On December 13, 2017, the Los Angeles City Council passed and Mayor Eric Garcetti signed a “linkage fee” ordinance that has been in the works for over two years and is projected to bring more than $100 million in annual revenue to the City. The ordinance was published on December 18, 2017.
On September 29th, Governor Brown signed a long-anticipated package of 15 housing-related bills, as summarized in our prior post, “California Legislature Passes Historic Housing Legislation in Effort to Tackle State’s Housing Crisis” (9/22/17). Collectively, these bills constitute the legislature’s farthest reaching action in years to address California’s ongoing housing crisis. Though the bills are expected to make only a small dent in California’s annual shortage of new housing stock, they are, at the very least, a resounding acknowledgment that the state’s housing crisis requires action at the highest level. This post highlights AB 1505, also known as the “Palmer Fix”.
On Friday, September 29th, Governor Brown signed a long-anticipated package of 15 housing-related bills, as summarized in our prior post, “California Legislature Passes Historic Housing Legislation in Effort to Tackle State’s Housing Crisis” (9/22/17). Collectively, these bills constitute the legislature’s farthest reaching action in years to address California’s ongoing housing crisis. Though the bills are expected to make only a small dent in California’s annual shortage of new housing stock, they are, at the very least, a resounding acknowledgment that the state’s housing crisis requires action at the highest level. This post highlights the core bills: SB 35 (which provides a streamlined entitlement process for qualifying projects), and SB 2 and SB 3 (both of which are intended to provide much-needed funding for affordable housing).
In an eleventh hour push at the tail end of the 2017 legislative session last week, California legislators passed a bundle of bills targeted at calming the state’s unprecedented housing crisis. Taken together, the bills address a wide swath of issues affecting housing production and affordability, including: funding for subsidized housing development, requirements for entitlement and permit streamlining, and tools for local and state agencies to enforce local planning obligations. This extensive legislative effort to reform California housing policy stands in stark contrast to the logjam that has vexed Sacramento lawmakers for years, if not decades. While the bills still require the signature of Governor Brown by mid-October, here is a first look at the pending changes to state housing law, including links to each of the bills. Continue reading →
- California needs 180,000 new homes each year.
- Over the last ten years, annual production has averaged less than 80,000 homes.
- Californians overpay for housing, commute too far, and are overcrowded.
- The existing system of land use regulation creates barriers to development.
- The housing crisis makes it difficult for California businesses to attract and retain employees.
- A smaller percentage of Californians own their homes than at any time since the 1940s.
- The housing shortage disproportionately impacts California’s younger residents and the economically and physically disadvantaged.
- California is home to 12% of the nation’s population and 22% of the nation’s homeless.
- Funding for affordable housing is unstable.
- High housing costs increase health care costs and decrease educational outcomes.
- California’s population will grow from today’s 39 million to 50 million by 2050.
While this report is candid and open, its findings mean little if California’s elected officials at every level do nothing meaningful to counter these growing and disturbing – but hardly surprising – realities. The Legislature cannot continue to avoid reconciling legitimate environmental concerns, the challenges of climate change, the need for greater housing affordability, and the increasing demand for housing of all types by avoiding true CEQA reform and adopting ever increasing restrictions on new housing development. Nor can it simply decree that more affordable housing be built, ignoring the reality that those who build homes will not do so unless it makes sound business sense. At the local level, residents understandably want to avoid traffic jams and overcrowding and would like to define their own visions of their communities. Those who own their homes are thrilled by the increases in home prices resulting from the housing shortage. But when every community says “We don’t oppose more housing, just do it somewhere else,” there ultimately is nowhere else in California to go. Combine these factors with environmental solutions that, intended or not, produce elitist housing outcomes, and we have a housing crisis which no one denies, but the most powerful forces in the state are seemingly helpless to address. The challenges are complex and there’s no easy answer, but looking the other way only increases the cost of housing, makes doing business in California less attractive, and sends our young adults elsewhere. That, for sure, is not an acceptable outcome.
Public comment on the HCD draft report is open through March 4. Click here for the full draft report or go directly to the HCD website.
This post was previously published by Tim Paone in LinkedIn.
