November 30, 2018 Housing Action Coalition

Brett Gladstone Weighs in on Central SoMa

Author – Brett Gladstone, Esq., partner, Hanson Bridgett LLP

Tacked to the bulletin board in an office at San Francisco’s Planning Department is a sticker with a peace sign accompanied by the slogan, “World peace through better zoning.” While it is meant to be whimsical, it is the case that most San Franciscans tend to view any rezoning process as an evil force destroying local culture and a certain way of life, encouraging social and economic strife and causing “bad hair days, you name it” (in the words of one of San Francisco’s senior urban planners, Josh Switzky).

The City of San Francisco is well known for its five to ten-year long rezonings, which tend to bring dozens of organizations and hundreds of individuals to express outrage during years of emotional hearings. It has been said that rezoning discussions are the closest thing to a legal blood sport one can find in a very liberal modern city such as San Francisco.

These emotional interactions of special interest groups routinely expose the cracks in a very progressive city where almost no one disagrees on state-wide and national issues. Political labels are often turned upside down, leading many to call progressives the defenders of the old and often failed policies of traditional urban planning, and certainly the very conservative when it comes to physical changes.

Gabriel Metcalf, until recently the head of San Francisco’s urban planning think tank SPUR, recently wrote “Regardless of realities, most San Francisco progressives chose to stick with their familiar stance of opposing new development, positioning themselves as defenders of the city’s physical character. Instead of forming a pro-growth coalition with business and labor, most of the San Francisco Left made an enduring alliance with home-owning NIMBYs.”

Those who follow which American cities are growing the fastest know that San Francisco has been a leader in growth of population, growth in the number of businesses and growth in office construction, starting in the year 2000. The first San Francisco economic “gold rush” of the 21st Century took place from 2000-2007 and generated a great deal of tension between old-timers and the new younger population of tech workers. The fear of displacement and too rapid change prompted a downzoning of much of the City’s eastern neighborhoods through an Eastern Neighborhoods Plan that encouraged the preservation of industrially zoned lots, some new housing but little new office development.

At the end of 2018, San Francisco now prepares for enactment of a large up zoning of the commercial heart of the City since the City’s renowned Downtown Plan was adopted in the 1980’s. This time the rezoning is oriented mostly to produce more office space. The City feared that its high- tech boom is creating an office space demand that, if not addressed, could cause the loss of its financial and tech sector and thus doom the City’s extremely generous social services and the progressive values for which the City is famous.

The question is whether San Francisco is getting it right, and whether any City can do so given rezonings can be in process so long that they can start during an economic cycle that calls for more of one kind of land use and can end during an economic cycle calling for more of an entirely different land use. In fact, the Eastern Neighborhoods Rezoning took almost ten years.

This massive City effort rezones the central portion of its fast-growing South of Market (SoMa) district, after almost 20 public hearings (so far) and dozens of workshops and committee meetings. The Central SoMa plan proposes some of the most innovative urban planning tools seen in recent years in major U.S. cities, and such tools are the focus of this article. The best location of this proposed land use intensification has been clear for a decade or more, as up zoning around public transit has become the mantra of California’s big cities, now more clogged with traffic than ever before. Indeed, the City has long planned and is now building a new (and mostly underground) transit line down the center of the Central SoMa district, along 4th Street. The new line extends from the 4th and Townsend Street train station to Chinatown.

In spite of all the controversy, on May 10, 2018, the San Francisco Planning Commission voted unanimously to adopt the Central SoMa Plan and certify its Environmental Impact Report (EIR). The proposal is now considered by the City’s elected legislative body, the San Francisco Board of Supervisors, and is expected to be adopted at the end of 2018.

This rezoning legislation (represented in a 600-page document) is intended to produce 40,000 new jobs, the construction of millions more square feet of office space than currently allowed, and roughly 7,000 new housing units. The area affected has the following boundaries (generally): a western boundary at 6th Street, an eastern boundary at 2nd Street, a northern boundary at Folsom, Howard and Stevenson Streets; and a southern boundary at Townsend Street.

The plan covers about 230 acres and is intended to generate $500 million for local and regional transit improvements. Additionally, the Plan will create multiple acres of new and rehabilitated parks and recreational open spaces and will include funding for investments in air quality improvements and green energy programs. The City has published a study stating that the plan will result in $2 billion in public benefits for the neighborhood while generating $1 billion in revenue for the City’s General Fund.

As stated earlier, a rezoning process that lasts five years tends to span cycles during which a City’s needs can change. During the last two years of the City’s Central SoMa rezoning, the well-known housing supply crisis reached epidemic proportions, and elected officials have been subject to pressure to sacrifice lots planned for office only uses to residential uses at a high density. Indeed, during the last several months, the Plan changed from a 6-1 ratio of jobs to housing to a 4-1 ratio, which will create an additional 1,240 new dwelling units beyond what was previously planned, and a commensurate reduction of 4,750 new jobs.

