Density Bonus Law & CEQA Tiering Upheld

DBL

This winter, two California Courts of Appeal issued decisions that reaffirm some of the positive aspects of state laws related to housing production, from both a CEQA perspective and via the State Density Bonus Law (“DBL”). In the first case, out of East Bay city Newark, the First District Court of Appeal upheld a tiered CEQA review for a 469-lot subdivision based on a program-level EIR prepared for a Specific Plan. About a week later, the Fourth Appellate District upheld San Diego’s approval of a 20-story residential tower, relying heavily on the protections afforded to mixed-income residential projects under the DBL. We discuss each below.

In Newark, the City approved a specific plan in 2010 for up to 1,260 units, as well as a golf course and related facilities, relying on an EIR. The EIR specifically noted that Newark would proceed under CEQA Guidelines Section 15168 for specific development proposals and “tier” off of the EIR to the extent applicable. In 2019, the applicants submitted a subdivision map proposing 469 residential lots, but no golf course. Other changes from the development analyzed in the EIR included filling and elevating only certain areas on the site (the project site is located next to the San Francisco Bay) and locating the filled and elevated areas directly next to wetlands, with riprap along the western banks. The City prepared an exemption checklist comparing the EIR to the subdivision’s impacts and conducted background technical studies, including an updated sea level rise analysis. The checklist found that the subdivision would be consistent with the specific plan, and that there were no changed circumstances or new information that might trigger the need for more CEQA review than what was done for the EIR. It was a classic example of CEQA “tiering.”

The Court of Appeal upheld the City’s use of the checklist. First, it rejected an argument that the project changes made tiering inappropriate. The Court helpfully pointed out that changes in and of themselves do not eliminate the ability to tier off an EIR; instead, the environmental consequences resulting from those changes must be new, greater, or substantially different than what was analyzed in the EIR. Here, they were not. The Court also rejected the appellant’s claim that the amount and rate of sea level rise was different enough to require a new EIR, finding that the EIR’s unambiguous finding of a significant impact due to sea level rise was adequate, as was some language in the EIR noting that the rate of sea level rise was uncertain and might be accelerating.

Finally, the Court determined that adaptive management plans for sea level rise do not improperly defer consideration of mitigation measures. Taking a refreshingly common-sense approach to climate change and CEQA, the Court would not fault Newark for acknowledging in the EIR that adaptive management would be required. “The City’s potential responses to environmental conditions between 50 and 80 years from now cannot be considered part of the project,” it concluded. “Because the City currently can only dimly guess what measures will be needed to respond to conditions several generations from now, the City was not required to analyze the impacts of the adaptive pathways” as part of the project.

The Court of Appeal’s opinion in San Diego generated more buzz, particularly among the pro-housing groups that have done yeoman’s work in recent years to strengthen California’s housing protections. The case was originally not certified for publication, in part because San Diego’s City Attorney was reluctant to have a published case that so clearly spelled out the limits of the City’s discretion to deny or downsize density bonus projects. Nevertheless, after receiving petitions to publish it, the Court did. It is helpful in several ways, reaffirming the City’s evidentiary burden to deny waivers or concessions; harmonizing General Plan consistency findings with the DBL; and applying the conclusion the First District Court of Appeal reached in Wollmer v. City of Berkeley that a density bonus project can be approved with residential amenities such as a courtyard.

The Project—a 20-story, 204-unit mixed use tower at 6th Avenue and Olive Street across from Balboa Park—faced pushback from neighbors, at least some of whom the Court implied would lose their view of the park. Somewhat surprisingly, instead of arguing that the project would have an unmitigable health and safety impact on the adjacent park, the neighbors argued administratively, at the trial court, and at the Court of Appeal that the project should be denied because it did not comply with several General Plan and Community Plan guidelines that call for contextual development and massing moderation of tall towers. They also argued that the City should not approve waivers that contradicted the guidelines, and that the City should have approved a shorter and squatter development that had the same number of units but a smaller courtyard.

