How San Francisco Dodged a Builder’s Remedy Bonanza

San Francisco city officials were left scrambling in October when they mistakenly thought their deadline for a state-approved housing element was four months later than it actually was. The panic intensified after they realized the consequences: triggering California’s formerly obscure builder’s remedy provision, which could lead to a development bonanza.

In the end, San Francisco pulled it together and became one of three Bay Area cities to get its housing element approved and certified by the Department of Housing and Community ahead of the deadline. But it was a close call that came down to the wire.

The mad dash was kicked off by the DHC putting a renewed focus on housing development and its intentions to hold cities accountable for inaction.

“We recognize that San Francisco, along with every other jurisdiction, has to step up and build housing and more affordable housing if we’re going to meet the [Regional Housing Needs Assessment] goals and make housing more affordable in the bay area,” Rich Hillis, planning director, said to The Real Deal.

HCD worked closely with San Francisco officials to make the necessary changes to the housing element in order to make it viable in time. Led by Sohab Mehmood and Paul McDougall, there were eight drafts reviewed by HCD throughout the process, and city and state officials met “monthly, if not weekly,” to review the process, according to Robert Frutchman from YIMBY Law.

When the first draft was sent along in May, San Francisco was relying on the existing housing pipeline to a portion of the housing element goals, and HCD asked the city to identify alternative options if the pipeline didn’t deliver as expected.

The first draft stated San Francisco needed to rezone for 22,000 new homes. The thought was the housing pipeline would account for 70 percent of the housing goals, and the city wanted a 15 percent buffer.

In August, the state announced it would conduct a nine-month “housing policy practice review” in San Francisco, and city officials indicated they would adopt the recommended changes, according to Frutchman.

But the saga heated up in October. A shockwave of panic rippled across the state when WS Communities filed applications for 12 projects totaling nearly 4,000 units in Santa Monica after the city failed to get its housing element certified.

WSC leveraged the builder’s remedy provision, which was part of a 1990 housing law aimed at stimulating development for more affordable housing. Cities without a compliant housing element forfeit their ability to review certain development proposals. Specifically, under the provision, projects are rubber stamped if at least 20 percent of their units are affordable, or if the entire project is dedicated to moderate income tenants.

In other words, developers who meet the criteria are in control.

The 11th hour

Just two weeks after news in Santa Monica broke, San Francisco officials were blindsided when they learned that they grossly miscalculated their own timeline. Statewide, cities had different deadlines to get their housing elements certified. In the Bay Area, that deadline was January 31. However, San Francisco and other cities believed they had a 120-day grace period that would extend to May 31.

So as WSC was touting its builder’s remedy blitz, San Francisco city attorneys were explaining to officials that the penalties would not kick in until the 120 day grace period ended. But the planning staff learned on twitter — through a disclosed email from the DHC — that this was not the case. Instead, San Francisco would be subject to builder’s remedy and other penalties beginning January 31.

The revelation “incensed” the city officials, according to Hillis, and they were left with little time to iron out a plan to add 82,000 housing units by 2031.

The potential consequences inspired the city to move quickly and deliberately. It had no other choice.

“We were scheduled to complete the plan in May, and as we were reviewing the plans, this builder’s remedy threat… accelerated the schedule and we had to cut four months,” Miriam Chion from the Planning Department, said in an interview with TRD.

The planning department went back to the commission on November 3 to “unpack” the current submission to HCD and talk about how it would implement the zoning changes required to build the mandated housing units in eight years, which is triple the number of state-required units from the last housing element cycle.

The planning commission unanimously approved legislation designed to increase density on November 19. About 60 percent of San Francisco’s residential areas are zoned for single- and two-family homes, largely in the western half of the city. The legislation also allows up to four units on lots now zoned for one-, two- and three-family homes.

In the final draft, the city said it would need to rezone for 35,000 new homes, rather than the initial 22,000 in the first draft.

City officials also included in the draft that if they fail to permit 29,000 new homes by Jan. 2027, then they must propose actions to reduce development constraints in areas where it’s not permitting enough new homes.

It’s a concession that would hand over control to the state if the city fails to meet the necessary benchmarks.

This could lead to more “aggressive rezoning” in parts of the city where housing development isn’t on track, according to a letter to the city by HCD.

“The way most cities approach the housing element is that they’ll do some analysis and write policies from that,” Frenchman said. “San Francisco wrote the policy first and struggled to get the analysis done. The reason San Francisco ended up agreeing to letting the state approve its alternative actions and dictate what it does with the housing policy practice review, is because they did not actually submit the analysis that is required by state law. The HCD let them slide, because they agreed to give them more discretion later.”

Buzzer beater

By the time December 15 rolled around, the planning commission voted to approve the housing element plan, after making changes as it was being reviewed. The next step was getting past the land use committee on January 10 and having Mayor London Breed’s approval. However, those plans changed when the meeting was canceled and had to be rescheduled for January 23 due to federal holidays.

With just a week remaining before the deadline, San Francisco city officials left themselves no wiggle room when it scheduled the final vote by the board of supervisors for January 31, the last day it could file its housing element to the state.

On Jan. 22, city officials got some positive news when the HCD issued preliminary approval of its housing element ahead of the final board of supervisors vote.

HCD was more diligent with its housing elements mandates and was “a lot more specific with the requirements than they had been in the past,” according to Hillis.

With the green light from the HCD, the board of supervisors moved its meeting up to January 25. The plan passed in anticlimactic fashion, with a unanimous vote and no comment. Mayor Breed signed off on the plan on January 31 and the state officially certified it the next day.

San Francisco clearly understood the gravity of the situation, unlike some of its Bay Area neighbors. It recognized it was playing a high-stakes game that it couldn’t afford to lose.

“The likelihood of builder’s remedy projects was high in San Francisco,” Sonja Trauss from YIMBY Law said. “San Francisco, unlike other cities we’ve seen, really took this seriously. At times when elected officials in other cities really derailed the process, San Francisco really didn’t.”