With rising housing costs remaining a priority concern for the region, affordable housing had a major presence on Bay Area ballots this November. As detailed below, voters in three municipalities and three counties across the Bay Area passed measures to increase affordable housing funding for low and moderate-income households. Taken together, these measures will yield about $2 billion in new housing funds.

Rent control measures were a mixed bag. Overall, six municipalities passed rent control legislation, with the protections ranging from modest to ambitious.  Voters in the City of Alameda, for instance, chose between two competing rent control proposals and rejected strong renter protections in favor of more modest rent controls.  Mountain View’s voters, by contrast, also chose between two vying rent control proposals and narrowly approved the more ambitious rent control and eviction protections.  Burlingame’s lone rent control measure was rejected, Richmond passed its first regulation governing annual rent increases, and Berkeley and Oakland, unsurprisingly, expanded their existing protections.

Here’s the roundup from the Bay Area (and just the San Francisco measures here):

Approved Affordable Housing Measures

Alameda County

Seventy two percent of Alameda County voters approved Measure A1, authorizing a $580 million housing bond to construct 8,500 units of affordable rental housing, provide housing services for homeless people, and deliver home-buying assistance to low and moderate-income home buyers.

Santa Clara County

With 67 percent approval, county voters narrowly approved Measure A, which required two-thirds approval to pass.  The measure provides a bond that allows the County to borrow up to $950 million to construct and maintain roughly 5,000 affordable housing units.

San Mateo County

Seventy percent of voters approved Measure K, extending a half-cent sales tax for 20 years.  The tax is anticipated to generate $85 million annually and will fund infrastructure upgrades and affordable housing for families, veterans, seniors, and people with disabilities.

Berkeley

Eighty three percent of voters passed Measure Z1, an unopposed measure authorizing the city to construct 500 new affordable units.

Oakland

Eighty two percent of voters approved Measure KK, a $600 million infrastructure bond that includes $100 million for affordable housing.

San Francisco

Sixty eight percent of voters approved Prop C, which allows the City to use the remaining $261 million from a 1992 general obligation fund for seismic upgrades to rehabilitate multi-unit buildings and convert them to affordable housing.

Approved Rent Control Measures

Berkeley

Seventy two percent of voters approved Measure AA, which increases a landlord’s payment to a  tenant in an owner move-in eviction from $4,500 to $15,000 (and up to $20,000 for low-income households, disabled people, the elderly, families with minor children, or tenancies that began before 1999).  The measure also requires the new $15,000 payment for any owner move-in eviction.  Previously, only low-income tenants were eligible for an owner move-in eviction payment.  The measure also prohibits owner move-in evictions of families with school-age children during the school year.

Oakland

With seventy four percent approval, Measure JJ expanded Oakland’s just-cause eviction requirements from residential units rented before October 14, 1980 to those approved for occupancy before December 31, 1995.  It also requires landlords to request approval from the City to increase rent by more than the City-established cost-of-living adjustment.

City of Alameda

Fifty five percent of voters approved Measure L1, which requires the City’s Rent Review Advisory Committee to mediate disputed rent increases of more than 5 percent, but does not cap annual rent increases.  It also limits the justifications for evicting a tenant, and in some circumstances, requires the landlord to pay relocation fees.  These measures were not as far-reaching as those proposed in Measure M1, the City’s other, competing rent control measure on the ballot (discussed below).

East Palo Alto

Nearly eighty percent of voters approved Measure J, which clarifies provisions from the City’s 2010 Rent Stabilization Ordinance.  Notably, the measure clarifies the definition and calculation of “maximum allowable rent,” limits annual rent increases to 80% of increases in the CPI, enhances informational notice requirements, and permits evictions for demonstrated nuisances or hazards.

Mountain View

Voters narrowly approved Measure V, a citizen initiative that won with fifty one percent support and which provided clearer rent controls and tenant eviction protections as compared to Measure W, the competing rent control measure proposed by the City Council (discussed below).  Measure V caps annual rent increases at 5 percent, and landlords cannot increase rent by more than the annual percentage increase in CPI.  The measure also enumerates the requirements for just cause evictions; and unlike Measure W (discussed below), does not permit exemptions from just-cause eviction requirements for landlords who pay prescribed relocation payments.

