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Bringing By-Right Affordable Housing to California
Last week in a rather low key manner, California Governor Jerry Brown proposed one of the most significant changes to California's land use policies in years, permitting projects that provide affordable housing to be approved as-of-right. Though an important and significant step in the right direction, if adopted as-is, language in the bill could hinder its implementation.
What the proposed legislation says
As part of his 2016-2017 state budget proposal, Governor Brown offered legislation that would amend the Permit Streamlining Act (CA Government Code Sec. 65913) to permit housing project that provide 20 percent affordable housing, or for projects providing 5 to 10 percent affordable housing when located in a Transit Priority Area (TPA), to be reviewed ministerially. Any design review of a development project utilizing these provisions must be completed in no more than 90 days from submittal. According to the proposal, entitlements impacted by this legislation would include, but would not be limited to:
- Enactment and amendment of zoning,
- Enactment and amendment of design review ordinances or guidelines,
- Zoning variances,
- Conditional use permits, and/or
- Tentative subdivision maps.
Similar to the existing State Density Bonus, the developer must opt-in to the new law. The developer is required make a written request to the local government that he/she intends to utilize the benefits of the new law. To utilize the authority of the new law, the development project must meet three criteria:
- Be consistent with the jurisdiction’s general plan and zoning standards,
- Be located on a site that is either immediately adjacent to “urban uses” or at least 75 percent of the perimeter of the parcels that adjoin the project are development with urban uses.
- Must provide on-site affordable housing units and record a land use restriction requiring the units remain affordable for at least 30 years or more.
Urban uses are defined very broadly to include "any residential, commercial, public institutional, transit or transportation passenger facility, or retail use, or any combination of those uses." Thus, virtually any project location in California's cities would potentially qualify for ministerial review under the proposal. However the percentage of on-site affordable housing units required depends on whether or not the project is located in a TPA. TPA's are defined as an area within one-half mile of a major transit stop that exists or is planned within an adopted general or specific plan.
Projects located within a TPA would be required to provide on-site affordable housing units equal to or greater than a) 10 percent of total units for lower-income households or b) 5 percent of total units for very low-income households. (Low or very low income is defined under California Health and Safety Code Sec. 50079.5 and 50105 respectively.) In California's major cities, like Los Angeles and San Francisco, with well established (and expanding in Los Angeles) transit systems, developers will have a number of options in terms of allocating a percentage of affordable housing. Projects not located within a TPA would be required to provide on-site affordable housing units equal to or greater than 20-percent of all residential units. These units would be restricted to residents making 80 percent or less of the area's median gross income.
Potential impact on housing development in California
It is not an exaggeration to suggest this is arguably one of the most significant proposal to reform current land use policy in California in years, with the potential to expedite the entitlement process (and lower the cost) of thousands of new housing units in a state desperate for additional supply.
The greatest impact of the proposed legislation would likely be felt in the coastal communities of California, where far too little housing has been developed to meet current and high demand. Projects in these communities often require numerous discretionary approvals and face ardent opposition from local groups. A typical conditional use permit or variance application in Los Angeles, for example, takes approximately 18 months to complete with little to no opposition. When opposition is present (meaning usually), these discretionary approvals can often take years when appeals are considered. Under the proposal, what once took over a year could potentially be completed in three months.
Of course, while large communities often in the news for housing, such as Los Angeles and San Francisco, would clearly be impacted (San Francisco would be uniquely impacted because all projects are currently require discretionary review), perhaps the more important impact will be in smaller neighboring cities which are often rightfully criticized for using their local police powers to prevent increased housing density. Cities like San Mateo, Palo Alto, and Menlo Park on the Peninsula south of San Francisco would no longer be able to prevent sorely needed housing, so long as the projects qualify under the proposed law.
Superseding local ordinances
As state law, the legislation would supersede less permissive local ordinances and, in that sense, it would take away some local control. However, as I’ve argued in the past, housing is in such need in California that in order to provide the necessary supply, we need to remove the issue from the rationally self-interested (the individual) in order to produce the more rational and progressive outcome that benefits all.
As described above, the new law would likely function in a similar manner as the existing State Density Bonus law. Developers are not required to utilize the law and could simply continue to utilize local land use ordinances instead. However, if a developer does elect to utilize the new laws authority and meets all requirements, the city would be obligated to comply and permit the project ministerially. Under the proposal, failure of cities to approve qualifying projects could result in a writ of mandate issued by a court, ordering the city to comply.
