• Wiener’s Streamlined Infill Housing Approvals Legislation Continues to Move Forward

    We reported in December that State Senator Scott Wiener marked his first day in state office by introducing legislation (SB 35) to address barriers to housing production. Senator Wiener has introduced amendments to SB 35 that would create a streamlined, ministerial (i.e., not triggering CEQA) approval process for certain infill projects in localities that (1) fall short on regional housing needs assessment (RHNA) production goals, or (2) fail to provide annual housing production reports to the State for two consecutive years before the infill project’s application. SB 35 has been passed by the Senate Transportation and Housing Committee, and is now before the Governance and Finance Committee for further consideration.

    What Qualifies Under SB 35?

    Under the current version of SB 35, certain multifamily and accessory dwelling unit projects would qualify for a streamlined, ministerial approval process if they meet various criteria, including being within a locality reporting RHNA housing production shortfalls or failing to provide annual housing production reports.

    The percentage of affordable units and required affordability levels vary depending on the type of RHNA housing production shortfall reported by the locality. If the shortfall is for households earning below 80% of area median income (AMI), then the majority of project units must be affordable to those households. If the shortfall is for “above moderate-income households” (i.e., households earning above 120% AMI under the current RHNA schedule), then 10% of project units must be affordable to households earning below 80% AMI. Shortfalls for moderate-income households (i.e., households earning between 81% and 120% AMI) aren’t addressed in the current version of SB 35.

    If a local inclusionary housing ordinance requires a greater percentage of units to be affordable to households earning below 80% AMI (more than 10% of project units in the “above moderate-income households” shortfall scenario, or more than 50% of project units in the “below 80% of AMI” shortfall scenario), that local ordinance would set the floor for the required percentage of affordable units needed for SB 35 streamlining eligibility.

    Very generally, the remaining criteria require an eligible project to be:

    1. located on a qualifying urban infill site zoned for residential or residential mixed use development with at least two-thirds of the square footage designated for residential use;
    2. consistent with objective zoning and design review standards, including the State Density Bonus Law;
    3. outside of certain sensitive areas (e.g., coastal zone) and certain high-risk areas (e.g., floodways); and
    4. not located on a site with an existing historic resource or certain existing housing (e.g., rent controlled units or units occupied by tenants within the past 10 years) that would be demolished.

    In addition, a qualifying project must be subject to certain enforceable prevailing wage requirements. If the project includes subsidized units, those units must remain subsidized for 45 or 55 years, for ownership and rental units, respectively.

  • Affordable Housing Bonus Program Takes Shape in San Francisco

    The State Density Bonus law has been in effect for almost 40 years, but it has required a prolonged housing crisis to push San Francisco to adopt a local implementing ordinance.  Last year the Board of Supervisors adopted the 100 Percent Affordable Housing Program for affordable housing projects, but was unable to agree on a program for market-rate projects.  Supervisor Katy Tang has now introduced legislation that would consolidate existing and add new density bonus programs to local law.

    The Affordable Housing Bonus Program (AHBP) renames the existing 100 Percent Affordable Housing Program and adds three new components: 1) the HOME-SF Program; 2) the Analyzed State Density Bonus Program (ADSBP), and 3) the Individually Requested Bonus Program (IRBP).

    HOME-SF Program

    The HOME-SF Program seeks to increase affordable housing production, especially housing affordable to middle income households.  It provides incentives to sponsors of housing projects that set aside at least 30% of on-site units as affordable, including the minimum percentage and income range required under the inclusionary ordinance, and reaching the 30% threshold by providing units affordable to middle income households (defined here for ownership as an average of 120% of Area Median Income (AMI), equally distributed at 90%, 120% and 140% of AMI, and for rental as an average of 80%, equally distributed at 55%, 80% and 110% of AMI).  The legislation limits the zoning districts to which the HOME-SF Program applies, and among other things, excludes the RH-1 and RH-2 Zoning Districts.  It is not available where a project would demolish, remove or convert residential units, or is seeking a density bonus under one of the three other programs.

    Eligible projects must establish that the project will not result in certain specific environmental impacts, will provide a unit mix that includes a higher percentage of larger units designed to accommodate families, and will include certain ground floor active uses. A qualifying project would be eligible for certain incentives, including up to 20 additional feet of height that may be used for up to two additional stories, and an additional height of up to 5 feet at the ground floor in certain cases.  Projects under this program would require conditional use approval, with some specified limits on the Planning Commission’s ability to modify the project.