When a city planning department proposes a change in the city’s development standards to address a specific planning concern, it often is asked by its city council “What are other cities doing?” This question is particularly likely when the proposed change, on its face, suggests that local residents might be inconvenienced. But in the face of increasing economic challenges, some California city councils are willing to pioneer creative planning approaches to stimulate economic activity in their cities, rather than let that activity land elsewhere.
One example is the adoption in late 2016 by the Lancaster City Council of an ordinance which eliminates specific off-street parking requirements (e.g., the number of spaces which must be provided based upon the square footage of the proposed development) for development in commercial zones. Instead of the arbitrary “one size fits all” approach for particular uses, Lancaster’s ordinance requires developers with projects in commercial zones to demonstrate that they are providing adequate parking for their proposed use without being tied to a formula which may or may not be a good measure of the demands of that use. One of the stated purposes of the ordinance is to maximize the City’s economic return from commercial development. In its report on the ordinance to the City Council, Lancaster’s planning staff expressed its belief that “the City’s minimum parking requirements were rooted primarily in a perception of convenience, and not in economic return.” The staff report recommending approval of the ordinance recognized that removing the “regulatory barrier” of formulaic minimum parking requirements in favor of requirements based on actual demand would give developers “the ability to maximize land use potential and value generation, with resulting long-term benefits to the City.” In other words, common sense planning can be a win-win.
From the perspective of the commercial developer, the adoption of Lancaster’s flexible approach to parking requirements is both enlightened and welcome. Most significantly, it reflects an acknowledgement of the many unintended consequences of the typical cookie-cutter approach to parking requirements. Perhaps most impressive is the recognition that rigid parking requirements dictate the design of buildings in ways that, ultimately, may contribute to vacancy and lost economic productivity for the city. Rather than an abstract, formulaic, or “this is how we’ve always done it” approach to planning, Lancaster’s approach reflects the uncommon understanding that what makes a project work for the developer also is likely to be what makes the project work for the city.
The City of Lancaster is located in northern Los Angeles County, relatively far from the hustle and bustle of the Los Angeles metropolitan area. While the remote location of Lancaster undoubtedly influenced its desire to take steps to enhance economic activity within its community, the logic of its new parking ordinance makes sense for any city competing for new economic activity. Beyond parking, this approach could open the door to merging planning and economic development considerations in other types of development. For example, the affordability of nearby housing for employees is a factor which impacts the decisions of businesses to locate within a particular community. For retail development in particular, more houses also means more customers which, in turn, generates greater economic activity for the city. Perhaps one day, California communities will see the wisdom of easing development standards and other regulations for housing to facilitate the production of desirable and affordable residential communities that will benefit home purchasers, tenants, the broader community, and even the city’s coffers. Stay tuned.
Environmental justice goals and policies are coming to the general plans of California cities and counties. So what does that mean for new development projects?
Timing. The new environmental justice requirements are the product of SB 1000, which was signed into law by Governor Jerry Brown on September 24, 2016. Under SB 1000’s amendments to Government Code Section 65302, a local agency will now be required to address environmental justice issues when, on or after January 1, 2018, it concurrently adopts or revises two or more general plan elements. In those circumstances, the local agency must either adopt an environmental justice general plan element or include environmental justice goals, policies, and objectives in its existing general plan elements.
The Meaning of Environmental Justice. To better understand the environmental justice movement and the types of “EJ” provisions local agencies will be pressed to place in their general plans, it is helpful to look at the goals of the California Environmental Justice Alliance, which, along with the Sierra Club and other prominent environmental organizations, is one of the state’s strongest advocates for EJ legislation. The Alliance’s goals include assuring that all families live in healthy neighborhoods, that polluting industries are replaced by green industries, that planning priorities place people above profit, and that lower cost housing is not exposed disproportionately to sources of noise, air, and other pollution.
“Disadvantaged Communities.” Under the new law, all general plans must identify “disadvantaged communities” within their boundaries. These may be areas already identified under existing law in Cal EPA’s list of disadvantaged communities. Areas on that list are specifically targeted for the investment of funds generated by the California Air Resources Board’s cap-and-trade program for reducing greenhouse gases.
Alternatively, a “disadvantaged community” may be identified as a “low-income area” that the local agency has determined to be “disproportionately affected by environmental pollution and other hazards that can lead to negative health effects, exposure, or environmental degradation.” A “low-income area,” in turn, is an area with household incomes at or below 80% of the statewide median income or with household incomes at or below the low income threshold designated by the Department of Housing and Community Development.
