· There has been significant neighborhood opposition, numerous Planning Commission hearings and adoption of many resolutions regarding live/work projects in the City"s industrial zones and surrounding neighborhoods over the last five years. In spite of that, in the four-year period from 1997 through 2000, more than 1,400 live/work units were completed and 3,148 were in the pipeline. During that period and through today, the Planning Department has not proposed and the Planning Commission has not adopted permanent zoning controls for the industrial zones. Because the Planning Department was not responding to concerns about live/work and office development in the Mission District, that neighborhood developed their own interim zoning controls, which were adopted by the Board of Supervisors, without Planning Department participation. The Planning Department only began a community planning process to develop permanent zoning controls in the City"s eastern neighborhoods, including the Industrial Protection Zones (IPZs), in the fall of 2001.

· Not just the construction of live/work projects, but the failure of live/work projects to be used either as artist work spaces or, in some instances, as residences at all, was discussed before the Commission by neighborhood organizations, community members, and staff on many occasions. Due to the lack of Planning Code clarity on the extent to which the live/work unit occupant must engage in arts activities or on the definition of "work" as a component of "live/work", the Planning Department has determined that enforcing the art or work component of live/work is not feasible. Because the cost of live/work units is high, they are no longer affordable as artist work space, and some live/work units in the Mission and South of Market have been reportedly converted to office use. Although in the May 1999 Planning Department report to the Planning Commission, the Department listed failure to enforce Planning Code live/work regulations as one of the contributors to the growing problem of live/work development, the Planning Department did not have a team dedicated to enforcing planning regulations prior to FY 2001-2002.

· Conditional use approval and discretionary review of live/work projects has resulted in a large number of live/work projects being developed. Though the Planning Commission has found otherwise, the cumulative effect of these live/work projects do not conform with General Plan policies, especially policies to conserve and promote housing development and neighborhood character, produce affordable housing, and protect industrial and service sectors from displacement.

Industrial Protection Zones and Live/Work Projects

The Planning Code includes provisions to protect the character and stability of the City"s industrial areas and maintain economic diversity by preventing displacement of industrial uses.¹ The Planning Code defines two types of industrial districts, light and heavy, and permits some types of housing in these districts with conditional use approval. In the 1990s until the present time, as more live/work projects were approved in industrial areas, many community organizations became concerned that the spread of new live/work projects would change the character of their neighborhoods, reduce the supply of affordable artist live/work space and displace industrial uses.

The Board of Supervisors adopted legislation in 1988, which amended the Planning Code, allowing the development of live/work units that combined residential space with work space. Live/work projects were defined as commercial space rather than housing, and originally were intended to serve as housing and work space primarily for artists. Initially, live/work units were converted from existing buildings, but by calendar year 2000, approximately 90 percent of live/work developments were new construction.² Construction of live/work units began to increase in 1996 and 1997 and reached its maximum in 1999, when more than 600 live/work units were completed. The average initial sales price in 2000 of $353,100 for the new live/work projects was 32 percent higher than non-live/work housing.³

Not just the construction of live/work projects, but the failure of live/work projects to be used either as artist work spaces or, in some instances, as residences, was discussed before the Commission by neighborhood organizations and community members. Because the cost of live/work units was high, they were no longer affordable as artist work space. Some live/work units in the Mission and South of Market were reportedly converted to office use.⁴ Prior to FY 2001-2002, the Planning Department did not have a team dedicated to enforcing planning regulations. In the May 1999 Planning Department report to the Planning Commission on live/work, the Department listed failure to enforce Planning Code live/work regulations as one of the contributors to the growing problem of live/work development.

As shown in Exhibit 3.1, from 1997 through 2001, the Planning Commission conducted public hearings and adopted resolutions regarding the encroachment of live/work and office developments in the industrial zones of the City and established interim Industrial Protection Zone (IPZ) zoning controls, but did not adopt permanent zoning controls. Independent of the Planning Department and the Planning Commission, the Board of Supervisors adopted a six-month moratorium on construction of new live/work units in the City in February 2001.