The Court began its analysis by noting that the neighbors had “sidestepped” the implications of the DBL, not discussing it at all in its opening brief and then dismissively claiming the DBL is not a “free pass.” The Court identified the narrow grounds by which a City can shrink or deny a DBL project and pointed out that the neighbors simply failed to make any arguments about that point.

It then went on to explain that the developer specifically requested concessions under the DBL that were germane to each of the General Plan and Community Plan guidelines the neighbors claimed the project did not comply with. The City Council expressly made a finding that there was no evidence to support the denial of the requested incentive, which the Court found to be determinative—acknowledging that the burden on this issue has now shifted to cities if they attempt to deny a project, not the developer proposing an incentive. It also concluded that the project’s waivers were correctly layered on top of the project with requested concessions, meaning a project qualifies for waivers based on its form with both the density bonus and the concessions.

The Court finally rejected the neighbors’ claim that the project’s design was not dictated by the density bonus and concessions, but by a large courtyard. It pointed out that this precise argument was raised and rejected in the Wollmer v. City of Berkeley case from 2011, one of the first cases analyzing the modern DBL. The San Diego City Council could not demand the developer remove the courtyard or redesign its building to satisfy the neighbors’ subjective concerns. The Court stated: “a city cannot apply a development standard that would physically preclude construction of the project as designed, even if the building includes ‘amenities’ beyond the bare minimum of building components.” It remains to be seen what qualifies as an “amenity” that can be baked into a project other than a courtyard, as both Wollmer and the San Diego case related to open space and courtyard amenities. And the evidentiary burden and procedural posture here were also the same as Wollmer: a city defending a project approval with amenities instead of making a project shorter or smaller by eliminating them. This issue may be ripe for further litigation.

The Newark case—Citizens Committee to Complete the Refuge v. City of Newark et al. (2022) ___ Cal.App. ___ (A162045, Alameda County Superior Court No. RG19046938)—and the San Diego case—Bankers Hill 150 et al v. City of San Diego et al (2022) ___ Cal.App. ___ (D077963, Super. Ct. No. 37-2019- 00020725-CU-WM-CTL)—are reminders that well-crafted CEQA documents, entitlement applications, and approval motions can help ensure new state laws meant to protect and streamline housing projects are accurately applied to a project.

 

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.

SB 7 Renews Expedited CEQA Review for Leadership Projects

SB 7

Titled the “Jobs and Economic Improvement Through Environmental Leadership Act of 2021,” SB 7 reenacts and revises expedited CEQA administrative and judicial review procedures for certain Environmental Leadership Development Projects (“Leadership Projects”) established by AB 900. The bill was introduced by Senator Atkins as an urgency measure and went into effect on May 20, 2021. Since enactment, large projects are again eligible to be certified as Leadership Projects, and a new category of smaller housing projects may now be certified. Requirements for each type of project are discussed below.

Examples of projects certified by the Governor as Leadership Projects in the past include the Apple Campus 2 project in Cupertino, the Golden State Warriors Event Center and Mixed-Use Development project in San Francisco, the Downtown West Mixed-Use Plan in San Jose, the Potrero Power Station project in San Francisco, and the Hollywood Center project in Los Angeles. Once the Governor certifies a project, it must be approved by its lead agency within a certain period of time.

By requiring CEQA challenges to Leadership Projects to be resolved in under a year, SB 7 aims to expedite construction for housing projects and boost high-wage employment with the prevailing wage requirements that are a prerequisite for receiving the benefits of SB 7. However, given the increased costs prevailing wage requirements add to projects, developers of smaller housing projects that are unlikely to be challenged in court may not find Leadership Project certification economical. How many smaller residential projects choose to opt in to the program is yet to be seen.

