(OLA #: 005-03)

LEGISLATIVE ANALYST REPORT

To: Members of the Board of Supervisors

From: Willow Schrager, Melissa Sills, and Greg Wagner with Adam Van de Water, Office of the Legislative Analyst

Date: June 11, 2003

RE: San Francisco Housing Development

Summary and Scope of Work

Supervisor McGoldrick requested that the Office of the Legislative Analyst (OLA), working with graduate students at UC Berkeley's Goldman School of Public Policy, research barriers to residential housing development in San Francisco and provide possible courses of action the Board of Supervisors could take to overcome them. As part of this analysis, the OLA is requested to compare San Francisco to other comparable cities and to consult with appropriate stakeholders in the development of any recommendations or conclusions.

Executive Summary

San Francisco consistently falls short of its housing production goals. Over the past decade, housing production has not kept pace with employment and population growth. As a result, housing has become unaffordable for many of the city's residents, commuting to jobs in the city has increased, and many of the city's households are becoming overcrowded. These trends threaten the health of the City's economy, citizens, and natural environment. If the City does not take new steps to stimulate housing production, these trends are expected to continue.

There are several strategies the City can pursue to meet housing production goals. These strategies involve reducing the direct costs of construction and the uncertainty costs of the development process. By reducing these costs, the City can encourage housing production and create more competition in the development market. This report details the following strategies for stimulating housing production:

Many of these policy changes will create significant cost savings to housing developers. The City benefits from these costs savings because more profitable development opportunities draw new developers into the market and increase the overall housing supply. The City can also benefit by making regulatory changes designed to increase affordable housing production or increases in developer fees that can be used to fund City services.

Many of these strategies can be packaged to create comprehensive approaches to neighborhood development. Comprehensive approaches involve one community-wide planning process that allows for substantial community input and requires significant upfront investments from the planning department. Developers are willing to fund such programs, however, in exchange for the cost-savings they create in the long-run. The City also benefits in the long-run from increased housing development, well-planned communities, and happy residents.

Introduction

San Francisco's Plan for Housing Development identifies matching housing growth to job growth as the primary housing goal for the city. Over the past decade, however, employment has increased by 9 percent in San Francisco, while the housing stock has increased by only 5.5 percent.¹ Between 1990 and 2000, the population growth of San Francisco also outpaced housing growth. As a result of this increase in the need for housing, a shrinking proportion of San Francisco's workers are able to live within the city and growing proportions are commuting from surrounding areas. The remaining San Francisco residents have faced dramatic increases in housing costs, leaving many without affordable housing options.

San Francisco's Housing Crisis

The supply of housing in San Francisco increases by about 1,200 units annually, while the need for housing is projected at about 2,700 units annually through 2006. This disparity leads to increased commuting, over-crowding, low vacancy rates, and escalating housing prices. Over the past decade, 60 percent of new jobs in San Francisco were filled by commuters rather than residents, and this trend is projected to continue through 2010.² Census data show that 30 percent of rental and 11 percent of owned housing is overcrowded in San Francisco. In addition, vacancy rates reach as low as about 2.5 percent during the economic boom of the late 1990s and early 2000s, which is about one-half the national average.³ These low vacancy rates are associated with escalating housing prices, as would-be residents compete for the relatively few available units and consequently bid up the price of housing.

San Francisco's housing prices are also among the highest in the nation. In 2000, the National Association of Home Builders estimated that 60 percent of all homes sold nationwide were affordable to a family earning the national average household income. In contrast, only 6 percent of home sales in San Francisco were affordable to households earning the area median income. As job growth outpaced housing development in San Francisco, sale prices for the average single-family home increased by 86 percent and rental prices increased by 175 percent over the past decade. Even in less expensive areas, rent for the average household size does not fall below $2,105, which is over 150 percent of what low-income households can afford.⁴

These dramatic increases in the price of housing create pressure on employers to compensate their workers for high housing costs and lengthy commute times with higher wages. San Francisco employers already pay higher wages than other U.S. cities, as Table 1 indicates:

Table 1. Annual Median Base Salaries by U.S. City

Source: The San Francisco Partnership, San Francisco's Business Climate: Quick Facts.

To the extent that the housing needs of San Francisco's workforce continue to go unmet, employers will experience increased pressure to pay higher wages and will no longer remain competitive with businesses located in other U.S. cities. Meeting the City's housing goals is, therefore, directly linked to maintaining the health of the San Francisco economy. Although San Francisco employers pay higher wages than other cities, on average, incomes in San Francisco have not increased enough to match increasing housing prices. The Association of Bay Area Governments (ABAG) has created housing targets for the city's workforce. The following table shows the ABAG targets for the past decade and the failure of new housing construction to match the projected need for households at different income levels.

Table 2. San Francisco Housing Targets and Total Production (1989-1998)

*Source: SF Planning Department, Housing Element: Final Draft for Public Review, February, 2003.

As shown in Table 2, San Francisco has fallen short of housing production goals at all income levels. Market rate housing has been produced at a higher rate than housing for households at lower income levels, but still falls short of its goal by roughly 400 units per year. The development of housing for low- and moderate-income residents has fallen far short of targets for the past decade. Employment projections indicate that job creation at low and moderate income levels will continue to outpace additional housing development that is affordable at these levels.

Table 3. Projected Occupational Growth by Income Category

*Source: California Employment Development Department. Available: http://www.calmis.cahwnet.gov

As shown in Table 3, San Francisco's workforce will continue to need housing growth at all income levels and especially for very low income workers. City efforts to increase housing affordability and growth should begin with an understanding of how City regulations impact housing prices and supply.

Effects of Regulation on Housing Prices and Supply

Growth controls and regulations drive up the price of housing. Because regulations can reduce the ability of housing suppliers to respond to the demand for housing, vacancy rates decline as demanders compete for existing units, and housing prices rise accordingly. There is a substantial body of economic research showing that, when controlling for other factors, higher levels of regulation prevent housing construction from responding to increases in demand, and consequently drive up housing prices. In the late 1980's Lawrence Katz and Kenneth Rosen found that the presence of strong growth controls increased housing prices between 17 percent and 38 percent. In a more recent analysis of 56 U.S. cities, Stephen Malpezzi found San Francisco to have the highest level of housing regulations of any city and, consequently, the highest rent and purchase prices for housing. Based on this study, Malpezzi concluded that a high-regulation city would have rent prices 17 percent higher and purchase prices 51 percent higher than a city with low levels of regulation.