During the four-year period from 1997 through 2000, more than 1,400 live/work units were completed. 71 percent of completed live/work developments were in the South of Market (SOMA) and 16 percent were in the Mission.

Exhibit 3.1
Planning Commission Actions on Live/Work Development and IPZ Zoning Controls
From 1997 through 2000

As noted in Exhibit 3.1, the Planning Department prepared draft permanent IPZ zoning controls in May 2000. According to the Department"s Time Accounting System, the Department expended approximately 2,000 staff hours (approximately 1.0 FTE) in FY 1999-2000 and approximately 4,000 staff hours (approximately 2.0 FTE) in FY 2000-2001 to draft permanent IPZ zoning controls. Although the Department had developed recommendations for permanent controls, these recommendations were never presented to the Planning Commission. When the interim controls expired after two years, the Commission substituted policies and procedures and recommended a community planning process for the industrial areas of the City. The issue of development in the industrially zoned areas of the City had been on the agenda for more than four years but the community planning process was not formally introduced until May 2001.

Community Plans

Under pressure from community organizations and from the Board of Supervisors, the Department developed a proposal for a community planning process on the eastern side of San Francisco. In late 2000, the Department began to approach community organizations to develop a new working relationship. Prior to that time, community organizations" access to the planning process was chiefly through public comment at Planning Commission meetings or addressing specific projects presented to the Planning Commission. Only infrequently did Planning Department representatives attend community-based meetings.

In 2000, community organizations in the Mission formed the Mission Anti-Displacement Coalition (MADC), which began to independently formulate interim zoning controls for the Mission district. Initially, the Planning Department had little involvement with the MADC in developing interim zoning controls, although MADC informed the Department of their process. The proposed interim controls were introduced to the Board of Supervisors without Planning Department participation.

During this period, representatives from the Potrero Hill community stated that they were conducting "guerilla warfare". According to community representatives, they attended Planning Commission meetings to speak to specific projects but had no other forum for working with the Planning Department about the broader issues of permanent controls in the Industrial Protection Zones. According to community organization members, they were told only that the Department was working on recommendations for permanent controls.

In May 2001, the Board of Supervisors approved a $1,900,000 supplemental appropriation, of which $1,500,000 would fund planning studies for permanent zoning controls in South of Market (SOMA) and the Mission. The $1,500,000 appropriation was to be used for outside consultants to perform public outreach, urban design, transportation planning, economic and real estate analysis, and environmental planning for establishing Mission and SOMA zoning controls, including the industrial zones within the Mission and SOMA.

The Planning Commission adopted a resolution on August 9, 2001, establishing community plan areas for the areas in and around the IPZs. The community plan areas included SOMA, Showplace Square/Potrero Hill, Bayview/Hunters Point, and the Mission. Eventually, Visitacion Valley was included in the community planning process. However, in August 2001, due to a projected Planning Department revenue shortfall of approximately $2.2 million, the Department proposed applying $1,422,960 of the $1,500,000 supplemental appropriation for planning studies for permanent zoning controls in SOMA and the Mission to budget savings.

The Department did not begin to seriously work on the community plans until fall 2001. In response to Board of Supervisors" and community demands, the Department proposed re-allocating resources within the Department to fund five planner positions to work with community organizations to develop the community plans. Because of the partial hiring freeze for City employment, requisitions for three of the five community planning positions were not approved by the Department of Human Resources (DHR) until December 2001 and the two remaining requisitions were approved by DHR on January 30, 2002. In early January 2002, three staff planners were hired internally for the community planning process.

The community planning process is intended to develop basic zoning controls in the selected neighborhoods. Unlike the more extensive Better Neighborhoods program (discussed in Section 4 of this report), the community plans will not address design or transportation issues and the Department will not hire consultants to help develop the plans.