Environmental Leadership Development Projects:

Only certain development projects qualify to be certified as Leadership Projects. These projects include:

  • Large residential, commercial, retail, sports, entertainment, cultural, or recreational use projects that:
    • Result in at least $100,000,000 in investment
    • Create high-wage and highly skilled jobs that pay prevailing and living wages, provide construction jobs and permanent jobs for Californians, help reduce unemployment, and promote apprenticeship training
    • Are 15% more transportation efficient than comparable projects, i.e. that generate fewer vehicle trips per employee, visitor, or customer
    • Are located on an infill site
    • Are consistent with any local sustainable communities strategy or alternative planning strategy and applicable policies where the California Air Resources Board has accepted the strategy achieves Greenhouse Gas reduction targets
    • Meet other environmental standards, including no net new greenhouse gas emissions with an emphasis on on-site emission reductions
    • Provide unbundled parking for multifamily residential projects
  • Housing development projects that:
    • Would result in an investment between $15,000,000 and $100,000,000
    • Create high-wage and highly skilled jobs that pay prevailing and living wages, provide construction jobs and permanent jobs for Californians, help reduce unemployment, and promote apprenticeship training
    • Are located on an infill site
    • Are consistent with any local sustainable communities strategy or alternative planning strategy and applicable policies where the California Air Resources Board has accepted the strategy achieves greenhouse gas reduction targets
    • Meet other environmental standards, including no net increase in greenhouse gas emissions
    • Dedicate at least 15% of the project to lower income households or dedicate the percentage required by local government, whichever is higher
    • Do not provide short term rentals
    • Do not include industrial or manufacturing uses
    • Dedicate at least 2/3 of the square footage to residential use
    • Provide unbundled parking for multifamily residential projects
  • Renewable clean energy projects that generate electricity through wind or solar only

Qualifying projects must go through a certification process to become Leadership Projects. First, the Governor must determine the project meets each condition as required above. Second, the Governor must submit that determination to the Joint Legislative Budget Committee, along with any supporting information, for review and concurrence or nonconcurrence within 30 days. If there is no concurrence or nonconcurrence from the Joint Legislative Budget Committee within those 30 days, the project will be deemed certified. Typically, the entire process takes 3 to 6 months.

Extension of time and new requirements:

The following timelines are in effect under SB 7:

  • Leadership Projects must be certified by the Governor before January 1, 2024.
  • Leadership Projects must be approved by the lead agency before January 1, 2025.
  • The provisions of the bill will expire January 1, 2026.

Projects certified by the Governor before January 1, 2020 and approved by a lead agency before January 1, 2022 are subject to the former AB 900 requirements in place on January 1, 2020.

SB 7 has added requirements that eligible projects use a “skilled and trained” workforce for all construction work and project applicants pay all trial court costs in addition to court of appeal costs associated with hearing and deciding any case. The bill has also authorized the Governor’s Office of Planning and Research (“OPR”) to charge a fee to applicants. Given the additional requirements SB 7 has introduced for Leadership Project certification, it is unclear how feasible or desirable it will be for development projects, especially smaller housing development projects, to obtain Leadership Project certification going forward.

 

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.

Pending State Bills Seek To Boost Housing

House

This week’s update focuses on five pending bills in the State Legislature, all of which are intended to encourage housing development. These bills, if passed into law, could have a significant impact on housing production and real estate development in San Francisco. A typical mechanism in these bills for expediting housing production is to make the particular approvals ministerial, and therefore not subject to CEQA review.

Lawmakers were expected to return from summer recess on July 13th. Due to at least one Assembly member testing positive for coronavirus, the resumption of the summer session has been delayed until the end of this month. This year’s legislative session is slated to end on August 31, 2020.

AB 2580: Conversion of Motels and Hotels: Streamlining

California Assembly Bill 2580 would allow a ministerial, streamlined conversion of non-residential hotels and motels into multifamily housing. Among its provisions, this bill would establish a process for use by cities and counties, including charter cities and counties, for the complete conversion of a non-residential hotel or motel into multifamily housing units that is streamlined, ministerial and not subject to a conditional use authorization. Because conversion of non-residential hotels and motels into multifamily housing would be a ministerial approval, such conversions would not require CEQA review.

San Francisco has approximately 34,000 hotel rooms in more than 200 hotels. In the short-term, the conversion of hotel rooms to residential could bolster the stock of smaller, affordable units. However, as the economy recovers, the loss of hotel space could dilute or erode convention/tourist facilities in key locations near regional transit. Tenant protections may limit the ability to covert back to hotel to meet future needs.

