State Density Bonus Law Debuts in San Francisco

The San Francisco Planning Commission took a major step on December 8, 2016, by approving the first market rate housing project to utilize the State Density Bonus law.

The State law, which has been in effect for almost 40 years, incentivizes developers to construct more affordable housing by providing density bonuses of up to 35 percent for projects that incorporate on-site affordable units. The amount of the density bonus varies depending on the level of affordability and the number of affordable units.  The State law provides that local development standards, such as building height and FAR limits, may be modified without new legislation if necessary to physically accommodate the additional units. It also provides for certain development concessions and incentives in the form of the waiver or reduction of local zoning requirements. The State law was recently amended to require that local jurisdictions adopt an implementation program.

San Francisco has historically offset affordable units provided under the local inclusionary housing ordinance against the density bonus percentage. This effectively eviscerated the State law.  But a 2013 California Court of Appeals case in Napa County held that even required affordable units count toward the density bonus total.  Since that case, advocates have been pushing for local compliance with the State law, which has remained elusive until now.

To date, the San Francisco Board of Supervisors has been unable to agree on a comprehensive implementation program.  Instead, it passed a local density bonus ordinance this past summer that only applies to 100 percent affordable housing projects, leaving the mixed-income component of the program at a standstill. In the meantime, projects that comply with the State law are moving forward in the pipeline. On December 8, 2016, the 333 12th Street project, relying on the State law, requested and received from the Planning Commission the maximum 35 percent density bonus (about 52 additional units). It also received a height increase of about 25 feet for the additional units, which normally would require a Height Map amendment approved by the Board of Supervisors.

What’s next for the implementation program? The mixed-income component isn’t scheduled to be considered by the Planning Commission until March 2, 2017, even though the pressure is now on. One of the major issues is sorting out the City’s inclusionary affordable housing requirements under Proposition C, which was passed by San Francisco voters last June, and the related legislation passed by the Board of Supervisors.  Once that happens, the City will need to determine how those requirements interact with State law, taking into account the 2013 Court of Appeals case.