California Passes New Law to Spur Housing

| Melinda Sarjapur
production

Last week the California Legislature passed SB-423, new law introduced by Senator Scott Weiner to spur statewide housing production.

SB-423 extends and expands SB-35 (Weiner, 2017), which allows streamlined, ministerial processing for housing developments in cities that haven’t met their Regional Housing Need Allocation (RHNA) goals. Qualifying SB-35 projects must also meet certain criteria, including on-site affordability and labor requirements, and comply with local objective zoning standards.

SB-35 has been celebrated by housing development advocates statewide over the past six years for unlocking the potential to develop thousands of new homes. According to an August 2023 report issued by the UC Berkeley Terner Center for Housing Innovation, SB-35 spurred applications for construction of more than 18,000 new units in California between 2018 and 2021, 62% of which were 100% affordable.

SB-423 extends the original term of SB-35 by decade, to January 1, 2036.

It also makes a number of significant tweaks to SB-35, including:

  • Extending into the Coastal Zone. Previously, SB-35 did not apply to property within California’s Coastal Zone, which is a band of land that extends approximately 840 miles along California’s coast. SB-423 removes this exemption, allowing SB-35 to apply within the Coastal Zone beginning January 1, 2025, except for certain environmentally sensitive or hazardous locations, or areas not zoned for multifamily housing. Qualifying developments would still require a Coastal Zone Permit, but the public agency must approve it if they determine the development is consistent with objective zoning standards, which may be modified through state density bonus law.
  • Shortening San Francisco’s Reporting Period. SB-35 applies to cities that aren’t meeting their RHNA housing production goals either for low- or above-moderate income categories, which is typically determined by the California Department of Housing and Community Development (“HCD”) every four years. However, SB-423 singles-out the City of San Francisco, requiring analysis of its RHNA goal progress (and SB-35 eligibility under each income category) every year. As of the most recent assessment, San Francsico was meeting RHNA goals for above-moderate income housing, but not low-income housing. As a result, SB-35 projects in the City must currently provide 50% of units affordable to low-income households. However, if moving forward San Francisco falls below above-moderate income housing targets in an annual review period, projects could instead qualify for SB-35 by providing 10% of on-site units as affordable. Local Inclusionary Program requirements would still apply, but affordable units under SB-35 would count toward the local requirements.
  • Tying Application to Housing Element Compliance. SB-423 extends application of SB-35 to Cities that have failed to adopt a compliant housing element as determined by the California Department of Housing and Community Development (“HCD”), even if they’re currently meeting RHNA goals.
  • Altering Affordability Requirements. SB-423 amends the affordability requirements for rental units in 10% jurisdictions, requiring such units to be affordable to households making 50% of the area median income, instead of the current 80%. The legislation also includes an alternate definition for “affordable rent” for developments that dedicate 100% of their units, exclusive of manager’s units, to lower income households.
  • Clarifying Interaction with Local Inclusionary Programs. It specifies that if a local BMR program requires units that are restricted as affordable to AMI tiers higher than those required by SB-35, the units meeting SB-35 thresholds will satisfy the local program requirements for higher-income units.
  • Amends Labor Standards. It requires projects over 85 feet in height, regardless of unit count, to utilize a skilled and trained workforce. Further, on projects with 50 or more units, contractors and subcontractors with construction craft employees must meet specified apprenticeship program and health care expenditure requirements.
  • Allowing the State to Approve Development on State Property. It authorizes the California Department of General Services, at its discretion, to act in the place of the local government, at its discretion, in order to approve SB-35 projects on property owned by or leased to the state.
  • Creating New Noticing Requirements. Requires local governments to hold a public meeting within 45 days of receiving a notice of intent to submit an SB-35 application for projects proposed in a census tract designated as a moderate- or low-resource area, or an area of high segregation and poverty.
  • Limiting the Scope of Local Review. Expressly states that cities cannot request studies, information or other materials that are not related to determining whether the development is consistent with the objective standards, nor can they require compliance with any standards necessary to receive a post-entitlement permit before the issuance of the project’s entitlement.

SB-423 is now on Governor Newsom’s desk along with a long list of other new bills passed just before the end of the legislative session. The Governor has until October 14th to sign or veto the bill. Unless vetoed, it will take effect on January 1, 2024.

 

Authored by Reuben, Junius & Rose, LLP Partner Melinda Sarjapur.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Legislation Aimed at Impact Fee Reform Nears Final Approval

| Kaitlin Sheber
Development

Last month, the San Francisco Board of Supervisors passed on first reading Impact Fee Reform legislation aimed to make development more predictable, easier, and financially feasible. The legislation complements the proposed BMR and impact fee changes our office previously reported on and will:

  1. Reinstate the fee deferral program;
  2. Escalate development impact fees by 2% each January;
  3. Allow projects to lock in the type and rate of impact fees to be paid;
  4. Waive development fees for a narrow category of projects; and
  5. Adopt a nexus analysis that was completed in December 2021.