AB 2345 (Gonzales and Chiu): Density Bonus Expansion

California Assembly Bill 2345 would amend the State Density Bonus Law to provide additional options to qualify for State Density Bonus. Currently, a project may receive one, two or three incentives or concessions, depending on the amount and levels of on-site affordable housing. Projects providing 100% affordable housing may receive four incentives or concessions, but are not eligible for waivers given that density limits are waived. This bill would provide an option to receive four or five incentives and concessions for projects in which greater percentages of the total units are provided for lower income households, very low income households, or for persons and families of moderate income in a common interest development. In addition, when providing the additional affordability specified above, the project is entitled up to a 50% bonus. The bill would also authorize an applicant to receive six incentives or concessions for projects in which 100% of the total units are for lower income units, as specified. The bill would also provide one incentive for Student Housing Projects that are 20% affordable.

Due to San Francisco’s high inclusionary requirements, projects that provide onsite inclusionary housing may qualify for a larger bonus than 35%. A typical rental project would qualify for a 37.5% bonus and if located in a carve out area (North of Market Residential Special Use District, the Mission Area Plan, or the SOMA Neighborhood Commercial Transit District) may receive a 50% bonus.

AB 3040 (Chiu): Allow Cities to Permit up to Four Units on Single-Family Home Parcels

California Assembly Bill 3040 would allow jurisdictions to rezone parcels currently occupied by single-family homes for ministerial approval of up to four housing units, and to count these sites toward up to 25% of the housing units the jurisdiction must accommodate for its share of the Regional Housing Needs Assessment (RHNA). Because projects on these parcels would be designated for ministerial approval, CEQA review would not be required. The projects would still be subject to design review; however, local development standards applicable to the site cannot impede the development of four dwelling units. Covenants or other private provisions that prohibit or restrict the number of units would also be void. Single-family home sites counted toward the RHNA site inventory as potential four-unit sites must have been certified for occupancy at least 15 years ago.

In San Francisco, over 40% of the city’s residential land is zoned for single-family homes (RH-1 zoning) and single-family homes occupy lots in additional areas of the city. Under this bill, San Francisco would choose where to allow four-unit buildings on single-family home parcels and likely would consider factors like access to transportation, neighborhood services, parks, and schools as well as historic status.

SB 1120 (Atkins, Caballero, Rubio, and Wiener): Subdivisions

California Senate Bill 1120 would authorize ministerial approvals of either or both (i) a housing development of two units and/or (ii) subdivision of a parcel into two equal parcels. To use this bill, the subject parcel would need to be zoned for residential uses and in a single-family zoning district. Certain hazardous, protected parcels or currently occupied parcels could not take advantage of this bill. Projects could not result in the demolition of 25% or more of existing exterior walls, a parcel smaller than 1,200 square feet, nor provide short-term rentals. CEQA would not be required. Objective requirements may be applied, provided the requirements do not prohibit the project.

In San Francisco, approval processes for subdivisions and for new housing are discretionary and as such, require CEQA review. By making these projects ministerial, CEQA would not be required and the projects would be approved upon meeting the objective requirements. This would speed the entitlement process and limit the Department’s ability to apply design guidelines.

SB 902 (Wiener, Atkins): Allow Cities to Permit up to 10 Units on Infill Sites in Transit-Rich or Job-Rich Areas

We have previously updated readers on Senator Weiner’s Senate Bill 902, or ‘SB 50 Lite’. This bill would facilitate the passage of local ordinances to allow multifamily buildings with up to 10 units on qualifying parcels. The bill would not require any changes to existing zoning but could allow for faster passage of ordinances by removing the need for potentially time-consuming and costly CEQA review. A large portion of the city’s parcels would likely qualify for rezonings under this bill should the city’s elected officials choose to pass them. SB 902 was passed out of the Senate in late June, and is now being considered in the Assembly.

We will continue to monitor these bills, and will update readers accordingly.

 

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.