In addition to housing prices, high levels of regulation also affect the quantity of housing supplied. In the same study discussed above, Malpezzi estimates that high-regulation environments reduce development permits by 42 percent relative to low-regulation environments. Thus, fewer projects will go forward into development where regulation is high and housing supply will be restricted. The Malpezzi study also showed that high regulation levels have the indirect effect of reducing home ownership rates by about 10 percentage points.⁵

Although regulation has been shown to increase housing prices and reduce housing supply, regulation may also create substantial benefits for the City. Housing development regulation allows the City to control traffic and congestion and protect the environment. Regulation also allows the City to pace and prepare for the new infrastructure and public services costs associated with new residential development. If the City cannot provide the infrastructure and services new residents will need, for example, it may be beneficial to slow growth through regulation. Finally, many of San Francisco's regulations on housing development benefit current residents by granting them the power to maintain their neighborhood character through development reviews.

Restricting housing growth, however, can also impose a number of costs on the City. The current disparity between housing supply and need threatens to weaken the economy by giving other cities a comparative advantage in the labor market. High housing prices lead to commuting and overcrowding, which reduce the productivity and health of employees and citizens. In addition, the transportation system and natural environment of the Bay Area continues to be heavily burdened by high levels of commuting. The diversity of the City is also threatened as housing prices escalate and economically less-advantaged groups are pushed out of the San Francisco housing market. These groups may include low-income workers, racial and ethnic minorities, large families, seniors, and young adults. Lastly, homeownership, which may create numerous social benefits including improved maintenance of the housing stock, greater political stability, and less gentrification, is very low in San Francisco.

When the City chooses to create or maintain regulations on the housing market, it should do so because the benefits of these regulations outweigh the costs. Successful regulation, however, requires government to have extensive information about markets, costs, and benefits. This report provides information about the costs and benefits of the current regulatory environment in San Francisco. Ultimately, the recommended strategies are those that will reduce costs while maintaining or increasing benefits to the City.

Direct and Uncertainty Costs of Housing Development

Housing supply will increase in San Francisco as barriers to development are lifted or altered. Barriers to development include high direct costs of construction and high uncertainty costs associated with the development process. Direct costs are the explicit financial costs of creating housing, and include things such as land, labor, construction materials and fees. In San Francisco, the direct costs to housing development are among the highest in the nation. San Francisco is a mature city and much of the land available for residential development has been built out. In addition, the city is surrounded on three sides by water, which limits expansion. Construction costs are also relatively expensive due to higher labor wages and low-density construction. These factors drive up the price of development and, as a result, reduce the supply of housing overall because fewer projects are profitable. Many of these direct costs cannot feasibly be reduced through local policy, at least in the short term. For example, the costs of construction materials are determined in the national market, and labor costs are determined through negotiations largely outside of the City's control. Land costs are one of the few direct costs that can vary substantially over time. Unlike construction costs, which are relatively fixed over time, the cost of acquiring a given piece of land is determined by the value of the housing that can be built on it, making land much more expensive in a city like San Francisco where housing prices are high. To the extent that new housing supply can lower housing prices, land values will decline over time, further lowering costs and allowing even more new housing to be built.

High direct costs dramatically reduce the supply of low- and moderate-income housing because developers are least able to recoup these costs with sales or rentals to low- and moderate-income residents. Thus, for-profit developers rarely take on projects benefiting low- and moderate income residents because these projects result the lowest rate of return.

Uncertainty costs include the level of risk developers take on when they choose to build. All developers experience uncertainty in the building process because real estate markets can change in short periods of time and, therefore, developers build margins into their profit estimates to protect against these fluctuations. The development process in San Francisco, however, introduces added risk surrounding the permit and approval process. When the development process is highly uncertain, developers will build high margins (20 percent or more) into their estimates to protect against possible losses and only take on projects that allow them margins at this level. Reducing the uncertainty in the process will allow developers to reduce their margins and take on more projects, including projects that include more affordable units.

Taken together, high direct and uncertainty costs reduce competition in San Francisco's housing market. Competition is reduced by high direct costs because new developers have greater difficulty gaining financial backing even for small (but costly) start-up developments. The inaccessibility of funds represents a high fixed cost to entering the market. Competition is also reduced by high uncertainty costs because new developers face the costs of acquiring political capital necessary to increase certainty surrounding the development process. New developers must also acquire information about a complicated set of regulations in San Francisco. These investments in political capital and information also represent fixed costs of entering the market and, therefore, act as barriers. Strategically reducing barriers to development and increasing competition will improve the long-term health of the local housing market.

Strategies to Reduce the Direct Costs of Development

San Francisco can pursue a number of strategies to reduce the direct costs of development, including:

(1) Rezoning land use to increase the supply of land available for housing development;

(2) Relaxing Floor-to-Area restrictions for housing development downtown;

(3) Increasing height and density allowances along major transit corridors;

(4) Providing direct subsidies to affordable housing developers;

(5) Altering parking requirements; and

(6) Maintaining consistency of development fees.

The current development conditions often create a lose-lose scenario for both developers and the City. Reducing the direct costs will result in an overall gain which can be shared. Gains to developers will lead to increases in housing supply and more competition in the market. In some cases, if direct costs are reduced for developers, the City will benefit from these gains through higher fees, and the increased provision of affordable and reasonably priced units associated with a healthier housing market. The City will also benefit because lower direct costs mean that a greater number of affordable housing units can be built with current subsidy levels.

1. Rezone land use

Land use regulations designate land that can be used for commercial, industrial, or residential purposes. Although zoning can benefit the City, economic analyses have revealed that land use regulations also drive up the price of land. In the early 1990's, Krisandra Guidry, James Shilling, and C.F. Sirmans showed that the average lot price in unrestrictive cities was $23,842, compared to $50,659 in restrictive cities.⁶ While land use regulations have a direct effect on land prices, they also have an indirect effect on housing prices because they increase the direct costs of building housing. Along with Philip Srinivasan, Shilling also found that cities with land use regulations have housing prices 3 percent higher than cities without these regulations.⁷

In San Francisco, about 65 percent of land available for development is zoned for commercial/industrial uses, and less than 3 percent of the City's land is currently undeveloped and available for residential development. ⁸ One way to address the direct costs of land in San Francisco is to rezone some land for residential purposes. Much of the land in the Eastern areas of San Francisco is currently zoned only for industrial or commercial purposes. These land use regulations were created decades ago to protect industrial space in the city. However, the manufacturing industry has declined over time and adjustments could to be made to ensure the best use of available land.

The Planning Department's City-Wide Action Plan includes numerous options to rezone some of the Eastern areas of the city to accommodate residential housing and mixed use buildings. This study outlines three options for rezoning the Eastern neighborhoods to provide more land for residential purposes. All of the options maintain industrial spaces, but some offer more housing than others. The plans under consideration show that rezoning in these areas could have a large effect on potential housing construction. For example, if the City pursued a moderate option (Option B, see Figure 1), the housing capacity of the city would increase by about 22,600 units. Moderate land use rezoning of Eastern neighborhoods could result in 8,000 new units produced over the next two decades, which would make up almost 25 percent of the annual shortfall in new housing production.⁹ Other options under consideration would allow even higher amounts of new construction.