    Analyzed State Density Bonus Program (ADSBP)

    The ADSBP is based on the State Density Bonus Program, and offers a specific menu of incentives, concessions and waivers analyzed by the Planning Department and its consultants. Like the HOME-SF Program, the legislation limits the zoning districts to which the ADSBP applies. Among other things, it excludes the RH-1 and RH-2 Zoning Districts, and is not available where a project would demolish, remove or convert residential units, or is seeking a density bonus under one of the three other programs. The project sponsor must establish that the project will not result in certain specific environmental impacts, and that it meets other criteria.

    A qualifying ADSBP project that provides 12% or more of its units as on-site affordable units would be eligible for a density bonus of up to 35%, and various other concessions and incentives. In some cases, a height increase of up to two stories would also be permitted. Projects with 30% or more affordable units would also be eligible for priority processing.

    Individually Requested Bonus Program (IRBP)

    Finally, the IRBP is available to projects that generally comply with State Density Bonus law, but are not consistent with the pre-vetted menu of concessions, incentives and waivers offered in the ADSBP, and therefore require individualized analysis. The criteria are similar to the ADSBP, except that it applies to a broader range of zoning districts (generally only RH-1 and RH-2 are excluded, except where the Code would allow 5 or more units on sites within those districts).

    Qualifying projects are eligible for density bonuses up to 35%, as well as other concessions and incentives proposed by the City or the Developer that are appropriate for the project and will result in identifiable, actual cost reductions. In some cases, waivers from development standards may also be granted.

    Amendments to the legislation were adopted at the March 13 Board of Supervisors Land Use and Transportation Committee hearing, and the legislation has been continued to allow time for additional public review.

  • Ting Legislation Seeks to Pave the Way for Fees on Density Bonus Units

    Assemblymember Phil Ting (D – San Francisco) introduced new amendments to the State Density Bonus law on March 15, 2017 that would specifically require local jurisdictions to impose their local inclusionary housing requirements on density bonus units, unless the jurisdiction expressly exempts them by ordinance.

    As mentioned in our recent inclusionary housing legislation blog post, local legislation proposed by Supervisors Safai, Breed and Tang would require that an “in-lieu” inclusionary housing fee be paid for any density bonus units, as recommended by the City Controller. As we previously reported, that requirement would be additive, meaning that millions of dollars of additional fees could be due for market rate housing projects with otherwise required inclusionary housing units provided on-site. As currently drafted, AB 915 authorizes the general approach in Supervisors Safai, Breed and Tang’s density bonus fee proposal and could open up the door to other options for satisfying local inclusionary housing requirements vis-à-vis the density bonus units (e.g., off-site and on-site).

    This legislation joins the larger debate about the appropriate level of incentives necessary to encourage developers to participate in a local density bonus program. As discussed in a prior post, fees on density bonus units is one of the major issues expected to be discussed when the Board considers the competing inclusionary ordinances in the coming months.

  • Influencer Marketing: Best Practices for Advertisers & Agencies

    Auhored by Lindsay Gehman

    Influencer marketing saw explosive growth in 2016, with 86% of marketers having used the tactic, 94% of whom found it effective. In 2016, most marketers spent between $25,000 to $50,000 per influencer marketing program, which amounts are expected to double in 2017, with overall budgets increasing as well. Influencer marketing is a type of marketing that focuses on using key subject matter experts (or influencers) to drive a brand’s message to the larger market in a more personalized, authentic way. An influencer is anyone who has a sizable network of people who follow and engage with them, usually over social media channels such as Facebook, Twitter, Instagram, Snapchat or YouTube.

    While the reach and impact of influencer marketing is without question, the Federal Trade Commission (FTC) and other governmental and industry organizations are closely scrutinizing influencer marketing campaigns for indications of deceptive marketing practices, which could have financial and reputational repercussions for advertisers and agencies alike. The FTC publishes Guides Concerning the Use of Endorsements and Testimonials in Advertising (Guides), which are designed to reflect the principle that endorsements must be honest and not misleading. Generally speaking, the Guides provide that (i) an endorsement must reflect the honest opinion of the influencer and (ii) if a connection exists between an influencer and an advertiser that consumers would not expect and such connection would affect how consumers evaluate the endorsement, that connection should be disclosed.

    Odds are, if you’re an advertiser or agency, you’ve probably already incorporated influencer marketing as part of the your overall marketing strategy or offering. If not, you probably should. Either way, understanding FTC guidelines and recent decisions and adopting appropriate policies and best practices are crucial. A best practices checklist for how disclosures should be made, and what advertisers and advertising agencies can do to ensure compliance, are set forth below.

