December 12, 2016 Rob Poole

The State Density Bonus Has Arrived in San Francisco

On Thursday December 8th, the San Francisco Planning Commission approved the first market-rate housing project to apply the state density bonus law. The vote was 5-1. Commissioner Melgar was the dissenting vote and Commissioner Moore was absent. This marks a tremendous win for housing advocates who have pushed for this law’s implementation over many years.

The proposal up for a vote was 333 12th Street. The project team includes SFHAC-members Panoramic Interests, Macy Architecture, Pankow Builders and Reuben, Junius & Rose. Almost 30 people showed up to support the plan, while only a handful were there to voice opposition.

Because this was a first for San Francisco, there was some confusion about the law’s application and implementation. Here’s a simple history of the law, how it can be used and how it was applied to 333 12th Street.

The California State Density Bonus
The law was adopted in 1978. In the most basic terms, it states that market-rate housing projects that provide at least 5% on-site subsidized housing are entitled to a density bonus. Cities are required to waive development standards that prevent a project from building at the bonus density, e.g. by allowing additional height, reducing rear yard or exposure standards. The greater the percentage of inclusionary housing provided, the larger the density bonus, with the cap being a 35% bonus. The other factor includes what Area Median Income (AMI) level the Below-Market-Rate (BMR) units are priced at. Certain concessions and waivers can be granted with the application of the law. This Kronick, Moskovitz, Tiedemann & Girard paper clearly explains what is allowed.

San Francisco and many other local governments ignored the state law for many years, taking the position that affordable housing required by local ordinance did not qualify for a density bonus. However, in 2013, the California Court of Appeal considered – and squarely rejected – this approach, holding that required inclusionary units do qualify for a bonus under state law. Although inclusionary units may qualify a project for a bonus under state law, it’s important to note that the density bonus law cannot supercede local inclusionary housing requirements. In San Francisco’s case, a project that files its Environmental Application today would have to include 25% on-site subsidized housing for the base project.

333 12th Street
To understand how the law applied to this project, it’s helpful to know what is allowed under base zoning and what can be achieved with the state density bonus.

Base Zoning
The base project is subject to a grandfathered 18% on-site affordable housing requirement (per June 2016 Prop C) under the local inclusionary ordinance. Under the base project, the building would have included 148 homes, 27 of which would have been BMRs. Panoramic elected to provide 11% of the units at 50% AMI to qualify for a 35% bonus. This is slightly less than the 55% AMI pricing allowed by the inclusionary housing program. The remaining 7% of affordable units are required under the inclusionary housing program and are priced at 55% AMI.

With the Density Bonus
With the state state bonus, the building was granted a 35% bonus, allowing up to 200 homes. However, the inclusionary requirements do not apply to those 52 extra homes, so the project still includes 27 BMRs, with the same AMI levels. This brings the total inclusionary percentage to 13.5%.

What Does This Vote Mean for San Francisco?
This vote set a precedent and should make people aware that state law does indeed to apply to San Francisco. There are other projects in the queue that plan to use the density bonus and everyone involved in these projects should have a clear understanding of the law’s implementation.

The Board of Supervisors failed to passed a local density bonus law earlier this year when it rejected the AHBP. The density bonus they did pass only applies to 100% affordable housing projects. Whether or not the entire ordinance passed did not affect the state law’s application.

Commissioner Dennis Richards said during last week’s hearing, “It lights a fire under us to get a real local density bonus program passed…I keep remembering Tim Colen getting up here arguing against us punting this program (the AHBP)…at least we have the State Density Bonus program…the chickens are going to come here to roost and here we are, squawk squawk.”

We couldn’t agree more.

Help SFHAC pass a local density bonus program in 2017 by joining or renewing as a member!

Image: 333 12th Street, Panoramic Interests

Rob Poole

Rob is the former Development and Communications Manager at SFHAC.

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