Benefits to the City will be maximized if efforts to change land use target areas that have sufficient infrastructure to accommodate residents without tremendous public costs and/or allow for appropriate time horizons to create the necessary infrastructure. Also, changes in land use should focus on land that is underutilized for industrial purposes so that displacement of current land users is minimized. These rezoning efforts will be most effective if they take a neighborhood approach that focuses on producing jobs and commercial centers in addition to residential space. Although the planning of these areas would be costly for the City, the new neighborhoods could generate significant revenue for the City in the long-run.

Figure 1. Moderate Rezoning of the Eastern Neighborhoods

2. Relax the Floor-to-Area Restrictions

Floor-to-area restrictions (FAR), designed to protect airspace and limit office development downtown, could be relaxed for housing development. Currently, the City places limits on the total amount of square footage of building space that can be built on a given block. In some cases developers can exceed this limit, but they must purchase the air space from historical buildings in the area. Because office space is more profitable than housing, it is often not profitable to acquire land and airspace for housing downtown. Relaxing the FAR for housing, but not for commercial space, would give housing a comparative advantage. This area of the city is a desirable location for new housing because it is a transit-intensive and an employment center. The downtown area is also one of the few locations in the city that could accommodate very high-density projects in close proximity to transit without altering the character of the neighborhood.

Housing developers assert that lifting the FAR for housing would have a significant impact on housing development. When interviewed, developers estimated that new housing production could be as high as 10,000 and 25,000 units over time.¹⁰ These are only estimates, and the true increase in housing production that would result from a change in the FAR would depend on several economic factors including how the demand for residential uses of land in downtown would change relative to commercial uses and what additional requirements the City would place on developers. At a minimum, we can conclude that if the lifting of FAR leads to an annual increase of even one high-density development, then this policy change would substantially increase housing production for the City. For example, one new very large development in downtown could produce three hundred or more additional housing units, which represents about 20 percent of the City's annual housing shortfall.

Relaxing the FAR would make housing development more profitable downtown and allow developers to reap substantial gains. The City can share these gains with developers by requiring more affordable housing units or increasing fees that could be targeted toward affordable housing development in exchange for relaxing the FAR. If the City does not place such requirements on developers, some of the gains will accrue to landowners in downtown because they may now be able to charge higher prices for their land. Any additional requirements on developers in downtown, however, would require an economic study to ensure the new burdens will not be set at a level so high as to outweigh the benefits of the change, making development unfeasible. Alternatively, the City could start by asking developers to include more affordable units in exchange for relaxing of FAR and observe the response of developers. Based on this response, the City could alter the original request.

3. Increase Height and Density Allowances

Many San Francisco neighborhoods have strong restrictions on the density of new housing developments. These restrictions are often designed to maintain the character of the neighborhoods and reasonable levels of congestion and traffic. Along high-transit corridors, however, the city is better able to accommodate more residents and higher-density housing. Higher density housing should be also be targeted at high-transit neighborhoods and areas where substantial public services are already in place to sustain new residents. If implemented well, altering density allowances for some areas of the city would reduce the direct costs associated with development and, therefore, lead to more housing production. Figure 2 shows how increasing density allowances could increase housing production:

Increased density allowances allow for more units to be built and make more projects profitable by spreading some of the costs across more units. The City could link these increased density allowances with higher levels of affordable housing. Furthermore, lower costs per unit mean that developers will not have to compensate as much for the production of an affordable unit as the value of the unit will be closer to the cost of producing that unit.

Raising the current height limitations along transit corridors and in residential-commercial neighborhoods would also encourage increases in housing production generally and could allow for the construction of more affordable units. As Figure 3 shows, the City could raise height limitation from 40 feet to 50 feet, which would allow developers to build an extra floor of housing.

Changes to current height restrictions would allow developers to take on some projects that are not currently profitable. For many developments, the cost of adding an additional story or a small number of additional units is small in proportion to the cost of the development as a whole. Because additional units are built at lower cost, the average cost per unit in the development is usually lowered as developers are able to build upward.¹¹ In exchange for the additional profits higher height limits may bring, developers could be required to provide more affordable housing units or increased fees to fund affordable housing. For example, a developer could be allowed to build an extra story, provided that some of the units on that additional story are designated as affordable.¹² Density and height changes along transit corridors will have positive impacts on general and affordable housing production and allow for the introduction of new housing units where infrastructure and services are already in place to serve new residents.

4. Provide Direct Subsidies to Affordable Housing Developers

Construction of affordable housing is often directly subsidized by government. High land and construction costs in San Francisco make direct subsidies particularly important to housing production for low income residents. Although other policy changes could stimulate both affordable and market rate housing development, one of the primary barriers to affordable housing construction is the limited pool of money available for direct subsidies.

Affordable housing developers in San Francisco face many of the same barriers as developers of market rate housing. They may encounter high competition for available land, uncertainty in the approval process, and opposition from nearby residents. But affordable housing developers are constrained even further by the fact that they cannot recover high development costs through charging higher sale prices or rents.

New affordable housing, particularly housing reserved for residents at very low income levels, will not be provided by the market without significant public intervention. It can cost well over $200,000 per unit to develop affordable housing. However, housing that serves a family making 25 percent of the Area Median Income (AMI) (or $19,375 for a family of three) can be rented for only $533 per month, which amounts to only $6,396 per year. Given this wide disparity between development costs and the amount of money that can be recovered through the rental price of these units, it is impossible for developers to provide them at a profit. In fact, a subsidy of well over $100,000 per unit would be required to make such a development feasible. A development with housing units priced for income levels somewhere near 70 percent of AMI would be required for a developer to break even and recover basic development costs.¹³ Even at that income level, it would be impossible to obtain financing on the market for such a development, since financers will not make loans for developments without a substantial projected profit margin.