The Department intends for the community planning process to take approximately six to eight months. Initially, the Department did not designate specific staff planners to work with neighborhood groups to implement the community planning process and set up public workshops. Department staff produced a report, assessing the eastern neighborhoods of the City (which include the IPZs) on January 25, 2002. The Department Director and Chief of Citywide Policy and Analysis conducted the initial meetings in December with community organizations to plan the community workshops. Although two staff planners were tentatively assigned to work with SOMA and the Mission District, no staff planners were assigned to set up the first community planning workshops, which were scheduled for February 2002. In January 2002, the Department assigned a staff planner to work specifically with Showplace Square/ Lower Potrero Hill organizations in planning and implementing workshops for that district, and developed tentative assignments for the other neighborhoods.

In interviews, representatives from community organizations have expressed some optimism that the community planning process will improve the working partnership between the Department and the community. These same representatives are cautious, however, about how the Department will assess and incorporate community ideas into a final zoning proposal. Although the Department has developed a basic structure and concept for the community planning process, no formal mechanism has been developed for assessing and incorporating community input.

Barriers to Industrial Zone Planning

Insufficient Long Range Planning Resources

The Planning Department has allocated a lesser portion of its budget and its staff for long range policy and analysis. Prior to FY 1999-2000, the Planning Department allocated only about one-fifth of its annual budget to long term planning and special projects, as shown in Exhibit 3.2 below. The Citywide Policy and Analysis Unit analyzes demographic trends, develops land use and housing databases, maintains and updates the San Francisco General Plan, and conducts other policy analyses as required. Special projects include planning management of special projects, such as the Ballpark Special Use District, Mission Bay, Treasure Island, and the Hunters Point Shipyard. Excluding these special projects, the Citywide Policy and Analysis Unit budget was only 11.5 percent of the total Planning Department budget in FY 1997-1998 and 14.1 percent of the total budget in FY 1998-1999. In FY 1999-2000, the Planning Department implemented the Better Neighborhoods program (discussed in Section 4), resulting in increased funding to the Citywide Policy and Analysis Unit. The Citywide Policy and Analysis allocation was 27 percent of the Department"s budget in FY 2001-2002.

Exhibit 3.2
Percent of Work Program Budget Allocated to the City Wide Policy and Analysis Unit and to Special Projects
FY 1997-1998 - FY 2001-2002

Source: Planning Department Work Programs

Insufficient Enforcement Resources

As discussed above, prior to FY 2001-2002, when the Board of Supervisors approved four new positions for an enforcement team, the Planning Department did not have a team dedicated to enforcing planning regulations. In the May 1999 Planning Department report to the Planning Commission on live/work, the Department listed failure to enforce Planning Code live/work regulations as one of the contributors to the growing problem of live/work development. According to this report, the Planning Code restricts live/work units for "arts activities" as the principal form of work. However, the Planning Code does not define work nor require that work constitute a certain portion of the live/work unit. Further, the Planning Code does not define how often or to what extent the live/work unit occupant must engage in arts activities. The Planning Code permits other work activities, in addition to arts activities, in some zoning districts, such as parts of SOMA, but does not specifically define what constitutes work. The Planning Department concluded that arts activities or other work in live/work developments was not enforceable under the existing Planning Code language. The Planning Commission has not adopted new definitions of live/work since 1997, and as discussed previously, has continued indefinitely the resolution to redefine live/work as loft housing.

The Planning Department"s current enforcement effort focuses on multi-unit live/work developments with possible conversion to office uses. Due to the lack of Planning Code clarity regarding the extent to which the live/work unit occupant must engage in arts activities and the definition of work as a component of live/work, the Department has determined that enforcing the art or work component of live/work is not feasible.

Lack of General Plan Conformity

The Planning Commission adopted various policies at different times regarding approval of live/work projects. Such projects were only strictly prohibited from August 1999 through August 2001 in identified Industrial Protection Zones through interim IPZ controls adopted by the Commission. Both during the period of interim IPZ zoning controls and currently, Planning Department staff could administratively approve proposed live/work projects adjacent to residential developments or in areas zoned for housing as part of the building permit review. In other zones and in different periods, live/work projects could be approved through a discretionary review or conditional use process.

