San Francisco Bureaucrats Can Shoot Down Almost Any Housing Project They Want. This Ballot Initiative Would Change That.

Mayor London Breed's Affordable Homes Now initiative would streamline the approval of code-compliant housing projects as long as developers include additional affordable units.

San Francisco Mayor London Breed is proposing a ballot measure that would eliminate city bureaucrats' ability to shoot down code-compliant housing developments. In exchange, the developers would have to include more affordable units than the city already requires.

On its face, it's a pretty marginal reform. For the City by the Bay, it's a radical gamechanger.

"Anyone who tells you that we don't need fundamental reforms to building housing, or that we need years of review before a project can be approved while we're in the middle of a historic housing shortage, is simply wrong," Breed writes in an essay announcing the Affordable Homes Now ballot initiative. "We can shave years from project approval and save millions of dollars of project costs on 100% affordable housing."

In San Francisco, every single building permit is officially issued at the discretion of the city's Planning Commission.

That means that even if someone's proposal for a new single-family home or falafel restaurant conforms to the city's labyrinthine zoning code, commissioners can still demand changes or, in most cases, reject the application entirely.

Members of the public can also request that commissioners use their discretionary authority to review a particular planning application, a privilege that has been weaponized by businesses to stifle competitors, by neighbors to block unwanted development, and by activists to shake down deep-pocketed developers.

Breed's proposed ballot initiative would amend the city's charter to make multi-family housing projects "as-of-right" if they include 15 percent more affordable units than what is already required or are 100 percent affordable. That means they would receive a simplified administrative review by city staff and skip any discretionary review from the planning commission. Permits would have to be issued within six months.

Currently, projects of 10 to 24 units must make 13.5 percent of their units affordable, while buildings containing more than 25 units must make 20.5 percent of them affordable. In this context, an "affordable" unit is one where rents are capped at 30 percent of a tenant's income and the tenant must fall within a specific income bracket.

This policy is known as inclusionary zoning.

"While I ultimately don't think either optional or mandatory inclusionary zoning programs are a solution to broad-based affordability, Mayor Breed's proposal can't make things worse," says Emily Hamilton, a scholar at George Mason University's Mercatus Center.

Hamilton has researched these policies in Maryland and Virginia. She found that mandatory inclusionary zoning programs increase overall home prices by one percent per year.

That wasn't true for opt-in inclusionary zoning programs that gave developers permission to build taller, denser buildings in return for their voluntary inclusion of affordable units. These voluntary programs did not act as a tax on development. But they also didn't produce much affordable housing, except in communities with very strict limits on density.

Hamilton says Breed's proposal is more like the voluntary inclusionary zoning programs. Whether it actually produces many affordable units is difficult to determine, she says.

Renting out more than a third of your units at below-market rates is a big cost to absorb. San Francisco projects that have tried to include that many affordable units have stalled.

But the city's permitting process is so lengthy and onerous—taking four years on average to approve multi-family projects—that any opportunity to bypass it would be worthwhile. That's particularly true at a time when construction costs continue to skyrocket, making every delay all that more costly.

Hamilton notes that the 100 percent affordable projects that would be permitted "as-of-right" in Breed's proposal could be rented out to tenants making up to 140 percent of the city's median income. In San Francisco, that would allow developers to charge monthly rents of more than $4,000 for some families.

"It might be the case that developers can provide these units without incurring a big cost to do so," says Hamilton, "in which case it would just allow more housing to be built where lots of people want to live at a lower price-point."

"Building in [San Francisco] is expensive. It doesn't have to be complicated too," said Sharky Laguana, president of the city's Small Business Commission, in a press release, adding that the proposal "gets government out of the way."

Breed's ballot measure would also put an end to her city's most egregious development battles, where activists try to wring more concessions out of developers by gumming up the approval process with cynical, often absurd complaints.

Some might recall the case of Robert Tillman, who wanted to convert a laundromat he owned in the city's Mission District to an apartment building. Though his land was already zoned for housing, activists were able to delay the project for years by claiming his laundromat was a historically significant building and that the building he wanted to erect would cast shadows on an already shaded playground.

Tillman told me in 2018 that what he wanted more than anything was certainty.

"Just tell me what the rules are, and I'll either make a decision to build something based on those rules or I'll make a decision that it's not economical," he said. "Don't change the rules on me midstream, or put in place rules and then act as if they don't exist."

Breed voted to delay Tillman's project when she was still on the Board of Supervisors But her initiative would provide the certainty that Tillman desires.

Though this would be a marked improvement, it's important to stress that the initiative would not change the city's underlying zoning code. All the restrictions on density that exist now would remain in place.

Supporters have their work cut out for them to even get the measure on the ballot. The New York Times notes that it has to get 50,000 signatures from registered voters in a city of 900,000 people.

If it wins, it will be a marginal, but nevertheless significant, improvement on a deplorable status quo.