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San Francisco scrambles to prep for lawsuits after rejecting 800 new housing units

The policy fight over new housing in the Tenderloin and SoMa neighborhoods is flaring up in what will likely be the first round of lawsuits filed against San Francisco over decisions to block two projects. 

Both decisions may be on shaky legal ground; in both cases, the Planning Commission approved the proposals before they were turned down by the Board of Supervisors last month. At a Dec. 14 board meeting, developers of the two projects rattled their legal sabers with accusations that the supervisors had no justification for rejecting the proposals and were inventing reasons after the fact. The state Department of Housing and Community Development has also questioned the decisions. 

YIMBY Law, a pro-housing group, filed suit against the city and the Board of Supervisors on Dec. 30, alleging the decision to block construction of a housing project at 450 O’Farrell St. in the Tenderloin violates the state Housing Accountability Act. The decision was made at an Oct. 5 Board of Supervisors meeting after a Sept. 28 hearing of an appeal of the project’s conditional use permit. 

The Housing Accountability Act allows petitioners to sue cities which fail to approve housing projects that meet their established zoning rules and other established criteria. 

At the  Dec. 14 meeting where the findings associated with the decision were published, YIMBY Law Director Sonja Trauss described those findings as “embarrassing.” She noted that one published finding for denying 450 O’Farrell was on the grounds that the project was not financially viable. She then pointed out that a similar project, the Panoramic Cityspace at 1321 Mission St., was purchased by the city for use as permanent supportive housing. 

Letitia Moore, an attorney with Holland and Knight who is representing the developers of the Tenderloin project at 450 O’Farrell testified that “the board’s disapproval of the planning commission’s decision is a clear violation of state housing law, including the Housing Accountability Act. … The project complies with applicable objective standards. The statutory deadline for the city to contend otherwise has passed.” 

In a letter accompanying her testimony, Moore noted that the California Department of Housing and Development had expressed concerns to San Francisco over the supervisors’ “effective denial” of 450 O’Farrell, as well as the practice of “prior Planning Commission approvals of significant housing projects being overturned … without any documented findings.”

Randy Shaw, director of the Tenderloin Housing Clinic and opponent of 450 O’Farrell, says that using the Housing Accountability Act to attack the conditional-use process would be “a big mistake,” particularly in the Tenderloin, which already has density-friendly zoning.

Rafa Sonnenfeld, director of Legal Advocacy at YIMBY Law, disagrees. 

“We think the law in this case requires the city to approve (450 O’Farrell),” Sonnenfeld told The Standard.  “We’re not saying that cities can’t have a conditional-use process. But when a project is covered under the Housing Accountability Act, only the objective components of the conditional-use process should apply.” 

Shaw and some other Tenderloin activists withdrew their support for 450 O’Farrell when the Fifth Church of Christ, Scientist — a group that wants to build a new house of worship along with the 316 single-room apartments — changed developers for the project and went with a  “group housing” format, which provides a larger number of single-room apartments. This is different from the previous plan, which had a mix of floor plans including units deemed more suitable for families. 

“Group Housing” developments have been targeted by the Board of Supervisors. District 3 Supervisor Aaron Peskin recently introduced two new ordinances which would tighten regulations over them. 

Richard Hannum of Forge Development Partners, the current developer of 450 O’Farrell, maintains the project has fallen victim to misinformation. He says previous developer Trammell Crow “broke their pick” on a plan that “simply couldn’t be financed” when the market changed.

Neither Hannum nor other representatives of Forge would comment on the litigation, but sources close to the case say the developer is considering a parallel suit in Federal court. 

The Supervisors also enraged state officials and pro-housing groups in a controversial decision at an Oct. 26 hearing when it blocked development of 469 Stevenson St.,  a proposed 495-unit apartment complex on a Nordstrom’s parking lot in SoMa. 

The 27-story tower on  Stevenson would have included 495 dwelling units ranging in size from studios to five bedrooms, 24% of which would be affordable. It’s become a cause celebre in the housing activist community, as well as for District 6 Supervisor and state Assembly candidate Matt Haney

YIMBY Law’s Trauss announced her intent to sue San Francisco over 469 Stevenson in a promotional video last month. Sonnenfeld says that a lawsuit could be filed next week. 

Sonnenfeld admits the two cases have some differences. While the 450 O’Farrell case is over a conditional-use permit, 469 Stevenson is over an appeal under the California Environmental Quality Act (CEQA). “It’s a bad faith use of CEQA review, to effectively deny the project,” says Sonnenfeld.  “For these state laws to be meaningful, there has to be some way for the CEQA process to be contained in a reasonable amount of time.” 

Other advocacy groups may join in the fight.

Dylan Casey, executive director of the California Renters Legal Advocacy and Education Fund, or CARLA, a housing advocacy law firm, told The Standard in December that  “both decisions are in violation of state law and we are reviewing whether to take legal action on our own. We try to use our resources where they make the most difference.” Casey also noted that the California Office of the Attorney General and state Department of Housing and Community Development are investigating. 

A spokesperson for Housing and Community Development told the Standard that the agency is “still reviewing findings and cannot provide further comment at this time.”

The litigation on both projects puts San Francisco’s new city attorney, David Chiu, in an interesting position. His office is charged with defending the interests of both the Board of Supervisors, which denied the projects, as well as the Planning Department, which supported them. Jen Kwart, communications director for City Attorney Chiu, told The Standard, “We are reviewing the complaint and will respond in court.”