Are San Francisco's NIMBYs Finally Getting Their Comeuppance?

State housing officials have launched a first-ever investigation of the city's housing policies and practices, setting the stage for far more sweeping interventions.

San Francisco's homegrown hostility to new development has made it the epicenter of California's housing crisis. It will now become a testing ground for a newly empowered state government's ability to force liberalizing reforms on a city that repeatedly refuses to build.

On Tuesday, the state's Department of Housing and Community Development (HCD) announced that it would be launching an unprecedented review of San Francisco's housing policies and practices "aimed at identifying and removing barriers to approval and construction of new housing there."

Over nine months, the HCD's Housing Accountability Unit will examine how exactly the city ended up with the state's longest approval times for new construction and its highest housing and construction costs.

"We are deeply concerned about processes and political decision-making in San Francisco that delay and impede the creation of housing and want to understand why this is the case," said HCD Director Gustavo Velasquez. "When we find policies and practices that violate or evade state housing law, we will pursue those violations."

That's a pretty clear rebuke of San Francisco officials' willingness to solve the city's sky-high housing costs or even follow state housing law.

Housing advocates are taking a victory lap at the audit announcement, saying it's yet more evidence that the state's young "yes in my backyard" (YIMBY) movement has succeeded in making it increasingly untenable for localities to just say no to new development.

"This doesn't just happen out of nowhere," says Sonja Trauss, director of YIMBY Law and one of the state's first YIMBY activists. "This happens when the governor, HCD, feel that they have enough political will on the ground to make [this audit] make sense."

Indeed, both San Francisco Mayor London Breed and state Sen. Scott Wiener (D–San Francisco) released statements welcoming the HCD's intervention.

The HCD's audit, while unprecedented, isn't necessarily surprising.

It follows months of mounting public warnings from the department to San Francisco's leaders that their decisions—from rejecting individual projects on specious environmental grounds to passing ordinances that purposefully made housing development more difficult—could attract state intervention.

Then, on Monday, the HCD rejected a draft housing plan San Francisco submitted to the state that was supposed to outline how the city planned to accommodate an additional 82,000 housing units—a move that sets the stage for far more sweeping intervention.

State law requires cities to submit housing elements once every eight years showing how they'll update their zoning regulations to meet their projected housing demand.

For a long time, the preparation of housing elements was a perfunctory and meaningless exercise. Some cities didn't do them at all. Others produced unrealistic plans that couldn't conceivably result in the predicted amount of housing actually being built.

In recent years, a series of legislative fixes require cities to produce more realistic housing elements. State officials at the HCD have proven increasingly willing to reject housing elements that don't meet these new standards. Grassroots scrutiny from YIMBY activists has also made it harder for cities to get away with their typical housing element dirty tricks—like claiming that new schools and cemeteries will be redeveloped into new housing within a few years.

An April 2022 comment letter from San Francisco YIMBY groups, including YIMBY Law, on the city's housing element pinpointed a number of ways that it would not lead to the housing production it predicted.

For instance, the city was claiming that a state law legalizing duplexes (which San Francisco's Board of Supervisors did everything it could to undermine) would produce 1,500 new units in eight years. The YIMBYs' letter noted that only 10 applicants had made use of the duplex law in the first three months it was in effect, and that it would likely produce only 40 units a year.

Their letter also called out the city for wildly optimistic projections of how many "pipeline projects" would actually turn into new housing. Pipeline projects are new housing units that have been proposed by a developer, but not permitted by the city.

The trouble is that San Francisco's Board of Supervisors and Planning Commission frequently vote to delay new projects or force them to undergo endless rounds of environmental review—effectively keeping projects in the pipeline in perpetuity.

The city's housing element claims that these pipeline projects will produce some 44,000 new units over eight years. The YIMBYs' comment letter says that past completion rates indicate pipeline projects will result in less than 10,000 new housing units.

These specific complaints all appeared in HCD's exhaustive 17-page rejection letter of San Francisco's housing element, which told the city it needed to more thoroughly examine the "cumulative impact of government constraints" on new housing—from a complex maze of height and density restrictions to fees that run $60,000 per new housing unit.

That letter provides something of a roadmap for the kinds of barriers that HCD's audit will try to spotlight. If San Francisco's politicians fail to meaningfully commit to eliminating those barriers in their next housing element draft, they could invite far more sweeping state intervention than a simple review.

The city could be hit with escalating fines or lose access to state infrastructure and affordable housing dollars. Courts are also empowered to appoint a planning expert to write San Francisco's housing element for it.

There's reason to think that neither of these remedies would actually be applied. The state might not find it politically practical to cut off one of its largest cities from infrastructure and housing funds. It could easily be accused of making San Francisco's problems worse.

Courts probably aren't eager to get involved in the weeds of housing element disputes either.

"The last thing in the world a court wants to do is to write a housing element," said University of California, Davis law professor Christopher Elmendorf during a Tuesday Twitter spaces conversation. "It's just so cumbersome, it's so tedious."

One state remedy that might be more impactful, Elmendorf said, is an as-of-yet untested "builder's remedy."

State law says that cities without a compliant housing element can't use their zoning code to reject projects that include some affordable units. Theoretically, this would allow developers to build projects at unlimited densities anywhere in a city. Someone could propose a skyscraper in a single-family neighborhood, and city officials couldn't stop it.

Despite being on the books for decades, no one has used California's builder's remedy successfully before. One reason for that is developers didn't want to risk pissing off city officials who could still make their lives difficult.

"In the olden days, what was the special talent a developer had? The special talent was glad-handing. You got to be buddies with the city officials who had discretionary authority over your projects," said Elmendorf.

But that's changing. A bevy of YIMBY-sponsored state laws that limit local governments' discretion to shoot down duplexes, granny flats, and affordable housing developments have created a new class of builders less dependent on the goodwill of city politicians. Elmendorf predicts this same class of developers might be willing to try to get a "builder's remedy" project approved.

There also exists a network of YIMBY nonprofits with a history of suing cities on behalf of (often reluctant) developers for rejecting projects in violation of state housing law.

This is all prospective. San Francisco still has until January 2023 to adopt a compliant housing element. A builder's remedy couldn't kick in until then.

But the specter of a builder's remedy still puts San Francisco's anti-development politicians between a rock and a hard place: Either eliminate constraints on development generally or forfeit all local control over a particular class of projects.

The fact that the city finds itself in this pincer is a testament to the pro-development machine the YIMBY political movement has become after less than a decade in existence.

Despite the complexities of reform, the cause of the housing crisis in America's most expensive cities is pretty simple. Local governments have established regulatory barriers that prevent the market from building new housing where its most in demand. That pushes prices up and people out.

The YIMBY solution to this sad state of affairs is to pass state laws that empower property owners to build and deprive localities of their once-unquestioned powers to say no to new development. California, for all its problems, has gone the furthest in implementing this approach. Other states are starting to follow suit.

The tools California's YIMBYs have created and sharpened are now being applied to the nation's NIMBY capital. If it works there, it can probably work anywhere.