San Francisco is still a union town and as a result the Plan emphasizes the “quality” of the jobs appropriate for San Francisco and not just the number of jobs. Unions argue that it is only union jobs that can provide the “quality” jobs. While the City cannot require that jobs be union where public money and land is not involved, the Plan has a “higher quality” job mandate for non-residential buildings of over 25,000 square feet.

Inspired by the landmark New York City 1920’s zoning rules that require the “sculpting” of the upper floors of towers to preserve light to the street, the Central SoMa Plan has two features to accomplish this: First, an “urban room” concept that limits the height of new buildings at the street property line to a height equivalent to the width of the street. Second, there is a “skyplane” concept that requires upper story setbacks above the base building, and the sculpting of the upper building to push the building’s mass away from the street. Many buildings above 85 feet will be subject to “skyplane” controls. Buildings of 85 feet and less will be subject to skyplane controls only when fronting on narrow streets and alleys.

Another proposed way of preserving a pedestrian’s view of the sky is a requirement that towers over a certain height be separated by 115 feet. Exceptions will be allowed where the two towers are built to very different height levels.

The Plan will allow the sale of Transferable Development Rights (TDR’s) to new buildings within the Plan area, for the first time. Transferable Development Rights are rights held by owners of historic buildings. These owners can give up development rights on their lots (for example, the right to add a vertical addition) in exchange for selling such development rights to developers of new buildings whose lots do not allow as much development. After that transfer, the developer will then have enough building square footage for a project on its site to pencil out. The Plan requires that a nonresidential project receiving an increase in development capacity via the Plan must purchase TDR’s from historic buildings. This is of course an historic preservation tool, since those selling these “air rights” over historic buildings can no longer add square footage to their buildings, vertically or otherwise. For the most part, proceeds of sales of air rights must be used for future maintenance and repair of the historic building. The larger new office building developers will be required to purchase Transferable Development Rights from historic buildings, if the project is opting to utilize greater zoning allowance than allowed under preexisting zoning.

With only 49 square miles and a City where the overwhelming percentage of lots are zoned for 30 to 40 feet, one obvious solution to intensification of land use was to allow greater height in the Central SoMa district. With some exceptions where 130 feet in height is allowed, most of the current district is zoned for heights of 85 feet or less. The Plan creates certain areas (generally near the Caltrain Station, along 4th Street, and adjacent to the Downtown Plan area and Rincon Hill) where height limits will be changed to 130-160 feet, subject to controls to encourage building sculpting. A more limited number of lots nearby will allow towers 200-400 feet in height. Most observers have felt that there will be too few towers of 160 to 300 feet allowed.

The Plan also includes new development impact fees and taxes to fund proposed community benefits, including community facilities, transit, affordable housing and open space. These exactions would be imposed by tiers based on height increases given since greater allowed height means developers will have more funds from which to pay such exactions. One exaction tier covers 15-45 feet additional height, another 50-85 feet in additional height, and another 90 feet or more of additional height.

The City has published a study stating that the Plan will result in nearly $2.2 billion in public benefits over a 24-year period. This is over 400 percent more than the $500 million in public benefits that would be expected to occur if the Plan were not adopted. Most of these public benefits would be provided by new development and be directed back to the district, while generating $1 billion in revenue for the City’s General Fund.

The $2.2 billion would be generated through a combination of three mechanisms: (1) specific development projects (e.g., assigning a value to on-site affordable housing units), (2) a one-time impact fee paid when a project is ready to start, such as a Jobs-Housing Linkage Fee and Plan Area fees (e.g. an Eastern Neighborhoods Infrastructure Impact Fee), and (3) ongoing taxation through a Mello Roos Community Facilities District. The new Central SoMa project fees also include the Central SoMa Community Services Facilities Fee, and the Central SoMa Community Infrastructure Fee. These supplement existing fees such as a Transportation Sustainability Fee, a Childcare Fee, a School Impact Fee and a Public Art Fee.

A large portion of that $2.2 billion would be used as follows:
● $70,000,000 to enhance storm water management, freeway corridor air quality and greening improvements.
● $64,000,000 for new childcare centers, and new schools serving K-12.
● $840,000,000 in transit improvements of which $500 million will be local transit improvement to enhance convenience and safety and $340 million for regional transit capacity enhancement and expansion.
● $40,000,000 for the preservation and maintenance of historic buildings, of which half will go to the restoration of the U.S. Mint Building on Mission at 5th Street (although this amount is less than half of what would be needed to restore the entire building to full use).
● 38 percent of new or rehabilitated housing is expected to be Below- Market Rate (BMR). That is higher than the percentage currently applied to most San Francisco residential projects.

On May 1st, then Mayor Farrell and Supervisor Kim introduced San Francisco’s first “Housing Sustainability District.” This legislation was made possible by California State Assembly Bill 73, which was sponsored by Assemblyman David Chiu and signed into law in September 2017. The new “Central South of Market Housing Sustainability District” (“Central SoMa HSD”) will allow residential projects that meet certain standards to take advantage of a 120-day streamlined review and approval process (assuming no appeals). Today, even small to mid-sized projects will take one to two years for approval.