The Impact Fee Reform legislation is a part of the City’s efforts at recovery from the pandemic and is meant to supplement efforts to accomplish the policy goals outlined in the updated Housing Element that was adopted earlier this year. Inclusionary housing development impact fees are specifically excluded from the scope of the legislation, so would not be affected.

Below is a brief summary of the changes proposed by the legislation:

Fee Deferral Program

The legislation would reinstate and modify a Fee Deferral Program that expired in 2013 to allow project sponsors to defer 80%-85% of total development impact fees, except inclusionary affordable housing fees. For projects that opt to defer fees:

  • Generally, projects subject to a neighborhood infrastructure impact development fee would be required to pay 20% of the total amount of development fees owed prior to issuance of the first construction document;
  • For projects not subject to a neighborhood infrastructure impact development fee, project sponsors would be required to pay 15% of the total amount of development fees owed prior to issuance of the first construction document.

The remaining percentage of fees must be paid before issuance of the first certificate of occupancy. To obtain deferral, the project sponsor must submit a deferral request to DBI on a form provided by DBI before issuance of the first construction document. Fee deferral is not available to project sponsors that pay the fee before the effective date of the legislation. Projects subject to a development agreement would be eligible for fee deferral, unless otherwise agreed by the parties.

Development Fee Indexing

The legislation would replace and simplify the current method of annual fee escalation with a 2% escalation rate every January 1st.

Development Fee Assessment

The legislation proposes to freeze the rates of development impact fees as follows:

Additionally, the legislation institutes new procedures for assessing development impact fees when a development project requires a modification, renewal, or extension.

Development Impact Fee Waivers for Certain Projects

The legislation would also waive development impact fees for certain projects. Eligible projects that obtain a final approval before the effective date of the ordinance that have not already paid development impact fees are eligible for waiver. Waiver under the legislation is set to expire on December 31, 2026.

Projects in Production, Distribution, and Repair (“PDR”) Districts:

Within PDR Districts, projects that meet the following requirements are eligible for waiver from development impact fees related to establishing new PDR or retail use:

  • Located in a PDR District;
  • Contain a retail or PDR use and no residential uses;
  • Propose new construction of at least 20,000 square feet of Gross Floor Area (“GFA”) and a maximum of 200,000 square feet of GFA;
  • Located on a vacant site or site improved with buildings with less than a 0.25:1 Floor Area Ratio on the date a development application is submitted; and
  • Submit a complete development application on or before December 31, 2026.

Projects in C-2 and C-3 Districts

Within C-2 and C-3 Districts, projects that meet the following requirements are eligible for waiver from development impact fees related to establishing hotel, restaurant, bar, outdoor activity, or entertainment use:

  • Located in a C-2 or C-3 District;
  • Contain hotel, restaurant, bar, outdoor activity, or entertainment use; and
  • Submit a completed development application on or before December 31, 2026.

 

Authored by Reuben, Junius & Rose, LLP Attorney Kaitlin Sheber.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Sacramento Doubles Down on SB 9

| Thomas P. Tunny
SB 9

In 2022, SB 9 took effect, imposing radical new requirements on local jurisdictions to approve new housing in single-family neighborhoods.  Although the results of SB 9 have been mixed (more on that later), Sacramento has seized upon the SB 9 playbook and looked to expand it.

SB 684 seeks to “create new pathways to homeownership for middle-income Californians” by making it faster and easier to build smaller, more naturally-affordable “starter” homes near jobs, schools, transit, and other amenities.  The bill streamlines approvals for homes in infill developments of 10 homes or less, in multi-family zones, and on vacant lots in single-family zones.  (It’s worth noting that in San Francisco inclusionary requirements kick in at 10 units, so projects seeking 8 or 9 units under this bill may get some pressure to do 10 and fulfill the inclusionary requirement.)

The bill supercharges the lot-split provisions of SB 9.  The bill amends the Subdivision Map Act, the state law that regulates the creation and improvement of subdivisions and lot splits, to make it faster and easier to build more housing on a single parcel of land.

Specifically, SB 684:

  • Requires ministerial approval of a subdivision map that creates up to 10 units on qualifying parcels in multi-family neighborhoods and on vacant lots in single-family neighborhoods.
  • Shortens the timeframe development may begin by requiring local agencies to approve building permits once a tentative map has been approved under the Subdivision Map Act.
  • Prohibits the removal of housing that is low income, rent-controlled, or occupied by tenants within the last 7 years.
  • Ensures streamlined projects meet environmental sustainability standards.

SB 684 was introduced by Anna Caballero, whose district is in the Salinas Valley, and recently was passed by the state Senate.  It now moves to the Assembly.

Speaking of SB 9, the 2022 law was adopted with great fanfare.  A 2021 analysis by the Terner Center estimated that over 700,000 new homes could be newly feasible to build if SB 9 passed, and taking into account on-the-ground market dynamics.  But the reality has been different.  Many California cities passed urgency ordinances implementing additional regulations prior to implementing the benefits of SB 9.  Some jurisdictions still have yet to adopt the objective design standards needed to approve SB 9 projects.