According to the San Francisco 2000 Housing Inventory, live/work units made up 30 percent of new housing in San Francisco in 2000.⁶ 20 percent of new housing units (non-live/work as well as live/work) were constructed in the interim IPZs. The average initial sales price of a live/work unit in 2000 was $353,100, or 32 percent, more than the average initial sales price of $266,900 for non-live/work units. In 2000, affordable housing unit construction declined by 40 percent. Affordable housing unit construction made up only 9 percent of total housing construction in San Francisco in 2000. Live/work developments are lower density, on average, than non-live/work developments, and, because they are generally designed with open floor plans, are less flexible in accommodating families.⁷

Approving live/work projects and housing construction in the industrial zones on a project by project basis, rather than developing and implementing a comprehensive policy, has resulted in an overall lack of conformity with the General Plan. The cumulative effect of live/work development does not conform with the General Plan even if individual projects conform. The overall impact of live/work development does not conform with at least three of the eight General Plan priority policies. Policy 2 requires that existing housing and neighborhood character be conserved and protected in order to preserve the cultural and economic diversity of neighborhoods. Extensive production of high-end live/work housing concentrated in certain neighborhoods, which does not accommodate families, does not meet these objectives. Further, live/work projects are assessed lower school district permit fees, resulting in fewer proceeds for local school development. Because live/work projects have not been defined as housing, developers who construct live/work projects cannot be required to pay into the affordable housing fund under the Planning Commission"s inclusionary housing policy.⁸ Policy 3 requires that the City"s supply of affordable housing be preserved and enhanced. As noted above, live/work projects, which made up 30 percent of construction in 2000, displaced affordable housing unit construction, which only made up 9 percent. Policy 5 requires that the diverse economic base be maintained by protecting industrial and service sectors from displacement due to commercial office development. As discussed above, conversion of live/work projects to commercial office space was a problem identified by the Commission.

Absence of Community Involvement in Planning Process

From 1997 until 2001, community organizations had no formal access to planning and policy making regarding zoning in industrial districts and construction of live/work developments. Community access to the planning process was generally through addressing projects on an individual basis or through speaking during public comment at Commission meetings. In some instances, the Commission conducted informational hearings or presented proposed resolutions for public comment. In the Mission district, community organizations introduced their own interim zoning controls without Department involvement. The Department has only reached out formally to the Community since the Board of Supervisors election in November of 2000.

The process for releasing requisitions and hiring staff planners to work on community plans has been slow. The Department has filled three of the five new positions for community plans with in-house staff but two of the positions have not yet been filled. Until February 2002, staff assignments to work with the five neighborhoods were tentative and the Department Director and Chief of Citywide Policy and Analysis did much of the initial work on setting up the community workshops. Although the Department and representatives from community-based organizations have reviewed the public workshops positively, how the Department will assess community input and include it in the proposed community plans has not been fully determined.

Conclusion

The Planning Department has not taken the initiative in developing permanent zoning controls in the industrially zoned areas of the City or on live/work projects, and until recently has not engaged community organizations in the planning process. Further, the Planning Commission, after five years of public hearings and resolutions, has not adopted permanent zoning controls in the Industrial Protection Zones. There are several factors contributing to the Planning Department"s failure to develop policies for the IPZs and live/work projects and to actively engage the community.

First, the Department has not given priority to long range planning in allocating resources. Prior to FY 1999-2000, the Department allocated only one-fifth of its budget to the Citywide Policy and Analysis Unit. Although the Department initially proposed $6,150,000 in the FY 2001-2002 work program for Citywide Policy and Analysis projects, or 33.5 percent of the Department"s budget, in November 2001 this allocation was reduced to $4,258,000, or 27 percent of the Department"s budget, to achieve budget savings. Because of the importance of the Citywide Policy and Analysis Unit to long range planning for San Francisco neighborhoods, the Planning Department should submit amendments to the approved annual work program and budget in writing to the Board of Supervisors, as well as the Planning Commission, with an explanation of the Department"s reasons for selecting reductions to each program.

