Negotiating a Win-Win Zoning Solution

When two enterprising young women opened a co-working space in the heart of San Francisco's historic Chinatown, they immediately drew opposition from the city's zoning inspectors and a powerful neighborhood advocacy group that didn't want to alter a land use plan that had been in place for decades. Holland & Knight's Chelsea Maclean negotiated a compromise that allowed the innovative business to stay while preserving the traditional character of the neighborhood. Ms. Maclean was supported by Holland & Knight's West Coast Land Use and Environment team, whose more than 20 attorneys and land use professionals operate out of the firm's three West Coast offices. The West Coast group also works closely with the firm's national Land Use and Government Team.

1920C, named for the year women gained the right to vote, opened in March 2015 with an art gallery, community meeting space, and co-working space for freelancers and entrepreneurs. This last use – providing desks and office space for independent workers with plans starting at $5 an hour – immediately drew the attention of Planning Department inspectors and a neighborhood advocacy group. They said the co-working space violated strict zoning rules against offices in an area restricted to small retail, nonprofits, restaurants and professional services.

The city issued a notice of enforcement against the business within a month of its opening, and several days later, a planning commissioner and the neighborhood advocacy group made a strong public statement against the nascent business when they held a press conference in front of the 1920C building.

The city and neighborhood had genuine concerns about the office space. San Francisco's rents have soared in recent years as tech companies expand and Chinatown denizens feared that an encroachment from the nearby financial district would destroy the character of the neighborhood and transform it into just another expensive destination for the booming tech community. They have been vigilant in enforcing a zoning prohibition against general office space, even though there is a high vacancy rate in the area as retail and restaurants struggle in the face of a changing cultural milieu that has eroded Chinatown's once-unique character.

1920C, located above a souvenir shop, had no intention of turning over its 4,000 square feet to the tech community. But its young owners did assert that providing working space for entrepreneurs and independent workers could boost the neighborhood, which increasingly has failed to attract sufficient numbers of young people and businesses that don't cater to tourists. They believed the zoning restrictions passed in the 1980s didn't allow the flexibility the neighborhood needed to accommodate a 21st century workforce of independent workers whose digital connections allow them to work anywhere. The owners also pointed out that the gallery and meeting space were viable only because they were subsidized by the co-working space rents.

Nonetheless, the neighborhood advocacy group and the Planning Department said the law was clear: no office space allowed.

At this point, Holland & Knight's San Francisco Land Use team, led in this matter by Chelsea Maclean, stepped in, taking 1920C as a pro bono client. 1920c hoped to find a solution that acknowledged the neighborhood's fears of selling out its cultural heritage, but also recognized the needs of a modern economy where young, independent business people and artists are vital to niche communities such as Chinatown.

1920c began by defusing the tension between the business and the neighborhood advocacy group and Planning Department, showing how its mission to provide space for art exhibits and community gatherings, as well as work space for independent workers, was a boon to Chinatown. 1920c also helped organize supporters who filled a Planning Department public meeting. Supporters who spoke in favor of 1920C included a young translator who needed working space, the owner of a print shop who said 1920C users had increased his business, and artists who used the exhibit space.

Holland & Knight then went to work on the legal aspects and found that 1920C only needed to tell its whole story to show the city that it already was mostly in compliance with the city's zoning. Holland & Knight demonstrated that the code allows "accessory users" if the primary user falls into a permitted category, such as institutional, retail or professional services. The accessory user can occupy no more than one-third of the business' space and there must be a relationship between the accessory and institutional mission.

Holland & Knight identified the co-working space as an accessory use and the business' focus on exhibits, meetings and nonprofits clearly was institutional. 1920C's emphasis on skill sharing between those who used the work space, exhibits and meeting space met the requirement of having a relationship.

Ms. Maclean then became the facilitator of a three-way negotiation among 1920C, the Planning Department and the neighborhood advocacy group, with support from the latter group being critical. After a series of meetings, all three saw that they sought the same thing: a thriving Chinatown that maintained its historic character and remained affordable for small business owners.

Under the agreement cemented by Holland & Knight, all sides agreed that the zoning code continued to prohibit general office space in Chinatown, but they endorsed 1920C's co-working space as a permitted use under the law – as long as it complied with the rules for accessory use. This satisfied the city and neighborhood's fear of opening the floodgates to offices that would increase rents and drive out existing businesses. 1920C agreed to regular inspections by the Planning Department and the submission of quarterly reports proving its continued compliance.

The win-win solution culminated in a joint, conciliatory statement between 1920C and the neighborhood group, and the Planning Department issued its own statement allowing 1920C to continue to operate and clarified the application of the zoning law to co-working spaces and other alternative uses.