Richmond

Sixty four percent of voters approved Measure L, an initiative that established a maximum allowable rent in Richmond for the first time.  The measure establishes a maximum allowable rent based on the rent in effect in July 2015 and caps annual rent increases according to annual increases in the CPI.  The measure also enumerated the requirements for just-cause evictions.

Rejected Rent Control Measures

Burlingame

Sixty seven percent of voters rejected Measure R, an initiative to set annual rent increases to an amount equal to the CPI, and not to exceed 4 percent a year for most multi-family rental units with certificates of occupancy before February 1, 1995.  The initiative would have also established just-cause eviction restrictions for most rental units, and created a commission to set fees and implement the ordinance.

City of San Mateo

Sixty one percent of voters rejected Measure Q, which would have amended the City’s charter to permit rent regulations and just-cause eviction requirements for units with a certificate of occupancy from before February 1995.  Presently, residential landlords may charge any rent they wish and, with proper notice, remove a tenant without establishing just cause.  The measure would have also created a Rental Housing Commission to implement the new regulations.

Mountain View

In contrast to Measure V, 51 percent of voters rejected Measure W, which the City Council proposed.  The measure would have amended the City’s rent program by requiring binding arbitration for disputed annual rent increases over 5 percent in most multi-family units occupied before February 1995, but it would not have set a fixed cap on annual rent increases.  Although the measure would have also established just-cause eviction requirements, landlords would be exempted from these requirements if they complied with the City’s Tenant Relocation Assistance Ordinance.

City of Alameda

Sixty six percent of voters rejected Measure M1, a proposed City Charter amendment to limit annual rent increases to 65 percent of the CPI, create an elected Rent Control Board to impose fees and assess penalties, limit reasons for terminating tenancies, and require landlords to pay relocation fees to tenants in certain circumstances.  Measure M1’s rent control provisions were stronger than Measure L1‘s, the competing rent control proposal that passed with 55 percent approval.

Prior to the November 8 election, we reported on the long list of local propositions on the San Francisco ballot, including a number of measures impacting real estate taxes, land use and governance.  The results were of course eclipsed by national news, but there are some significant local developments, updated here.

The results are predictably unpredictable.

Voters in some cases upheld the status quo, rejecting a proposed shift in authority from the Mayor to the Board of Supervisors and an increase in the range of income eligibility for affordable housing. In other cases voters supported change, allowing development in Hunter’s Point and Candlestick Point to be exempted from the office development cap, requiring Production, Distribution and Repair (“PDR”) replacement in certain areas of the City, and increasing the real estate transfer tax (okay, maybe the tax increase was predictable).

Below are the preliminary results as reported by the Department of Elections, subject to certification by the Board of Supervisors on or prior to December 2.

There were also a number of important housing-related measures considered around the Bay.  Read our analysis from around the Bay Area here.

Summary of San Francisco Results:

Proposition L

Would have shifted authority from the Mayor to the Board of Supervisors regarding the San Francisco Municipal Transportation Authority.  REJECTED.

Proposition M

Would have shifted authority from the Mayor to the Board of Supervisors regarding the Mayor’s Office of Economic Development and the and the Mayor’s Office of Housing and Community Development.  REJECTED. 

Proposition O

Exempts new office construction at Candlestick Point and Hunter’s Point from the office allocation cap.  PASSED. 

Proposition U

Sought to expand the range of household income levels for affordable unit eligibility.  REJECTED.

Proposition W

Increases the real estate transfer tax rate by 0.25% for sales valued between $5 million and $10 million (increase from $10/$500 in purchase price to $11.25/$500), and between $10 million and $25 million (increase from $12.50/$500 in purchase price to $13.75/$500), and creates a new tier of transfer tax for sales valued above $25 million of 3% of the purchase price ($15/$500).  NOTE:  The effective date will be 10 days after the date that the vote is certified by the Board of Supervisors, which is supposed to occur no later than December 2, 2016 (for an effective date that would occur on or prior to December 12, 2016).  PASSED. 

