Development Archives

Palo Alto Adopts Bold Upzoning

November 27, 2023November 27, 2023 | Alex Klein

Palo Alto recently reached a new housing milestone. On November 13, Palo Alto’s City Council adopted a legislative package implementing rezonings originally proposed in the City’s still uncertified sixth cycle Housing Element. In addition to increasing density and height limits on specific parcels across Palo Alto, this rezoning effort will unlock multi-family residential development on certain properties zoned for industrial or commercial uses.

The City Council’s action comes after a year marked by Palo Alto’s inability to adopt a compliant Housing Element. After missing its state mandated January 2023 deadline, Palo Alto adopted a Housing Element in March. But HCD, the state agency tasked with ensuring local compliance with Housing Element Law, rejected the City’s March Housing Element forcing City planners to go back to the drawing board. A second round of Housing Element legislation passed in May but to little avail. During its review process, HCD again refused to certify Palo Alto’s Housing Element. In a letter sent to the City’s Planning Department in early August, HCD requested Palo Alto make various modifications before it would certify the City’s Housing Element, citing concerns that the City’s site inventory was insufficient. Consequently, as of the time of this publication, Palo Alto’s Housing Element is out of compliance with state law and the City may be vulnerable to further Builder’s Remedy projects. With the adoption of this legislative package, the Palo Alto City Council seeks to appease HCD in the hope that the agency will finally certify the City’s Housing Element.

In addition to modest upzoning across the city, the enacted legislation focuses on rezoning parcels identified as housing opportunity sites in the City’s Housing Element. These identified opportunity sites are primarily clustered around a handful of the City’s major transit corridors, including properties along the west side of El Camino Real between Page Mill and Matadero Avenue (the “El Camino Real Focus Area”), commercial and industrial properties near San Antonio Road and Fabian Way (the “GM/ROLM Focus Area”), and certain sites owned by Stanford University along El Camino Real and Pasteur Drive. These changes come as affected property owners and lessees along El Camino Real have expressed increasing interest in redeveloping their properties to accommodate new housing.

Under the adopted rezoning package, opportunity sites identified in the City’s Housing Element will be rezoned to allow multi-family housing as a permitted use and will enjoy higher density and height limits compared to base zoning. The upshot is that industrially zoned properties located in the GM/ROLM Focus Area will allow multi-family housing as a permitted use, maximum height increases, and FAR maximum increases from 0.5 to 2.5 within the focus area and 1.5 on other opportunity sites. Because these densities would represent the “base” density, developers could leverage the rezoning and use the State Density Bonus Law to construct even taller and denser buildings. Properties located in the GM/ROLM Focus Area will also enjoy modified development standards, including a relaxed landscape coverage standard, reduced parking requirements, and taller height limits further easing constraints on development and leading to more housing in Palo Alto.

Sites identified as part of the City’s El Camino Real Focus Area will also enjoy higher densities, height limits, and lot coverage maximums. But, in response to local concerns, these projects will also face new headwinds. Residential development on these properties will be subject to architectural review to meet either objective design standards or context-based design criteria and would be required to provide 20% below-market rate housing at 80% AMI, an increase from the City’s typical requirement of 15%.

Finally, responding to demands from Stanford University, Palo Alto’s City Council also adopted higher density zoning regulations for university owned properties along El Camino Real and Sand Hill Road. Even though Palo Alto will count housing built on Stanford campus toward its RHNA, the university intends to develop these parcels with subsidized housing for graduate students, faculty, and other Stanford employees.

Beyond the focus areas identified as part of the Housing Element update, however, the rezoning also relaxes design and development standards for certain exclusively residential projects intended to accommodate lower income households across the City. Palo Alto’s recent rezoning legislation presents opportunities across Palo Alto to develop more residential housing in one of the most expensive communities in the Bay Area.

Authored by Reuben, Junius & Rose, LLP Attorney Alex Klein.

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.

Increased State Density Bonus Available Next Year

November 8, 2023November 8, 2023 | Sabrina Eshaghi

As we’ve previously covered, Governor Gavin Newsom signed a substantial amount of housing bills into law this year. Two of the most notable pieces of legislation will significantly increase the state density bonus permitted under state law and will make noteworthy changes to SB 35. Below is a more in-depth look at the amendments to the State Density Bonus Law as well as an overview of the potential impacts of the amendments to SB 35 in San Francisco.

