New State Law Slashed SF's Housing Permit Timeline. Will Builders Follow?

San Francisco, the slowest city in California to approve new housing, has its first batch of potential projects under a new state law that could dramatically shorten the timeline for building permits.

The law, SB 423, went into effect in San Francisco last week, and the city’s Planning Department has already received four “notices of intent” to build a variety of infill housing, including a 23-story tower in Duboce Triangle with 28 units designated as affordable. Other projects are more modest, consisting of two- or three-story buildings with granny flats and other accessory dwelling units.

Two of the submitted projects will be heard by the Planning Department at the end of this month.

“Additional housing is crucial,” department spokesperson Anne Yalon told KQED. “We’re pleased that this legislation is speeding up its production, helping us reach our goal of 82,000 units by 2031.”

SB 423, authored by state Sen. Scott Wiener, streamlines the permitting process for new developments that meet existing planning standards by requiring only “ministerial” review without discretionary hearings. It expands previous legislation by applying it to the majority of new homes built in cities that miss their state goals on planning for new housing, focusing on mixed income and market rate housing.

In San Francisco, the first city subject to the law, it could shorten the permit approval timeline from more than two years, in some cases, to six months.

While SB 423 aims to streamline the permitting process in San Francisco, a report released Tuesday by real estate company Redfin shows that permits are falling nationwide — not because they’re harder to obtain, but because builders are applying for fewer of them, due to high interest rates and saturation in the housing market.

Permits for new multifamily housing so far this year have dropped nearly 30% since the same periods in 2021 through 2023, Redfin found. In both Stockton and Bakersfield, no permits for multifamily homes were issued from January through May of this year, the report found. The rates are still grim in other parts of the state, with Fresno issuing one permit per 10,000 people and San Francisco and Riverside issuing two each per 10,000 people.

This comes after a nearly record-breaking building boom across the U.S. over the past three years from projects started during the pandemic. Less than half of newly built apartments were rented out within three months, signaling that landlords are competing for tenants, according to Redfin. Though rent prices are at their highest levels since 2022, the competition is putting a cap on how much rent prices can grow.

“Prospective renters should be aware that now may be a better time to sign a lease than later,” Redfin senior economist Sheharyar Bokhari said in a statement. “Property owners might start jacking up rents again once all the new apartments hitting the market fill up with tenants and there’s no longer so much supply, which could be the case in a year or two.”

Builders in Cape Coral, Fla., had the highest rate of new permits among the 79 metro areas Redfin studied, with 27 per 10,000 people. Despite flooding, sea level rise and the growing homeowners insurance crisis, demand is still high in the state, partly from out-of-towners moving there during the pandemic.

With permitting levels down elsewhere across the country and especially in California, some experts worry it could mean construction labor is showing a recession risk. Construction workers are finishing up projects in the pipeline, but if permit levels remain down, there might not be work waiting for them after those projects are completed, leading to job loss for that sector.