SB 1000 appears to provide local agencies with considerable discretion in interpreting the boundaries of “disadvantaged communities,” which is likely to lead to different approaches to defining those boundaries throughout the state.
General Plan Requirements. So, what are the required policy considerations that these environmental justice general plan amendments must address? Pursuant to SB 1000, they must spell out objectives and policies that:
- Reduce the unique or compounded health risks in disadvantaged communities by means that include . . . the reduction of pollution exposure, including the improvement of air quality, and the promotion of public facilities, food access, safe and sanitary homes, and physical activity.
- Promote civil engagement in the public decisionmaking process.
- Prioritize improvements and programs that address the needs of disadvantaged communities.
As with the definition of “disadvantaged communities,” the interpretation of these broad policy statements is likely to lead to the implementation of the new law in vastly different ways.
Prudent Practices. Keeping in mind that all new development must be consistent with the provisions of the local general plan, landowners and developers should keep close tabs on general plan amendments implementing the new law so that their concerns are considered before the new general plan provisions are firmly in place.
In addition, developers should know exactly where their local agency stands in the process of making the required amendments. If a local agency has not timely made the required amendments, legal challenges are likely to confront projects approved when the local agency is not yet in compliance. Buyer beware: this should be a due diligence consideration when acquiring land, not merely something to address at the tail end of the entitlement process.
What the Future Holds. In the end, environmental justice issues are likely to play an increasingly significant role in all new development in California. Each local agency will approach its own EJ considerations in the context of its own political environment, its existing state of development, and its anticipated future development patterns. You should expect that some EJ general plan amendments will contain mundane and less impactful requirements, while others will contain more aggressive provisions that easily could jeopardize the viability of a project.
Given the broad, generalized requirements of the new law, and the likelihood that its provisions will be interpreted and applied in varying ways by local jurisdictions throughout the state, rest assured that the courts will play a key role in shaping the scope of environmental justice requirements throughout California. This definitely falls within the category of “Stay Tuned.”
No matter your politics or perspective on development in the state, one thing is beyond debate – California is facing a serious housing shortage crisis. A recent article in the Los Angeles Times warns that this shortage will have significant adverse effects on the state’s economy. Making matters worse is a dearth of affordable housing. Efforts by policymakers to deal with these shortfalls have resulted in mixed success. Most recently, Governor Brown’s proposal to streamline the approval of “as of right” housing projects that include some affordable units stalled last August.
The California Legislature, however, has come up with new tools to either incentivize or require a developer to intensify development and create affordable housing opportunities. An issue that sometimes comes up is how these tools of local government square with existing state statutes or regulations governing conservation or protection of sensitive lands, such as those regulated by the California Coastal Commission.
In Kalnel Gardens, LLC v. City of Los Angeles, the court of appeal tackled this issue in the context of a relatively small project in the Venice area of Los Angeles. The developer applied to the City to tear down a two-story, three-unit apartment building and replace it with five duplexes and five single-family homes for a total of 15 residential units. The project was granted additional density and height limits beyond what was allowed on the site because two of the units would have been designated as affordable units.
The City’s Zoning Administrator granted these development incentives based on the following statutes:
- Housing Accountability Act. This act is sometimes referred to as the state’s “anti-NIMBY law.” The Housing Accountability Act limits the ability of local governments to reject or make infeasible housing development projects based on their density without a thorough analysis of the “economic, social, and environmental effects of the action,” including the adoption of express findings required by the statute.
- Density Bonus Act. This act addresses the shortage of affordable housing in California by requiring local governments to award a developer certain development concessions and a density bonus that allows an increase in density above what the zoning ordinance allows if the developer agrees to set aside a certain percentage of the units in a housing development for low or very low income residents.
- Mello Act. This act establishes minimum requirements for affordable housing within the coastal zone by requiring, first, the construction of replacement low income housing when existing affordable housing is demolished and, second, new affordable housing units as part of new developments, either at the site of the new development or somewhere else.
A group of neighbors administratively appealed the project, alleging that it violated the Coastal Act because the project’s height, density, setbacks, and other visual and physical characteristics were inconsistent with the existing neighborhood. The West Los Angeles Area Planning Commission found that the project did not conform to the Coastal Act on that basis, and on appeal to the City Council by the developer, the City Council agreed with the Commission.