Local regulations—such as low maximum unit size, height limitations, and other design rules—can render the construction of SB 9 homes infeasible.  Not to mention high construction costs and/or lack of expertise with homebuilding.  As a result, few jurisdictions in California are seeing much SB 9 activity, and many are seeing none.  In San Francisco, only 34 applications have been submitted, and 16 approved (21 total units).  Los Angeles had the most overall activity in 2022, with 211 applications for new units under SB 9.  We will continue to monitor the progress of both SB 9 and SB 684.

 

Authored by Reuben, Junius & Rose, LLP Attorney Thomas P. Tunny.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Matt Haney Seeks To Eliminate Only-in-San Francisco Appeals

| Thomas P. Tunny
appeals

Housing developers in San Francisco no doubt recognize this entitlement moment of disbelief:  after a grueling, years-long process of working with staff, neighbors, and policy-makers, with numerous concessions made to address the potential impacts of their proposed project, the project finally receives its entitlement from the Planning Commission (a recent study found that a multifamily housing project takes 627 days on average to obtain a building permit) when lo and behold, the Board of Appeals sends notice that the project’s site permit has been appealed; and/or the demolition permit is appealed; and/or the grading permit; and/or the tree planting permit…

Fueling the disbelief even further is that the appeal isn’t based on anything new.  The project has already gone through exhaustive review and revisions.  The permit appeal process simply gives project opponents one more “bite of the apple”, an opportunity to cause delay and gain leverage for further negotiations and concessions.  The standard of review for the Board of Appeals is merely whether the permit was issued in error.  And four out of five votes are needed to overturn the permit.  All of this highlights the City’s recognition that these appeals are superfluous; and yet, they remain allowed.

Assembly Member Matt Haney seeks to change that.  This month he introduced AB 1114, a new bill that recognizes the absurdity (and steep costs to housing) of these appeals, and would eliminate them.  The bill would bar cities from allowing building-permit appeals after an applicant has navigated the long and winding road to entitlement.  Although the legislation would apply to all cities and counties in California, San Francisco is the only jurisdiction in the state that allows such appeals of entitled projects.  Hence, only San Francisco would be affected by the new law.  Only permits for projects that are at least 2/3 residential would be protected by the legislation.

One potential hurdle for the legislation is the City’s Charter.  Arguably, this proposed change requires an amendment of the City’s Charter, which can be done only by San Francisco voters.  But Haney is seeking to bypass that requirement, relying on the state’s vested interest for all California jurisdictions to build more housing.

The bill was introduced February 15 and is scheduled tentatively for a committee hearing on March 18.  State Senator Scott Wiener supports the bill, and the Housing Action Coalition was instrumental in its drafting.

 

Authored by Reuben, Junius & Rose, LLP Attorney Thomas P. Tunny.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Housing Element Fallout: From Noncompliance to Lawsuits

| Daniel J. Turner
Noncompliance

The January 31, 2023 deadline for Bay Area cities and counties to revise and update their Housing Elements has passed, and only four of the Bay Area’s 109 local jurisdictions – San Francisco, City of Alameda, Emeryville, and San Leandro – have adopted fully compliant Housing Elements so far. While many of the Bay Area’s other jurisdictions have made substantial progress toward updating their Housing Elements, others have shown little effort in meeting their obligations under the state’s Housing Element Law. State law imposes a number of potential enforcement penalties and consequences on jurisdictions that fail to comply with the Housing Element Law, including the oft-discussed “Builder’s Remedy”, and housing advocacy groups have started turning to the courts to enforce these provisions against noncompliant jurisdictions.

Background

California’s Housing Element Law was enacted in 1969 and is intended to encourage housing development by requiring cities and counties to adopt Housing Elements as part of their General Plans. A Housing Element is a jurisdiction’s detailed plan for the development of housing within its borders, and it must meet various statutory requirements, such as identifying adequate development sites to meet the jurisdiction’s allocated housing need, creating programs to incentivize the production of affordable housing units, and describing the necessary measures to implement the plan. To achieve compliance with the law, the Housing Element must also receive certification from the California Department of Housing and Community Development (HCD) before the jurisdiction’s statutorily determined deadline. A jurisdiction that fails to do so is considered out of compliance and is exposed to certain penalties and other enforcement mechanisms until it adopts a compliant Housing Element.

Penalties for Non-Compliance

Among the potential consequence for noncompliance is the notorious Builder’s Remedy. Under the Builder’s Remedy, a jurisdiction is prohibited from denying an affordable housing project based on the project’s noncompliance with the jurisdiction’s General Plan or Zoning Ordinance. It effectively frees such projects from all local zoning and development controls, unless the jurisdiction can justify project modifications or disapproval by articulating specific, adverse impacts to health or safety. To qualify for the Builder’s Remedy, a project must provide either 20% of units as affordable to ≤80% AMI households (low-income), or 100% of units as affordable to ≤120% AMI households (moderate-income). While potentially very powerful, it should be noted that the Builder’s Remedy has had minimal real-world testing, with sparingly few examples of successfully entitled projects.

