Foster City may soon allow more developers to receive extensions on their project permits, as many struggle to secure financing amidst tighter market conditions.
Cities offer developers and homeowners entitlements that are typically valid for one or two years, depending on the jurisdiction. But many also offer the ability to prolong permits for an additional year or so if needed. While Foster City allows such extensions in limited cases, a new zoning update would apply the offer to a wider breadth of projects.
The move would be a reprieve for many developers, as more conservative underwriting — partially driven by high interest rates, climbing construction costs and plateaued rents — has led to protracted delays in securing finances. And without an extension, applicants must undergo the entire approval process again once their permits expire, which delays construction of much-needed housing in some cases and virtually guarantees a higher price tag for the project.
"In recent times, staff have received requests from several applicants after they've received entitlements where, when they were set to expire, these applicants were citing hardships, and especially impacts due to the pandemic. We saw soaring interest rates and inflation and also things like securing tenants due to economic conditions," said Senior Planner James Atkins during a Planning Commission meeting Wednesday, June 6.
The city received several such requests across a variety of developments in the last two years, including a proposed hotel, a Vintage Park Drive research and development facility and a commercial property at Chess Drive.
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And the issue affects not just commercial real estate — currently seeing notoriously high vacancy rates — but ongoing remote work patterns have also contributed to decreased rent prices, further suppressing lenders' and investors' appetite for multi-unit residential development projects, which already tend to have thinner profit margins.
Many neighboring cities have a process for extensions, ranging from one to two years. About nine out of the 15 commercial or multi-unit residential projects in San Mateo have requested extensions, with almost all of them submitting the request beginning last year. San Mateo allows for a single two-year extension in most cases, while South San Francisco allows for up to three one-year extensions. Burlingame and Belmont each allow a single one-year extension.
The Planning Commission was supportive of allowing two one-year extensions, provided there are no changes to the original project. Due to several recent state laws, commissioners also voiced support for zoning amendments that would streamline and expedite approval of accessory dwelling units.
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