Some affordable housing production has been achieved through inclusionary housing policies, which require developers to provide a certain percentage of affordable units in market rate housing developments. However, only about 5 percent of affordable housing has been produced through inclusionary requirements in the last few years, and although the new inclusionary housing policy adopted in 2002 is expected to increase that amount, it will not be enough to meet the city's large affordable housing deficit.¹⁴

Historically, the federal government has provided significant funding for affordable housing construction. Over the last few decades, however, annual federal funding for housing construction has declined by nearly $15 billion, leaving local governments responsible for a significant amount of new construction.¹⁵ In 2000-2001, local funding sources were responsible for 86 percent of publicly subsidized affordable housing construction. In recent years San Francisco has provided funding for affordable housing construction primarily through tax-increment financing from Redevelopment Areas and the 1996 Proposition A affordable housing bond, with additional support from other sources such as the hotel tax and job-housing linkage program. ¹⁶

The number of units produced using local funding sources depends on a number of factors. One such factor is the income level that the new housing serves. Housing for very low income residents (below 50 percent of AMI) requires larger subsidies per unit than housing for higher income categories. Thus the City can choose to provide deeper subsidies, which will produce fewer units but serve the neediest people, or more modest subsidies, which will produce more total housing units serving low to moderate income groups. The question of whether to produce fewer highly subsidized units for the lowest income categories or a larger number of units for slightly higher income categories is a policy decision that must be made by City leaders.

So-called "demand-side" strategies, which aim to make housing affordable by increasing the purchasing power of lower-income individuals, have been studied in great detail. For example, subsidies could be used to help moderate income individuals purchase new homes. While such approaches do not directly increase housing production, they can have an impact on the share of new units that are consumed by low- and moderate income individuals. Although such programs are outside the scope of this paper, there is a large body of literature on their effectiveness, and the City may wish to consider them as a compliment to policies emphasizing housing production. It should be noted, however, that using subsidies to ensure permanent affordability of rental units can in many cases distribute the benefits of the subsidies over a larger number of individuals and over a greater length of time. For example, depending on how they are structured, down-payment assistance programs may help an individual to purchase a home at an affordable price, but then allow that individual to later sell the housing unit at market rate. While such programs help to build wealth among lower-income residents, they confer the benefits of the subsidy to one person at one time, without maintaining the affordability of the housing unit over the long-term.

The Proposition A housing has been a primary source of affordable housing subsidies since the first bonds were issued in 1998, and will continue to be until the remaining funds are expended over the next few years. That bond was used to subsidize construction of over 1,300 units of affordable housing, or roughly four full years worth of affordable housing production at the city's average rate of 320 units per year over the last 10 years. A large portion of the units funded by Proposition A have been dedicated to very low income levels. Bond funds can also be an effective means of investing in housing production because they can be used to leverage other funding sources. This is particularly true in light of State-imposed restrictions on the ability of local governments to access other funding sources.

All of the funds from the Proposition A bond are now either spent or committed. As a result, the City will face a dramatic reduction in the pool of subsidies available for affordable housing construction in the coming years. Proposition B, which would have authorized a second affordable housing general obligation bond issue in 2002, did not receive the two-thirds of votes required for approval under State law. However, some State legislators are currently considering a proposal that would allow local governments to determine for themselves the threshold for voter approval of new expenditures. If such a proposal were adopted, San Francisco could potentially lower the threshold for voter approval of housing investment funds from the current 67 percent level, increasing the likelihood that new funding sources will be approved.

In any case, San Francisco will face extraordinary barriers to meeting the projected need for affordable housing without identifying significant new funding sources in the near future, even if other regulatory changes are made to stimulate affordable housing production.

5. Alter Parking Requirements

Current parking requirement regulations are a major barrier to new housing development in San Francisco because they increase direct costs to developers and reduce flexibility to maximize housing production on a given piece of land.

Currently, the City requires one parking space for every new housing unit in many zoning classifications (this requirement is also known as the one-to-one parking ratio). This requirement is much higher than in many dense urban areas. In general terms, strict parking requirements reduce a developer's ability to adapt physical design of a new building (and thus the financial viability of a new development) to match the particular characteristics of a given parcel of land. There are two ways that parking requirements can inhibit developers from maximizing the housing potential of a given site. First, parking spaces are relatively costly to construct, especially in a dense urban area such as San Francisco, where a parking lot cannot be easily constructed on an adjacent piece of land. Estimates of the cost of constructing parking range from $17,000 to $50,000 per space. This expense adds to the average development cost per unit, and therefore increases the amount of money that must be recovered in sale prices or rental rates. For affordable units, the increased costs mean greater subsidies must be provided to make development financially viable. Second, parking occupies physical space that could otherwise be used for additional housing units. In addition, the requirements can reduce the height or density of developments because only a limited number of parking spaces can be economically constructed given the geometry of the land parcel, thus limiting the units accompanying them.

The Cost of Providing Parking

At a cost of $17,000 to $50,000 per space, parking construction can be a significant component of development costs. These costs must be recovered by developers either through increased sale value of the new housing, or through increased development subsidies in the case of affordable or rent-restricted units.

In market rate developments, especially those serving higher income levels, a parking space often adds substantial value to the sale price per housing unit. A 1996 statistical analysis of home sale prices estimates that a parking space can increase the sale value per unit by $38,000 to $46,000, although some developers anecdotally estimate this figure at a higher amount.¹⁷ Thus, in some cases, parking costs can be recovered through higher sale value, and may even be desirable to developers when they can be sold at a profit. However, in some market rate projects, developers would be able to increase profits by reducing parking and adding additional housing units. The extent to which this will occur will depend on the specific characteristics of sites and developments, and is very difficult to estimate. However, some portion of market rate developments would surely take advantage of increased flexibility in parking requirements.

In more modestly priced developments the cost of parking provision can be a liability to developers. This is especially true in developments serving lower-income groups. In such developments, the cost of parking provision is difficult to recover through higher sale prices, and therefore higher subsidies or lower levels of affordability are required to offset the costs of construction. For example, an affordable housing developer who would otherwise have constructed units to serve very low-income groups (less than 50 percent of AMI) may be forced to make a higher portion of units in a development serve moderate income groups (80 percent of AMI) in order to recover the higher construction costs associated with parking through higher rents. The Planning Department estimates that a $52,200 capital subsidy is required for development of a low income housing unit (50 percent to 79 percent of AMI).¹⁸ If parking is not provided for such a unit, the cost savings could eliminate the need for half of the subsidy required for development.

Table 4 below calculates the cost savings for reduced parking under three scenarios, and compares those savings to the estimated amount of subsidies needed to produce the units. While imperfect, this comparison gives a rough estimate of the possible reduction in affordable housing costs that could result from lowering parking requirements. Lower subsidies could save local government money, or the savings could be used to fund additional affordable housing projects. The three scenarios assume reductions of 25 percent, 50 percent and 75 percent in the amount of parking spaces constructed for affordable housing units after eliminating the one-to-one parking requirement.

Table 4. Cost Savings from Parking Reductions in Affordable Housing Developments as a Percentage of Annual Subsidies

Source: Annual average production and capital subsidy needs estimates are from SF Planning Department Housing Element Draft for Public Review, 2001, p. 100 and 101, respectively. These figures assume a $25,000 cost per parking spaces, which is based on estimates from several sources including the Housing Element, SPUR, Reducing Housing Costs by Rethinking Parking Requirements and Nonprofit Housing Association of Northern California, Rethinking Residential Parking.

