Rationalize the Permit Approval Process

by the SPUR Housing Committee

 

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This article first appeared in the SPUR Housing Report, September, 2000.

This report is the fifth in a series of SPUR reports on ways to increase the supply of housing in the San Francisco. The others are: "The Central Waterfront – One SPUR Answer to San Francisco's Housing Crisis" (March, 1998, Report 361); "Zoning for More Housing – Proposed Changes to San Francisco 's Planning Code and Zoning Map" (April, 1998 Report 362); "Reducing Housing Costs by Rethinking Parking Requirements" (November/December 1998, Report 369); and Building Department Review and Processes: Reducing the Uncertainty and Increasing the Efficiency" (March 1999, Report 372).

Introduction

Uncertainty and delay are deadly to the efficient production of housing, both affordable and market rate projects. Uncertainty in the approval process means more risk for developers, investors and lenders. And that translates directly to higher costs to developers for both equity and debt, leading to less housing being built and ultimately higher costs to housing consumers.

Uncertainty also simply chases many would-be housing developers away. When there is no assurance that a housing project of a certain size will be approved, many developers will not undertake the significant up-front expense and time to go through an uncertain approval process. This is especially the case in California, where compliance with the California Environmental Quality Act (CEQA) is extremely time-consuming and expensive and must be completed before a project can be approved.

An unduly long approval process also directly adds to the cost of producing housing by increasing land carrying costs (the interest a developer pays on the cost of land) and other "soft" costs (architectural, engineering and legal fees).

This report suggests several ways that the approval process for new housing in San Francisco can be reformed in order to add certainty to the process and reduce the time it takes to obtain project approval. These reforms, if implemented, would reduce housing costs for the producers of housing, without compromising the public process. Those costs savings should lead to increased supply, which will decrease housing prices and rents.

Recommendations

SPUR proposes four specific reforms the City should implement to expedite and make more predictable the permit approval process:

4.1 Produce neighborhood plans with program environmental impact reports so that individual projects implementing those plans need not undergo their own extensive environmental review process;

4.2 Develop more specific inclusionary affordable housing guidelines;

4.3 Remove the automatic conditional use requirement for any project over 40 feet in height in all R zoning districts;

4.4 Establish enforceable timelines for the review of residential projects.

4.1 Produce neighborhood plans with program level environmental impact reports so that individual projects implementing those plans need not undergo their own extensive environmental review process.

Individual neighborhood plans should be developed and adopted that recognize the distinct characteristics of each neighborhood, define the qualities that should be preserved, and spell out what type of new development is desirable and where it should be located. In this way, a consensus can be developed within each neighborhood among City leaders, neighbors and developers as to the desired type and level of housing development in that neighborhood. In this way, housing developers can propose projects that will be accepted by the neighborhood, its residents and other stakeholders.

In conjunction with each neighborhood plan, a master program level EIR (Environmental Impact Report) would be prepared. A program EIR is an environmental review that covers the maximum development potential on many or all sites within a specified area. The advantage in producing this type of EIR is that projected impacts can be dealt with up front. When individual projects are proposed, no separate EIR or negative declaration needs to be prepared because the program EIR has already anticipated it, and general mitigation measures have already been developed. Having a final program EIR in place can shorten the review period of an individual project by six months to one and a half years, thereby reducing up-front soft costs and carrying costs.

Program EIR's are typically prepared when a new area specific plan and/or rezoning is undertaken. Examples include the Van Ness Plan and the Rincon Hill Plan and their program EIR's which allow many projects to pass through the environmental review process in one to two months instead of six months to a year. However, there is no reason that program EIR's cannot also be done for areas where smaller in-fill projects are contemplated, such as the lots in the Hayes Valley freed up by demolition of the Central Freeway.

A group of housing advocates, including SPUR, has proposed to Mayor Brown that funds be placed in the 1999-2000 and 2000-2001 budgets to begin such neighborhood planning for four areas of San Francisco: (1) the Balboa Park BART Station area, (2) Hayes Valley-Upper Market, (3) the Central Waterfront, and (4) the Northeast Mission. Each year, additional neighborhoods can be selected for master planning. While the Planning Department would lead this effort, planners from MUNI, DPW, and Recreation & Parks would be involved to discuss matching increasing housing in each area with increased neighborhood amenities (e.g., better parks, additional MUNI service, etc.) The general fund monies used in early years can be replenished over the years by fees charged to individual projects that take advantage of the program EIR's, thereby avoiding their own expensive and time-consuming environmental review processes.

Implementing Agencies: Planning Commission, Redevelopment Agency. Board of Supervisors approval necessary only if the General Plan, Planning Code or Zoning Map is amended.

4.2 Develop more specific inclusionary housing affordability requirements to build certainty into the approval process.

Although there are guidelines in place now which call for 10% of all units in projects over 10 units which require Planning Commission approval to be affordable, the exact cost of this requirement is not determined until very late in the process -- generally at the Planning Commission approval hearing. Either a Planning Commission policy, or even better a City ordinance, should set forth the exact percentage of units requiring BMR (below market rate) rents or sales prices and the actual prices (rents and sales prices) that may be charged. These rents and sales prices should be adopted and published on a yearly basis so that the development community, land sellers and lenders clearly understand the costs before commitments on land sales are made.

The Planning Commission then must follow these rules in its project approvals. Knowing the requirement up front will remove a significant risk factor from the process and will therefore promote more housing construction.

Implementing Agencies: Planning Commission. Board of Supervisors approval necessary if guidelines set forth in a City ordinance.

4.3 Amend the Planning Code to remove the automatic Conditional Use requirement for high density residential zoning districts.

If the purpose of high density residential zoning districts is to promote high density residential use, then this type of project should be permitted without special discretionary approvals. Currently, however, all projects of this type automatically require conditional use authorization (and the public hearing process that goes along with it) when they are over 40 feet in height. The purpose of this conditional use requirement is largely to provide design review. If there are no other reasons why a conditional use would be required (such as reduced parking or some other exception), then the design review could be handled at the staff level and no conditional use would be required. The net result of this proposal would be to remove another risk factor in the approval process and shorten the review timeline, which in turn would promote the construction of these types of projects. Implementing Agencies: Board of Supervisors, with advice from the Planning Commission 4.4 Establish enforceable timelines for the review of residential projects.

In some cases, such as for variances, the Planning Department promises a certain hearing date when an application is filed. Such timelines should be developed and published for all other types of applications filed with the Planning Department. For complicated projects, such as those requiring environmental review, an approval matrix or branched timeline may be necessary, showing, for instance, commitments to review each aspect of an application within a guaranteed timeframe. The State of California has enacted The Permit Streamlining Act to address the issue of permit approval delays. The City should do no less.

Implementing Agency: Planning Department

This report was drafted by the SPUR Housing Committee, co-chaired by Oz Erickson and Tom Jones. The report was debated, refined and passed by the SPUR Board. It represents the official policy of SPUR.