SB 827 Dies in Committee as Three Bay Area SB 35 Projects Get Underway

Yesterday the much-debated Senate Bill 827 (SB 827) authored by Senator Scott Wiener failed to make its way out of its first policy committee hearing, effectively dooming its chance of passing this year.  SB 827 would have provided a “transit rich housing bonus” to qualifying urban, infill projects on transit corridors that provided required percentages of affordable housing.  That bonus would override local zoning restrictions, providing substantially increased heights and density and reducing parking requirements.  Our prior update on SB 827 can be found here.

As SB 827 goes down, Senator Wiener’s Senate Bill 35 (SB 35) from last year’s legislative session is starting to bear fruit.  SB 35 created a “by right” approval process for multi-family, infill housing projects in urbanized areas that provide affordable housing.  The “by right” approval process applies in areas that fail to issue sufficient building permits to meet their State-mandated affordable housing goals (the vast majority of cities and counties in California fail to do so).  In a city or county that does not issue sufficient building permits for above moderate income units, a project that dedicates at least 10% of its units to households earning below 80% of the area median income (AMI) qualifies for ministerial review.  If a city or county does not issue sufficient building permits for households earning below 80% of AMI, a project that dedicates at least 50% of its units to such households qualifies for ministerial review.  SB 35 projects are generally required to pay prevailing wage, and restrictions apply to avoid displacement of existing tenants.  A city or county is required to approve an SB 35 project within 180 days.  Our prior update on SB 35 can be found here.

Three SB 35 Projects Now Underway in the Bay Area

SB 35 was part of a package of fifteen housing bills signed by Governor Brown in September 2017 that sought to tackle a wide range of issues, from streamlining of project approvals to funding for local planning and affordable housing to strengthening the Housing Accountability Act.  SB 35 went into effect on January 1, 2018.  On January 31, 2018, the Department of Housing and Community Development released its analysis of cities and counties subject to SB 35 streamlining for failing to meet their affordable housing goals (378 failed to meet their above moderate income goals, and 148 failed to meet their 80% AMI goals).  As of today, there are three projects that are seeking approval under SB 35.  Based on the timeline for approval under SB 35, all three expect to receive their approval within 180 days.

1900 Fourth Street, Berkeley

The project sponsor had sought approval of a development at this site for approximately 5 years.  The site, currently a parking lot, is designated for housing in the city’s general plan and zoning and is located near the Amtrak Capitol Corridor Train and buses.  However, vigorous opponents argued that the development of the site would harm cultural resources and have other deleterious impacts.  In March 2018, after years of negotiating with the opponents and a prolonged environmental review process, the project sponsors changed tack and sought a denser development of the site using SB 35 and the State Density Bonus Law.  The project now proposes 260 units, 50% of which will be affordable to households making less than 80% AMI, 27,500 square feet of retail and restaurant space, a community park area, and a community center.

Vallco Town Center, Cupertino

The owner of the nearly-vacant Vallco Shopping Mall had sought approval of a development at the site for nearly 6 years.  Several years of vigorous opposition had stalled the specific plan that would have allowed for the renovation of the property.  In April 2018, the project sponsors took a different approach and revamped the project to utilize SB 35 streamlining.  The revised project reduces the office area from 2.4 million to 1.8 million square feet, reduces retail from 640,000 square feet to 400,000 square feet, and increases housing units from 800 units to 2,402 units, of which 50% will be affordable to households earning less than 80% AMI.

681 Florida Street, San Francisco

As a result of a market-rate housing development next door, the city became the owner of this parcel which it would develop into a 100% affordable housing development.  The city chose two affordable housing groups to develop the project, one of whom actively opposed passage of SB 35 before it became law.  However, as the two groups moved forward with the project it became apparent that the normal approval process would be time consuming and uncertain, preventing them from bringing the project to market as quickly as they hoped.  In April 2018, the groups chose to reformulate their proposed development at the site to proceed under SB 35 and the State Density Bonus Law, which they expect will allow a 130-unit project where normally only 86-units would have been possible.

The Future of SB 35

In a statement following yesterday’s committee vote on SB 827, Senator Wiener stated his intention to keep working on the bill and suggested that perhaps it would take more than one legislative session to get the necessary support.  He compared the bill to Governor Brown’s 2016 budget trailer bill that would have streamlined approvals by creating “by right” land use approvals for multifamily, infill housing developments within “transit priority areas” that also include affordable housing.  The Governor’s trailer bill failed when environmental and labor groups walked away from negotiations, but some have speculated that the trailer bill may have paved the way for SB 35 the following year.  Perhaps the ambitious changes that SB 827 proposes will take another legislative session to enact.  However, if SB 827 is coming back next year, the Senator will not only need to persuade the Legislature to pass it, he will also have to persuade a new governor to sign it.

Authored by Reuben, Junius & Rose, LLP  Attorney, Matthew Visick

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.