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City easing onerous approval process for accessory dwelling units

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San Francisco’s program to permit accessory dwelling units has resulted in just 81 new homes, a low rate that city officials are trying to fix. (Jessica Christian/2016 S.F. Examiner)

San Francisco’s program to permit accessory dwelling units, or in-law units, has resulted in just 81 new homes, a low rate city officials are keenly aware of, and trying to fix.

The low number of units is blamed primarily on the onerous process applicants have had to go through and the challenges associated with fire codes of building units within old buildings.

A Civil Grand Jury report issued in July identified the challenges and recommended fixes — most of which city departments have or will implement — and that was followed by a directive from Mayor London Breed issued on Aug. 30 to streamline permitting and clear the backlog.

The program allows units within existing structures like garages or basements. It began in 2014 in just two neighborhoods but was expanded citywide in 2016 as the pressures of a housing crisis prompted San Francisco to try new strategies.

The San Francisco Examiner first reported in February the lack of unit approvals and complaints about the permitting process.

“We acknowledge that the lengthy permitting process and strict building codes are one reason more ADUs have not been built,” Breed wrote in a Sept. 3 response to the civil grand jury report. “Through better coordination between City departments, permitting times have already fallen significantly.”

Breed said in the letter that “from this point forward, it should only takes four months for the City to review a completed application to construct an ADU and only six months to clear the 900 unit backlog of permits.”

The Board of Supervisors Government Audit and Oversight Committee held a required hearing on the civil grand jury report last week.

P Segal, who sat on the civil grand jury investigating ADUs, told the committee there were two reasons building owners weren’t more interested in the program.

“The two things that stood in the way the most was the permitting process that has taken a very long time and the cost of permits,” Segal said. “In three other cities where permit costs have been lowered the number of ADUs under construction increased dramatically.”

Supervisor Aaron Peskin said during last week’s hearing that “the permitting process has been streamlined to a great extent.”

But Peskin didn’t agree with the recommendation by the grand jury to reduce or waive fees to encourage more participants.

To construct an ADU can cost about $200,000, depending on the complexity of the job, and permit fees are about 10 percent.

“It’s a relatively small percentage of the entire package,” Peskin said. “I agree that lower fees are an incentive but I don’t know that this is where the bottleneck is occuring.”

Instead the committee recommended the City Controller’s Office study the permit fees and report back in six months to determine if its influencing homeowners whether to pursue them.

Peskin pointed to another challenge for property owners and that was to secure financing. He said he was in talks with the San Francisco Federal Credit Union and believes they will offer a loan for ADU projects within 45 days.

He said many of applicants have been “large apartment owners who know the system and have access to financing.”

“The part of the potential market that we are not exploiting is the 125,000 single family home owners,” Peskin said. “The largest barrier to entry is getting a loan product that would allow them to recoup that over the life of the rental property.”

Segal agreed financing was a challenge. “This was not in the report, but it would be great if we had a city bank to offer loan interest loans to people who would like to do this,” Segal said. “There is very little available financing through conventional banks.”

The City is exploring opening a public bank that could help.

To date, the program has resulted in 81 accessory dwelling units, Marcelle Boudreaux, who manages the program for the Planning Department, told the committee last week. Another 393 units were approved for construction she said. The demand is high. She said overall the program has received nearly 900 applications for one or more units.

The Planning Department has estimated the program could yield as many as 16,000 units over the next two decades.

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