The previous notwithstanding, cities could still pass more stringent affordable housing ordinances. For example, a city could offer its own incentives to require developers to provide, for example, 30 percent affordable housing on site and clarify that units provided must meet both the local affordable housing requirements and that under the new state law. It would be at the discretion of the developer to determine whether the state or local provisions would be most beneficial to the project. Or to put another way, it would be the responsibility of the city to create incentives more beneficial to the developer than those provided under state law. Nevertheless, the current proposal makes it abundantly clear that cities have failed to adequately provide enough housing supply utilizing their own local authority.
Relationship to CEQA needs clarification
While the governor's proposal is a significant step in the right direction, it requires clarity in at least two major areas, first its relationship to the California Environmental Quality Act (CEQA).
Under CEQA, ministerial projects are exempt from review (see Sec. 21080(b)(1)). If a project qualifies under the proposal and is therefore to be approved using only ministerial authority, would that project also be considered exempt under CEQA? A strict interpretation of the proposal would indicate the project would be exempt. This may very well be the case as the environmental review required for non-categorical exempt projects under CEQA is a potentially long and expensive process. If this is the intent, however, the proposed language should be clarified to establish the relationship with CEQA, rather than leave it open to misinterpretation, litigation, and delay.
Requirement to be consistent with zoning ordinances is untenable
The second area in need of clarification is with the consistency requirement. The intent of the proposed law, from my perspective, is to not by itself permit a developer to simply throw in a variance for less-than-required parking or to add increased height or density simply because he/she is adding affordable housing. However, the proposed language does not clarify this relationship and is ambiguous at best. At worst, the consistency requirement makes any potential qualifying project untenable.
This is actually a critique of CEQA in general as well with regard to Section 21159.21, which lists other exemption for qualifying housing projects. If a project requesting the benefits of the Governor’s proposal does not already meet parking, height, density, or some other zoning requirements, could it be considered consistent with zoning standards in effect at the time of submittal? Arguably no. This is why most large housing projects never qualify for exemption under the aforementioned section of CEQA, even if they meet all other criteria, and are required to undergo a full Environmental Impact Analysis.
When we explore the governor's proposal specifically, the inclusion of the consistency requirement, while simultaneously exempting projects from discretionary review, is inherently at odds with itself. At a time when most general plans and zoning ordinances have not been updated to reflect contemporary development practices, let alone planning and market realities of land use and construction costs, few projects are financially plausible without seeking deviation from existing zoning ordinances. In fact, it's only under state law that consistency with zoning is often required. As part of the entitlement application for discretionary approvals in general, a project applicant will write findings demonstrating their consistency with only the general plan. Zoning code consistency is removed because a discretionary approval for items such as height, density, or the like is to approve a project that is specifically not consistent. This being the case, the benefits of the proposed law become rather meaningless as the projects in most need are, by definition, inconsistent with current zoning. (Again, with the exception of San Francisco where all projects are subject to discretionary review even if they meet general plan and zoning ordinance requirements.)
The counter claim is that the otherwise discretionary requests would only be applicable insofar as they are required to construct the affordable housing units. If a developer can build a seven story building by-right, but in order to add affordable units on top the developer need to request a variance to both height and density, that variance must be granted as ministerial in order to permit the affordable units. This is not an unreasonable assumption, however current language fails to define these boundaries. Even so, such boundaries, while they should be clarified regardless, would still limit the potential of the Governor’s proposal.
The proposed legislation has the opportunity to greatly benefit the residents of California by allowing more market-rate and affordable units to be constructed in a timely manner. The proposal not only warrants but demands serious consideration by state legislators. However, the current language is both ambiguous and conflicting. While the relationship to CEQA should be more well defined, the issue of zoning code consistency will remain the biggest barrier to utilization. The Governor's Office and legislators should amend the proposed language to remove the zoning code consistency requirement, while a requirement for general plan consistency could remain. Alternatively, language similar to that in the State Density Bonus law could be added to preclude application of zoning standards that would otherwise prevent the project. This way, the developer who actually wants to build the tall dense residential tower in a city’s downtown can realistically provide affordable housing, while ensuring that project remains well within a city's vision for its development future.
[Update: This post has been updated since its original posting to provide clarity the topic of superseding local ordinances. With regard to the existing State Density Bonus, it should be noted that cities can require more stringent standards for their own affordable housing requirements and developers who wish to comply must meet the more stringent of the two. However, cities cannot preclude affordable housing that meets the more stringent local standard from counting as qualifying units under the State Density Bonus as well. It is not unreasonable to assume courts would have a similar interpretation for the proposed legislation as written. I apologize for the confusion.]