Special to the Vanguard
Sacramento CA – Senator Wiener last week announced he has introduced SB 1227, new legislation that spurs the revitalization of downtown San Francisco by providing regulatory and tax relief to a targeted area for a period of 10 years. To speed the conversion and remodeling of outdated buildings into vibrant new uses, SB 1227 provides a temporary exemption from the California Environmental Quality Act (CEQA) — saving projects years of potential litigation and appeals while leaving local zoning and permitting authority fully intact — and expands a tax exemption for affordable housing to include workforce housing.
Combined with SB 423 — a powerful housing streamlining law the Senator passed last year — SB 1227 will allow change in San Francisco’s downtown area to create a brighter future. Senator Wiener is also authoring SB 969, which will help San Francisco energize outdoor spaces downtown as “entertainment zones” and continues to be hyper-focused on shoring up our public transportation systems, which are essential to downtown’s future.
Vibrant urban downtowns are a critical economic and climate strategy. They create powerful synergies for economic development and job creation. Because of their proximity to public transportation and focus on walkable communities, they reduce carbon emissions.
Recent new leases and rising tourism show encouraging signs for downtown San Francisco’s economic recovery, but many metrics show a struggle to regain its pre-pandemic levels of activity. The office vacancy rate climbed steadily in recent years to reach 35.8% by the end of Q4 2023 — a steep rise from Q4 2019’s vacancy rate of 5%. Foot traffic is returning more slowly to San Francisco than to other California cities, reaching just 67% of 2019 levels compared to 83% for Los Angeles and 96% for San Jose. These reduced levels of activity are stifling small 
businesses, hotels, and vital local tax revenue in San Francisco.
Downtown San Francisco’s economic recovery has been impeded by its overreliance on office space, particularly in the Financial District. With the rise in remote work, and the high cost of housing pushing people to live further and further away from the City’s central areas, downtown San Francisco needs a more balanced mix of academic campuses, bars, restaurants, athletic and performance venues, and housing to draw the same levels of activity the area enjoyed before the pandemic.
“Downtown San Francisco matters to our city’s future, and it’s struggling — to bring people back, we need to make big changes and have open minds,” said Senator Wiener. “That starts with remodeling, converting, or even replacing buildings that may have become outdated and that simply aren’t going to succeed going forward. By providing a temporary, targeted exemption from CEQA, SB 1227 will save downtown projects years of review and litigation while leaving local control firmly intact. To bring middle-class housing downtown, SB 1227 also expands an existing property tax exemption to include housing affordable to more middle class families.”
“San Francisco thrives when Downtown thrives, but the reality is that we need to evolve beyond the traditional 9 to 5 neighborhood it has been for decades,” said Mayor London Breed. “At the local level, we’ve improved public safety, streamlined rules for conversions and small businesses, delivered tax incentives, and focused on strengthening the arts, entertainment and public spaces. But there is much more work to do. This important and impactful proposal authored by Senator Wiener will build on this work to encourage new investments in housing, educational institutions, and a wide range of other developments downtown.”
SB 1227 provides two forms of relief to downtown San Francisco, an urbanized area far removed from most sensitive natural resources. Both provisions expire on December 31, 2035, ten years after the bill is enacted.
First, the bill provides a CEQA exemption for most projects, so long as they meet specific environmental, labor and tenant protections. The exemption could be applied to large-scale projects such as academic institutions, student housing, athletic facilities, laboratories, new office buildings, mixed-use projects that contain housing, retail, infrastructure, and public works projects. It could also be applied to small projects, such as changes to a small business’s façade.
SB 1227 does not relax any local permitting or zoning requirements. The City of San Francisco will continue to implement its local permitting requirements. The City will also be able to invoke this CEQA exemption.
SB 1227 contains strong anti-displacement and environmental protections. To qualify for the exemption, developers must show, among other requirements, that a project would not:
- demolish a building that has housed tenants in the past 10 years;
- demolish a registered historic landmark;
- occupy an unmitigated hazardous waste site;
Many housing projects in San Francisco will likely soon become exempt from CEQA review under SB 423, a landmark housing law Senator Wiener authored in 2023. However, SB 423 applies to projects that are at least 2/3 housing. SB 1227 extends its new CEQA exemption to mixed use projects that contain some housing, but do not meet the 2/3 threshold necessary for SB 423.
Second, SB 1227 expands the ‘welfare exemption’ from property tax for specified projects that provide rental housing up to 120% of the area median income, so long as projects are rented 10% below the market value, as determined by the Housing and Urban Development Fair Market Rents. This provision expands a property tax exemption used by affordable housing projects to encourage the production of moderate-income workforce housing projects in downtown San Francisco. This expansion will help the City meet its housing goals while giving more moderate-income workers a chance to locate close to jobs and supporting local businesses with an increase in area residents.
The downtown zone covered by the bill includes the Financial District, Union Square, Civic Center, Yerba Buena, East Cut, South Beach, and Rincon Hill.
SB 1227 is sponsored by San Francisco Mayor London Breed. The bill is supported by the San Francisco Housing Accelerator Fund, the San Francisco Chamber of Commerce, and SPUR.
“The future of our downtown depends on it being filled with a vibrant mix of uses, including homes for the people who help our city run and thrive,” said Rebecca Foster, CEO of the SF Housing Accelerator Fund. “This bill will ensure that we can build the affordable workforce housing our city needs now, while ensuring it will be affordable for the next generation of San Franciscans.”
“Downtown’s future is San Francisco’s future,” said Rodney Fong, President and CEO of the San Francisco Chamber of Commerce. “As we recover from the pandemic and revitalize our City, we have a once-in-a-generation opportunity to reimagine downtown. Senator Wiener’s proposal would move us one step closer to that new vision of a more diverse and vibrant downtown.”