Proposition X

Imposes replacement requirements for Production, Distribution, and Repair (“PDR”) space for certain zoning districts within SoMa and the Mission.  The replacement percentages are higher than those in the Central SOMA Plan.  PASSED. 

Members of the Board of Supervisors have proposed two important Propositions for the November ballot that would amend the City Charter and shift authority over certain City agencies and Departments from the Mayor’s Office to the Board of Supervisors.

Prop L

Currently, the Mayor appoints all seven directors of the San Francisco Municipal Transportation Agency (SFMTA), subject to Board of Supervisors confirmation.  Under Prop L, the Mayor would appoint four directors, and the Board would appoint the remaining three.  In addition, a simple six-vote majority of the Board would be required to reject the SFMTA’s budget, which is presented to the Board every two years.  Under current law, seven votes are required to reject the budget.

Prop M

Prop M would take two offices that are under the Mayor’s control—the Office of Economic and Workforce Development (OEWD) and the Mayor’s Office of Housing and Community Development (MOHCD)—and turn them into City departments under the oversight of a new Housing and Development Commission.  That Commission would be made up of seven members, three appointed by the Mayor, three appointed by the Board, and one appointed by the City Controller.  The Commission would have appointment and removal power over the heads of the two new departments.

The Commission would additionally provide recommendations to the Board of Supervisors regarding:

1. Surplus real property conveyances;
2. Development agreements where the Department of Economic and Workforce Development participated in negotiations; and
3. Ordinances setting or changing affordable housing requirements.

The Controller’s analysis predicts that Prop L would have a minimal cost impact, while Prop M would cost the City approximately $210,000 per year.  Supervisor Yee is listed on the City’s Department of Elections website as the proponent argument author for Prop L, and Supervisor Weiner is listed as the opponent argument author.  For Prop M, Supervisor Peskin is listed as the proponent argument author, and Senator Feinstein is listed as the opponent argument author.

Transfer tax on the sale of most commercial property in San Francisco will increase if voters approve Proposition W.

If approved, Prop W will increase the transfer tax rate by 0.25% for sales valued above $5 million (increase from $10/$500 in purchase price to $11.25/$500) and above $10 million (increase from $12.50/$500 in purchase price to $13.75/$500).

The proposition would also create a new transfer tax threshold for sales valued at or above $25 million ($15/$500), for a transfer tax rate of 3%.  There would be no change in the calculation of transfer taxes for properties sold in San Francisco for less than $5 million.  The Controller estimates that such increase in transfer tax could generate average annual revenues of $45 million, but reminds voters that revenue from transfer tax “is the City’s most volatile revenue source, and estimates based on prior years’ activity may not be predictive of future revenues.”^[1]

Prop W provides no effective date, but the State Elections Code provides that “if a majority of the votes on a proposed ordinance are in its favor, the ordinance shall be considered as adopted on the date the vote is declared by the board of supervisors, and shall go into effect 10 days after that date.”^[2] Further, the election results must be declared by Resolution of the Board of Supervisors no later than the fourth Friday following Election Day, which would be December 2, 2016.^[3]

In all, if Proposition W is passed, it is likely to go into effect on or prior to December 12, 2016.

No one likes to see a closing date slip, an unexpected delay this year could be costly in San Francisco, particularly for sellers who by custom generally pay transfer tax in San Francisco County.

The City’s Department of Elections website lists Supervisor Kim as the proponent argument author for Prop W, and the San Francisco Apartment Association as the opponent argument author.

[1] City and County of San Francisco Voter Information Pamphlet & Sample Ballot, page 227

[2] Cal. Elections Code Section 9122; San Francisco Elections Code Section 380.

[3] Cal. Election Code Section 10263.

In a city hungry for development along the eastern waterfront, one large hurdle looms – the cap on new office space development.  The cap, imposed by the voters as Proposition M in 1986, limits new office development by square footage.  While the cap increases each year by 950,000 square feet, the recent building boom will soon subsume the office space that is available for allocation.

Enter Proposition O on this November’s ballot. 

