Small Prop. Owners of S.F. Inst. v. City & Cnty. of S.F.

• Decision Date: 11 April 2018
• Docket Number: A145860
• Court: California Court of Appeals Court of Appeals
• Parties: SMALL PROPERTY OWNERS OF SAN FRANCISCO INSTITUTE, Plaintiff and Appellant, v. CITY AND COUNTY OF SAN FRANCISCO, et al., Defendants and Respondents.

22 Cal.App.5th 77

231 Cal.Rptr.3d 225

SMALL PROPERTY OWNERS OF SAN FRANCISCO INSTITUTE, Plaintiff and Appellant,

v.CITY AND COUNTY OF SAN FRANCISCO, et al., Defendants and Respondents.

A145860

Court of Appeal, First District, Division 2, California.

Filed April 11, 2018

Certified for Partial Publication.^*

Attorneys for Appellant: Zacks & Freedman P.C., Andrew M. Zacks, James B. Kraus, Ryan J. Patterson, San Francisco

Attorneys for Respondents: Dennis J. Herrera, City Attorney, Kristen A. Jensen, Deputy City Attorney, Brian F. Crossman, Deputy City Attorney

Miller, J.The City and County of San Francisco adopted an ordinance that allows property owners to make changes to certain types of housing units that previously could not be enlarged, altered or reconstructed. But the ordinance imposes waiting periods of up to 10 years before changes can be made to units where tenants are evicted under "no-fault" provisions, including tenants who are evicted in accordance with the Ellis Act, which allows property owners who seek to exit the rental business to evict residential tenants and prohibits local governments from "compel[ling] the owner of any residential real property to offer, or to continue to offer accommodations in the property for rent or lease." ( Gov. Code, § 7060, subd. (a).) The Small Property Owners of San Francisco Institute (SPOSFI) filed a petition for writ of mandate and declaratory relief against the City and County, the Board of Supervisors (Board), the Planning Commission (Commission), and the Planning Department (Department), collectively "the City," challenging the ordinance on the grounds that the City failed to comply with the City Planning Code and with CEQA, and on the grounds that the ordinance imposes a prohibitive price on property owners exercising their right to exit the rental business and therefore conflicts with and is preempted by the Ellis Act. The trial court denied the petition, and judgment was entered in favor of the City.

SPOSFI argues on appeal that the trial court erred in denying a motion to augment the record, in determining that SPOSFI failed to timely raise challenges to the ordinance under the San Francisco Planning Code and CEQA and therefore waived them, and in determining that the ordinance does not conflict with the Ellis Act. In the unpublished portion of this opinion we conclude that SPOSFI has not shown error with respect to the record or waiver. In the published portion, we conclude that the ordinance is preempted by the Ellis Act because it requires a property owner who exercises Ellis Act rights to wait 10 years before being eligible for a permit to make alterations. Therefore, we shall reverse the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

Before San Francisco Ordinance No. 286-13 (Ordinance No. 286-13) was adopted in December 2013, section 181 of San Francisco's Planning Code generally prohibited the enlargement, alteration or reconstruction of "nonconforming units," which are legal residential housing units that exceed the currently-permitted density for the zoning district in which they are located.¹ As modified by Ordinance No. 286-13, Planning Code section 181, subdivision (c), now permits the enlargement, alteration or reconstruction of nonconforming residential units in zoning districts where residential use is principally permitted, as long as the changes do not extend beyond the "building envelope" as it existed on January 1, 2013. However, a waiting period of five to 10 years applies for changes to units where a tenant has been evicted under the provisions of San Francisco Administrative Code (Administrative Code) section 37.9, subdivisions (a)(8) through (a)(14), which set forth grounds for evicting a non-faulting tenant. (S.F. Planning Code (Planning Code), § 181, subd. (c)(3).) In particular, a 10-year waiting period applies if a tenant has been evicted under Administrative Code section 37.9, subdivision (a)(13), which allows a property owner to evict tenants to remove residential units from the rental market in accordance with the Ellis Act.² ( Gov. Code, § 7060, subd. (a) [barring statutes and regulations that compel the owner of any residential real property to offer, or continue to offer, accommodations in the property for rent].)

