San Francisco Passes Terrible Housing Ordinance

There’s a clear lesson emerging from the first cities that have legalized “missing middle” housing. The more rules you lift on the construction of these two-, three-, and four-unit homes, the more you’ll actually see built.

San Francisco politicians have absorbed this information and are now using it for evil. On Tuesday, the San Francisco Board of Supervisors passed an ordinance theoretically legalizing fourplexes in the city’s lowest density neighborhoods, but only under conditions that will ensure almost none of this housing actually gets built.

The measure passed by the Board yesterday officially gets rid of the city’s exclusively single-family zoning, which is allowed only one primary residence per property. Duplexes will now be allowed by default in those neighborhoods.

Property owners will also be allowed to build four-unit homes in those areas too, but only if they’ve owned the property for five years (or inherited it from a family member) and place the new units under the city’s rent control ordinance.

The former requirement effectively excludes professional developers from building missing middle housing and instead relies on longer-term homeowners to do it themselves. The rent control requirements will likely make it financially unfeasible for mom-and-pop operations to redevelop their properties.

When combined, those two elements will likely stop anyone from taking advantage of the opportunity to build three- and four-unit homes. The duplexes the city just legalized aren’t subject to these conditions, but it’s probable that few of them will be built either.

A California state law, SB 9, passed last year already requires cities to allow people to divide single-family zoned lots and build a duplex on each half.

Crucially, SB 9 also requires cities to approve those duplexes and lot splits “ministerially,” meaning they can’t require projects to undergo lengthy approval processes that give neighbors the opportunity to weigh in and politicians the discretion to impose conditions or permits.

But because SB 9 only applies in single-family zoned areas, and San Francisco just got rid of single-family zoned areas, this requirement to ministerially approve duplexes is now toothless.

Instead, potential duplex builders will still face the possibility of going through the city’s “discretionary review” process. That process opponents of a new duplex to drag the project sponsor before the Planning Commission, which could allow new conditions not mandated by the zoning code or even reject the project entirely.

The process is expensive and time-consuming for the project sponsor, even if they win. City staff have already identified discretionary review as an obstacle to building, particularly in low-density zones where duplexes are now legal.

Supervisors who supported yesterday’s ordinance have been explicit about their desire to reserve discretionary review.

Other supervisors have been quite critical about the effort to route around SB 9.

“I think it’s an attempt to thwart our state bill,” said Supervisor Ahsha SafaĆ­ at yesterday’s board meeting. “I think this legislation, actually at the end, will end up making it more difficult than it will be to make it easier to achieve the goal of building more housing.”

SafaĆ­ had authored a separate, failed fourplex bill that would have preserved SB 9’s streamlining provisions. He was one of four supervisors to vote against yesterday’s ordinance. Another six supported it.

San Francisco’s planning director likewise told the San Francisco Chronicle that the impact of the legislation would be “fairly small.”

The experience of other cities suggests that’s right.

Minneapolis was the first city in the country to end single-family-only zoning, legalizing triplexes on residential land citywide. The reform took effect in January 2020 and has thus far produced only about 100 newly legal duplexes and triplexes.

One reason for the modest results of reform is that the city allowed more units to be built, but largely left regulations about the size of homes in place. So, a three-unit home in Minneapolis will generally have to fit in the same “envelope” as a single-family home.

San Francisco’s newly passed ordinance likewise legalizes more units per property, while making no or very modest changes to allowable building sizes. That would kill off a lot of potential development, even without the rent control and ownership requirements.

Portland, Oregon, has probably adopted the most liberal missing middle zoning reforms and has had the best results. Builders get density bonuses so that duplexes can be bigger than single-family homes, triplexes can be bigger than duplexes, etc., etc.

The process for approving this housing is by-right, meaning no discretionary review is needed. It doesn’t mandate rent control on new three- and four-unit developments. The city hasn’t tried to force out developers with ownership requirements, and as a result, a new breed of missing middle builders is now springing up to build newly legal fourplexes and cottage clusters.

Portland’s reforms went into effect in August 2021, and have thus far produced just under 100 units. Housing policy wonks and industry participants expect that a subsequent round of reforms passed by the Portland City Council earlier this month will accelerate development.

To be sure, even the best missing middle housing reform isn’t going to cure a high-cost city’s affordability problems overnight. But these changes do make homeownership possible for a larger swath of buyers.

Portland builder Eric Thompson told Reason Earlier this month that his city’s missing middle reforms have allowed his company to build units that are less than half as expensive as the single-family homes they used to construct. “We’re able to maintain profitable projects while hitting price points that the vast majority of the buying public can afford,” Thompson says.

That’s not something you’ll likely see under San Francisco’s latest reforms.

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