San Francisco has a new fourplex ordinance. While Bornstein Law and our partners can assist in the construction of new units, this message may fall on deaf ears.
Regulations are relaxed, but going from one to four is a giant leap.
An ordinance signed into law in late October 2022 will permit new or renovated buildings of up to four units, and up to six units on corner lots, in all Residential House (RH) districts. This accounts for approximately 94,000 parcels across San Francisco and includes a large swath of real estate in the western half of the city.
New structures are required to conform to existing height and rear yard requirements. The nascent law expands upon SB-9, which allows property owners to subdivide their parcels and then build duplexes on each lot. These additions must be compatible in terms of character and scale with neighboring buildings.
Being so laser-focused on the practical, day-to-day tasks of managing landlord-tenant relationships and accomplishing the goals of our clients, Bornstein Law has largely avoided the political hot potato of the housing crisis, but sometimes the topic is inescapable and we are asked about it.
Our answer is always the same and goes something like this: Housing is political, and the politics will dissipate when we build new housing, yet this requires a lot of resources and motivation from policymakers.
Looking to build in San Francisco? Patience is in order.
If history is any indication, those looking to build in San Francisco will have to wait years, with a staggering 627 calendar days before constructing a multifamily housing project and an 861-day wait to obtain approval for a single-family residence.
We are encouraged that the message to build more housing is beginning to sink in for San Francisco lawmakers, but it's not by persuasion. It's because they are being forced to do so with state mandates.
On the eve of a deadline to develop a plan for state housing watchdogs at the Department of Housing and Community Development, the Board of Supervisors signed off on its Housing Element, a wildly ambitious plan to build 82,000 new homes in the city in the course of eight years. No less than 46,000 of them are to be affordable. In a surprisingly harmonious conclusion, the state has said it will approve the blueprint.
Business as usual? Yes, but the business has become more serious.
Every eight years, all California cities estimate how much housing each metropolitan area has to produce in order to accommodate demand, as part of the state's Regional Housing Needs Allocation (RHNA).
Yet as The Frisc observed, there have been no penalties up until now for cities that fall short of housing goals. Cities treated RHNA as neither an order nor a suggestion, but as more of a light buzzing noise that hardly anybody minded.
If the inertia continued and no concrete plans were put into place, San Francisco would have been at risk of losing state funding for projects and most compelling, local control over development.
Control over housing is something that none of San Francisco's politicians want to give up. We've seen it recently in the form of tighter regulations on short-term rentals, a vacancy tax, and rent registry requirements that demand reams of information about a landlord's business.
We don't want to be wrong again.
The pint-sized dwellings of Accessory Dwelling Units, also known as in-law units, granny flats, and the like, were touted as a big solution to adding to California's housing stock. We had a love affair with ADUs after San Francisco relaxed regulations and even built a website dedicated to the construction of these living quarters and the legalization of unwarranted units in the shadows.
The appeal was a "missing middle" solution to California's housing dearth - they were supposed to increase density without raising so many concerns about changing a neighborhood's character - contrast this with a large residential project.
Instead of tens of thousands of new units being added to sorely needed housing inventory, only hundreds sprouted up.
Is there any reason to believe that the new San Francisco fourplex law will not similarly deflate expectations? Given the newfound ability to build, will there be droves of homeowners looking to add units to their properties? We think not.
Dubbed the California HOME Act, the law ended single-family zoning and allowed property owners to split their homes' lots and build up to four homes on a single-family parcel. Fast forward a year later and a study reveals that the impact that SB-9 has had on new housing production has been negligible.
When we say negligible, we mean single and double digits, if not a big fat zero.
Judging by history, those looking to build in San Francisco will have to wait years, with a staggering 627 calendar days before constructing a multifamily housing project, and expect an 861-day wait to obtain approval for a single-family residence.
Supervisor wants to hold the city accountable
We hardly ever see eye to eye with Dean Preston, the former tenant attorney and progressive Supervisor who is the city's most prolific author of renter protections. Yet we agree with his sentiment that without adequate funding, the city is setting itself up for failure by committing to such a lofty goal. In order to hold San Francisco accountable, Preston is calling for the ability of affordable housing developers to sue the city if it falls short of its goals.
Today, I announced local legislation designed to force our City to deliver on affordable housing commitments. https://t.co/g8gQgHLvrP
— Dean Preston (@DeanPreston) January 25, 2023
What we might take exception to is the urgency to build affordable housing with market-rate housing playing second fiddle.
By building more housing at market rate, it allows for the fluid nature of more affluent tenants freeing up "tired" buildings that are affordable. We need more housing, period, but it should be economically diverse.
If you build more housing, you will have more housing, which will mean more housing will be available for a larger population that will be more economically diverse, and even if you build high quality that is expensive, those other properties that are older and less aesthetically attractive will be lower in rent for other people to access so we've got to commit to building more and more housing and reduce the regulations, the permit time and what have you, so that we can focus on building and building and doing so efficiently.
~ Daniel quoted in this webinar
Some caveats with San Francisco's fourplex ordinance
In order to take advantage of the ordinance, owners must have owned the property for at least a year. The original iteration of the ordinance vetoed by Mayor London Breed required ownership of five years. This restriction was put into place to discourage well-funded corporate investors from scooping up properties and immediately building on them.
Read our related article about the larger war being waged on "greed-fueled" landlords →
One concern we have that stands out in the law like a flaming beacon is that new units are subject to rent control and "just cause" eviction protections. This will assuredly spook owners who are contemplating building, as they will be subject to the most complicated regulatory regime anywhere. Especially when living in close quarters, owners who would otherwise be motivated to build will not like the prospect of having an undesirable tenant entitled to live in their midst indefinitely unless there is a just cause reason to evict.
Economists will agree that rent and eviction controls have always stifled housing production and there is no reason to believe that San Francisco's fourplex ordinance will defy this axiom.
With the addition of housing, there can be a subtraction of services
Owners looking to build will surely eye spaces like laundry rooms, parking, storage areas, and so forth for conversion. We want you to keep in mind that if tenants rely on these spaces as part of the rental agreement, having these amenities gobbled up by new living quarters may embolden a tenant to claim there was a reduction in services and that rent should be decreased.
Other concerns abound such as participation in a citywide rent registry, the owner's ability to condo convert after residing in their home for a time certain, and more. Whenever building new units is contemplated, it is imperative to seek proper counsel.
Can't imagine one without the other.
Bornstein Law can handle the myriad of legal issues that surround the production of new living quarters. But, taking a concierge approach, we also come equipped with a reliable team like Edrington & Associates who can handle the building details and comply with maddening planning codes. Granted, regulations have been relaxed. But this means rather than taking a drink out of a 50,000-gallon firehose, it is now a 10,000-gallon firehose.
Erecting new housing is an uphill battle but this process can be made easier with proper counsel and building professionals who can evaluate the feasibility of your project and oversee it from start to finish.
While we are not exuberant that the newfound ability to build will contribute significantly to new housing stock, any bit helps. And part of the barrier is education. Many homeowners simply are not aware of the possibilities available, but in this regard, Bornstein Law and our partners are committed to doing our part in enlightening owners of their options to build intergenerational wealth, earn extra income, realize increased property value, and move in family members in full compliance with applicable rules.