Neighborhood, Small Business Groups File Lawsuit Over San Francisco Rezoning Plan

Plaintiffs representing small businesses and neighborhood groups filed a lawsuit on Friday morning challenging Mayor Daniel Lurie’s controversial “Family Zoning Plan,” which allows for taller and more dense housing in large swaths of the city.

The litigation comes after months of debate and input on the plan, which aims to make it easier to build housing as the city faces a state mandate to add tens of thousands of new homes by 2031. Filed by members of Neighborhoods United San Francisco and Small Business Forward, a progressive business coalition, the lawsuit seeks to pause implementation of the rezoning plan that the city passed in December and is set to take effect Monday.

“You cannot claim to support families and affordability while advancing a rezoning that encourages displacement, strains infrastructure, and offers no clear path to housing people can afford,” Katherine Petrin, co-founder of Neighborhoods United, said in a statement.

California required San Francisco to adopt an updated zoning plan by Jan. 31 to make way for 82,000 housing units in the next five years. Some 43,000 units that the city has already approved, but that have yet to be developed, are included in the tally of total units. The city’s plan aims to create capacity for at least 36,000 units for various income levels.

The mayor’s office, planning department and other agencies held numerous public meetings, workshops and feedback sessions on the plan leading up to its final vote in December. Some changes were included in the plan, including an amendment to remove any building with three or more rent-controlled units from demolition.

Critics of the zoning plan said it didn’t go far enough to protect tenants and businesses that could be displaced as a result of development or increasing rental prices. The lawsuit also alleges that the city did not conduct a proper review under the California Environmental Quality Act before passing the plan.

“Rather than prepare a CEQA document to analyze the 2025 upzone’s impacts and to consider reasonable alternatives and mitigation measures, the city instead bypassed CEQA review and relied on the addendum to the environmental impact report prepared in 2022 for the Housing Element of the City’s General Plan,” the complaint said.

A rezoning plan is also required under the city’s Housing Element, a set of policies aimed at guiding where and how the city’s future housing should be built. Plaintiffs in the lawsuit also allege that the mayor’s plan does not fully comply with the Housing Element, saying the new rezoning rules allow for more dramatic redevelopment than what was approved in the city’s housing plan passed in 2022.

“The mayor’s plan left in thousands of rent-controlled housing units. A lot of our small business employees live in these,” said Christin Evans, who owns The Booksmith in Haight-Ashbury.

“The concern from Small Business Forward is that we get this housing plan right, that we make sure that we are taking care of not displacing small business workers from the city, that we are protecting small business workers, not just their jobs and livelihoods, but also the housing that they live in.”

City officials defended the mayor’s housing plan on Friday, saying it underwent a thorough review before approval by state officials.

“The Family Zoning Plan is the product of years of study, outreach and hearings. The city took deliberate obligations under state law, including CEQA. We are comforted that the California Department of Housing and Community Development reviewed the Family Zoning Plan and felt it complied with state law,” said Jen Kwart, a spokesperson for the city attorney. “We will review any lawsuit once we are served and will have more to say in court.”

Representatives from the mayor’s office underscored that the city needs to build more housing to meet state requirements and keep up with increasing demand for housing.

State housing authorities could have withheld critical public funding and taken over local housing plans and approvals if San Francisco failed to pass a housing plan by the end of this month.

“More and more, families are struggling to live in San Francisco, and the Family Zoning Plan will help us build the affordable homes they need to stay here,” said Charles Lutvak, a spokesperson for the mayor’s office. “The status quo isn’t working for families in this city, and we’re not going to wait around for someone else to do something about it.”

The lawsuit filed on Friday may not be the only legal challenge that Lurie’s rezoning plan faces. Pro-housing development advocacy groups such as YIMBY Law, the legal arm of Yes In My Backyard, have also suggested that they could file a lawsuit if the city doesn’t do enough to produce more housing in the city.

“We passed that Housing Element and it passed unanimously. So if we’re not just not meeting the spirit but not meeting the letter of the law, then we want to make sure we are holding San Francisco compliant,” said Jane Natoli, Bay Area Director of YIMBY Action.

Estimates for how much housing might actually result from the zoning changes have been mixed. Due to economic constraints like building and construction costs, the Planning Department estimates that the mayor’s plan could realistically open up to 19,000 units; however, modeling from the city’s Chief Economist suggests that it could produce only around 14,600 units.

“One of the small ironies of today’s lawsuit is if they are saying we need to go back [to the zoning plan], we definitely don’t have a plan that’s compliant and are opening ourselves up to the builder’s remedy,” Natoli said, referring to a legal process through which the state allows developers to bypass local zoning rules if the city is not meeting state housing requirements.

Plaintiffs in the lawsuit filed Friday are also exploring a 2026 ballot measure that would give voters a chance to potentially weigh in on additional changes to the new zoning plan.

Richard Drury, the attorney representing Neighborhoods United and Small Business Forward, said that the plaintiffs have not yet decided whether they will seek preliminary relief or a resolution in the court.

“This plan didn’t go through the right public review process to produce more affordable housing and less damage,” Drury said. “Instead, they upzoned parts of the city and are threatening to eliminate some rent-controlled housing to build luxury condos, which is the opposite of what the plan aimed to do.”