How San Francisco’s lengthy permitting process enables corruption

How San Francisco’s lengthy permitting process enables corruption

Director of Public Works Mohammed Nuru and his accomplice Nick Bovis shouldn’t be the only ones indicted in this week’s FBI complaint.

Nuru’s arrest is an indictment of San Francisco’s entire planning system.

On Tuesday, news broke that San Francisco’s public works director was arrested by the FBI along with Bovis and linked to five schemes detailed in a 75-page complaint.

One of the outlined corruption schemes relates to a “multi-million dollar mixed use development” project.

Nuru and his daughter flew out to China in late 2018, according to the complaint. They stayed at lavish hotels owned by a billionaire Chinese developer free of cost.

And when they left? Nuru texted the developer: “Thank you very much for all your generosity while we were in China. We had a great vacation and my daughter had a wonderful time. I will do my very best to see that your project gets completed.”

Nuru first got in touch with this developer through the help of a permit expediter who the FBI alleges had also been bribing Nuru with international trips in exchange for help with the expediter’s projects.

The developer and permit expediter aren’t named in the complaint. It’s now believed, as reported by Examiner columnist Joe Fitzgerald Rodriguez, that DEVELOPER 1 and CONTRACTOR 2 are Z&L Properties and Walter Wong of the Jaidin Consulting Group.

This complaint raises questions about San Francisco’s development process. What is it about The City’s permitting process that’s so complicated that developers need a permit expediter? Does our system itself enable corruption?

Real estate developers need a variety of permits before they can start new housing construction. This process is lengthy, expensive, and complicated.

The average time it takes to get through the permitting process in San Francisco is nearly four years, according to the UC Berkeley’s Terner Center for Housing Innovation. There’s little to no consistency in the time frame of these approvals however. Some projects take as long as 14 years to be approved.

Again, these time estimates are solely for the approval process. The average San Francisco housing development takes over six years to erect including both permitting time and construction.

Any small error on one of these applications can set a developer back months.

For this reason, many large developers hire a permit expediter to oversee the approval process and make sure their project stays on track.

You can think of permit expediters as project managers with extensive knowledge of the industry. Permit expediters have experience working with almost everyone in City Hall, so they can anticipate bottlenecks before they appear.

The FBI complaint released on Monday isn’t the first time that San Francisco permit expediters have been embroiled in controversy.

In 2010, well known permit expediter Jimmy Jen was arrested for forging hundreds of documents that claimed his clients had completed steps in the permitting process that they hadn’t. Jen went so far as to create fake rubber stamps using the names of licensed engineers for these documents.

The City cracked down on permit expedition in 2015. For the first time, permit expediters on large development projects had to register with The City and report their compensation and any city officials they talked to.

“We are not saying that these activities can’t or shouldn’t occur. We are saying that it’s important for the public to know when they occur,” said then-Supervisor David Chiu. “That transparency is critical.”

San Francisco has a more complicated permit approvals process than other cities, which gives developers an incentive to cheat the system.

For example, the John Buck Company has worked on projects in both San Francisco and Chicago concurrently. Their Chicago project was fully constructed before their San Francisco project had received permits, according to Bisnow, a news organization reporting on real estate.

But developers continue to develop in San Francisco due to the high rate of return. Once projects are completed, developers can get away with charging higher rents in San Francisco than they can in other cities.

“It’s tough to get in, tough to get things done, but once you do, there is great stuff to work with,” John Buck Company Senior Vice President Evan Schwimmer told Bisnow in 2018.

Some of the additional steps in San Francisco’s permitting process were added by progressive supervisors in order to cut into developers’ high profit margin and extract community benefits. For example, San Francisco charges higher fees to use for affordable housing than other cities.

But other holdups amount to inefficient bureaucracy.

In Oakland, a permit application is handled by a single planner. But in San Francisco, a single applicant can be handled by three to six separate people, which makes it challenging for applicants to know who to go to with questions.

San Francisco also allows citizens more leverage to challenge new construction than other cities. After initial permits are issued, neighbors can hold up the project in appeals. Complaints as frivolous as “blocking views” are entertained.

Reforming these processes could help to mitigate corruption. If the process were more transparent, developers would be less incentivized to pay for a leg up.

Reforms could also allow for faster construction of housing in exclusionary neighborhoods. On average, permits in San Francisco’s wealthier neighborhoods take longer to secure, according to the Terner Center.

It’s clear that The City needs to take a second look at our permitting process.

But we’d be remiss to ignore a broader issue illustrated through the Nuru complaint.

The City desperately needs more housing, but in our current system, what gets built where is at the whim of private developers. Developers decide what to build where based on what will extract the biggest profit, not by where housing is needed in the community.

Only a long term vision that decouples housing development from the private market will eliminate the incentive to cheat the system to maximize profits entirely.

Perigo is a data scientist and fair housing advocate writing about the San Francisco housing crisis. You can follow her on Twitter at @sashaperigo. She is a guest columnist and her point of view is not necessarily that of The Examiner.

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