Table 4 shows that direct cost savings to affordable housing developers resulting from increased flexibility in parking requirements could have a major effect in offsetting the need for capital subsidies from the public sector. With materials, construction and land costs somewhat fixed over the medium term, parking is one of the few direct costs to developers that could be reduced by a relatively costless policy change.

Furthermore, the lower cost associated with parking ratio reductions can reduce the price of housing, making it more accessible to people with lower incomes. For example, one economic study found that 20 percent more San Franciscan households would qualify for mortgages for units without parking than for units with parking.¹⁹

Use of Floor Area for Parking

A parking space can occupy 400 square feet of floor space or more, including circulation space and the area used for ramps and driveways in parking structures.²⁰ Given housing units of 800 square feet or less, these parking spots can take up a large proportion of space that could be dedicated to housing. Figure 4 shows how reduced parking requirements can be used to allow for a greater number of housing units in a development on a given land parcel with a set height limit:

In some developments, parking requirements may also restrict housing by impeding a developer's ability to build up to the height limit on a given land parcel. It can be very expensive to build multi-level parking facilities, and even more expensive to build parking underground. As a result, the total number of housing units can be limited by the number of parking spaces that fit on the first level. For example, Figure 5 models a development on a piece of land that is large enough to accommodate 10 parking spaces on the first level, but with a height limit that would allow more than 10 units of housing. In this case, the developer will have to determine whether it is economical to build additional parking facilities that will allow construction of additional units. For the additional units to be built, the revenue they create would have to outweigh the costs of constructing additional parking.

Costs and Benefits of Altering Parking Requirements

It is extremely difficult to predict the citywide impact of altering parking requirements, but doing so would allow developers greater flexibility to respond to the particular physical and economic circumstances of their projects. High parking requirements such as those currently in place in San Francisco restrict the ability of the market to maximize housing production. If minimum parking requirements were lowered, some developers would continue to build large amounts of parking because it would make sense economically. Others, however, would take advantage of increased flexibility and reduce parking provision in favor of additional housing units.

In many car-dependent locations, high minimum parking requirements are necessary. In a dense urban area such as San Francisco, however, residential parking could be reduced with minimal negative consequences, particularly in high-density, transit-intensive areas. Furthermore, neighborhoods with high population densities that favor public transportation and pedestrian travel rather than catering to automobiles can be highly desirable places to live. San Francisco has the second lowest automobile ownership per capita in the country following New York City, with 40 percent of households not owning a car.²¹ Housing policy should be designed to reflect the fact that many San Franciscans use alternative modes of transportation.

Altering parking requirements may cause concern among neighbors of new housing developments. Neighbors often worry that a new development will bring new residents and increase competition for street parking. However, high parking availability often leads to higher automobile ownership rates, which in turn creates the perception that additional parking is needed. This cycle leads to decreased housing density and increased congestion.²² High-density neighborhoods with limited parking availability are generally associated with low automobile ownership rates, even among affluent residents.²³ Public education about the relationship between parking provision and automobile ownership may help offset concerns about reduced parking requirements.

Some demographic groups such as seniors and low income residents also have much lower rates of automobile ownership.²⁴ Consequently, housing designed for these groups can have much lower levels of parking without negative impacts. In many such developments, parking goes unused, and the perception of free and abundant parking may even act as an incentive for car ownership or storage of friends' and relatives' cars.

Policy Options for Altering Parking Requirements

There are a number of steps the City could take to reduce the role of parking requirements as a regulatory barrier to housing provision.

6. Maintain Development Fees

The City charges developers a variety of fees for permitting and to offset development impacts. It is within the City's power to reduce or waive those fees in order to lower costs and stimulate housing development. However, fee reductions would have substantial negative impacts on the City's planning and approval functions, and are unlikely to lead to a significant increase in housing production.

Currently, fees account for approximately 3 percent of development costs on average. While this can be a meaningful amount, it is small relative to other costs such as land (19 percent) and building construction (50 percent). Fees in San Francisco are roughly in line with those of other central cities, and are much lower than those in suburban areas, where infrastructure does not exist and must be built along with new housing.²⁶

Economic theory holds that if fees are clearly defined and consistently applied, they will be absorbed in lower land costs and will not be a barrier to development. Fees are an expected cost of development, and will not unduly discourage housing development if they are predictable and can be planned for at the early stages of the development process.

Development fees are an important source of funding for City planning functions, and since they can be applied in ways that do not discourage development, the cost to the City of waiving or reducing fees would outweigh the benefits. In many cases, developers would be happy to accept increased fees in exchange for greater certainty in other aspects of the development process. The City can, however, encourage housing development by taking steps to ensure that fees are predictable, transparent, and evenly applied. Any increase in fees should be phased in so as not to impact housing already making its way through the development process.

Strategies to Reduce the Uncertainty Costs of Development

San Francisco can pursue a number of strategies to reduce the uncertainty costs of development, including:

(1) Pursuing program environmental impact reports;

(2) Revising conditional use requirements; and

(3) Reducing the costs of discretionary review.

Uncertainty in the permitting process, both in terms of likelihood of approval and the estimated length of the process, is one of the greatest challenges for developers in San Francisco. Because of the complicated and politicized nature of the approval process in San Francisco, developers can neither predict the length of the process nor the final outcome. The result is to make the costs associated with this process highly uncertain, which means more risk for developers, lenders, and investors. As with any economic venture, higher risk must be balanced by the potential for higher profits. This uncertainty is a significant barrier to housing production, and partially accounts for the high prices consumers face: it forces developers and lenders to raise their required profit margins on all projects to cover their losses on projects that are unpredictably delayed. These increases in profit margins are ultimately passed on to renters and homebuyers.

The cost of delays to developers can range from $1000 to $2500 per day.

Prior to initiating the permit approval process, developers must secure land and pay for engineering and architectural design. These up-front "soft costs" often cannot be financed, and are lost entirely if development does not go forward. But even more costly than losing these investments due to a decisive rejection by the City are the costs associated with ongoing delays during the approval process. Every time that permitting or review is delayed, developers must continue to pay interest on financing, legal fees, and must continue to pay the landowner to hold the land ("land carrying costs"). These costs are highly variable, but reasonable estimates place them near $1000 to $2500 per day, depending on the specifics of the development.²⁷

San Francisco is known, and in some cases feared by developers, for its complex and politicized permitting process. Outside developers trying to enter the San Francisco housing market face tremendous barriers due to their lack of parochial understanding. In order to improve their chance of approval and minimize delays and associated monetary costs, developers must be well versed in the intricacies of the City's approval process, making local development experience crucial to success. Developers potentially face hearings before three different elected and politically appointed review boards, regardless of their compliance with all written zoning regulations. As a result, political connections are often another necessary condition for approval. Through these two avenues-the necessity of local experience and political connections-uncertainty in the permitting process works to limit competition in the housing development market in San Francisco.

