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Solimar Research

Four Takeaways From This Year's Housing Bills

William Fulton on
Sep 26, 2017

Moved by the undeniable statewide housing crisis the California Legislature passed more housing bills this year than at any time in memory. The legislators – and Gov. Jerry Brown – are clearly taking housing seriously and they’re likely to come back next year with more bills. But what do this year’s bills add up to? Here are four takeaways:

  1. Forget CEQA Reform

For decades, the California Environmental Quality Act has been the favored whipping boy of the homebuilding industry. If CEQA were eliminated or streamlined, more housing would be built, housing would be affordable, and everything would be fine. In the last few years CEQA reform has been front and center in the Legislature every year.

Not any more. CEQA reform wasn’t on the radar – indeed, it was barely even mentioned. The focus of attention has been not on reforming CEQA but end-running it. Gov. Jerry Brown put “by-right” reform of the land-use approval process on the agenda last year and this year a by-right bill got through – SB 35. Other bills encourage cities to create various specific plan-level districts that will limit the need for project-level CEQA review.

Bottom line: CEQA reform is too hot a potato for the legislature. As I’ve written before, too many constituencies have too much invested in the use of CEQA to extract blackmail of one kind of another from developers. Why fight that battle when you can end-run CEQA instead?

  1. Good Luck Finding That “Unicorn” Project

By-right approvals are now legal – but good luck finding a project that meets the many criteria laid out in SB 35. It’s a little like those CEQA infill exemptions – looks good in concept but it comes with so many strings attached you’ll be hard-pressed to find a developer who can use it.

To qualify, the jurisdiction has to be demonstrably behind in meeting its RHNA numbers with actual construction. The project has to be a multi-family project located in an infill zone that is planned for residential development but hasn’t been used for residential in at least 10 years (basically, that’s those old commercial or industrial sites near new transit stops). There has to be an affordable component too, and to qualify for the by-right approval you have to use prevailing wage or union labor. Oh, and the project can’t be in the coastal zone or on wetlands or ag land or anything like that.

Basically, if it’s an infill project on old commercial or industrial land that has affordable housing or prevailing wage as part of its funding requirements anyway – sure, then maybe. But how many projects like that are there?

By the way, you can hold hearings on an SB 35 project – so long as the hearings are confined to compliance with objective standards and you approve the project ministerially in the end.

  1. Pay Attention To That Housing Element – Especially The Land Inventory

The legislature paid an awful lot of attention to the land inventory in the Housing Element and using it to stop cities from eating up their affordable housing land supply with market-rate projects – or projects with lower densities than called for in the Housing Element.

SB 166 – the so-called “no net loss” bill -- requires that a local jurisdiction must maintain a current stock of available land with appropriate densities for all income groups, including the 40% of the housing supply that typically must be set aside for low- and very-low-income units. This could lead to some pretty gnarly accounting issues – to say nothing of political issues -- for cities and counties, who will have to constantly recalibrate their land inventories and possibly rezone property to maintain an adequate stock of land for affordable housing.

Local government officials say they don’t think their state counterparts quite realize what a political challenge this might be. After speaking with legislators and state officials, veteran housing lawyer Barbara Kautz said, “Their view is, cities should just zone a whole bunch more sites than they need.”

Then there are the amendments to the little-known Housing Accountability Act, a law dating back to the '80s that puts bumpers on local governments’ ability to deny housing projects. This year’s changes – enacted across a range of bills – put a great deal more of the burden for denying projects on the local governments themselves.

One new provision changes the burden of proof on the city’s findings for denial from “substantial evidence” to “preponderance of evidence”. This gives the courts a lot more leeway to reverse city denials. No longer will they have to give great deference to local government judgments when it comes to findings. Judges can conclude that even if there is substantial evidence on the part of the local government, there may be more or better evidence on the other side.

Other new provisions beef up the requirement that a denial must be based on an “objective standard” and a public health and safety finding – not a welfare finding. These provisions are likely to mean that vague standards such as “character of the neighborhood” will gradually be replaced by more specific standards contained in the development code – and could even limit the role of planning commissions and design review boards in the long run.

On affordable projects, the findings to deny a project include requiring that everything in the RHNA is being built otherwise, a coastal act override, inadequate water and sewer capacity, and inconsistency with both the general plan and zoning (assuming the jurisdiction has a current housing element).

But the city is also going to have to provide developers with a list of inconsistencies within 30 days (60 days for big projects) or else the project will be deemed consistent with the general plan and zoning. So consistency is going to have to be determined much earlier in the process.

  1. Believe It Or Not, There’s Money For All This

SB 2 is a recording fee on certain real estate transactions that's expected to generate $250 million. The main goal of the fee is to provide a permanent source of funding for affordable housin, but half of the first-year money will go to local governments for planning and other efforts that expedite housing projects. So even though the state is going to make jurisdictions tow the line much more carefully on housing elements and certain types of project approvals, there may actually be money to implement the new laws. In addition, SB 3 is a housing bond -- to be placed on the November 2018 ballot -- that will provide $4 billion for housing over the next several years and will likely provide refreshed funding for state housing programs such as the transit-oriented developnent and infill infrastructure grant programs, which could also help local governments plan for and build housing called for in the RHNA. 

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