Beyond the Builder’s Remedy, a noncompliant jurisdiction can experience a variety of other consequences. For example, a jurisdiction that does not become compliant within 120 days of missing its deadline is subject to tighter implementation and rezoning timelines once it does adopt a compliant Housing Element. Further, as long as a jurisdiction remains noncompliant, it may be subject to other statutory or judicial losses of zoning and permitting authority, it may be liable for court-imposed fines, and it may have reduced access to state funding and grants for housing, infrastructure, and municipal operations.

Current Status of Bay Area Jurisdictions

The 105 remaining Bay Area jurisdictions – beyond those four listed above – are in various states of noncompliance with the Housing Element Law. These jurisdictions range from those that have made substantial progress toward compliance and are undergoing review and certification by the HCD, to those jurisdictions that have barely begun preliminary drafts.

Oakland, the Bay Area’s third-largest city, is among those jurisdictions that did not achieve compliance by the deadline after its Housing Element was denied certification on February 3rd. Despite having already undergone multiple revisions since it was first submitted in December 2022, a number of technical deficiencies were identified in Oakland’s Housing Element and HCD requested further edits. HCD’s denial letter to Oakland also commended the city’s overall efforts in completing the process. Oakland resubmitted its Housing Element on February 13th, and it is currently pending review.

According to the HCD’s Housing Element Review and Compliance Report (as of 2/14/23), approximately 34 Bay Area jurisdictions are in a similar situation to Oakland’s, with an adopted Housing Element that is currently awaiting review and certification by the HCD. About three-fourths of these jurisdictions submitted their Housing Elements on or within a few days of the January 31st deadline, and given this large influx, the HCD’s review timeline is uncertain. While technically out of compliance, these jurisdictions are unlikely to experience the more severe enforcement consequences due to the substantial amount of progress they have already made and the high likelihood of achieving compliance within the next few months.

Based on the Compliance Report, another 59 jurisdictions have submitted an initial or subsequent draft Housing Element to HCD for review but have not yet adopted it. Because the adoption process includes environmental review, public participation, and multiple hearings, these jurisdictions have a longer road ahead of them (although it will vary greatly for each individual jurisdiction). A further 12 jurisdictions have not yet submitted anything to HCD and may not have even begun the drafting process.

Housing Advocacy Group Lawsuits

In response to the numerous jurisdictions that failed to meet the Housing Element deadline, housing advocacy groups, including YIMBY Law, California Housing Defense Fund, and Californians for Homeownership, have started filing lawsuits against those jurisdictions that are furthest out of compliance. These lawsuits are requesting that the court compel each jurisdiction to bring its respective Housing Element into compliance and are asking the court to impose additional sanctions available to the court under the Housing Element Law, which range from fines to removal of permitting authority. Further, each lawsuit is seeking a judgment declaration regarding the provisions of the Builder’s Remedy, with the apparent intent of laying the groundwork for developers to take advantage of it without having to face extraneous judicial challenges.

It is unknown whether these advocacy groups will expand their current litigation efforts, and it remains to be seen whether any developers will actually employ the Builder’s Remedy at risk of garnering the ire of local agencies for future projects. However, these lawsuits may provide helpful insight in how the courts – and the cities themselves – will respond to the various enforcement mechanisms enacted over the past few years.

 

Authored by Reuben, Junius & Rose, LLP Attorney Daniel J. Turner.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

SF Housing Element Certified by State, adopted by the Board on Jan. 31 deadline

| Kaitlin Sheber
law

Today, the San Francisco Board of Supervisors (the “Board”) unanimously voted to adopt an ordinance that amends San Francisco’s Housing Element as required under California law. Today was the last day for the City to meet its deadline to adopt an updated Housing Element that complies with a variety of new state laws.

The updated Housing Element plans for 82,069 new housing units in the next 8 years—nearly three times the units the City was expected and failed to construct over the past 8 years. Of the 82,069 new units, 32,881 units must be affordable to Low or Very Low Income households. To plan for the ambitious requirement and comply with new Housing Element Laws, the City has made extensive updates to its Housing Element, including the following:

  • Housing production is being shifted towards small and mid-rise housing across all neighborhoods, particularly along transit corridors and the west side of the City.
  • Programs and actions to affirmatively further fair housing have been added as newly required under state law.
  • The Housing Element has been updated to reflect the City’s commitment to advancing racial and social equity in San Francisco.
  • Environmental justice policies will address unique or compounded health risks in affected areas.

As many jurisdictions across the Bay Area work to ensure their updated Housing Elements comply with state law to avoid consequences such as loss of state funding, fines, and potentially loss of local control, the California Department of Housing and Community Development (“HCD”) issued a letter on January 20, 2023 deeming San Francisco’s Housing Element update will comply with State Housing Element Law when it is adopted, submitted to, and ultimately approved by HCD.