The developer sued the City, arguing that the City had violated the housing density statutes identified above by reducing the size of the Project and denying the incentives sought under the Density Bonus Act. The question for the court, then, was whether the Coastal Act takes precedence over the “density bonus” allowances sought by the developer.
The court’s answer? The Coastal Act does supersede a local government’s obligations under these housing density laws. The court reached this conclusion by assuming that it must apply the law in a manner that is “most protective of coastal resources,” essentially putting the housing density statutes in the backseat. In sum, in a clash between the Coastal Act and the state’s housing density statutes, the Coastal Act will win.
Although the court here looked to specific language in the Coastal Act and the housing density laws to reach this conclusion, this decision suggests that other statutes similarly protective of sensitive lands may be viewed as superseding other state law mandates that local government incentivize affordable housing projects in order to meet the state’s housing crunch. Bottom line: if you face that balancing act as a developer, beware.
. . . The Corps’ Definition of Waters of the United States
From Clark Morrison:
Justice Scalia’s passing may have an immediate impact on the Army Corps of Engineers’ expanded definition of “waters of the United States” under the Clean Water Act. Last October, the United States Court of Appeals for the Sixth Circuit issued a nationwide stay of the Corps’ new broader definition until the matter is fully litigated, citing skepticism over whether the Corps’ definition is scientifically supportable. Recently, the 6th Circuit decided that it will hear the entire case rather than returning it to the district courts for trial. So, we may see a ruling on this regulation much more quickly than we previously anticipated. Should this matter end up before the Supreme Court, it should be remembered that Justice Scalia was a staunch proponent of the idea that the Corps should not exercise jurisdiction over waters that are not truly navigable (e.g., “reasonably permanent flow”).
. . . Dueling Ballot Measures for Los Angeles
From Alex DeGood:
Two competing initiatives are currently gathering signatures in the City of Los Angeles for placement on the November 8 general election ballot. One, called “The Build Better LA Initiative,” is sponsored by a coalition of labor unions and housing advocates. The second, called the “Neighborhood Integrity Initiative,” is backed by the Coalition to Preserve LA. Both initiatives would have far-reaching implications for future development in Los Angeles.
The Build Better LA Initiative would affect projects requiring general plan amendments or zone changes that permit additional floor area, density, or height. It contains inclusionary affordable housing requirements, mandating affordability for up to 25% of the units in rental projects and up to 40% of the units in for sale housing projects. Offsite affordable housing and the payment of a substantial affordable housing in lieu fee would be options in some instances. The initiative also would impose substantial union labor and local hire requirements on affected projects.
The Neighborhood Integrity Initiative appears to particularly target large development projects. It would impose a two-year moratorium on general plan amendments or zone changes that increase density or intensity. It also would require updating the general plan with various lower-growth principles and limit the City’s ability to approve parking reductions for projects.
Both initiatives take direct aim at the planning and development process in Los Angeles, and either one could dramatically alter development plans across the City.
. . . Inclusionary Rental Housing
AB 2502 was introduced in the California Assembly on February 19 principally to offset the 2009 court decision in Palmer v. City of Los Angeles and allow local jurisdictions to impose, as a condition of project approval, rental units affordable to, and occupied by, tenants whose household incomes fall within the lower, very low, or extremely low categories. If adopted, AB 2502 also will apply to for sale residential developments. In 2013, Governor Brown vetoed similar legislation, noting that inclusionary rental requirements can “exacerbate” the challenges faced by low and middle income communities seeking to attract new development. That, however, occurred before the California Supreme Court’s ruling in California Building Industry Association v. City of San Jose upholding a City of San Jose ordinance requiring developers to include affordable units in their residential projects. The San Jose ordinance specifically stated that it would not apply to rental projects until either the Palmer decision was overturned by the courts or the Legislature authorized inclusionary rental housing. It will be worth watching to see if the Governor’s views on the potentially negative impacts of inclusionary housing requirements have changed since 2013.