Proposition O would exempt new office construction at Candlestick Point and Hunters Point from the existing cap, allowing development of the projects to continue.  San Francisco voters have previously supported these projects through Proposition G in 2008, which encouraged development in the area and allowed the City to implement a redevelopment plan that could include over 2 million square feet of office space and up to 885,000 square feet of retail and entertainment uses, 10,500 housing units, and approximately 330 acres of public parks and open space.

Proponents argue that Proposition O will create essential jobs in the Candlestick Point and Hunters Point neighborhoods, both for construction jobs related to the development and a projected 17,000 permanent jobs once the projects are completed.  Supporters also point out that while the Proposition M office cap may make sense for downtown San Francisco, it is harder to justify limiting development in and around the old shipyard which is sparsely populated today.

Opponents of this proposition argue that Proposition M was enacted to limit office development for a reason, and the fact that the City is close to the Proposition M cap means that the cap is finally working, not that it needs to be raised.

Further, this ballot measure is a precursor to a broader discussion on whether the cap set by Proposition M should be raised for all development in the City, and under what conditions such an increase might occur.  ULI San Francisco has hosted several panels on the topic over the past few years, and the San Francisco Business Times has discussed the possibilities of such an increase here and elsewhere.

For now, San Francisco voters can register their views on new office development under Proposition O while the larger office cap issue remains for another election.

The City’s Department of Elections website lists Dr. Veronica Hunnicutt, Shamann Walton, Sophie Maxwell as the proponent argument authors for Prop O, and Calvin Welch as the opponent argument author.

Production, Distribution, and Repair (PDR) space is a hot commodity in San Francisco.  Over the past few years, numerous organizations, policymakers, and elected officials have been engaged in efforts to preserve existing and create new PDR, community, and arts spaces, particularly in SoMa.  Supervisor Kim, who previously sponsored the moratorium on conversion of PDR space in SoMa that expired in October, has sponsored Proposition X for the November ballot.  Prop X would impose a conditional use and on-site replacement requirement for many new projects or changes of use that displace PDR, Institutional Community, or Arts Activities uses.

The replacement requirements vary by zoning district, and would only apply within SoMa and the Mission as follows:

• 100% replacement in the SALI district
• 75% replacement in the UMU, MUO, and SLI districts
• 50% replacement in the MUG and MUR districts

For projects with Environmental Evaluation applications filed by June 14, 2016, the ballot measure contains partial grandfathering for 15,000 square foot-plus projects, and full grandfathering for smaller projects.  Full grandfathering is also provided for all projects approved by that date.  There are a number of other exceptions included in the ballot measure for Port, Recreation and Park Commission, and other properties and specific project types.

The replacement requirements in Prop X are broader than those in the recently released Central SoMa Plan, which proposes 100% PDR replacement on parcels being rezoned from SALI to MUO or WSMUO, and 50% PDR replacement on parcels being rezoned from SLI to MUO.

The Controller’s analysis projects a loss of revenue between $2.1 and $4.3 million annually, based on the lower assessed values of new property for PDR, Institutional Community, and Arts Activities uses.  Supervisor Kim is listed as the proponent argument author on the City’s Department of Elections website, and SPUR is listed as the opponent argument author.

Admittedly the issues may appear benign compared to the Presidential race and the drugs, sex and other provocative topics on the state ballot.  But San Francisco voters again face a long list of significant local propositions on November 8th, and among them are a number of measures impacting real estate taxes, land use and governance.

Unfamiliar Terrain summarizes the key measures impacting our industry:

• Propositions L and M: Shifting authority from the Mayor to the Board with respect to San Francisco Municipal Transportation Authority and the Office of Economic and Workforce Development/Mayor’s Office of Housing and Community Development
• Proposition O: Exempting office space in Hunter’s Point/Candlestick Point from the Proposition M office cap
• Proposition U: Making affordable units available to low and moderate income households
• Proposition W: Increase in transfer tax
• Proposition X: Production, Distribution and Repair space replacement

We hope that our summaries will help you navigate the issues.  And if all else fails, take a break and check out our “What We’re Reading” post.