Newsom needs to get tough on S.F.
“NIMBYism is destroying the state.” In a recent interview with The Chronicle, Gov. Gavin Newsom was blunt in his assessment of California’s continued inability to solve the housing crisis. And his hometown of San Francisco is one of the worst offenders. Our city openly flouts laws designed to increase the production of housing.
And yet despite his tough talk, Newsom and his Housing Department haven’t done nearly enough to crack down. Here’s how San Francisco breaks state housing laws and what actions Newsom can take to correct the situation — if he can summon the political courage.
The Permit Streamlining Act: San Francisco is one of the most environmentally friendly places in the state to build housing. Residents have short commutes, ample public transit and don’t use much water or air conditioning. Allowing more people to live here, instead of hotter, thirstier, car-centric exurban communities, is one of the most environmentally beneficial actions we can take as a city. But San Francisco has some of the strictest and slowest environmental review processes in the entire state. It can take over two years for the Planning Department to declare a “negative declaration” (that a project has more environmental benefits than impacts) and just under three to complete a required environmental impact report for new housing. Projects that seek an exemption for these reports can run into problems with the Board of Supervisors, which can decide at any time that the environmental impacts have been insufficiently studied or require further review, which they did for the 495 apartments at 469 Stevenson St.
The Permit Streamlining Act, passed in 1977, requires cities to approve permits in a timely manner. If a city cannot meet the law’s deadlines to mark projects as complete, or approve/disapprove building permits, a project is supposed to be “deemed approved” and the developer allowed to start building. However, this remedy kicks in only after a city completes an environmental review. San Francisco has no such process. Often, the planning department will only mark an environmental review as complete when it approves the final permit for a project. The Permit Streamlining Act is supposed to ensure that applications are processed quickly. But if San Francisco never completes its environmental reviews, builders do not have any way to challenge excessive permitting delays.
The state should reject San Francisco’s Housing Element — a legally mandated development plan cities need to complete to receive crucial state funding — until the city fixes this status quo. The state could also file suit on behalf of every project applicant who has been subjected to undue delays.
No net loss rules: In 2019, the California Legislature passed a law that requires cities to avoid a net loss in the number of homes that could be built under their zoning codes. San Francisco is currently proposing to remove the ability to build group housing apartments in Chinatown and the Tenderloin. It will offset this loss by legalizing fourplexes on most lots.
But there’s a problem: Group housing is financially feasible to build. The proposed fourplex rules, on the other hand, have been saddled with such high affordability requirements that few if any homes are expected to be built. The new rules would also deny homeowners the ability to split lots and build duplexes without going through an exhaustive review process. While not technically illegal, these rules will almost certainly result in fewer homes produced.
State density bonus: State law grants developers “bonuses” — more apartments or extra height beyond what zoning regulations allow for — in exchange for building additional below-marketrate apartments in a project. San Francisco is the only jurisdiction in the state that tries to subject these additional units to the city’s inclusionary zoning rules and fees. Even though the attorney general’s office thinks that this practice is illegal, San Francisco persists. The Housing Department could sue on behalf of any building subject to these fees.
Nonprofits skirting tax rules: TODCO is a 501(c)(3) nonprofit organization that owns eight low-income apartment buildings in the South of Market area, but it does not build new housing or even manage the buildings — it takes rent from tenants and subsidies from the federal government, pays a property management company a fee and uses the leftover money to pay salaries and conduct political campaigns, including appealing 469 Stevenson and changes to the city’s density bonus rules.
John Elberling, TODCO’s president, lives in one of his organization’s buildings in a room designated for a maintenance worker. Elberling’s apartment should be taxed at its market value, but TODCO claims it is worth just $10,248 per year in in-kind compensation, about a third of the going rate for a top-floor SoMa studio. The building manager, who rents an identical room in the same building, declares over $30,000 in noncash compensation on tax forms.
There are nonprofits in other cities that behave similarly. Newsom could ask the Franchise Tax Board to audit nonprofits that conduct political campaigns and work with local governments to ensure that apartments owned by nonprofits are fit for habitation.
Recent changes in state law were designed to make development more predictable and quicker to approve. But San Francisco still prefers to subject every project to the discretion of its supervisors and the whims of cozy nonprofits. Newsom had no problem suing the conservative Orange County city of Huntington Beach. It remains to be seen whether his appointees will apply the same scrutiny to liberal San Francisco.