Now that the updated Housing Element has been adopted, the City will begin work on implementing its Housing Element to stay in compliance with State Housing Element Law. This will entail rezoning significant swaths of the west side of the City within the next 3 years to allow for more density, especially as HCD has indicated the City should pursue its most aggressive rezoning strategy. The City will also work to reduce governmental constraints in an effort to facilitate housing production under its new Housing Element.

 

Authored by Reuben, Junius & Rose, LLP Attorney Kaitlin Sheber.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Bigger Code Violation Fines In SF’s Future?

| Mark Loper
code

We kick off Reuben, Junius and Rose’s 2023 client updates by discussing a proposed San Francisco ordinance that would significantly enhance penalties for unpermitted work eliminating or adding residential units and significantly altering historic resources, and increase administrative and civil penalties for violations of the Building and Planning Codes.

The legislation, co-sponsored by Supervisors Ronen, Peskin and Chan, was introduced in July 2022 (Board File No. 220878). In October 2022, the Building Inspection Commission voted unanimously to recommend approval. A Planning Commission hearing is scheduled for next Thursday, January 19th. After the Planning Commission, hearings would take place at the Board of Supervisors’ Land Use and Transportation Committee, followed by the full Board.

The ordinance would increase the Zoning Administrator’s authority to impose significant monetary fines on property owners who carry out unpermitted work associated with a residential demo, merger, or change of use, and significant alterations to historic buildings. For unpermitted alterations, mergers, or demolition that eliminate one or more residential units, and also for unpermitted additions of more than two unauthorized units, the property owner would be liable for an administrative penalty of up to $250,000 for each unit. The owner also would be required to file a permit and request retroactive permission from the Planning Commission to eliminate the dwelling unit with a Planning Code Section 317 Conditional Use permit. The Planning Department’s Zoning Administrator would ultimately determine the amount of the fee; the ordinance directs the Planning Commission to adopt factors and criteria for the Zoning Administrator to consider.

The ordinance would also punish property owners who carry out alterations that are tantamount to demolition without securing a Section 317 Conditional Use permit. For five years, no permits authorizing construction or alteration are allowed. There would be one exception: the permit would need to have the same or more residential units, with the same or higher proportion of residential to non-residential units as the building as it existed before the unpermitted work occurred. Also, the replacement units need to be at least 40% of the size of the largest unit in the project. They also could be subject to rent control; as written, this provision of the draft ordinance is unclear.

The ordinance would also enhance the potential penalties for unpermitted damage to historic properties. For historic properties that are designated locally or on the California or National registers, a penalty of up to $500,000 is available for each structure that is “significantly altered or damaged,” or “demolished.” Similar to the unpermitted residential work, the Historic Preservation Commission would be tasked with adopting factors and criteria for the Zoning Administrator, and would also need to define the terms “significantly altered or damaged” and “demolished.”

Also, for all Notices of Violation (“NOVs”)—not just NOVs relating to unpermitted work on residential or historic buildings—the ordinance would add the following additional factors when considering whether to uphold the NOV and whether to assess administrative penalties:

  • if a violation was willful or intentional;
  • the extent to which it resulted in financial gain;
  • if tenants were displaced; if the violation is reversible; and
  • if it created a nuisance, health hazard, or dangerous condition.

Also, the daily administrative penalty would be increased from $100 to $200.

On appeal to the Board of Appeals, if the Board upholds in whole or in part the Zoning Administrator’s decision on the amount of the penalty, it can reduce the penalty, but not below $50,000 for each residential unit or $100,000 for each historic property.

The ordinance would also allow a court to assess a daily civil penalty of between $200 and $1,000 and adds criteria for a court to consider when assessing the amount of any civil penalty for any Planning or Building Code violation. They include: the nature and seriousness of the misconduct, number of violations, the persistence of the misconduct, length of time, willfulness of the defendant, if any tenants were displaced, if the violation is reversable, if the violation impacted an historic resource, the financial gain because of the violation, and the defendant’s net worth.

Finally, the ordinance adds some procedural teeth. Any time after issuing an NOV, the Zoning Administrator can issue a “Notice of Additional Compliance Actions and Accrued Penalties” that requires a responsible party to perform additional abatement actions, and/or sets out the total penalties accrued to-date. Final NOVs or Notices of Violation and Penalty Decisions (“NOVPD”) may be recorded as an Order of Abatement on title, which also would spell out the steps necessary to abate the violation. The Ordinance would also make transferees responsible for daily penalties that accrue after the transfer if an NOV or NOVPD has been recorded on title; if not, the Zoning Administrator can only start assessing daily penalties if a notice and an opportunity to cure the violation are provided.

We will continue to track this interesting piece of legislation as it moves forward.

 

Authored by Reuben, Junius & Rose, LLP Attorney Mark Loper.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

CEQA Litigation Win

| Sabrina Eshaghi
EIR

RJR Attorneys Successfully Defend 180-Unit Housing Development

Earlier this month, the First District Court of Appeals handed down a win for our client in a CEQA lawsuit challenging the approval of a 180-unit residential project in Petaluma (Project). (Save North Petaluma River and Wetlands v. City of Petaluma (Nov. 14, 2022, A163192) [nonpub. opn.].) Matthew Visick and Sabrina Eshaghi of our office represented the developer during entitlements and litigation.

