Supervisors Katy Tang and Ahsha Safai have introduced legislation that is intended to attract small businesses to their respective districts by shortening the entitlement and construction permitting process. The legislation proposes to create a two-year program that will allow small businesses to set up their businesses and streamline the permitting process that, currently, can take six months or more to complete. The legislation would also allow a reduction in the time required for permits necessary for a storefront to switch from one use to another — if a laundromat were converted into a restaurant, for instance. This currently requires a Zoning Change of Use. Further, in many cases, uses are not allowed without securing a Conditional Use Permit (CUP). Tenants are often required to secure both permissions, a very expensive and time-consuming process.
If a business wants to go into a space that requires a CUP, not only does it have to wait six months or longer to move through the review and public notification process, but it also has no guarantee that the CUP will be approved. Additionally, property owners are generally not willing or financially able to wait for such extended periods without rent being paid. As a result, the business and the property owners are immediately faced with enormous financial risk just to start the process. In addition to filing for and paying for the CUP application, businesses must also hire attorneys, consultants and architects to help with the filings and move the process through to the approval hearing. As it stands, the process is very cumbersome and overwhelming, particularly for businesses that are newly formed or new to the market with no prior experience with the process. The process contributes to businesses choosing not to locate in San Francisco.
As a commercial real estate broker, I commend both supervisors for introducing this legislation. However, it is disappointing they are doing so without looking for feedback, input and suggestions from the brokerage community. We, along with our colleagues at large, are the people that actually help businesses to put these deals together, ultimately bringing valuable goods and services, jobs and tax revenue to our city. Brokers are the front line of this process. We must be able to convince both landlords and tenants to come to agreement and then follow through on the process. I encourage the supervisors to utilize our collective knowledge and experience to craft solutions that encourage retail businesses to locate in San Francisco, and to thrive following opening for business to the public.
We want to see a streamlining of the process but believe it needs to be for all retail ventures. With the explosion of online retailing, retail is facing challenging times. Coupled with a very high cost of living, difficulty securing qualified employees, increasing wages, increasing cost of goods and products, high taxes and many other factors, adding a very difficult and costly approval and permitting process makes operating a retail business in San Francisco extremely difficult. We need to make San Francisco welcoming to all business that want to serve our community.
We also believe that neighborhoods need to rethink their formula retail laws and find ways to streamline that process as well. It is equally unfair for a formula retailer to have to wait nine to 18 months to learn whether their business will be approved. In addition to the lengthy time required, the cost of the process is highly prohibitive, ranging from $60,000 to more than $200,000 per store location. This money primarily benefiting attorneys and consultants, not the neighborhoods or The City. Currently, the vast majority of formula retail applications for businesses do get approved by The City. With this high an approval rate, it should not take this long to find out the results. We believe that to begin the process of streamlining, we should also include any retailer, and if after notifying the public for 30 days there is no public opposition, their uses should be approved and then proceed to construction permits. If they are contested within the 30 days, The City should then make a determination if the opposition has merit. If the opposition is deemed frivolous, then they should proceed to permit. Both of these additions would not require major changes to planning or costs to The City.
I invite all members of the Board of Supervisors to reach out to our brokerage community. We are your partners to help retail succeed in San Francisco.
Hans Hansson is president, principal and founding partner at Starboard Commercial Real Estate.