. . . The Hiring of a New Executive Director for the Coastal Commission
From Tim Paone:
With the termination of Dr. Charles Lester as Executive Director of the California Coastal Commission, all eyes are on the Commission’s selection of his replacement. Lost in the unfortunate characterization of Dr. Lester’s dismissal as a battle between developers and environmentalists was the Commission majority’s stated desire for a more efficient process. Shortly before the Commission hearing on Dr. Lester’s performance evaluation, former Commissioner Jana Zimmer had urged in an Op-Ed that appeared in the Santa Barbara Independent that a “black hat versus white hat” approach to the decision before the Commission was not productive. Given the prominence of the Executive Director position, there should be no shortage of candidates who are effective managers with strong integrity, have credibility with the environmental community, and don’t own either a white hat or a black hat.
Forget nexus. Don’t worry about rough proportionality. It’s not an exaction and it’s not a taking. In a ruling that will adversely impact landowner and market-rate developers, while providing new opportunities for affordable housing developers, the California Supreme Court has given the go-ahead to the City of San Jose’s affordable housing ordinance which requires developers to include affordable housing units within their market rate projects, unless they elect other equally impacting alternatives.
As a result of the Court’s ruling today in California Building Industry Association v. City of San Jose, developers should anticipate that both the Legislature and local municipalities will consider new opportunities to increase the numbers and distribution of affordable units, both rental and for-sale, within local communities. One of the important practical effects of this ruling is that municipalities will not need to demonstrate that market rate housing creates the need for affordable housing in order to adopt and implement an affordable housing ordinance.
The San Jose ordinance applies to all for-sale projects of twenty or more new, additional, or modified residential units. The ordinance requires that fifteen percent of a project’s on-site units be available to “moderate income” households, those earning no more than 120 percent of the area median income. The ordinance itself provides that it will not apply to rental units until a 2009 appellate court decision, Palmer/Sixth Street Properties, L.P. v. City of Los Angeles, is no longer the law. When and if that occurs, the ordinance requires nine percent of the rental units to be available at rates affordable to moderate income households, with another six percent to be available at affordable rates to very low income households. It also contains alternative methods of compliance, such as building off-site affordable for-sale units, paying an in lieu fee, dedicating land, and rehabilitating offsite affordable units. The Court’s focus, however, was on the “inclusionary” component of the ordinance.
In adopting this ordinance, the San Jose City Council found that, among other things, new market-rate housing drives up the price of land and diminishes the amount of land available for affordable housing. It also found that new market rate homes create demands on services resulting in “a demand for new employees” whose earnings will allow them only to pay for affordable housing. Those circumstances, in turn, were found to “harm the city’s ability to attain employment and housing goals articulated in the city’s general plan and place strains on the city’s ability to accept and service new market-rate housing development.”
The stated purposes of the ordinance included meeting the city’s share of regional housing needs, implementing the goals of the city’s general plan and, specifically, its housing element, and providing for the integration of affordable and market rate housing products in the same neighborhoods.
In its ruling, the Court made a critical distinction between affordable housing impact fees intended to mitigate the specific impacts of a project and an inclusionary affordable housing requirement designed “to serve a constitutionally permissible public purpose other than mitigating the impact of the proposed development project.” In doing so, the Court carefully distinguished both state and federal judicial decisions focusing on “nexus” and “rough proportionality,” concluding that this ordinance is more akin to other “permissible land use regulations,” such as use, density, size, setback, and aesthetic requirements and restrictions and price controls. As a result, the Court concluded that the San Jose ordinance is neither an exaction nor a taking, but rather a proper exercise of the city’s general police power to regulate land development to promote the public welfare. In the context of constitutional law, once the Court reached that conclusion, it could only review the ordinance “deferentially” and the burden shifted to the California Building Industry Association to establish that the ordinance bears “no reasonable relationship” to the public welfare, a challenging threshold which the Court determined had not been met.
The Court concluded that increasing the supply and distribution of affordable housing within the city is within the city’s “constitutionally permissible public purposes” and is “intended to shape and enhance the character and quality of life of the community as a whole.” As a result, the ordinance was found to address “the critical need for more affordable housing in this state” and allowed to stand.
In rendering this decision, the Court has provided public agencies and developers alike with additional guidance on how far a California agency may go in regulating land development before its actions will be considered an exaction subject to the constitutional limitations of “nexus” and “rough proportionality.” The implications of this decision are likely to be significant not only with respect to affordable housing, but also with respect to other land use restrictions and requirements aimed at “promoting the public welfare.”
Unless a hearing before the United States Supreme Court is sought and granted, this is the final say on the validity of San Jose’s affordable housing ordinance.