The Court confirmed:

  • The “baseline” conditions against which biological impacts are measured can be drawn from site visits, studies, and habitat evaluations that were undertaken both before and after the Notice of Preparation (NOP) for the Environmental Impact Report (EIR) is issued; and
  • The EIR need not contain a standalone analysis of evacuation impacts, despite expert testimony to the contrary, where substantial evidence indicates large-scale evacuations would not be necessary.

The Project went through an extensive environmental review process that resulted in the release of a Draft EIR in 2018. The City allowed for an extended public comment period on the Draft EIR and held two hearings to solicit additional comments before preparing the Final EIR. As intended under CEQA, the developer adjusted the project multiple times to respond to comments received during the hearings on the Draft and Final EIR. Despite the developer’s efforts to respond to community input, opponents of the Project submitted a letter from an attorney to the City on the day the City Council approved the Project asserting a broad range of alleged errors in the Project’s CEQA review. Soon after the City Council approved the Project, the opponents filed a lawsuit seeking to invalidate the approval.

At the Trial Court, in addition to challenging the adequacy of the EIR’s biological resources and emergency evacuation analysis, the opponents claimed the developer had deprived the public of its right to meaningfully participate in the CEQA process by making changes to the Project in response to public and City input after publication of the Final EIR, failed to analyze the impact of formaldehyde off gassing from composite building products, and failed to adequately analyze potential impacts related to flooding from the adjacent Petaluma River. The Trial Court rejected the opponents’ wide-ranging claims and upheld the EIR’s certification. The opponents promptly appealed.

The Court of Appeal affirmed the Trial Court’s decision as to the two issues raised on appeal: the “baseline” for measuring biological resources impacts and the adequacy of the Project’s emergency evacuation analysis.

First, the Court agreed that information and analysis conducted both before and after the NOP is issued can be the basis for establishing the “baseline” against which Project impacts are measured. The state CEQA Guidelines generally require existing baseline conditions to be based on the environmental conditions at the time the NOP issues. Here, the NOP was published in 2007, but a special status species report for the EIR’s biological resources analysis was drafted in 2004. The EIR indicated its analysis included updated database reviews and information gathered from site visits in the years following the NOP. The Court confirmed that the use of materials from before and after the NOP issued did not require additional justification because there was no indication that the conditions had changed. Instead, the Court determined that the “inclusion of the post-2007 information indicates that the EIR was prepared with an eye toward ‘completeness’ and ‘a good faith effort at full disclosure.’” The Court also rejected the opponents’ argument that the EIR must provide additional documentation from the biologist’s studies and site visits to allow the opponents to evaluate whether they support the analysis in the EIR, confirming that factual information in the EIR itself may constitute substantial evidence. The Court also noted that the opponents could have obtained this information if they had raised their comments during the public comment period rather than on the day the Project was approved.

Second, the Court agreed that where the City has substantial evidence that large scale evaluations will not be necessary, the EIR need not include a stand alone analysis of evacuation impacts. While the EIR did include an analysis of the Project’s impact on adopted emergency response and evacuation plans, the opponents argued that the EIR also needed to evaluate egress and evacuation safety due to neighborhood concerns regarding flooding and grass fires as well as a letter from a “national evacuation expert” opining on allegedly dangerous public safety impacts in the event of an evacuation. The Court reaffirmed that CEQA does not allow courts to reweigh conflicting evidence when reviewing an EIR and that case law allowed the City to rely on the expertise of its staff to determine that the Project will not have a significant impact. Here, City staff prepared a memo reiterating that the Project is outside the 100-year floodplain and is not within the high fire severity zone, and the Assistant Fire Chief confirmed the Fire Department did not have significant flood or fire access/egress concerns. Given the analysis in the EIR and the corroborating statements from City staff, the Court concluded that the opponents failed to prove any inadequacy of the public safety analysis in the EIR.

This opinion affirms the deferential review that the Courts will give to an EIR. So long as the EIR reasonably sets forth enough information to allow informed public participation and allows the City to make a reasoned decision whether to approve a project, the Courts will not second guess the City’s decision to approve a project.

 

Authored by Reuben, Junius & Rose, LLP Attorney Sabrina Eshaghi.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

2022 Housing Legislation Round-Up

| Justin A. Zucker and Daniel J. Turner
bills

This year was a blockbuster year for housing legislation coming from Sacramento. Last week, Governor Gavin Newsom signed into law more than three dozen bills related to housing and housing production. Below please find a brief overview of twelve housing bills signed by the Governor that become effective next year.

