As expected, on June 28, the California Department of Housing and Community Development (HCD) determined that San Francisco has not made adequate progress toward its State-mandated housing production goal. The City’s Housing Element—which it adopted and HCD certified in January 2023, just in time to avoid triggering certain penalties under the State Housing Element Law (see earlier post here)—sets forth the City’s plan to approve 82,000 units over an eight-year period ending in January 2031. However, according to its most recent Housing Inventory, San Francisco approved only 3,039 new units in 2023, and the City has yet to adopt the zoning amendments required by State law to implement the Housing Element.

Senate Bill 423 requires San Francisco, specifically, to annually demonstrate that it is keeping pace with its housing production. HCD’s June 28th determination means that many mixed-income housing development projects in San Francisco will now be subject to a streamlined, ministerial approval process. Qualifying projects will be approved by Planning staff and will not require a public approval hearing by the Planning Commission or Board of Supervisors, although in many neighborhoods a pre-application informational hearing at the Planning Commission will be required.

To qualify, projects must be at least 2/3 housing, meet specified labor requirements, and meet certain site-specific criteria—including that the project be located on a residentially-zoned site, not demolish tenant-occupied or rent-controlled units, and not demolish historic structures listed on a historic register—among a few other requirements. Importantly, prior to HCD’s determination, projects also had to restrict 50% of units in the project as affordable to households at 80% area median income (AMI). Now, however, the affordability requirement has been drastically reduced to just 10% of the units in the project, which must be affordable to households at 50% AMI. While the percentage of affordable units required to qualify for streamlined review is now lower, SB 423 does not relieve projects from local inclusionary housing requirements if such requirements are higher.

If the criteria are met, the following projects must be approved ministerially:

• Code-compliant projects with 2-9 dwelling units.
• Code-compliant projects with 10 or more dwelling units that meet San Francisco’s inclusionary affordable housing requirements.

Notably, Code-compliant projects include projects that take advantage of State Density Bonus Law to increase their unit count above what would typically be permitted under existing zoning.  The City’s application for streamlined approval pursuant to SB 423 is available here.

Under SB 423, projects of 150 units or fewer must be approved within 90 days of submittal of an application, and projects with more than 150 units must be approved within 180 days. As stated in a press release by former San Francisco Supervisor and now State Senator, Scott Wiener, who authored SB 423, as of June 28 San Francisco is going “from the slowest approver of new homes in California to one of the fastest.”

Due to San Francisco’s specific annual housing production progress requirement and the City’s lack of progress to date, the City is likely to remain out of compliance. Accordingly, projects complying with San Francisco’s inclusionary affordable housing requirements and SB 423’s site criteria may qualify for streamlined, ministerial review for the foreseeable future. For the time being, we note that 18 other Bay Area jurisdictions do not have compliant Housing Elements and are therefore subject to the same reduced affordability requirement to qualify for SB 423 streamlining benefits. Those jurisdictions are currently Atherton, Belmont, Cupertino, Daly City, Hercules, Lafayette, Larkspur, Los Gatos, Napa County, Palo Alto, Pittsburg, Portola Valley, San Mateo, San Mateo County, Santa Clara County, Saratoga, Woodside, and Yountville. Unlike San Francisco, most or all of these Bay Area jurisdictions will return to the higher 50% affordable requirement when their Housing Elements become compliant, which for some of these jurisdictions could happen within days or weeks.

Coblentz attorneys will continue to monitor Housing Element compliance and other developments as they relate to these and other jurisdictions.