city with a population of over 50,000 and within 1/2 mile of a major transit stop would be eligible for different incentives, including an additional one story above the otherwise allowable height, and relief from maximum density and minimum parking requirements. There are additional exemptions related to historic district and floodplain designations.

    As before, the legislation delays implementation for designated “sensitive communities” to allow time for planning efforts directed at affordable multifamily housing.

    The legislation would also create a statewide streamlined ministerial process to convert vacant land and homes to multifamily buildings of up to four units. Qualifying conversions could not propose substantial exterior alteration and would be required to meet certain local land use controls such as height, setback, and lot coverage as they existed on July 1, 2019.

    SB 50 has a number of co-authors and early supporters, but continues to face opposition from some cities and counties, principally over loss of local land use control, and housing advocates concerned with gentrification and displacement.