What the Measure Would Do

Proposition H would amend the Planning Code and the Business and Tax Regulations Code to allow for greater flexibility within commercial districts and to speed review and inspection of new businesses and new uses in existing businesses. This increased flexibility and efficiency would support small businesses impacted by the hardships of COVID-19, allowing them to pivot to new offerings without the prolonged delays that would typically come with seeking new permits. These changes are also designed to make it easier for new businesses to open.

Significantly, the measure would require a streamlined, 30-day review and inspection process for business uses that are already principally permitted in Neighborhood Commercial Districts (NCDs)¹ and Neighborhood Commercial Transit Districts (NCTs).² (For the definition of “principally permitted,” see “The Backstory” below.)

Prop. H would make a number of other planning code changes, including:

• Allowing businesses that offer food and drink in NCDs and NCTs to offer workspaces as well
• Permitting temporary “pop-up” retail activities in vacant commercial storefronts
• Allowing certain outdoor activity areas on the ground level
• Permitting temporary uses in certain bars and entertainment venues for up to six years
• Allowing for certain kinds of restaurant service, such as table service, in parklets
• Allowing arts activities and social service or philanthropic facilities to operate as principally permitted uses in most NCDs (meaning that they would not have to seek special permission)

For the first three years, Prop. H would allow the Board of Supervisors to pass certain amendments that expand the scope of code changes (but not narrow it). After three years, the Board would be allowed to make any amendments to the provisions.  

The Backstory

Before the pandemic, retail was already in a state of flux. COVID-19 has accelerated the urgency of determining how to best support active main streets and commercial corridors. With social distancing and shelter-in-place rules, many nonessential businesses are already closing or are likely to close or struggle in the coming months, even those that have been most successful at adapting to current conditions. In March, the California Restaurant Association estimated that without public action, the COVID-19 crisis could cause between 20% and 30% of restaurants to permanently close statewide. San Francisco’s Golden Gate Restaurant Association has suggested that that number could climb as high as 50% in San Francisco.

Earlier this spring, the Mayor’s Office began exploring policies and changes to the city code that would make it easier for small businesses and community-serving organizations to open and operate. The mayor signed an executive order in March 2020 announcing a moratorium on commercial evictions for small and medium-sized businesses. The moratorium will prevent any small to medium-sized business from being evicted due to a loss of income related to economic impacts from the COVID-19 pandemic. The city also launched a number of efforts to support small businesses, such as deferring business taxes and license fees and starting a relief fund for impacted businesses.

But an ongoing challenge for businesses that want to operate in the city is the San Francisco Planning Code, which is notoriously specific and complex. The code sets forth certain allowed uses in residential, commercial or industrial-zoned districts. In each district, a certain use may be allowed (principally permitted), allowed by permission (conditionally permitted) or not allowed. Businesses looking to open in San Francisco or businesses interested in making changes to their operations often need permits from multiple agencies, such as the Department of Building Inspection or the Department of Public Health. Prop. H would allow businesses greater flexibility to move forward with more efficiency and cost savings.

Because the changes contained in this measure faced an uncertain path to approval through the Board of Supervisors, Mayor London Breed placed Prop. H directly on the ballot. As an ordinance, it requires a simple majority (50% plus one vote) to pass.

Equity Impacts

The pandemic has magnified deep challenges and racial and gender disparities in the business community. Earlier this year, McKinsey noted that a large concentration of minority-owned small businesses fall within industries that are more susceptible to disruption, making them even more vulnerable to the pandemic.³ Industries such as food service, personal and laundry services and retail have the highest share of minority-owned small businesses. But despite these challenges, McKinsey’s poll showed that more than 40% of minority-owned small businesses have added new services to support their communities and employees, compared with 27% of all respondents. These businesses recognize that in order to survive they will need to be flexible and nimble, innovating on their original business model. By making it easier for businesses to introduce some new uses in their existing spaces, Prop. H could help support such minority-owned small businesses.

Data from the 2012 U.S. Census Survey of Business Owners indicated that roughly one-third of San Francisco small businesses (employing fewer than 100 people) were owned by minorities or women, and these firms tended to be smaller and employ a smaller number of people than businesses with white owners.⁴ Overall, 31% of San Francisco businesses were owned by people of color, and 17.3% were owned by women.

To ensure that Prop. H, if approved, benefits minority-owned small businesses as much as other small businesses, it will be important for city staff to execute a robust community engagement plan that helps small businesses (especially those that are not part of a managed business improvement district) become aware of these offerings and learn how to access them.  

Pros

• The proposed changes included in this measure would address ongoing challenges that small businesses face when working with San Francisco’s permitting and approvals process, potentially clearing the way for new businesses to open their doors or for existing businesses to pivot to new offerings.
• Prop. H would allow for amendments by the Board of Supervisors. This provides flexibility to make future changes or additions to the ordinance in response to new challenges or needs from the business community.
• The new processes would likely shorten the overall length of time for permitting, conditional use applications and public notification requirements, which would reduce time and administrative costs for both the city and businesses.
• If the measure is successfully implemented, any increased business activity in the city’s neighborhood commercial areas might slightly increase the city’s revenue from business taxes in future years.
• By allowing nonprofits as a principally permitted use and streamlining their permitting process, Prop. H could help struggling organizations secure space in San Francisco and avoid displacement.

Cons

• The proposed changes made in this measure are items that should be decided by a Board of Supervisors hearing, not at the ballot box. The regular legislative process is a better way to alter the planning code than asking the voters to approve a full package of complex planning and zoning changes.
• The decision to take these changes to the ballot delays implementation for months when small businesses could benefit from these changes sooner if the Board of Supervisors were to enact them.
• Most (but not all) of the changes in Prop. H would benefit new businesses rather than existing businesses, which are struggling to stay afloat.
• The city could incur increased staffing needs due to the requirement to have all permits reviewed and completed within 30 days.