    Best Practices

    Advertisers and agencies must ensure that influencer disclosures are “clear and conspicuous.” Below is a best practices checklist for disclosures:

    • Use clear, plain and unambiguous language so that consumers understand the disclosure.
    • Place the disclosure at the beginning of the post (or “above the fold”) and as close as possible to the ads to which it relates.
    • Ensure that the size, color and graphic treatment of the disclosure are easy to read in relation to the other parts of the post.
    • Ensure that the disclosure is clear and visible on all devices, including mobile.
    • Ensure that the disclosure is appropriate for the platform and complies with any applicable terms of use. For character-restricted platforms (such as Twitter), a hashtag such as #ad or #sponsored may be appropriate. For video platforms (such as YouTube), the disclosure needs to remain on screen long enough to be noticed and read (in other words, a disclosure in the description box alone is not enough).
    • Repeat disclosure as necessary on lengthy websites and/or in connection with repeated claims.
    • Ensure that the disclosure remains intact when ads are republished or reposted.

    The FTC holds advertisers responsible for ensuring that influencers comply with the FTC’s guidelines. While the FTC has not yet held agencies or influencers themselves directly responsible for compliance, agencies and influencers may be held contractually liable through indemnification or other provisions vis-à-vis the advertiser. As such, advertisers and agencies are highly encouraged to take appropriate steps to ensure that the influencers engaged by them or on their behalf are in compliance. Below is a best practices checklist for what advertisers and agencies should do with respect to the influencers they engage:

    • Adopt a written social media policy for all influencers they engage with.
    • Train, instruct and contractually require influencers to make proper disclosures regarding their relationship to the advertiser and/or its products.
    • Monitor influencers to ensure they are making the proper disclosures, both before, during and after posting.
    • Terminate influencers who fail to make the proper disclosures and/or require them to take down or edit the applicable posts.

    Click here to download a PDF of this checklist.

    For further information and assistance, including with respect to drafting social media policies and/or influencer agreements, contact Lindsay Gehman at lgehman@coblentzlaw.com.

  • Competing Inclusionary Housing Proposals Introduced at the Board of Supervisors

    Is the City another step closer to sorting out inclusionary housing requirements and implementation of Proposition C?  Board of Supervisors members have introduced two competing ordinances that seek to call the question regarding the City’s inclusionary housing priorities and requirements.

    Very generally, the legislation introduced by Supervisors Safai, Breed and Tang comes closer to reflecting the City Controller’s recommendations regarding inclusionary housing percentages, summarized in our February blog post. It would also substantially increase the percentage of inclusionary units that are targeted for middle-income earners. By contrast, the legislation proposed by Supervisors Peskin and Kim would maintain inclusionary housing percentages and income level distributions that are closer to existing requirements.

    As shown in our side by side summary chart, both ordinances would add new complexity to inclusionary housing requirements. For example, they would:

    • Distinguish between requirements for ownership and rental units;
    • Require rental units to remain rental for at least 30 years or meet higher requirements;
    • Change income level distribution requirements;
    • Revise the basis for the fee rate calculation; and
    • Introduce new unit mix requirements, with an emphasis on larger, family-focused units.

    Notably, the Safai/Breed/Tang legislation would apply the new unit mix requirements project-wide — not just to the inclusionary housing units — with certain exceptions.

    The Peskin/Kim legislation would generally retain existing grandfathering protections for pipeline projects, and projects over 120 feet in height would generally be subject to a 30% requirement for off-site or fee compliance, as compared to the existing 33% requirement. The Safai/Breed/Tang legislation would generally retain existing grandfathering protections for pipeline projects complying with the on-site option but would generally eliminate such protections for off-site and fee compliance, although the proposed percentages are generally equivalent to or lower than existing grandfathering protections. There is an exception: existing protections for projects with an Environmental Evaluation (EE) application on file prior to January 1, 2013 would be retained in all instances.

    One key issue is how inclusionary housing requirements should interact with State Density Bonus law. The Safai/Breed/Tang legislation would require that an “in-lieu” inclusionary housing fee be paid for any density bonus units, as recommended by the City Controller. As we previously reported, that requirement would be additive, meaning that millions of dollars of additional fees could be due for market rate housing projects with otherwise required inclusionary housing units provided on-site. The Peskin/Kim legislation does not currently specify that the fee would apply to density bonus units, but it proposes to increase the on-site inclusionary percentage by 5% for buildings over 300 feet — even though the City Controller reported that he found no evidence to support a higher requirement for high-rise projects.

