Assembly Bill 1633, signed into law by Governor Newsom on October 11, 2023, aims to ensure that cities in California cannot reject certain housing projects if they meet specific conditions. The bill sets criteria, stating that if a housing project is not in a hazardous area but in an urban zone close to public transportation, with a density of at least 15 dwelling units per acre, and qualifies for an exemption under the California Environmental Quality Act (CEQA) without any substantial evidence that an exception applies, it cannot be turned down by the city. This law will come into effect on January 1, 2024.
According to recent reports, California faces a significant shortage of two million housing units, requiring the addition of at least 180,000 new units each year to keep up with population growth until 2025. However, a review of San Francisco’s housing policies revealed that the city’s process for granting entitlements to housing developers takes an average of 523 days, significantly longer than the state average of 385 days. Furthermore, the delay continues with an additional 605 days for the city to issue building permits, compared to the state’s average of 418 days.
San Francisco is falling significantly behind the state’s target of constructing 82,069 housing units, including 5,825 affordable units, by 2031, which amounts to 10,259 housing units annually. The report highlights that the city’s local development review rules are not in line with the state’s Housing Accountability Act, which prohibits the rejection of specific housing projects meeting certain objective criteria.
Recent amendments to the act aim to compel San Francisco and other cities in California to accelerate the approval and construction of housing units. This is particularly significant as the bill seeks to streamline the CEQA review process, which often involves time-consuming studies, public hearings, and appeals that can needlessly delay or terminate a project, even when there are no significant environmental impacts.
The focus is now on expediting the progress of housing projects through entitlement and permitting stages to address the pressing housing shortage in the state.
The commercial real estate oversupply could also help alleviate some of San Francisco’s shortfall of new residential units. If commercial landlords think outside the box and try to convert available commercial assets, sitting vacant, into residential units there may be an avenue for progress. Various efforts are being made in California to repurpose vacant commercial properties for residential use, in response to the pressing need for affordable housing units. This has been a particularly crucial issue in the face of rising real estate prices and housing shortages in many parts of the state. Several initiatives and legislative measures are being considered to facilitate the conversion process.
Some potential strategies include:
Local Government Policy Changes
Some local governments are considering changes to zoning regulations and building codes to make it easier to convert commercial spaces into residential units. This might involve streamlining the permit process and reducing certain requirements for repurposing commercial buildings like parking, setbacks, fire separation walls, etc.
Financial Incentives to Property Owners
In some cases, financial incentives were being proposed to encourage property owners to convert vacant commercial spaces into residential units. This might involve tax breaks, tax credits, grants, or low-interest loans to offset the costs associated with the conversion process.
Public-Private Partnerships and Collaborations
Public-private partnerships were being explored to facilitate the conversion of vacant commercial properties into affordable housing units. These partnerships might involve collaboration between local governments, developers, and community organizations to streamline the conversion process and ensure that the resulting housing units meet the needs of the community and were safe for human habitation.
Community Engagement
Community engagement and input were considered vital in the process of repurposing vacant commercial properties. Involving community members in the planning and development process could help ensure that the resulting residential units meet the needs and preferences of the local population.
Final Thoughts
Assembly Bill 1633 is another avenue to improve the affordability of housing in California. Conversion of commercial space to residential units is another. We all need to think outside the box to improve the overall housing situation – and we all need to be flexible in the solutions and potential outcomes to keep California moving forward and remain the number five economy in the world.
David currently is the broker/owner of several real estate related businesses which manage and maintain 300+ client properties on the San Francisco Peninsula.
Trust, transparency, and performance guarantees are the foundation of these businesses. David challenges anyone to find a PM professional that offers services similar - extensive education, customer service, and performance guarantees.
David also provides consulting for his clients on property development feasibility, construction, and complex real estate transactions.
David has authored a published law review article, two real estate books, and over 120 real estate blog articles.
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