If the City can increase certainty, reduce delays, and depoliticize the permit approval process, lower costs to developers and increased competition within the housing development market will result. Reducing uncertainty and depoliticizing the development process will draw new developers into the market, creating competition that lowers profit margins, while at the same time minimizing loss of profit due to unpredictable outcomes. These changes will translate into lower costs to renters and buyers, and will stimulate housing production.

1. Pursue Program Environmental Impact Reports

When a developer begins the permit application process by submitting an application to the Planning Department, City staff analyze the proposed project in accordance with the California Environmental Quality Act (CEQA) and issue one of three documents: a Categorical Exemption, Negative Declaration, or an Environmental Impact Report (EIR) (See Figure 6). A Categorical Exemption is a determination that a project is exempt from environmental requirements. A Negative Declaration is a brief report which states that the proposed project, while not exempt from environmental review, will not have any significant impacts. An EIR is a lengthy document intended to provide governmental agencies and the public in general with detailed information about the effect a proposed project is likely to have on the environment; to list ways in which the significant effects of such a project might be minimized; and to indicate alternatives to such a project. An EIR details effects on air and water quality, geology and soils, public services and utilities, traffic and parking, historic resources, archaeology, hazardous materials, and aesthetics.

In most cities that are already highly developed, where a new building is unlikely to create significant new environmental impacts, most medium-sized projects will be processed through a Negative Declaration. San Francisco, however, because of the culture of neighborhoods and city government as well as the subjective guidelines for determining which level of review is needed, is particularly strict about requiring new developments to complete EIRs.

Environmental review is often the most time-consuming part of the approval process, taking anywhere from six months to one-and-one-half years, and must be completed before a project is fully permitted. The exact amount of time associated with completing an EIR is uncertain, as the draft, required to be completed within one year, must be publicly reviewed and can be contested. According to the land carrying costs cited above, at $1000 to $2500 per day, the costs associated with an EIR (exclusive of the fees themselves) would range from $183,000 to $1,370,000.²⁸

Currently, EIRs are conducted site-by-site, which means if two developers want to build housing on the same block, with identical height and bulk, they each would conduct separate EIRs and each carry the expense. The City could significantly reduce the uncertainty and expense associated with EIRs by preparing neighborhood-level ("Program") EIRs before proposals for development are even submitted. An EIR could be completed for a particular type of building within a designated area, allowing a developer with a project meeting those guidelines greater certainty.

Each Program EIR would cost the City approximately $300,000. However, the City could

The City could recover the costs of conducting a Program EIR by charging developers for its use.

easily recover its costs after the completion of only one Program EIR: any developer proposing a project in that neighborhood could pay a fee to the City for use of the Program EIR. A portion of these fees could then fund the next neighborhood's Program EIR. Fees for use of the Program EIR could be increased significantly from current fee levels without inhibiting development, since developers would be willing to pay additional fees in exchange for increased certainty and a reduction in carrying costs.²⁹ Conducting program EIRs could thus lower direct costs and uncertainty for developers while simultaneously generating revenue for the City, while in no way compromising environmental standards.

2. Revise Conditional Use Requirements

In most cities, including San Francisco, there are two types of permits: Principle Use and Conditional Use. A Principle Use is typically the standard permit issued when there is nothing exceptional about the project proposal. A Conditional Use permit (CU) is designed to provide stricter scrutiny to projects that are seeking exemptions to Planning Code specifications and policies. In San Francisco, however, CU authorization, and the public hearing that accompanies it, is often required in situations even when a development meets all zoning requirements and priorities set forth in the General Plan.

In San Francisco districts that are zoned to allow residential buildings over 40 feet in height, Conditional Use permits are currently required for all residential developments over 40 feet in height.³⁰ In addition, lots over a given size in neighborhood commercial districts are permitted only as Conditional Uses.³¹ This is particularly restrictive in NC-3 districts, which are transit corridors where high density is most desired, as described earlier. Since the purpose of the zoning in these areas is to allow high-density residential developments, it seems contradictory that all such developments should be subjected to special review. The purpose of these requirements is to ensure adequate public review of relatively large developments, which is a legitimate objective. For example, the automatic CU trigger for large lot sizes is designed to provide an extra level of review for big-box retail and other types of developments that may be out of scale for the neighborhoods in which they are proposed. Similarly, the 40 foot trigger exists for the purpose of ensuring design review for large projects that could substantially impact the character of a neighborhood. However, because these CU requirements are very broadly applied, they impact a larger number of developments that are outside the scope of the regulation's intent. For example, many housing developments over 40 feet in height could easily be handled at the staff level, and referred to a Commission for review if necessary.

Because many developers know they will face the CU permitting process, they have little incentive to design their projects to meet Planning codes and policy objectives, which in theory should allow them to bypass the longer, more scrutinizing CU process. The result is a large number of developments seeking exemptions, which could cause members of the community to be wary of new development.

Revising Conditional Use requirements will encourage high-density residential developments.

In order to receive a CU permit, a developer is required to appear before the Planning Commission, even if their project design fits all Planning Codes and General Plan policies for height and bulk. A developer may have to wait three months (costing $9000 to $225,000) for a decision by the Commission. In addition, all actions taken by the Planning Commission regarding a development with a CU permit are subject to appeal to the Board of Supervisors within 30 days. This compels yet another review of a development that has passed environmental review, been approved by the Planning Commission, and seeks no exemptions to City regulations. These arbitrary review requirements add another degree of political uncertainty and risk into the approval process. Removing the 40-foot CU requirement in areas that are already zoned for high-density residential would remove this risk and shorten the review timeline, while simultaneously working to depoliticize the approval process and encourage developers to conform to existing standards.

It is difficult to project the effectiveness of such a policy change in terms of increase in number of units developed, but this policy change will save time and reduce uncertainty, which will translate into dollar savings. These factors working together will encourage high-density residential developments.

Issuing Principle Permits instead of Conditional Use Permits in cases where developments already meet zoning requirements and General Plan priorities also has the potential to save the City a lot of money. Time required for Planning Commissioners to review and decide on the large number of CU cases, and the Supervisors' time for the Board to hear appeals, is expensive.

