Housing-Starved San Francisco Fines Developer $1.2 Million For Building Too Many Units

San Francisco, in the midst of a severe housing crunch, has fined a pair of developers for adding more housing units to an apartment complex than they were permitted to build. It might also require them to remove some of the existing illegal units.

On Friday, the San Francisco Chronicle reported that an ownership group including Yin Kwan Tam and Cindy Zhou Lee has agreed to pay the city $1.2 million to settle numerous code violations at a collection of apartment buildings they constructed on San Bruno Avenue in the city’s Portola District.

Planning documents show that in 2013 the city granted permission for the construction of five buildings—containing 10 units of housing plus office space and ground-floor retail—on lots that were either vacant or featured a shuttered gas station.

The developers instead ended up building 29 total units without any of the offices or open space they had promised. In addition, the final project lacked some of the promised parking spots and had none of the fancy façade features depicted in the original plans. The new units also lack a second means of egress, which is required for fire safety purposes.

The project received its final certificate of occupancy in 2016. According to the Chronicle, problems with the neighbors began even before construction was finished, as it became clear that the façade going up in their neighborhood did not match the plans approved by the city.

“I saw it go up and I thought, ‘This turd is not what we were promised,’” one neighbor told the Chronicle.

The Planning Department’s website shows several complaints dating back to 2017 about the building’s illegal units, lack of below-market-rate rental units, and absence of promised street trees.

The project is one of several approved by Bernard Curran, one of the building inspectors being investigated by City Attorney Dennis Herrera as part of a wide-ranging probe into corruption at the city’s Department of Building Inspection.

The question is what will now happen at the currently occupied apartment complex.

The developers’ attorneys have filed applications to legalize the additional, unapproved units and to add fire escapes on the rear of the building. That will require the city to grant variances for the properties, which are collectively zoned for only 14 units. That’s not guaranteed to happen, so some of the current units may end up getting dismantled and their occupants forced to move elsewhere.

There is precedent for that. In 2016, the city sued Judy Wu and Trent Zhu for illegally converting 15 legal units they owed into 49 apartments, which they then rented mostly to formerly homeless veterans. In 2018, the couple agreed to pay $2 million to settle the lawsuit. Ten of those 49 apartments ended up being removed.

If the same thing happens for the illegal apartments on San Bruno Avenue, the city will be removing existing housing units and displacing existing tenants for the sole purpose of enforcing an overly restrictive zoning code that has turned San Francisco into one of the most expensive rental markets in the country.

One recent working paper at the National Bureau of Economic Research found that restrictive zoning regulations drive up the costs of a quarter-acre lot in San Francisco by an average of $409,000. The National Low-Income Housing Coalition’s annual Out of Reach report found that a San Franciscan would have to earn $68 an hour in order to afford (i.e., spend no more than a third of their income on) a median two-bedroom apartment. (That report’s methodology arguably overstates the housing affordability challenges facing most renters, but it’s still useful for showing what’s available for what price.)

Just today, City Supervisor Dean Preston tweeted out a Chronicle write-up of that report, saying that we should “stop waiting for the market that created this problem to solve this problem. We need social housing and we need it now.”

Stop waiting for the market that created this problem to solve this problem. We need social housing and we need it now. https://t.co/1xEfXOgxOH

— Dean Preston (@DeanPreston) July 19, 2021

The case of the San Bruno Avenue homes shows that the market is more than willing to add additional housing in San Francisco. The city government Preston is a part of is meanwhile fining private developers for adding that housing, and it might even demand the demolition of some of what they’ve built.