The San Francisco Planning Department is under pressure from all sides to develop more affordable housing and to improve the efficiency of San Francisco’s planning process. Critics in search of answers to what has caused The City’s affordable housing crisis have started to point to the entire entitlement process as a leading cause of why housing prices are so high while supply remains so low.
The issues faced by the San Francisco Planning Department are a classic example of what happens when a critical department succumbs to political pressure and implements needless regulations and bureaucratic red tape.
On top of the red tape, there are no checks and balances in place to ensure that the planning department works with permit applicants, so San Franciscans have come to view the planning department as a deterrent, further impacting development in The City. The chart above illustrates the multiple steps involved in getting a project entitled in San Francisco.
To begin building from scratch in San Francisco, a developer is easily looking at two years and millions of dollars. I’m currently working with a developer who is interested in an 8,000-square-foot site. The developer is expecting to spend $2 million with the San Francisco Planning Department for a process that will likely take three years to finalize if he runs into opposition from the department.
This is a prime site, yet only a few developers are interested in taking the risk of going through The City’s permit process, since any project started today has at least four years before it can enter the market.
No one knows what kind of market we will be in four years from now. The latest tech boom is in its seventh year, and we’ve seen San Francisco transition from a boom to a bust market and back again over the last 30 years. Many sense a bust is inevitable, and may happen soon. If your project enters the market in four years, you could be starting to sell in a bust market.
As a result of permitting delays, many projects have been built cheaply and will not last the test of time. After waiting so long, and with costs so high, once developers do get a permit, they want to build as quickly and as inexpensively as possible. As a result, new buildings lack character and architectural integrity.
If developers had a faster, streamlined approach to the permit process, they would take on less risk and be able to bring their properties onto the market sooner, resulting in better buildings.
San Francisco officials are quick to point to the complex nature of our city as a reason for the complicated permitting process, highlighting that San Francisco is 49 square miles of the most congested population in the U.S. However, if you compare cities like New York to San Francisco in terms of the permit application process, you will see that developers have much more red tape to navigate before a project begins. As a result, developers in New York are able to secure a permit with less uncertainty and develop better, higher quality buildings.
The buzz word on everyone’s lips today is affordable housing, yet affordable housing is another program administered by the government lined with red tape, making applying for a unit very uninviting.
If San Francisco truly wants to solve its housing crisis, The City needs to find a way to streamline the permit process and move current projects in the pipeline forward.
Overall rental rates have already dropped around eight percent this year since new units have hit the market. By allowing current projects to be built faster, The City will increase supply to meet demand, solving the city’s housing crisis.
Hans Hansson operates Starboard TCN and StarWest Property Management and has more than 25 years of experience as a real estate broker.