3. Minimize Time Delays Associated with Discretionary Review

Discretionary Review (DR) introduces another source of uncertainty into the permitting process. DR allows an individual to appeal a development project for a minor fee of $125, and bring the appeal before a City commission (see Figure 7). Discretionary Review comes near the end of the building permit application process, after a developer has already paid for building design and completed an EIR, with significant land carrying costs. At this point, when a development is considered "approvable" by the City, the applicant is required to mail a notice to community members describing the project and sharing with them copies of the plans. There is a 30-

Discretionary Review comes near the end of the application process, after a developer has significant sunk costs.

day public review period in which anyone in the City may decide to file a DR request with the Planning Commission. The Zoning Administrator then sets a hearing date "as soon as feasible."³² The permit is either approved by the Planning Commission, approved subject to modifications, denied, or the case is continued at a future date. Any of these decisions may then be appealed to the Board of Appeals. The total time for this process before appeal to the Board of Appeals may be up to 5 months, which means additional carrying costs to developers of $145,000 to $362,500. If no DR request is filed, a project may still be appealed to the Board of Appeals once the permit is issued. Such an appeal must be filed within 15 days of the date of permit issuance; however, official issuance of a permit by the Central Permit Bureau may be well after Planning approval.

San Francisco is unique in allowing its citizens so much voice in the development process. The power this affords individuals and neighborhoods has both positive and negative effects on the process of housing development. On one hand, the Discretionary Review and appeals process is an important mechanism for public input, allowing community opposition to halt a development. This imposes an additional layer of accountability on the developer and institutionalizes a mechanism for neighborhood residents to fight undesirable or harmful developments. However, at times this power can be abused for the gain of one individual to the detriment of the larger community and at significant cost to the developer. DR can also be used to politicize the approval process, and can cause rifts within neighborhoods

It is within the authority of the Board of Supervisors or the Planning Commission to modify regulations governing Discretionary Review. For example, the fee for a DR application could be raised to deter frivolous appeals; multiple signatures could be required to ensure the appeal is voicing concerns of more than one resident; restrictions could be put on allowable causes for DR requests; a greater number of DR requests could be heard at the staff level, rather than going before the Planning Commission; or the right to request Discretionary Review could be cut-off earlier in the development process. In some cases, formal mediation of disputes through community organizations could help resolve issues between parties that are currently handled through the public DR process. Although both developers and current residents may be hesitant to commit to legally binding mediation in many cases, encouraging mediation could help provide a less confrontational, consensus-oriented alternative to dispute resolution that would be effective in many situations. Again, fewer reviews before the Planning Commission, Board of Appeals, and Board of Supervisors could save the City money.

Notwithstanding the possibility of mediation, none of the above solutions are ideal, and are diminished by equity concerns. Because of the benefits that accrue to allowing a strong community voice, quieting that voice would have high political and social costs. However, if the City were to facilitate a process for community input, review, and approval before the development process started, a strong community voice could be maintained while at the same time increasing certainty in the process for developers and reducing their costs, thus encouraging and accelerating housing development.

Many of the measures that can be taken to streamline the process can be combined under a comprehensive planning program that will both encourage development and improve community participation in the planning process and community acceptance of new housing, as described below.

Comprehensive Approaches to Housing Development

Specific area plans are a concept officially adopted under the California Environmental Quality Act (CEQA) in 1979, although they have been used infrequently in San Francisco. Specific area planning allows local governments to formulate plans for neighborhood-wide development, and to conduct an EIR for the changes to the neighborhood as a whole, rather than on a project-by-project basis. This approach can also be used to build consensus through public involvement prior to development, allowing development to take place smoothly once developers commit to specific projects.

There are several advantages to the comprehensive approach of increasing residential development. First, it helps achieve consensus around a vision for change, identifying appropriate amounts of new housing development in appropriate locations. Second, if done correctly, it allows for extensive community involvement during the planning process, not only in debates over specific projects. Third, it reduces uncertainty for developers and therefore encourages housing development.

Specific area planning has been used with mixed outcomes in San Francisco along the Van Ness corridor, Rincon Hill, and more recently through the Better Neighborhoods pilot program in Hayes Valley, Balboa Park, and the Central Waterfront. Expanded use of specific area planning could provide a major boost to housing production in a way that is acceptable to nearby residents.

The recent planning process for the Octavia Boulevard area illustrates the potential for area planning to maximize community input and achieve neighborhood support for new housing. The Planning Department has devoted significant time and resources to community outreach, and in general residents have responded with support for moderate-density housing development. There will be potential for 7,500 to 13,000 new housing units under the plan, 4,500 to 5,300 of which are expected to be developed over the next 20 years. ³³ Many people involved have noted that the process has helped to establish a very positive relationship between the Planning Department and neighborhood residents.

If a neighborhood-level EIR is funded, developers will have the advantage of greater certainty about development costs. Developers will save a significant amount of time and money by knowing that an EIR has been completed. Furthermore, they will know that extensive community outreach has already taken place, and that the community is generally supportive of the neighborhood plan. This will reduce the probability of a project being held up through appeals and permit approval problems.

Although the community input and consensus-building process minimizes the risk of a long DR process, a neighborhood-level EIR alone will not reduce all uncertainty associated with Conditional Use requirements and Discretional Review. In order to remove uncertainty and streamline housing development, the City may wish to alter CU and DR requirements in areas where an extensive community planning process has taken place. For example, the City could waive the automatic CU trigger for buildings over 40 feet and limit DR for projects that meet criteria explicitly set forth in the neighborhood plan. A highly public planning process will serve the same goals the CU and DR regulations, namely to allow public input and review of projects that could have negative impacts on existing residents. Thus some limitation on CU requirements and DR would be justified. If such limitations are put in place, however, it is crucial that the City conduct aggressive outreach and allow ample opportunity for community input during the planning phase.

Facilitate Infill Development

Specific area planning and the associated community outreach process will be more costly to the City than the current project-by-project planning that is dominant in San Francisco. These costs result from increased expenditure for community outreach and staffing. If the program is to be expanded or enhanced, new funding sources will be necessary. In exchange for the benefits developers in these neighborhoods will derive from the increased certainty and community outreach associated with planning process, the City could charge substantially higher permitting fees. The fees could be channeled into a fund that would be used to pay for future neighborhood planning efforts. As long as the higher fees are exacted in a consistent and transparent manner, and as long as they are set at a reasonable level, they will do little to inhibit housing production if they are accompanied by increased certainty. As discussed above, predictable fees are not a major barrier to housing production because they can be planned for in the early stages of development, and over time the added cost will be partially absorbed in lower land prices. Of course, if fees are raised but policy changes are ineffective in increasing certainty, the higher fees will serve to discourage housing production.