AB 1287 – State Density Bonus Law

Beginning on January 1, 2024, AB 1287 will allow an additional 20% to 50% density bonus on top of the existing maximum bonus for projects that provide additional affordable housing units. Currently, the maximum density bonus allowed under the State Density Bonus Law is 50%, which can be accomplished by providing 15% very low income, 24% low income, or 44% moderate income units. The new amendments will allow projects that qualify for a 50% bonus under the current law to provide additional very low income or moderate income affordable housing units in exchange for an additional density bonus based on the sliding scale shown below. For example, a project that provides an additional 5% very low income units, for a total of 20% very low income units, would be subject to an additional 20% bonus, for a total bonus of 70%.

The only limit placed on projects that utilize this additional density bonus is that no more than 50% of the total units can be restricted as affordable.

The amendments also allow up to four concessions for projects that include a total of at least 16% of the units for very low-income households or at least 45% for moderate income households in for sale developments.

The bill also makes some tweaks to the requirements for 100% affordable housing projects that are proposed under the State Density Bonus law.

SB 35’s Future in San Francisco

SB 35 is a state law that offers streamlined ministerial approval for projects in cities that haven’t met their Regional Housing Need Allocation (RHNA) goals in exchange for providing affordable housing and agreeing to certain labor requirements. SB 423, which will take effect on January 1, 2024, includes a number of amendments to SB 35, as discussed in detail here.

San Francisco is currently falling short of meeting its RHNA goals for low income housing, but not above moderate income housing. So, in order to qualify for SB 35, a project in San Francisco must provide at least 50% of its units (not including units granted via a density bonus) to low-income households.

However, due to the increase in the state’s housing production goals allocated to San Francisco for the current RHNA cycle (2023-2031), it is anticipated that the City will not meet its goals for above-moderate housing in the next reporting period. If the California Department of Housing and Community Development makes that determination next summer, then a rental project will qualify for SB 35 streamlining by providing 10% of its units as affordable to very low income households or 20% of its units to low income households. An ownership project can qualify by providing 10% of its units as affordable to low income households.

SB 35 allows for ministerial approval, meaning it eliminates environmental review under CEQA and discretionary entitlements from the Planning Commission. It also imposes a maximum 6-month time frame for approval of planning entitlements. If San Francisco becomes a “10% jurisdiction,” it could unlock the ability to pursue projects that are otherwise cost-prohibitive due to long processing and approval timelines.

Together, SB 35 and the new additional density bonus could significantly spur housing development in San Francisco next year.

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

2023 Housing Legislation Round-Up

October 18, 2023October 18, 2023 | Justin A. Zucker

Like last year, 2023 was a stellar year for housing legislation in California. Last week, Governor Gavin Newsom signed into law more than forty-five bills related to housing and housing production. Below is a brief overview of thirteen housing bills signed by the Governor becoming effective January 1, 2024, relating to the State Density Bonus Law, housing policies, and parking.

Density Bonus Law Updates

AB 1287 (Alvarez) Additional Density Bonus Layer. This bill adds another density bonus layer option to the State Density Bonus Law. If additional very low income or moderate income units are provided, a project is eligible to receive up to an additional 20% to 50% density bonus on top of the base density bonus, provided no more than 50% of the total units would be restricted as affordable. In addition, this bill alters the definition of “maximum allowable residential density” to mean the greatest number of units allowed under the zoning ordinance, specific plan, or land use element of the general plan, or, if a range of density is permitted, the greatest number of units allowed by the range. This bill clarifies that a local government is not prohibited from requiring reasonable documentation to establish eligibility for a requested density bonus and parking ratios. This bill also authorizes up to four incentives or concessions for projects that include at least 16% of the units for very low income households or at least 45% of the units for moderate income households in for sale projects.
SB 713 (Padilla) Development Standard Definition Adjustment. This bill amends the definition of “development standard” to include regulations adopted by a local government or enacted by the local government’s electorate. SB 713 codifies a recent technical assistance memorandum from the Department of Housing and Community Development (“HCD”) that explicitly re-states existing law, that local governments cannot impose standards that stop state density bonus projects from moving forward.