    The legislation is currently on hold under the Board’s 30 day rule, and is expected to be debated at the Land Use and Transportation Committee in the coming months. In the meantime, the Planning Commission is scheduled to hold an informational hearing on the legislation on March 16, 2017. Planning Department staff has produced a detailed analysis of the legislation, including exhibits that detail how the ordinances would impact fees and inclusionary percentages.

  • Inclusionary Housing Recommendations a Mixed Bag for Developers

    The City is one step closer to sorting out inclusionary housing requirements and local implementation of the State Density Bonus law now that the City Controller has released its final recommendations to the Board of Supervisors. The good news for developers is that recommended on-site and in-lieu fee percentages are below Proposition C levels. On the other hand, an “in-lieu” fee for density bonus units is now being contemplated.

    The legislation passed by the Board of Supervisors in the wake of Proposition C directs the Controller, working with an appointed Technical Advisory Committee (TAC) and independent consultants, to conduct a feasibility study and make recommendations to the Board of Supervisors.

    According to those recommendations, the Controller would:

    • Reduce the on-site requirement from 25 percent (generally) under Proposition C to 14 to 18 percent for rental projects and 17 to 20 percent for ownership projects, with an annual increase of 0.5 percent over a period of 15 years.
    • Reduce the percentage requirement used for calculating in-lieu fees from 33 percent (generally) under Proposition C to 18 to 23 percent for rental projects and 25 to 28 percent for ownership projects, with an annual increase equal to 1.3 to 1.4 times the rate of the on-site increase — if the Board of Supervisors wants to avoid incentivizing payment of the in-lieu fee.

    As noted in our December blog post, once inclusionary housing requirements are finalized, the City will need to determine how they interact with the State Density Bonus law. Notably, the Controller also recommends requiring an inclusionary housing “in-lieu” fee for density bonus units, which would be additive, meaning that millions of dollars of additional fees could be due for market rate housing projects with otherwise required inclusionary housing units provided on-site. To illustrate, a 100 unit building with 20 low-income units would qualify for the maximum 35 percent density bonus under the State Density Bonus Program, yielding a 135 unit building comprised of 20 low-income units, 80 market-rate units, and 35 market-rate bonus units. Assuming here that the 20 low-income units would meet the City’s forthcoming inclusionary housing requirements, the Controller’s approach would nonetheless apply the City’s in-lieu fee to the 35 bonus units.

    The Board of Supervisors will ultimately decide whether and how to implement the Controller’s recommendations, which are currently scheduled to be considered by the Planning Commission on February 23, 2017.

  • Transportation Demand Management Program Takes Effect in SF: How Will Your Project Comply?

    On February 7th, the San Francisco Board of Supervisors unanimously approved the implementing ordinance for San Francisco’s Transportation Demand Management (TDM) Program. Pending the Mayor’s approval, the TDM Program will take effect in March. What does this mean for project sponsors?

    Developers must now incorporate TDM features into their projects, chosen from a menu of options in the City’s adopted TDM Program Standards. As the number of on-site parking spaces proposed for a project increases, developers must include more TDM features such as bicycle parking and amenities, car-share parking, and vanpool programs.

     

    Menu of Options from TDM Program Standards: 

     

     

     

     

     

     

    To see how these new requirements would apply to your project, check out the Planning Department’s interactive web-based tool (soon to be updated to include the amendments to the TDM Standards discussed below), or its Excel tool (already updated to include amendments).

    Project sponsors are now required to submit a draft TDM Plan along with all Preliminary Project Assessment applications (and Development Applications for projects that have already submitted PPAs), and must discuss TDM measures and solicit community feedback at all required pre-application community meetings.

    Since our last post on the topic, important changes were made to both the implementing ordinance and the TDM Program Standards, which can be reviewed and modified by the Planning Commission at any time. Grandfathering language was added to the ordinance—projects that filed an Environmental Evaluation Application or Development Application on or before September 4, 2016 must meet 50% of the TDM target. Projects filing a Development Application between September 4, 2016 and January 1, 2018 must meet 75% of the TDM target.  After 2018, no grandfathering is available.

    The TDM Program Standards were amended by the Planning Commission on January 19th, and larger projects obtained some relief through these amendments. Large projects must only obtain 80% of the total available TDM points—without that amendment, some large projects would have exhausted the available number of TDM points. A previous version of the Standards would have required those projects to reduce parking below the amount permitted under the Planning Code. Numerous other changes were made, including amendments to address small projects and revised point totals available for providing on-site affordable housing.

