In San Francisco, it’s nearly impossible to build any kind of housing without a public hearing. In a city with a severe shortage of housing that’s causing knock-on effects ranging from homelessness and staggering income inequality to mass displacement and environmental degradation, our leadership supports allowing neighbors to appeal a permit for nearly any reason, including aesthetics, shadows, and parking.
Filing an appeal costs almost nothing, and if neighbors don’t prevail that way, they can gather signatures to put blocking new homes on a city ballot. Local control over housing production.
Also called “community input” or “local control,” this requirement means that every single time developers try to build affordable housing in SF homeowners fight it. They have been fighting one 50% permanently affordable housing project at the Balboa Reservoir since 2014. I attended the 26th public hearing on the project. One study found that four or more community meetings added, on average, five percent to the total cost of new affordable housing in California. I can’t imagine what this must be costing the developers, who have to promote, organize, and attend each hearing. The affordable homes would replace a parking lot.
In the Outer Sunset, homeowners were so amped to oppose 15 townhomes that a fucking mediator attended so neighbors could revolt more peacefully. Apparently human beings living in tent encampments in one of America’s wealthiest cities is a less pressing concern than a building facade that doesn’t meet their aesthetic standards.
But it’s not just wealthy homeowners who block affordable housing in SF. In the Excelsior low-income tenants are protesting 193 units of housing, 25% of which will be affordable because they mistakenly believe that new housing causes rents to rise. In fact the opposite is true.
At these hearings it’s common to hear racist dog whistles like preserving “neighborhood character” and preventing “urbanization.” These people support affordable housing, just “Not In My Back Bard” (NIMBY). “It’s not the parking, it’s the people,” resident Joe Bravo said about why he opposes low-income senior housing in Forest Hills. “This thing would be much more suitable for the Van Ness corridor.”
NIMBYism is written into California’s constitution. Article 34, passed in 1950 at the behest of the real estate industry, requires housing developers to get permission from neighbors before building affordable housing and remains in effect to this day.
The Planning Commission
Another roadblock to building more housing in San Francisco is our Planning Commission. Unlike most cities, in SF seven people review, judge, require changes of, or disapprove of any new development. They decide when and whether fellow homeowners can delay benign home renovations like adding new bedrooms, disallow conversions of apartments to condos, block new multi-family housing, and fine homeowners $250/day for renting out their homes to unrelated tenants.
The Planning Commission is mostly older homeowners who live in the development-averse west side of the city. In a city that’s 70% renters and extremely rent-burdened, it should not have that makeup, nor that power. There’s no compelling reason for the Planning Commission to ever block mid-sized developments of 10 or fewer units in the midst of an affordability crisis.
Residential impact fees
San Francisco has the highest permit fees in the nation. Planning permit fees in SF alone are about $5000 per home. And that’s before (this is not a complete list):
- Environmental review fees
- School fees
- Commission hearing application fees
- Utility fees
- Project impact fees
- Assessor-Recorder fees
- Compliance monitoring fees
- Transit fees
- Public art fees
- Development agreement fees
- Services fees
- Park fees
- Affordable housing fees
The Terner Center found that development fees in California can exceed $150,000 per unit, excluding utility fees. In San Francisco, they’re $165,000 per unit. “The impact fees are usurious,” said Governor Gavin Newsom. “I’ll say it. And we gotta call that out.”
They can comprise up to 18 percent of the median price. That additional $150,000 gets passed right along to renters, making truly affordable market-rate housing impossible to build profitably.
And these fees are only getting higher, having risen 2.5 percent between 2008 and 2015.
Nationwide, between 2008 and 2015 average permitting fees decreased by 1.2 percent. Today the average municipality charges between $500 and $2000.
In some cases these fees make building fewer, larger, more expensive units more profitable than many smaller, cheaper units.
General incompetence
San Francisco’s lengthy, complex, opaque, and arbitrary planning process also adds unnecessary cost to development. Developers must jump through numerous hoops just to find out how much they’ll be paying, adding to the cost and complexity of building. And the capricious, opaque system wherein bureaucrats have wide discretion on how much they can charge incentivizes cozy insider relationships between planners and developers.