AB 682. Density Bonus for “Shared Housing” Buildings

AB 682 amends the State Density Bonus Law to create a density bonus for “Shared Housing” developments. Shared housing, or group housing as it is commonly known, is characterized by single-room units with shared access to common kitchen and dining facilities. Each unit is typically intended for one or two occupants and features a small kitchenette. This new density bonus will allow shared housing developments to build at greater densities in exchange for dedicating a percentage of units to affordable housing, with the same affordability requirements and bonus amounts as is currently available to standard-unit developments. Notably, shared housing developments can provide up to 25% of their floor area as standard-unit housing and still qualify for a density bonus.

AB 916. No Public Hearing to Increase Bedroom Count

AB 916 prohibits cities from requiring a public hearing for a permit to add up to two bedrooms by reconfiguring existing space within an existing dwelling unit.

AB 1551. Commercial Development Bonuses for Providing Affordable Housing

AB 1551 creates a density bonus for commercial developers who partner with housing developers and support the provision of affordable housing through land donation, cash payment, or by directly building units. A commercial developer is eligible for up to a 20% density bonus. To qualify, the housing development supported by the commercial developer must provide either 30% of units as affordable for low income (<80% AMI) or 15% of units as affordable for very-low income (<50% AMI).

AB 2011. Affordable Housing and High Road Jobs Act

AB 2011 provides streamlined, ministerial approval of multifamily housing developments that contain affordable housing units located in commercial zones. Two tiers of development are available, depending on the amount of affordable housing provided. A project dedicating 100% of units as affordable for lower income households can be developed by right on most parcels zoned for retail, office, or parking uses. A project with market-rate units that provides a specific percentage of rental or ownership units as affordable for either lower income or very-low income households can be developed by right on parcels zoned for retail, office, or parking if the site has at least 50 feet of frontage on a commercial corridor (a street between 70 and 150 feet wide). AB 2011 projects are also subject to certain prevailing wage and skilled workforce requirements. We have discussed AB 2011 in greater detail in previous updates on August 24, 2022, and September 1, 2022.

SB 6. Middle Class Housing Act

SB 6 is intended to increase the development potential for middle-income housing by principally permitting housing developments that meet specific criteria in areas zoned for office, retail, or parking uses. Eligible developments are required to meet or exceed certain density thresholds established in the state’s Housing Element law, such as 30 units per acre in metropolitan settings or 20 units per acre in suburban settings. SB 6 projects must also meet certain prevailing wage and skilled and trained workforce requirements, although a development can be exempted from these in certain circumstances.

AB 2334. Density Bonus in Very Low Vehicle Travel Area

AB 2334 expands the available density bonus for 100% affordable housing developments in very low vehicle travel areas. A “very low vehicle travel area” is a transit analysis zone where existing residential development generates 85% or fewer vehicle miles traveled per capita than the regional area in which it is located. Qualifying density bonus projects are not subject to maximum density controls, are entitled to up to 4 development incentives, and may receive an additional three-stories of height. This additional density bonus is only available in the counties of the Bay Area, Sacramento, the Southern Coast, and Inland Empire. AB 2334 also clears up the grey area for application of the state density bonus in a form-based zoning district, requiring calculation of an “average unit size” multiplied by the density bonus amount to determine increase in floor area allowed.

AB 2653. Housing Element Reporting

AB 2653 alters some of the requirements for annual housing element reports cities must submit to the state. Cities must include greater detail, including the numbers of all new and demolished housing units in the jurisdiction, as well as data on all approved density bonus projects. AB 2653 also provides a mechanism for the state to request corrections and make referrals for enforcement.

AB 2668. SB 35 Streamlining Updates

AB 2668 amends SB 35 clarifying streamlined SB 35 projects are not subject to any non-legislative discretionary approval and that density bonus units are not considered when calculating whether a project satisfies SB 35’s affordability requirements. Further, the bill prohibits cities from denying an application for missing materials if there is enough information to allow a reasonable person to conclude the development is consistent with the applicable objective standards. AB 2668 also brings important change to how the Cortese List affects SB 35 eligibility. Placement on the Cortese List, which is the aggregate of the state’s decentralized hazardous waste sites databases, disqualifies a site from SB 35, until it is cleared for residential use by the authority having jurisdiction. However, longstanding confusion over the mechanism of clearing a site meant that once a site was listed, it was effectively barred from SB 35 permanently, even if it had undergone extensive remediation. AB 2668 establishes specific criteria, documentation, and agency determinations that allow a “listed” site to qualify for SB 35.

AB 2221 & SB 897. ADU Law Updates

AB 2221 and SB 897 make a number of changes to existing ADU law to provide for greater development flexibility and ensure consistent and efficient project review. Under these bills, a city that denies an ADU application will be required to provide a full set of written comments that includes a list of all deficient items and details how the application can be remedied. These comments must be provided within the existing 60-day review period. Additionally, a city will be prohibited from denying an ADU application based on nonconforming zoning conditions, building code violations, or unpermitted structures that are not affected by the ADU construction and do not pose a threat to safety.