The intent is to allow sponsors of residential projects to receive faster approvals in return for including at least 10 percent of dwelling units on- site as affordable to very low or low-income families households (not moderate-income persons) and to pay “prevailing wages” or use skilled labor for the construction of the project. In most cases, that means union jobs. In return for creating HSDs, municipalities are entitled to receive a ‘zoning incentive payment’ from the California Department of Housing and Community Development.

The “ministerial” fast tracked approval would be issued by the Planning Department within 120 days from receipt of a complete application for qualifying housing projects. To be qualified, individual projects must meet all of the following eligibility criteria:

  1. Propose a height of 160 feet or less (although 100 percent affordable projects qualify regardless of height);
  2. Be located in a zoning district that does not propose less than 50 units/acre or more than 750 units/acre;
  3. Have a majority of its gross square footage proposed for residential use.
  4. All nonresidential uses must be allowed by the zoning “as of right,” meaning the use is not one that triggers a Planning Commission approval.

Many of the Central SoMa lots rezoned to allow residential or office have existing zoning limited to industrial uses known as Production Distribution and Repair (PDR). To insure the preservation of such space and the creation of new PDR space, the City will allocate $180,000,000 in revenues over 25 years to the creation or preservation of PDR space, it being the goal that there will be no new net loss of PDR due to the Plan.

Projects proposing at least 50,000 square feet of new office use are required to include PDR in the project. The on-site amount required will be either 40 percent of the total lot area of the project or replacement space required under a pre-existing PDR replacement law known as “Prop. X”, whichever is greater. Alternatively, developers can provide the required onsite amount at an offsite location, at 1.5 times the amount that would be required if built on-site. Similarly, projects on very large development sites are required to have at least one 1,000 square foot or smaller “micro- retail” unit on the ground floor that is directly accessible from a public right of way or a privately owned public open space.

The Plan address sustainability through requirements for “living roofs” and solar photovoltaic systems, thermal systems and greenhouse gas-free electricity, as well as streetscape strategies to limit parking and enhance the pedestrian and bicycle experience and increase the flow of public transit on the street. Other sustainability features include capping residential parking at between 0.25 and at 0.5 spaces per unit and office parking at one space per 3,500 square feet. The Plan also creates a subarea called an “eco-district” that will require the use of 100 percent clean renewable energy by 2030 with 50 percent generated in the Plan Area, with a goal for Central SoMa to be carbon neutral and have zero solid waste

Projects proposing more than 50,000 square feet of most non-residential uses—including retail and office but not PDR—will need to provide privately owned public open space, commonly referred to as POPOS (or pay an in- lieu fee). Although outdoor POPOS is preferred, it can be indoors where outdoor open space causes design headaches. Among other design restrictions, it must be at street grade for at least 15 percent of the project site’s lot area, lined with “active” uses such as retail for outdoor POPOS, and feature amenities complimentary to nearby open spaces.

Because the City realizes that the character of existing districts can quickly be lost though rezonings, the Plan has some unique aspects to preserve the so-called “funky character,” of this district, something harder to preserve than historic buildings. The Plan encourages use of building materials and sidewalk features that express the district’s industrial legacy and historic fabric and, according to one Planning Staff report “the gritty character of the neighborhood.” Features of such a character will exist in public spaces and in the many small alleys that connect larger blocks. Another mechanism used to accomplish this is a prohibition on the merger of many small lots of 100 – 120 feet in depth and 25 to 40 feet in width, and the creation of small new historic districts.

A famous baseball movie has the memorable line: “If you build it, [they] will come.” San Franciscans tend to believe that if you zone for it, it will come. Zoning is indeed a powerful tool and helps to make sure that what we allow to get built in our environments manifests our highest ideals. However, Josh Switzky, senior planner at the San Francisco Planning Department, has wisely called for a little less naivety. In looking at the new Central SoMa Plan, Mr. Switzky writes:

“It has been almost too alluring in this economically red-hot city with great demand for growth in space for housing and jobs, to turn first to zoning as a salve. I say this with caution as a “zoner,” someone who thrives on the intellectual challenge of using zoning in creative ways to further policy goals and has made a career out of it: Zoning has created a false God and lulled us into the naive notion that zoning regulation is the primary tool to solve our thorniest economic and social urban problems, many of which are rooted in rapidly exacerbating income inequality and broader societal, political or macro-economic dynamics. It’s easier to amend some lines of zoning code than to create and fund assistance programs, create and pass a new tax scheme or spend our time and political capital lobbying for broader legal or political changes at higher levels of government. Because we have local land use control over zoning that regulates our neighborhoods, people often think that changes we see happening in our neighborhoods can be stopped with zoning changes. But better zoning is probably not going to keep that thrift store from becoming a high-end boutique (both are retail!) or ensure that neighborhoods maintain or honor their cultural heritage. I wish it would. It would be so easy. We often have to keep reminding ourselves, our colleagues and the community that planning and public policy is about a lot more than zoning.”

Housing Action Coalition

The Housing Action Coalition is a member-supported non-profit that advocates for the creation of well designed, well-located housing at all levels of affordability. We believe more housing means more choices and better solutions.

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