San Francisco's Large Central South of Market Upzoning Finally To Take Effect In January
Capturing lightning in a bottle: As fast-growing San Francisco concludes its largest rezoning in 10 years, will its novel new urban-planning guidelines for South of Market represent what the city's downtown needs in a fast-moving business, cultural and economic environment?
In early December 2018, the San Francisco Board of Supervisors gave final approval of the "Central SOMA Plan," (the Plan) resulting in the largest rezoning of the commercial heart of the city since the renowned Downtown Plan was adopted in the 1980's. The Mayor has indicated she will not veto it, and it will take effect in January 2019. The Plan covers about 230 acres and is intended to generate $500 million for local and regional transit improvements. San Francisco has published a study stating that the plan will result in $2 billion in public benefits for the neighborhood while generating $1 billion in revenue for the city's general fund.
About seven years ago, San Francisco started to fear that its high-tech boom was creating an office space demand which, if not addressed, could cause the loss of its financial and tech sector, and thus, doom the city's extremely generous social services and the progressive values for which the city is known. A rezoning process that lasts five or more years, as this one has, tends to span cycles during which a city's needs can change.
During the last two years of the city's central SOMA rezoning, the well-known housing supply crisis reached epidemic proportions. As a result, during the last six months, the Supervisor for this District, Jane Kim, amended the Plan to create more zones for housing, and fewer for offices, resulting in a change from an original 6-1 ratio of jobs to housing, to a less than 4-1 ratio. It is estimated that this will create additional new dwelling units of at least 1,240 more than what was previously planned, and a commensurate reduction of at least 4,750 new jobs. However, the majority of newly zoned lots will encourage office development. At least three large new office developments will now quickly move through the approval process with the possibility of starting construction next year.
Inspired by the landmark zoning rules of New York City in the 1920s, that require the "sculpting" of the upper floors of towers to preserve light to the street, the Central SOMA Plan has two features to accomplish this. First, an "urban room" concept that limits the height of new buildings at the street property line to a height equivalent to the width of the street. Second, there is a "skyplane" concept requiring upper story setbacks above the base building, and the sculpting of the upper building to push the building's mass away from the street. Light to the street will also be enhanced by a requirement that towers over a certain height be separated by 115 feet, with several exceptions.
For the first time, the Plan will allow the sale of Transferable Development Rights (TDRs) to new buildings within the plan area. TDRs are rights held by owners of historic buildings who can give up development rights on their lots. An example of this would be the right to add a vertical addition, in exchange for selling such development rights to developers of new buildings whose lots do not allow as much development as needed. The Plan requires that a nonresidential project receiving an increase in development capacity via the Plan must purchase TDR's from historic buildings. This is a historic preservation tool since those selling these "air rights" over historic buildings must agree to no longer add square footage to their buildings, vertically or otherwise. For the most part, proceeds of sales of air rights must be used for future maintenance and repair of the historic building. The developers of larger, new office buildings will be required to purchase TDRs from historic buildings, if the project is opting to utilize greater zoning allowance than allowed under preexisting zoning.
With only 49 square miles and the overwhelming percentage of lots zoned for 30 to 40 feet, one obvious solution for San Francisco to intensify land use was to allow greater height in the central SOMA district. Most of the current district is zoned for heights of 85 feet or less. This plan creates certain areas, generally near the Caltrain Station, along 4th Street, and adjacent to the Downtown Plan area and Rincon Hill, where height limits will be changed to 130-160 feet. A limited number of lots nearby will allow towers 200-400 feet in height.
The Plan also includes new development impact fees and taxes to fund proposed community benefits, including community facilities, transit, affordable housing, and open space. These exactions would be imposed by tiers based on height increases given, since greater allowed height means developers will have more profits from which to pay such exactions. One exaction tier covers 15-45 feet additional height, another 50-85 feet, and another 90 feet or more.
San Francisco has published a study stating that the Plan will result in nearly $2.2 billion in public benefits over a 24-year period. This is over 400% more than the $500 million in public benefits that would be expected to occur if the Plan was not adopted. Most of these public benefits would be provided by new development and be directed back to the district, while generating $1 billion in revenue for the city's general fund.
The $2.2 billion would be generated through a combination of three mechanisms: (1) specific development projects, e.g. assigning a value to on-site affordable housing units, (2) a one-time impact fee paid when a project is ready to start, such as a Jobs-Housing Linkage Fee and Plan Area fees, e.g. an Eastern Neighborhoods Infrastructure Impact Fee, and (3) ongoing taxation through a Mello Roos Community Facilities District. The new Central SOMA project fees also include the Central SOMA Community Services Facilities Fee, and the Central SOMA Community Infrastructure Fee. These supplement existing fees such as a Transportation Sustainability Fee.
San Francisco has recently passed California's first "Housing Sustainability District," (HSD). The new "Central South of Market Housing Sustainability District" will allow residential projects that meet certain standards to take advantage of a 120-day streamlined review and approval process, assuming no appeals.
The intent is to allow sponsors of residential projects to receive faster approvals in return for including at least 10% of dwelling units on-site as affordable to very low- or low-income family households and in return for paying "prevailing wages" (or using "skilled labor" for the construction of the project). In most cases, that means union jobs. In return for creating HSDs, San Francisco is entitled to receive a "zoning incentive payment" from the state.
To qualify, individual projects must meet all of the following eligibility criteria:
Many of the central SOMA lots rezoned to allow residential or office have existing zoning limited to industrial uses known as Production Distribution and Repair (PDR). To insure the preservation of PDR space and the creation of new PDR space, the city will allocate $180 million in revenues over 25 years to the creation or preservation of PDR space, with the goal that there will be no new net loss of PDR.
Projects proposing at least 50,000 square feet of new office use will be required to include PDR in the project. The on-site amount required will be either 40% of the total lot area of the project or replacement space required under a pre-existing PDR replacement law known as Proposition X, whichever is greater. Alternatively, developers can provide the required onsite amount at an offsite location at 1.5 times the amount that would be required if built on-site.
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