One study found that local governments in California added seven percent to the total cost of new affordable housing on average.
San Francisco’s city bureaucracy delays the median 10-plus unit apartment building by six years. Planners delayed one building for 24 years, and a “sizeable amount” of multi-family homes have taken more than 10 years.
Nationwide, the entire process takes a little more than a year.
The difference between most cities and ours is that SF bureaucrats add new, unforeseeable requirements and novel interpretations of existing codes at every stage in the already arduous permitting process.
For example, the SF Planning Department changed the required door size between the design and build-out stages of one housing project, forcing the developer to implement to change their plan before they could start building.
So complex and arbitrary is the process that it’s even spawned an industry of private “expediters” whose sole job is to help developers move permits through the bureaucracy. Delays from slow-moving, uncoordinated departments making last-minute changes developers cannot plan for add absolutely no value to the end product while increasing the cost substantially. And further incentivize developers to form and maintain close relationships with government bureaucrats.
CEQA
Then, there’s CEQA. One of the NIMBY’s most powerful tools is the California Environmental Quality Act (CEQA). CEQA is written as environmental protection legislation, but in practice CEQA makes housing more expensive, and exacerbates displacement and disruption.
NIMBYs and special interest groups frequently abuse CEQA to limit new housing development and shake down developers. Labor unions threaten developers with endless CEQA appeals in order to negotiate wage increases. They opposed SB35 until Senator Scott Wiener included “prevailing wages.” There’s money in CEQA for community organizers as well. Calle 24’s Erick Arguello and Luis Granados shook $1 million out of the developer for 1515 S. Van Ness and nonprofit ownership of eight apartments from the developer of 2675 Folsom by threatening CEQA lawsuits.
The costs and delays can shut down entire projects. Less noticeable, the existential threat of a years-long CEQA process prevents many projects from being proposed in the first place, especially in the most housing-averse communities. Usually, CEQA reviews draw out the process for a year and a half to two years and can add up to $1 million to the cost of building. But it can take much longer, depending on how many lawsuits you have to fight.
So disruptive is CEQA to building more homes that getting rid of it would likely be better for the environment on net. Reform is a widely supported way to ease the housing crisis. According to the Legislative Analyst’s Office, CEQA “limit[s] the amount of housing – both private and subsidized – built in California.” According to the East Bay Times, when it comes to not building enough homes “the state’s arduous and costly environmental review process” is “a key problem.” Edward Glaeser for the Brookings Institute calls California’s Environmental Impact Review process ”onerous.” And let’s not forget that California regularly exempts politically popular projects from CEQA reviews.
Research shows that this kind of excessive land use regulation entrenches historic class- and race-based segregation patterns. For instance, the Bay Area has a quota system to encourage municipalities to approve housing. But majority-white cities game their quotas to get lower housing requirements than cities with the same median incomes but more minority residents. San Francisco’s housing affordability crisis has helped shoot San Francisco to number-one for income inequality.
The most effective thing San Francisco could do to reduce construction costs is to streamline our permitting process. There are many ways to do this. We must expand the number of projects that can be permitted “by-right,” or exempt from unnecessary appeals and delays. Designating more projects by-right makes housing more affordable and more affordable housing pencil out. Reducing community hearings speeds up development and cuts costs.
In 2015 Oakland implemented a $600 million infrastructure and affordable housing bond called “Measure KK” and streamlined permitting. By 2019, they’d built 10,000 new homes, reduced their evictions more than 30 percent, and increased their affordable homes by 34 percent.
The only way to make housing more affordable to buy or rent is to make it more affordable to build. We need eased density and zoning restrictions, a streamlined approval process, and to disempower neighborhoods from blocking projects that meet all the existing requirements.
This is part five of a series. See parts one, two, three, four, and five.
Special thanks to Matt Larson for his edits.
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