The bills also increase ADU development potential by restricting setbacks that prevent ADUs below a minimum floor area, increasing the minimum height limit for ADUs located near transit stops or attached to primary dwellings, and prohibiting owner-occupancy requirements until January 1, 2025.  Importantly, the addition of an ADU will no longer constitute a change of R occupancy under the building code such as from an R3 (single-family or duplex) to an R2 (multi-family), and will not trigger a requirement for fire sprinklers if not previously required.

AB 2234. Post-Entitlement Permit Processing

AB 2234 focuses on post-entitlement non-discretionary building permit processes after the planning process has concluded and environmental review is complete. AB 2234 requires local agencies to compile a list of information need to approve or deny a post-entitlement permit, a checklist and post an example of a completed, approved application. AB 2234 also sets timelines for review of post-entitlement applications for housing projects: (a) for projects with 25 units or fewer, a local agency shall complete first review and comment within 30 days of an application completion; and (b) for projects with 26 or more units, a local agency shall complete first review and comment within 60 days of an application completion. These time limits are tolled if a local agency requires review of an application by an outside third-party reviewer. Failure to meet these timelines is a violation of the Housing Accountability Act.

 

Authored by Reuben, Junius & Rose, LLP Attorneys Justin A. Zucker and Daniel J. Turner.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Downtown Oakland Specific Plan: ZIP Update

| Justin A. Zucker
ZIP

As previously reported, the Downtown Oakland Specific Plan (“DOSP”) is working its way to the City Council for adoption, currently anticipated in late 2022. The DOSP includes Zoning Amendments (which we’ve previously reported on) and a Zoning Incentive Program (“ZIP”). Initial details for the ZIP were released earlier this summer (which we’ve previously reported on). Below are additional details regarding the ZIP based on the economic analysis reports prepared by Hausrath Economics Group, dated August 2022 and September 16, 2022, in addition to recent community meetings on September 13 (presentation slides) and on September 19 (presentation slides).

The ZIP was developed in response to community concerns to allowing development downtown without obtaining community benefits. The ZIP allows developers to voluntarily elect to provide community benefits, in one of four forms, to increase allowed development capacity, either additional market-rate dwelling units or commercial space. The four on-site community benefits options include providing (1) affordable housing, (2) below market-rate ground floor commercial space, (3) public restrooms, or (4) streetscape, open space and flood control improvements exceeding basic city requirements. Alternatively, the ZIP includes the option to provide community benefits through payment of an in-lieu fee instead of providing on-site benefits, or some combination of on-site benefits and an in-lieu fee.

The ZIP is a voluntary program that creates additional value for a development project with the City capturing a portion of the value increase. The increase in value from the additional, higher-intensity development is calculated as the difference in value of development under the maximum intensity zoning compared to the base zoning. The value is expressed in dollars per building square foot of added development for commercial and dollars per dwelling unit added for residential.

As currently analyzed, the ZIP is structured so that a third of the additional value from the more intense development is captured in the form of a community benefit. The remaining two-thirds is split with one-third to the developer to incentivize development at increased intensity and a third to the owner to account for increased resulting land value, which in turn results in increased property taxes. During recent community meetings, there has been discussion of adjusting this formula to increase the City’s value capture share.

In creating the incentive, the ZIP considers the costs and economic variables specific to development types, i.e., change from Type III or V (mid-rise/low-rise) to the more costly Type I (high-rise) construction. Properties with large increases in density supporting high-rise development over mid-rise/low-rise projects can have lower value capture per additional dwelling unit or per additional building square foot due to higher costs involved. To account for this, the ZIP establishes three Zoning Incentive Areas that reflect similar market contexts, development patterns and potentials, parcel sizes, and existing land uses. There are three areas each for residential development (map) and commercial development (map), with R-A, R-B, and R-C zones for residential and C-A, C-B, and C-C for commercial development.

The ZIP incentive areas allow additional density ranging from 11% to 800% more density with 65% of cases more than doubling density. The large density bonus accounts for increased costs associated with change in construction typology to Type I for high-rise development.

Based on location, a commercial development could obtain an additional 100,000 sf of office space with the provision of below market ground floor commercial space totaling 6,828 sf (Zone C-A), 4,655 sf (Zone C-B), or 3,724 sf (Zone C-C).

The ZIP is available to a developer in lieu of or in addition to the State Density Bonus set forth in Government Code Section 65915, et. seq. Meaning, a project could layer the State Density Bonus on top of the ZIP to increase development intensity. In instances when the ZIP and State Density Bonus are used in tandem, the project’s ZIP development intensity is the base density not the underlying base zoning density.

The DOSP and ZIP are slated to return to the Zoning Update Committee (“ZUC”) before advancing to the Planning Commission and City Council. While previously schedule to return to the ZUC on September 29, that hearing has been cancelled to allow additional public meetings. The ZUC hearing has not yet been rescheduled. We will continue to track this significant rezoning and community planning effort as it moves forward.

Reuben, Junius, & Rose LLP has experience with entitlement projects and land use diligence throughout Oakland, and we are pleased to have worked on some of the largest housing projects approved in the city over the last several years.

 

Authored by Reuben, Junius & Rose, LLP Attorney Justin A. Zucker.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.