Conclusion

This study suggests that the Board of Supervisors may use its legislative powers to increase housing development in San Francisco by taking any of the following actions: rezoning land use for residential purposes, relaxing the floor-to-area restrictions for housing downtown, increasing density allowances along transit corridors, providing direct subsidies for affordable housing development, allowing flexibility in parking requirements, pursuing program environmental impact reports, revising conditional use requirements, and minimizing time delays caused by discretionary review. Each of these recommendations may stand alone, or any number of them may be combined into a package to effectively promote housing development. Some of these changes have already been proposed in various forms at the Board of Supervisors.

An expanded neighborhood planning program such as the one described above allows planning to be tailored to individual neighborhoods, and thus has the potential to successfully combine many of the enumerated alternatives, as appropriate. Implementation of area planning could simultaneously add certainty to the development process, increase community participation, and create additional revenue for city government.

Different packages of policy changes will have different magnitudes of effect on housing production, and will do so over different lengths of time. For example, zoning changes have the potential to greatly increase housing construction, but the majority of this increase will occur over the long term. Other changes, such as relaxing parking requirements, may have smaller total impacts, but do more to increase affordable housing production. Any of these changes must be evaluated against the City's short term and long term housing goals.

Whether or not the City should take measures to spur housing development is a policy matter for the Board of Supervisors.

Bibliography

California Commission on Building for the 21st Century and Quality of Life. Invest for California: Strategic Planning for California's Future Prosperity. Sacramento, 2002.

City and County of San Francisco, Planning Department. San Francisco Municipal Planning Code, March 2003.

Chappell, Jim. President, San Francisco Planning and Urban Research Association. Interview by authors. San Francisco, CA, 28 March 2003.

Erickson, Oz. President, Emerald Fund. Interview by authors. San Francisco, CA, 15 April 2003.

Erikson, Oz. Our Housing Crisis: The Developer's Perspective. San Francisco: San Francisco Planning and Urban Research Association (SPUR), 2002. Available online at

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Marschner, Kim Ilana. Consultant to San Francisco Chamber of Commerce. Interview by authors. Berkeley, CA, 2 April 2003.

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Vettel, Steve. Attorney, Morrison & Foerster. Interview by authors. San Francisco, CA, 25 March 2003.

Welch, Calvin. Executive Director, Council of Community Housing Organizations. Interview by authors. San Francisco, CA, 16 April 2003.

White, Kate. Executive Director, San Francisco Housing Action Coalition. Interview by authors. San Francisco, CA, 28 March 2003.

¹ Grubb, Joe. 2002. San Francisco Housing Databook. San Francisco, CA: Bay Area Economics.

² Ibid.

³ Ibid.

⁴ SF Planning Department, Housing Element: Final Draft for Public Review, February, 2003.

⁵ Stephan Malpezzi. "Housing Prices, Externalities, and Regulation in U.S. Metropolitan Areas," Journal of Housing Research 7(2) (1996): 209-241.

⁶ Krisandra Guidry, James Shilling, and C.F. Sirmans, An Econometric Analysis of Variation in Urban Residential Land Prices and the Adoption of Land-Use Controls. Working paper. University of Wisconsin, Center for Urban Land Economics Research, 1991.

⁷ David Segal and Philip Srinivasan, "The Impact of Suburban Growth Restrictions on U.S. Housing Price Inflation, 1975-78," Urban Geography 6(1) (1985): 14-26.

⁸ Association of Bay Area Governments, Projections 98, December 1997.

⁹ San Francisco Planning Department, 2002 City-Wide Action Plan, 2002.

¹⁰ Author interviews with Oz Erickson, Steve Vettel, Steve Kuklin, Jim Chappell.

¹¹ There are same cases in which adding an additional floor would require developers to use more expensive construction methods and, thus, increase the average cost per unit.

¹² Oz Erikson, Our Housing Crisis: The Developer's Perspective, San Francisco, CA: SPUR, 2002.

¹³ SF Planning Department, Housing Element: Final Draft for Public Review, February, 2003.

¹⁴ San Francisco Planning Department, Housing Element: Final Draft for Public Review, February 2003, p. 100.

¹⁵ National Low Income Housing Coalition, The Federal Budget and Housing Assistance, 1976-2006, May 2001.

¹⁶ San Francisco Planning and Urban Research Association (SPUR), Analysis of the San Francisco Affordable Housing and Home Ownership Opportunity Bond Program, 2002; SF Planning Department, Housing Element (on averages).

¹⁷ Non-Profit Housing Association of Northern California, Rethinking Residential Parking, April 2001 (Original citation from Access, Volume 13, 1997) and personal interviews with Steve Vettel.

¹⁸ San Francisco Planning Department, Housing Element: Final Draft for Public Review, February, 2003.

¹⁹ San Francisco Planning and Urban Research Association, Reducing Housing Costs by Rethinking Parking Requirements, Report 369, November/December 1998.

²⁰ Personal interviews with Doug Shoemaker and Steve Kuklin.

²¹ US Bureau of the Census for the Department of Housing and Urban Development, American Housing Survey, November 2002.

²² San Francisco Planning Department, Technical Memorandum: Vehicle Ownership in San Francisco, Better Neighborhoods 2002, November 2001.

²³ San Francisco Planning and Urban Research Association, Reducing Housing Costs by Rethinking Parking Requirements, Report 369, November/December 1998.

²⁴ U.S. Bureau of the Census, 2000.

²⁵ San Francisco Planning and Urban Research Association, Reducing Housing Costs by Rethinking Parking Requirements, Report 369, November/December 1998.

²⁶ San Francisco Planning Department, Housing Element: Draft for Public Review, p. 88, and personal interviews with Steve Vettel and Steve Kuklin.

²⁷ Personal interviews with Oz Erickson, Jim Chappel, Steve Vettel, Steve Kuklin.

²⁸ The low end of the range is calculated at $1000 per day for six months; the high end is $2500 per day for one-and-one-half years.

²⁹ All developers we interviewed affirmed this.

³⁰ San Francisco Planning Code, Section 253(a): "In any [Residential] District ... wherever a height limit of more than 40 feet is prescribed by the height and bulk district in which the property is located, any building or structure exceeding 40 feet in height shall be permitted only upon approval by the City Planning Commission according to the procedures for conditional use approval."

³¹ 5,000 square feet in NC-1, Broadway, Castro Street, Inner Clement Street, Inner Sunset, Outer Clement Street, Upper Fillmore Street, Haight Street, North Beach, Sacramento Street, Union Street, 24^th Street-Mission, 24^th Street-Noe Valley, West Portal Avenue. 10,000 square feet in NC-2, NC-3, Hayes-Gough, Upper Market Street, Polk Street, Valencia Street. (San Francisco Planning Code, Section 121.1)

³² San Francisco Planning Code, Section 306(b).

³³ The Market and Octavia Neighborhood Plan, Draft for Public Review. San Francisco Planning Department, December 2002.