In San Francisco’s North Beach neighborhood, where espresso bars and old jazz clubs still echo the city’s bohemian past, new rules could soon change what types of businesses call the storied area home — stirring both hopes of renewal and fears about losing what has long made it special.

“It’s a really unique ecosystem that allows there to be, on one block, a record store next to a flower shop, a candle shop, a souffle restaurant and a jewelry store,” said local business owner Stuart Watts, who is also the president of the North Beach Business Association. “That’s unheard of in most neighborhoods because … it can become really expensive for micro businesses like that to operate.”

In recent months, Watts joined the chorus of more than 50 small business owners who opposed legislation authored by the area’s supervisor, Danny Sauter, that stands to set aside longstanding zoning restrictions meant to protect the diverse mix of small, locally-owned businesses in North Beach and several surrounding neighborhoods, in favor of more permissive regulations. 

The legislation, called “District 3 Thrives,” would, among other things, expand the types of commercial uses allowed in North Beach and the neighboring Nob Hill and Jackson Square neighborhoods and permit the merging of small storefronts into larger storefronts.

On Monday, Watts and other opponents were dealt a blow: A City Hall committee advanced the controversial legislation to the city’s Board of Supervisors, which is expected to hold a hearing on the legislation Tuesday. 

District 7 Supervisor Myrna Melgar, who chairs the Land Use and Transportation Committee, perhaps said it best: “As San Franciscans, it’s very rare that we all agree on something anytime.”

But in a city where recalling elected officials over land use decisions already has a precedent, crossing constituents means toeing a fine line. While a notable list of supporters on Monday welcomed Sauter targeting “archaic rules” that no longer make sense for the district, others said that the effort left them feeling blindsided and alienated. 

“Our supervisor doesn’t care,” said District 3 resident Romalyn Schmaltz during Monday’s hearing. “We know these changes will push a lot of us out in favor of larger, more corporate businesses, all while creating more vacancies. But he just stays the course.”

“My neighborhood’s morale is extremely low,” said another North Beach resident during the hearing, who gave his name as Apollo. “Here again is our new supervisor trying to fix something that isn’t broken.”

Not everyone agrees — neighborhood and business stakeholders including the North Beach Neighbors, the Jackson Square Merchants Association, the Golden Gate Restaurant Association and the San Francisco Chamber of Commerce have shared their support for the legislation.

Sauter said that his legislation will solve a problem that many commercial corridors throughout the city are experiencing: stubborn vacancies. Storefront mergers of up to 3,000 square feet would be permitted, allowing new businesses to enter North Beach, where such consolidations have long been banned. The legislation would also legalize new walk-up establishments and “flexible retail” — meaning a bookstore could now co-locate in the same space as a coffee shop. 

“District 3’s reputation as the hardest district in San Francisco to start or run a small business is not something I think anyone should be proud of, and I believe our legislation will go a long way towards changing that,” Sauter said.

Sauter said he’s also honored requests from constituents who are worried that his effort will open the door to well-funded businesses that have the ability to outbid mom-and-pop retailers, like medical offices.

On Monday, Sauter amended his legislation to walk back a provision that would have allowed “health services” uses in ground floor spaces in North Beach. 

But the change did little to appease constituents who do not believe that streamlining is an appropriate approach for revitalizing historic neighborhoods like North Beach and Jackson Square, where restaurants and bars dominate and retailers are bucking citywide trends. 

“North Beach is not a struggling corridor. … Our commercial vacancy rate is 6%, among the very lowest in the city,” said Nick Ferris, who is the president of the Telegraph Hill Dwellers association. “These policies that have created that stability are the very policies that this legislation would undo.” 

According to Ferris, larger storefronts equal higher rents, which would make it difficult for a range of small businesses to compete. 

“For nearly 40 years, storefronts have been capped at 2,000 square feet, with conditional use allowed up to 4,000 square feet — this has preserved small, independent businesses and prevented large format retail from dominating,” Ferris said. 

The concern is that the legislation, coupled with a current effort by Mayor Daniel Lurie to upzone commercial corridors citywide and a stalled effort to declare much of the North Beach neighborhood as a historic district, would incentivize the replacement of the neighborhood’s quaint commercial buildings with large box retailers. 

Opponents have also taken issue with a provision in Sauter’s legislation that would remove restrictions on new restaurants in North Beach and Jackson Square, by allowing limited restaurants — such as cafes — to open in spaces that were previously occupied by non-restaurant businesses. 

“If any business was able to turn into a restaurant, that would cost more per square foot. And as soon as that kitchen is put in, a candle shop is not going to pay to take out that kitchen — it doesn’t have the budget for that,” said Watts, adding that of the eight vacancies that his organization is tracking in North Beach, five are abandoned restaurant spaces. 

Watts said he is not opposed to more flexible zoning and incentives for new businesses to set up shop in the stretch of North Beach that he said is currently struggling with multiple vacant storefronts. The North Beach Business Association is pushing for an amendment to the legislation that maintains stricter restaurant density controls in the neighborhood’s core, he said. 

But if the committee’s vote on Monday is any indication, the future of North Beach may already be decided. Melgar described Sauter’s legislation as a “modest proposal.” 

“I think it is wise to look ahead and plan ahead into changes that are going on around us, and adapt and give a little bit more flexibility. I don’t think these changes are all that earthshaking,” Melgar said.

District 11 Supervisor Chyanne Chen acknowledged that preventing an “over saturation of specific kinds of establishments” is crucial in protecting a neighborhood’s small business ecosystem.

“I would like to see data that actually shows how the existing controls are working or not working, and I haven’t seen much of the data that could really help justify the changes that are being proposed,” she said, before voting to advance the legislation. 

Sauter agreed that the city “collectively” should do more to gather such data, and made a promise to the legislation’s detractors: “They have my commitment to monitor concerns, like the balance of restaurants and retail, to explore the idea of an inner and outer North Beach Neighborhood Commercial District, and to explore ground floor use reforms,” he said. 

Regardless of whether or not the legislation will win approval in its current form Tuesday, views on it are likely to remain divided.

“No one wants to lose (North Beach’s) loved and iconic businesses,” said North Beach resident Barry Schiller on Monday. “This legislation isn’t about that. It’s about removing archaic rules that do more harm than good.”