End of the Year Legislation Round-Up

Real Estate

Source: Melinda Sarjapur - Reuben Junius & Rose, LLP

Mayor Vetoes Proposed Short-Term Rental Restrictions
Mayor Ed Lee vetoed legislation last week that proposed additional restrictions on the short-term rentals in the City.  The legislation, which was introduced by Supervisors Breed and Peskin and approved 7-3 by the Board of Supervisors on November 29th, would have restricted short term rentals not already registered with the City to 60 days per year, regardless of whether the host was present.  The legislation would also have narrowed the group of people that are allowed to bring a private right of action against owners violating the City’s short-term rental laws.

The Mayor’s veto means that the City’s current short term rental law will likely remain intact for now, as the Board would need a vote of eight supervisors within 30 days to override it.

The City’s current short-term rental law, which was passed in 2014, restricts rentals of residential units for less than a 30-day period unless done by a permanent resident of the unit, who registers it with the Office of Short Term Rentals.  Short term rentals are currently capped at 90 days a year for un-hosted rentals (where the owner is not in the unit when it is rented), and are unlimited for hosted rentals.  The legislation also provides that a permanent resident must reside in the unit for at least 275 days per year.

According to a San Francisco Chronicle article dated December 9th, the Mayor wrote in his veto letter that the proposed legislation would make enforcement of the current law more difficult and less effective, and would drive even more people to illegally rent units.  The move may also reflect the will of the electorate, as San Francisco voters rejected a less-severe 75-day cap on short-term rentals proposed in November 2015.

It’s likely that we’ll see alternative measures proposed to increase regulation of the City’s short-term rentals in the future, as they’ve been the subject of considerable controversy over the past few years.  As reported by the Chronicle, only about 1,700 out of an estimated 8,000 to 10,000 hosts in the city are currently registered as required by the legislation, complicating enforcement.

Small Sites Program Adopted by the Board of Supervisors
This Board of Supervisors passed legislation this week amending the City’s Inclusionary Housing Program to allow sponsors of small projects (those comprised of 24 or fewer units) to meet their Program requirements by designating their Fee payment into a Small Sites Program overseen by the Mayor’s Office of Housing and Community Development (“MOHCD”).  The designated funds would then be used to acquire or rehabilitate “Small Sites” located in the same neighborhood as the development project.

Qualifying “Small Sites” eligible to receive designated funds under this program must meet the existing requirements for the City’s Small Sites Program under the Planning Code, including that they be:  (1) rental properties that will be maintained as rental properties; (2) vacant properties that were formerly rental properties as long as those properties have been vacant for a minimum of two years prior to the effective date of this legislation; (3) properties that have been the subject of foreclosure; or (4) a Limited Equity Housing Cooperative as defined in City’s Subdivision Code or a property owned or leased by a non-profit entity modeled as a Community Land Trust.

As noted by the Planning Department, these Small Sites are typically rental properties subject to the City’s Rent Ordinance that are occupied by long-term tenants at risk of eviction and displacement.  Some Small Sites also have street-level retail or commercial uses.  When acquired by the MOHCD, they become permanently affordable housing.

The legislation also provides that if the MOHCD is unable to identify and apply the fee to a qualifying Small Sites project within the same neighborhood within two years of the fee payment, the fee would then be released into the City’s Affordable Housing Fund for use on Small Sites projects elsewhere in the City.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.