The State and City of San Francisco Get Closer to Eliminating Single Family Zoning; ADU Construction May Receive Government Assistance.

Proposed State Changes to Single Family Zoning?Passes the State Assembly (and a Similar San Francisco Law is Introduced).

The California State Assembly approved both Senate Bill 9 and Senate Bill 10 this week, measures that allow for increased density in single-family home zoned areas — a move that will provide?relief to the state’s tight ?housing market. ??By allowing two units per parcel and permitting property owners to subdivide their lots,?SB 9 would increase density to as many as four units on a single-family plot.

SB 10 would allow cities and counties across the state to approve up to 10-unit buildings on single-family lots.

The State Assembly approved SB 10 on Monday, with a vote of 44 to 12. Thursday, the Assembly voted on SB 9 with a similar majority, approving the bill 44 to 16.

On May 18, 2021, ?San Francisco District 8 Supervisor Rafael Mandelman introduced legislation that could increase residential density to allow four units on corner lots located in residential RH zoning districts in the City. The legislation originally would have applied to all lots located within a half-mile radius of Muni, Caltrain, or BART station, as well as corner lots.???The Planning Department advised that this more impactful version would require a much lengthier study under the California Environmental Quality Act and as a result,??Supervisor Mandelman stated that he may sponsor that broader legislation next year?after the City completes its ongoing long-range “Housing Element” update to the General Plan.?

A major reason for this up zoning proposal is that according to the San Francisco Planning Department’s March 2020 City’s Housing Affordability Strategies Report,?local housing production has been heavily concentrated outside of RH zones.??In fact, approximately 90% of all new housing in recent years has been created in only ten neighborhoods, and most of these neighborhoods are in the eastern and southeastern sections of the City and not where RH districts are found.?

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The Local Small Business Recovery Act: Simplifying and Streamlining Businesses’ Land Use Approvals

On August 16, 2021, Mayor London Breed signed into law the Small Business Recovery Act (the “SBRA”), an ordinance which amends the Planning Code, Business and Tax Code, ?and the ?Police Code to stimulate and retain commercial and entertainment uses in the City.???Mayor Breed’s original draft made well over a dozen changes in local law.??However,?the Board of Supervisors has eliminated many provisions, including a provision that ?a Planning Commission approved conditional use permit does not expire by reason of abandonment.??During difficult economic times,??these approved uses may struggle to continue operation, and the Mayor did not want these uses (mostly small business uses) to expire permanently because they closed down for several years such as during the pandemic.

The final version of the SBRA make certain changes to expedite land use approvals in the City,?including but not limited to the following:

• allowing the continuation of longstanding places of entertainment
• allowing temporary outdoor entertainment, arts, and recreation activities
• expand streamlined review and inspection procedures to principally permitted storefront uses citywide; and
• allowing additional one-time entertainment permits.

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Legislation Proposed to Limit?San Francisco Home Sizes (Whether for New Homes or Expanding Existing Homes)

San Francisco?District 8 Supervisor Rafael?Mandelman has proposed legislation which?would discourage the creation of residential units over 2,500 square feet by requiring (with some limited exceptions) a conditional use permit hearing at the Planning Commission when these units are built in RH residential zoning districts.

At a Planning Commission hearing several weeks ago,??over a dozen speakers (and many of the Commissioners) significantly criticized the proposal;?later, the Commission continued?the matter until September 23, 2021.?The greatest concerns expressed included the following.

• That the 2500 square foot trigger for a Planning Commission hearing was arbitrary. In the fact,?Commissioners discussed Floor Area Ratio calculations?as a more appropriate measure.?However,??hearings on creating Floor Area Ratios several years ago had identified too many problems with that,?and several Commissioners repeated their concerns from several years ago.
• That the legislation may have correctly identified a problem within Supervisor Mandelman’s District 8,?but that evidence was lacking that it was a major problem in other districts.?
• That the government should?not be allowed to tell homeowners how many bedrooms are appropriate, and the size of those bedrooms, especially given the shortage of family sized single family homes.

The reason the Commissioners chose to hear the matter again on September 23, 2021, is that they wished to consider it at the same hearing as Supervisor’s Mandelman’s proposed legislation to allow four units on all corner lots in RH districts.

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Potential State Loans and Grants to Build Accessory Dwelling Units

In the last few years, the State Legislature has passed a number of bills removing obstacles for homeowners seeking to construct ADUs on their properties. But cost can be a barrier to entry for interested homeowners, and ADU financing options are limited.

The median statewide construction cost for ADUs in California is $150,000;?however, in the Bay Area, median construction costs for ADUs stand at $237,000, ?and as a result the creation of ADU’s is not feasible for most homeowners without financial assistance.??Home equity loans have not been available to assist because many owners do not have the income which would allow banks to make these line of credit loans.?A bill ?recently passed the State Assembly, ?named AB 561, ?would require the State Treasurer to create a program to assist homeowners in qualifying for financing for ADU construction. ??The bill was scheduled to ?be heard by the State Senate Appropriations Commission on August 26, 2021.

AB 561 ?would require the State Treasurer’s Office to create a program on or before April 1, 2022, which would provide secondary loans at low or no interest to homeowners to ensure they qualify for ADU financing.

AB 561 would allow these funds to be made available to property owners making 100% or less of area median income.??The main requirement?will be that participating homeowners rent out their ADUs to a tenant for a minimum of two years.?However, the rent does not need to be at an “affordable” level.

The bill does not specify where funding for the secondary loan program would be sourced. A previous iteration of the bill (authored by Assemblyman Phil Ting in 2020) had proposed that the California Housing Finance Agency issue revenue bonds to provide funding for the program.?Funding could also come from the state’s general fund into which $81 million was deposited this year to support the California Housing Finance Agency’s pilot ADU financing program.?

According to Assemblyman Ting’s office, federally backed mortgage providers like Fannie Mae and Freddie Mac are also considering the creation of ADU-specific loans.?

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