If anything defines the spirit of San Francisco, it’s the idea of doing things our own way. Immigrants, hippies, financiers, technologists, the LGBTQ community: Generation after generation, people with a vision for doing something differently and better, or simply for being different, have alighted here.
Doing things your own way can be great; our city has often been a haven for compassion and acceptance. But not always — and there’s nowhere we see that more profoundly than with land use.
San Francisco stands alone in making every permit for a land-use change subject to discretionary review. This means that anyone who doesn’t like a project can demand a hearing, and city officials may reject the project for any reason, regardless of applicable standards. And only San Francisco would be so bold as to post a self-study acknowledging its noncompliance with state permitting law — and then do nothing about it for the next two decades. And what other city would respond to a state mandate to plan for 10,000 new homes a year from 2023-2030 by submitting a plan for 5,000 homes a year by 2050?
The results indicate the San Francisco way:
Our city has the second highest rents in the nation. Housing production has nearly ground to a halt. We have been so determined to “capture value” from new development — with impact fees, affordable housing requirements, costly building standards, labor mandates and more — that virtually all potential housing projects in the city have become economically infeasible to build. An investor who buys a dilapidated single-family home or warehouse in San Francisco can make a lot more money flipping it or selling it to Amazon than redeveloping the site for apartments. The city’s own studies point this out.
Thus, we have homeless encampments, innovative firms disembarking for cheaper markets, rents that only the fattest-salaried professionals can afford, gentrification of working-class neighborhoods, the displacement of the city’s African American population and an underclass of super-commuting service workers who make grueling daily drives from the Central Valley.
But this week marks a turning point.
On Monday, Gov. Gavin Newsom’s Department of Housing and Community Development released a devastating review of San Francisco’s draft “housing element” — a required 8-year plan through which cities show how they’ll accommodate their share of regionally needed housing. As a consequence, San Francisco will be subject to the state’s very first housing policy review, “aimed at identifying and removing barriers to approval and construction of new housing.”
What happens if San Francisco doesn’t get its act together?
For starters, the state will decertify the city’s housing element, which would cut off various streams of state funding, including for affordable housing. More dramatically, it would empower a “builder’s remedy” under state law that would allow developers of affordable and moderate-income housing to bypass city zoning codes. There are unresolved questions about how this will work in practice, but a San Francisco without an approved housing plan could be San Francisco in which new apartments are allowed to pop up helter-skelter throughout the city. Ultimately, courts could rewrite the city’s master plan for housing, exercising judicial authority conferred by a bill signed into law that City Attorney David Chiu authored when he served in the legislature.
If city officials want to avoid this fate, a few things are now reasonably clear. First, San Francisco has just two years to come into compliance with state permitting law. This will require serious changes to standard operating procedures at the planning and building departments.
Second, any approved housing element will be an ongoing contract with the state, one with clear performance benchmarks and pre-specified consequences if the city comes up short.
Here’s an example: The city’s draft housing element tried to minimize the need for upzoning and regulatory reform by forecasting that the “pipeline” of already-proposed-but-not-fully-permitted-or-built projects will gush an unprecedented fountain of new homes — roughly doubling the city’s annual rate of housing production. This comes at a time when developers are abandoning projects left and right. Moreover, UC Berkeley data scientist David Broockman ran the numbers and found that San Francisco’s pipeline guesstimate vastly exceeds historical yields.
The state housing department’s review letter rightly asks what evidence supports the city’s magical projection. But more importantly, it told San Francisco to put a circuit breaker in its housing element, so that if the pipeline’s flow falls short of projections, the city will allow (for example) larger buildings to be developed citywide. A circuit breaker won’t work, however, if it merely triggers years of exhaustive environmental study followed by a vote on rezoning. San Francisco needs to decide now what the circuit breaker will do and allow it to operate on autopilot.
Third, the review letter hones in on the cumulative effect of San Francisco’s zoning, permitting, fees and all the other requirements of the city heaps on new development. San Francisco won’t be able to get its housing element approved unless it realistically commits to making 80,000 new homes economically feasible to develop over the next eight years.
San Francisco can go its own way in deciding which regulatory requirements to roll back first. Should it be impact fees for public art or affordable housing mandates? But the bottom line must be a regulatory environment in which building new apartments and condos is more appealing than flipping existing single-family homes.
San Francisco will remain a special place. No one wants to change that. We will continue to be inventive, wacky, dreamy, different. But many more people will be able to share in it and call our city home. Thanks in advance, governor.
Chris Elmendorf is Martin Luther King Jr. Professor of Law at UC Davis.