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 →
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.”
In the legal world, the word “dictum” refers to words in a court opinion which are best considered non-binding “remarks” or “comments.” Relying on dictum in a 2006 Supreme Court decision, the California State University Board of Trustees (the “University”) concluded that paying its fair share of offsite mitigation related to the traffic impacts of its proposed expansion of the San Diego State University campus was “infeasible.” Under CEQA, a proper finding of infeasibility would have allowed the University to adopt a Statement of Overriding Considerations and avoid the University’s fair share of offsite traffic mitigation. The only factual basis for the University’s finding of infeasibility was that the Legislature had not earmarked specific funds to cover the University’s traffic mitigation costs and was not likely to do so.
This week, the California Supreme Court issued a decision in City of San Diego v. Board of Trustees of the California State University stating in a moment of candor that the dictum which had been relied upon by the University was “simply an overstatement.” The Court concluded that the University failed to address the availability of funding from other sources and could not support its claim that using other funds available to the University for offsite mitigation would be an illegal gift of public funds. The Court agreed with the position urged by the City of San Diego, stating that under the University’s reasoning “off-site mitigation would likely be found infeasible for many, if not all, state projects that receive non-state funding, and more such projects would proceed without mitigation pursuant to statements of overriding considerations.” Because the Court concluded that the absence of earmarked funds did not make the University’s participation in the mitigation infeasible, the Statement of Overriding Considerations was invalid.
Although the specific holdings of this case apply to State agencies, the decision is an important reminder of the care that must be taken with any project, whether private or public, in making proper findings to support a Statement of Overriding Considerations. To support a Statement of Overriding Considerations, CEQA requires both (i) that a finding be made that there are specific considerations which make identified mitigation measures or alternatives infeasible and (ii) that there are “overriding economic, legal, social, technological, or other benefits of the project” which outweigh the project’s significant unmitigated impacts. For the first finding, CEQA defines “feasible” to mean “capable of being accomplished in a successful manner within a reasonable period of time, taking into account economic, environmental, legal, social, and technological factors.” Therefore, in the City of San Diego case, once the Court determined that reliance on the Legislature’s failure to earmark mitigation funds did not alone make the University’s fair share traffic mitigation obligation “infeasible,” the Statement of Overriding Considerations was doomed.
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.
2015 is shaping up as a year of significant developments in land use law thanks to the Governor, the Legislature, and the courts. Here’s an update on anticipated developments related to Sea Level Rise, Affordable Housing, Traffic Impact Analysis and the Drought, any or all of which could constrain land development:
. . . SEA LEVEL RISE AND THE COASTAL COMMISSION: Prospective purchasers, developers, and owners of coastal land should pay close attention to the Coastal Commission’s development of policies to address rising sea level and its implication not just for coastal resources, but also for existing and proposed development. Although final guidance has not yet been issued, the Commission’s Draft Sea-Level Rise Policy Guidance concludes that sea level rise threatens “seven wastewater treatment plants, commercial fishery facilities, marine terminals, Coastal Highway One, fourteen power plants, residential homes, and other important development and infrastructure.” Add in impacts to tourism, commercial fisheries, coastal agriculture, the ports, and sensitive coastal resources and it is easy to anticipate that the projected risks from sea level rise will create tough decisions for the Commission as it acts on Local Coastal Programs, LCP amendments, and Coastal Development Permits. Hazard avoidance and mitigation are likely to result in proposals for significant constraints on development. Every site and project will be different, but it will be important to evaluate the potential significance of sea level rise over the life of the project in the context of any investment or development within the Coastal Zone. The picture above is from a presentation by Charles Lester, Executive Director of the Coastal Commission, to the Senate Budget Subcommittee 2 on March 20, 2014. It shows a pre-Coastal Act home and more current setback requirements along a blufftop in Pismo Beach which has been impacted by bluff erosion.
. . . AFFORDABLE HOUSING FEES: We told you earlier this year that the California Supreme Court will be weighing in on the validity of an in lieu affordable housing fee in San Jose. Oral arguments in California Building Industry Association v. City of San Jose (click here to read the appellate court decision which is under review) were heard on April 8. CCN’s Mike Zischke was in attendance and observed an engaged and inquisitive Court. When this decision comes down, its significance likely will go beyond the affordable housing issue. With two new Justices sworn in at the beginning of this year, this decision could foretell where the Court will lean on land use issues, particularly those involving exactions and impact fees.
. . . THE DROUGHT: Governor Brown’s Executive Order calling for a 25% reduction in the State’s water usage will impact not only daily life for Californians (there goes that ten-minute shower), but potentially development proposals. At a time when some areas in the state are experiencing housing shortages, there undoubtedly will be pressure from some interest groups to cut back on the development of new housing. It’s too early yet to understand what the full effect of Executive Order B-29-15 will be, as local water agencies and local governments will be developing their own policies to comply with the Governor’s directive.
In many cities throughout California, concerns about traffic have made the State Density Bonus Law (“DBL”) a four letter word. Developers who are otherwise willing to provide affordable units as a component of a market rate multifamily or mixed-use project are increasingly discouraged from doing so. And it’s not getting any easier. On September 27, 2014, Governor Brown signed AB 2222, amending the DBL in response to a growing perception that the DBL could be implemented in a manner that could result in a net loss of existing affordable housing units for new housing projects. The bill requires developers to identify and replace all of a property’s pre-existing affordable units to be eligible for a density bonus under the DBL. While that goal sounds reasonable, in practice, it may prove to be difficult to implement and will most likely not achieve the intended result of retaining and creating more affordable housing throughout California. Continue reading →