  • Plan for the Extra Cost: Increased Prop W Transfer Tax is in Effect

    As we previously reported, on November 8, 2016, the voters of the City and County of San Francisco passed Proposition W (Real Estate Transfer Tax on Properties Over $5 Million) increasing real property transfer taxes. Effective December 27, 2016, the Real Property Transfer Tax is raised as follows:

    • From the current rate of 2% to 2.25% for properties with a value or consideration of at least $5,000,000 and less than $10,000,000;
    • From the current rate of 2.50% to 2.75% for properties with a value or consideration of at least  $10,000,000 and less than $25,000,000; and
    • From the current rate of 2.50%  to 3% for properties with a value or consideration of at least  $25,000,000 or more.

    Download a copy of the Transfer Tax Affidavit here.

  • State Density Bonus Law Debuts in San Francisco

    The San Francisco Planning Commission took a major step on December 8, 2016, by approving the first market rate housing project to utilize the State Density Bonus law.

    The State law, which has been in effect for almost 40 years, incentivizes developers to construct more affordable housing by providing density bonuses of up to 35 percent for projects that incorporate on-site affordable units. The amount of the density bonus varies depending on the level of affordability and the number of affordable units.  The State law provides that local development standards, such as building height and FAR limits, may be modified without new legislation if necessary to physically accommodate the additional units. It also provides for certain development concessions and incentives in the form of the waiver or reduction of local zoning requirements. The State law was recently amended to require that local jurisdictions adopt an implementation program.

    San Francisco has historically offset affordable units provided under the local inclusionary housing ordinance against the density bonus percentage. This effectively eviscerated the State law.  But a 2013 California Court of Appeals case in Napa County held that even required affordable units count toward the density bonus total.  Since that case, advocates have been pushing for local compliance with the State law, which has remained elusive until now.

    To date, the San Francisco Board of Supervisors has been unable to agree on a comprehensive implementation program.  Instead, it passed a local density bonus ordinance this past summer that only applies to 100 percent affordable housing projects, leaving the mixed-income component of the program at a standstill. In the meantime, projects that comply with the State law are moving forward in the pipeline. On December 8, 2016, the 333 12th Street project, relying on the State law, requested and received from the Planning Commission the maximum 35 percent density bonus (about 52 additional units). It also received a height increase of about 25 feet for the additional units, which normally would require a Height Map amendment approved by the Board of Supervisors.

    What’s next for the implementation program? The mixed-income component isn’t scheduled to be considered by the Planning Commission until March 2, 2017, even though the pressure is now on. One of the major issues is sorting out the City’s inclusionary affordable housing requirements under Proposition C, which was passed by San Francisco voters last June, and the related legislation passed by the Board of Supervisors.  Once that happens, the City will need to determine how those requirements interact with State law, taking into account the 2013 Court of Appeals case.

  • Senator Wiener Moves Quickly out of the Gate on Housing Bill

    Shortly after being sworn in as California State Senator on Monday, former San Francisco Supervisor Scott Wiener introduced SB 35, placeholder legislation addressing barriers to housing production. The legislation currently consists of a one paragraph intent statement, focusing on streamlining and providing incentives for creation of housing, and removing local barriers to creating affordable housing and complying with regional housing needs obligations.

    According to press coverage, Senator Wiener ultimately intends to pursue two approaches: (1) exempting 100% affordable housing projects from certain local requirements, and (2) allowing housing developers to avoid certain local requirements in cities that are out of compliance with their regional housing needs obligations.

    The legislation comes on the heels of the “By Right Housing Approvals” streamlining legislation proposed by Governor Brown, which died in the last legislative session due to opposition from a coalition of labor, environmental and other groups.  In San Francisco, the Board of Supervisors passed a Resolution urging the San Francisco legislators in Sacramento to seek amendments to the state legislation or oppose it; that Resolution was opposed by then-Supervisor Wiener and ultimately vetoed by Mayor Lee.

    As we reported in our November post-election summary, affordable housing had mixed results in Bay Area elections, with notable successes on major bond and sales tax measures, and a range of outcomes on rent control and other affordable housing-related issues. In San Francisco, this summer the Board of Supervisors failed to pass mixed-income density bonus legislation, and instead approved a density bonus program limited to 100% affordable housing projects. As a Supervisor, Wiener voted for the 100% affordable density bonus legislation, and also supported the mixed-income version.

    It remains to be seen what SB 35 retains or rejects from Governor Brown’s “By Right” legislation, and whether it becomes the vehicle for both the 100% affordable and regional housing needs obligation approaches that Senator Wiener is purportedly pursuing.