Second, Planning Code definitions for "live/work" are insufficient for enforcement. The Planning Department needs to develop a stricter definition of "live/work" and recommend Planning Code revisions to the Planning Commission. A stricter definition could include requiring a business license for live/work projects, creating a set of criteria for art activities and work activities, subjecting live/work projects to inclusionary housing requirements and school district permit fees comparable to other housing projects, and creating stricter guidelines for conversion of underutilized buildings into live/work projects.

Third, the absence of permanent controls has resulted in a large number of live/work projects being approved through the conditional use and discretionary review processes. The cumulative effect of these live/work projects has not conformed with General Plan policies, especially conserving existing housing and neighborhood character, producing affordable housing, and protecting industrial and service sectors from displacement. In working with community organizations to develop the community plans and permanent zoning controls in the industrial areas of the City, the Department needs to rigorously identify which projects are permitted or not permitted and limit the type of projects subject to conditional use. Community input on types of projects allowed should also help reduce the number of discretionary review applications filed for live/work projects.

Fourth, the Department needs to strengthen its working relationship with community based organizations in developing community plans. Specifically, the Department needs to develop a formal tool for assessing and incorporating community input in the community plans. The Mission Anti-Displacement Coalition has proposed developing an assessment tool for the Mission Community Plan, for which the Department should be involved.

Recommendations

Based on the above findings, the Director of the Planning Department should:

3.1 Submit amendments to the approved annual Work Program and budget in writing to the Board of Supervisors, as well as the Planning Commission, with an explanation of the Department"s reasons for selecting reductions to each program, in order to ensure that sufficient resources are allocated to the long range planning process and the development of zoning controls in the traditionally industrial zones of the City;

3.2 Develop a stricter definition of "live/work", including defining live/work projects as housing and defining the zones in which live/work projects are permitted, and recommend Planning Code revisions to the Planning Commission;

3.3 Rigorously identify which projects are permitted or not permitted and limit the types of projects subject to conditional use in developing the community plans and the permanent zoning controls and recommend Planning Code revisions to the Planning Commission; and,

3.4 Develop a formal tool for assessing and incorporating community input in the community plans.

Costs and Benefits

By developing a stricter definition of "live/work" in the Planning Code and limiting the types of projects subject to conditional use or discretionary review in the new proposed zoning controls, the Planning Department and Planning Commission would make clear the types of projects permitted under the Planning Code, and would reduce the cumulative impact of projects which fail to conform with the General Plan. Developing a formal tool to assess and incorporate community input into the community plans would give community organizations a clearer voice in the planning process. Submitting written amendments to the annual work program and budget to the Board of Supervisors would enable the Board of Supervisors to more closely monitor the allocation of resources to long range planning programs.

These recommendations can be incorporated into the existing Planning Department community planning process without additional costs.

¹ Planning Code Sections 101 and 101.1.

² San Francisco 2000 Housing Inventory, San Francisco Planning Department, July 2001.

³ San Francisco 2000 Housing Inventory, San Francisco Planning Department, July 2001.

⁴ San Francisco 2000 Housing Inventory, San Francisco Planning Department, July 2001.

⁵ In 1994 the Planning Commission adopted Resolution 13794, establishing a policy to protect the NEMIZ from residential and certain types of artist/live developments and requiring discretionary review for live/work developments of 10 units or more.

⁶ According to the Data and Needs Analysis, Part One, 2001 Housing Element Revision, although the City"s Planning Code considers live/work units as commercial space, the Planning Department tracks information on live/work units in the annual housing inventory.

⁷ San Francisco 2000 Housing Inventory, San Francisco Planning Department, July 2001

⁸ The Planning Commission established an inclusionary housing policy in 1992, under which the Commission could optionally require housing developments of 10 units or more, which required conditional use approval under the Planning Code, to either construct affordable housing units or to pay into the affordable housing fund.