A. Initial Proposal to Allow Changes to Nonconforming Units

In January 2013, Supervisor John Avalos introduced a proposed ordinance that would modify the Planning Code in several different respects, including by allowing the enlargement or alteration of nonconforming units in zoning districts where residential use is principally permitted. The Board transmitted the proposed ordinance to the Department for environmental review under CEQA.³ The Department determined that the ordinance was "[n]ot a project" under CEQA Guidelines section 15060, subdivision (c)(2) (Cal. Code Regs., tit. 14, § 15060, subd. (c)(2) ), and noted that individual projects proposed under the ordinance would undergo physical environmental review.

The Commission held a hearing on the proposed ordinance in July 2013. In advance of the hearing, Department staff prepared an executive summary, which raised the possibility that allowing changes to nonconforming units might have unintended consequences. Staff explained that "very often nonconforming units are among the city's most affordable housing stock, and are often subject to rent control." Allowing changes to those units "would provide increased flexibility, which could encourage the improvement, expansion, or production of family-sized housing," but that "[a]lternatively, the amendments could result in expansions that would increase the cost of the units, including rental units, such that they are no longer affordable." The Department could not predict the effects of changing the law, "but encourage[d] decision-makers to carefully consider these potential impacts to the city's most affordable, yet unsubsidized, form of housing."

At the Commission meeting, a memorandum from Supervisor Avalos was circulated proposing amendments to the ordinance, including two that related to nonconforming units. To preserve the affordability of nonconforming units, Supervisor Avalos proposed prohibiting alterations that would extend beyond the building envelope as it existed on January 1, 2013. To prevent owners from evicting tenants for the purpose of altering units, he proposed prohibiting alterations if a building had a "no-fault" eviction, including an Ellis Act eviction under section 37.9, subdivision (a)(13) of the Administrative Code, within the past 10 years.⁴ During the July 2013 hearing, a member of Supervisor Avalos's staff discussed amending the ordinance to address concerns that allowing changes to nonconforming units could give property owners the incentive to evict tenants so the owners could alter the units.

At the close of the hearing, the Commission adopted a recommendation that the portion of the proposed ordinance concerned with allowing enlargements and alterations of nonconforming units be split from the remainder of the proposal, and continued to September 2013.⁵

B. Adoption of Ordinance No. 286-13

About 10 days after the July 2013 hearing, Supervisor Avalos introduced a new proposed ordinance that would permit enlargement, alteration, or reconstruction of a nonconforming unit if the building is located in a zoning district where residential use is principally permitted so long as the enlargement, alteration, or reconstruction did not extend beyond the building envelope as it existed on January 1, 2013. The Board transmitted the proposed ordinance to the Department for environmental review, and the Department determined that the ordinance was not a project for purposes of CEQA.

The Commission held a hearing on the new proposed ordinance in September 2013. In advance of the hearing, Department staff prepared an executive summary stating that the limitation of changes to the existing building envelope reduced the likelihood that expanding nonconforming units would make them less affordable. At the hearing, Supervisor Avalos's aide, Jeremy Pollock, informed the Commission that Supervisor Avalos's office and the city attorney were "working on language that would not allow for alterations in units that had had an eviction, a no fault eviction within the last 10 years." Pollock explained, "[W]e're basically looking to model that [language] on other places in the Planning Code that have restrictions on no-fault eviction, such as the recently passed condo conversion ordinance and also the garage ordinance that dealt with garages in Chinatown, Telegraph Hill and North Beach." The Commission asked for public comment; none was offered.

During discussion of the proposed ordinance by the Commission, Department staff member Sophie Hayward noted that Supervisor Avalos "has been very clear to date as to the changes that he is hoping to make to this ordinance, which relates to language regarding no-fault eviction. If any other substantive change were made it would be automatically referred back to the Planning Commission." Commissioner Antonini, the only member of the Commission to vote against the ordinance, cited the proposed amendment regarding no-fault evictions as a reason for his opposition: "It reminds me of the garage door. We went through a discussion on a property ... and the present owners had nothing to do with the evictions that happened many years before, ... and they just wanted to provide garages for their own use. And [a supervisor] introduced this legislation to link them to something that happened well before and they had no control over. [¶] Ten years is a long time and you could have ownership changes. So just on the basis of that being part of this legislation, I think parts of this have some good uses, but I think that in particular I don't like." The Commission voted to approve the proposed ordinance by a vote of 6 to 1.

The Board's Land Use and Economic Development Committee (Land Use Committee...