California Environmental Quality Act (“CEQA”)

SB 423 (Wiener) SB 35 Extension and Expansion. This bill extends SB 35 (2017, Wiener), which is currently set to expire January 1, 2026, and expands its applicably, including into the coastal zone. A more robust overview of SB 423 can be found here.
AB 1449 (Alvarez) 100% Affordable Housing Exemption. This bill, until January 1, 2033, exempts 100% affordable housing projects from CEQA. While there are other tools available to make 100% affordable housing projects ministerial and not subject to CEQA, e.g., SB 35 (2017, Wiener), there are no workforce standards tethered to AB 1449.
AB 1633 (Ting) Housing Accountability Act Protection Extended to CEQA Review. This bill would expand the Housing Accountability Act’s definition of “disapprove the housing development project” to include any instance when a local agency fails to issue an exemption, fails to adopt a negative declaration or addendum for the project, or certify an environmental impact report or another comparable environmental document. This bill also clarifies “that attorney’s fees and costs shall rarely, if ever, be awarded if a local agency, acting in good faith, approved a housing development project.” The bill’s provisions sunset January 1, 2031.

Accessory Dwelling Units (“ADUs”)

AB 976 (Ting) No Owner-Occupancy Requirement. This bill makes permanent an existing prohibition to imposing an owner-occupancy requirement on an ADU that sunsets January 1, 2025.
AB 1033 (Ting) ADU Condominiumization. This bill allows a local jurisdiction to permit condominiumization and sale of ADUs separate from the primary residence.
AB 1332 (Carillo) Pre-Approved ADU Plan Sets. This bill requires jurisdictions, by January 1, 2025, to develop a program for the preapproval of ADU plans. This bill also requires local governments to approve a detached ADU project utilizing preapproved plans within thirty days.

Housing Policies

SB 439 (Skinner) Priority Housing Development Projects. This bill would allow a party to bring a motion to strike any part of a pleading in a lawsuit challenging approval of a priority housing development project within sixty days of service of the complaint or administrative record. A “priority housing development” is defined as a 100% low income affordable project.
AB 1218 (Lowenthal) SB 330 Amendments. This bill tweaks SB 330 (2019, Skinner) extending the protected unit demolition and replacement controls, which currently only apply to housing development projects, to projects that are not considered housing developments. This bill would also place the restrictions on demolition of protected units and replacement requirements into separate provisions (Government Code Sections 66300.5 and 66300.6) that will apply permanently. Those controls would otherwise become inoperative on January 1, 2030.
AB 1485 (Haney) State Intervention in Actions Involving Violations of Housing Laws. This bill grants the Attorney General and HCD an unconditional right to intervene in any lawsuit filed over a potential violation of an enumerated list of state housing laws, including, among others, the Housing Accountability Act, Housing Crisis Act of 2019, and the Density Bonus Law.
AB 572 (Haney) HOA Assessment Limits for Affordable Units. This bill places a cap on assessment increases a condominium homeowners association (“HOA”) could impose on a deed-restricted affordable unit, subject to certain exceptions. A more robust overview of AB 572 can be found here.

Parking Controls

AB 1308 (Quirk-Silva) Parking Requirements for Single-Family Homes. This bill prohibits a local jurisdiction’s ability to increase the applicable minimum parking requirements that applies to a single-family residence as a condition of approval of a project to remodel, renovate, or add to a single-family residence, provided it does not cause the single-family residence to exceed any maximum size limit imposed by the applicable zoning regulations, including, but not limited to, height, lot coverage, and floor-to-area ratio. This bill complements AB 916 (2022, Salas), which prohibits cities from requiring a public hearing as a condition of reconfiguring space to increase bedroom count within an existing dwelling unit.
AB 1317 (Carrillo) Unbundled Parking for Residential Property. This bill requires landlords to “unbundle” parking costs from rent for leases or rental agreements for residential property in Alameda, Fresno, Los Angeles, Riverside, Sacramento, San Bernardino, San Joaquin, Santa Clara, Shasta, and Ventura counties, commencing or renewed on or after January 1, 2025.

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

California Passes New Law to Spur Housing

September 20, 2023September 20, 2023 | Melinda Sarjapur

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 14^th 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.

Legislation Aimed at Impact Fee Reform Nears Final Approval

August 24, 2023 | Kaitlin Sheber

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:

Reinstate the fee deferral program;
Escalate development impact fees by 2% each January;
Allow projects to lock in the type and rate of impact fees to be paid;
Waive development fees for a narrow category of projects; and
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.

Sacramento Doubles Down on SB 9

June 14, 2023June 14, 2023 | Thomas P. Tunny

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.

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

March 1, 2023March 1, 2023 | Thomas P. Tunny

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.

Housing Element Fallout: From Noncompliance to Lawsuits

February 15, 2023February 15, 2023 | Daniel J. Turner

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.

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

January 31, 2023 | Kaitlin Sheber

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.

Bigger Code Violation Fines In SF’s Future?

January 11, 2023January 11, 2023 | Mark Loper

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 19^th. 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.