The “right” to market-rate housing

For those of us who believe that the affordable housing shortage ought to be addressed by enabling developers to build housing within the means of low- to middle-income households rather than by promoting the proliferation of projects catering to the well-off, good news and bad news came out of Sacramento this week.

The good news is that the budget passed by the Legislature earmarks $400 million for affordable housing.  Presumably, these funds can be used to help finance construction of homes that the ordinary working stiff can afford to buy or rent.

The bad news is that release of the money is tied to ultimate passage of Governor Brown’s proposal to allow market-rate development projects with as little as five percent affordable housing to skip the established process of review by the public and by local boards and elected officials.  If the Governor gets his way, a qualifying multi-family project containing almost exclusively market-rate units would be permitted – “as of right.”

No wonder that San Francisco Supervisor Aaron Peskin called the proposal “a huge giveaway to developers.”

Fortunately, the Legislature did not pass a bill incorporating the Governor’s proposal at the same time it approved the budget.  (The Chronicle reported Friday that a vote will be held in August).  More importantly, the latest version of the bill contains an exception that may render it inapplicable to future projects in Alameda.

But one never knows what deals the politicians may cut between now and August.  And if the exception is eliminated, there will be no way to stop upscale residential projects from sprouting up all over the island – as a matter of right – under the guise of providing affordable housing.

Here’s the story we’ve pieced together from published sources:

On May 13, Governor Brown submitted a series of “trailer bills” to the fiscal year 2016-17 budget.  According to the L.A. Daily News, trailer bills, so called because they are passed after the budget is adopted, have become “an established part of business as usual in Sacramento.”  They enable the governor to propose, and the legislature to enact, laws without going through the customary procedure of committee hearings, debate, amendments, and public notice.

One of the “trailer bills” submitted by the Governor was entitled, “Streamlining Affordable Housing Approvals.”  Under the bill, if an urban multi-family project located in a “transit priority area” is consistent with “objective planning standards” and restricts five percent of the total units to very low income households, it would be permitted “as of right.”  So, too, would be a project where 10 percent of the total units are restricted to “lower income” households.  For a project outside a transit priority area, the threshold is 20 percent of total units restricted to households with less than 80 percent of county median income.

By permitting projects meeting these criteria to be built “as of right,” the Governor’s proposal eviscerates the development review process upon which the public has come to rely.

First, for projects covered by the bill, the California Environmental Quality Act would not apply and therefore no environmental impact report (or similar environmental review) would be required.  And if no EIR is prepared, there will be no basis for compelling the developer to take steps to “mitigate” harmful environmental impacts.

Second, although the projects covered by the bill are not totally exempt from review by a local planning agency, the bill makes clear that such review “shall be ministerial.”  (Translation, thanks to the California League of Cities:  “The public official merely applies the law to the facts as presented but uses no special discretion or judgment in reaching a decision whether or how a project should be carried out.”)  In particular, design review “shall not in any way inhibit, chill, or preclude the ministerial approval provided by this section and the effect thereof.”

To illustrate the impact of the trailer bill submitted by the Governor, let’s suppose it had been the law when the Del Monte warehouse project was presented in early 2014.

Previously, the City had adopted an Environmental Impact Report for the entire northern waterfront.  But since the developer was proposing a project different from the one the EIR assumed would go on the Del Monte site, CEQA mandated that the developer conduct a supplemental environmental review to determine whether its project would result in “new significant environmental effects” or would “substantially increase the severity” of previously identified impacts.  If so, the developer would be required to propose measures for mitigating those impacts.

The Del Monte developer, Tim Lewis Communities, commissioned the necessary analysis and presented a written “subsequent mitigated negative declaration.”  Among other things, the SMND identified the traffic impacts of the project and obligated the developer to implement a transportation demand management plan and to share the cost of street improvements.  Both the Planning Board and Council held public hearings before approving the SMND.

Had the trailer bill submitted by the Governor been in effect, no environmental review would have been done, no mitigation measures would have been proposed, and no TDM plan would have been prepared.

In addition to undergoing the environmental review, the Del Monte project was scrutinized at two neighborhood meetings, a joint Planning Board/Historical Advisory Board meeting, six Planning Board meetings, and three Historical Advisory Board meetings.  The public was invited to – and did – comment at each of these meetings.  The issues raised, discussed, and decided were hardly “ministerial”; indeed, significant changes were made to the original proposal.  As staff later reported to Council, “Throughout the planning process, the general public and the adjacent neighbors maintained an active public dialog about the merits and potential issues with the project, which benefited the planning process and improved the design of the project.”

Then, after all of these hearings had been held, the project went in front of Council, which itself made a material change, reducing the total number of units from 414 to 380, before approving the development.

Had the trailer bill submitted by the Governor been in effect, no hearings would have been held, no opportunity for public comment would have been accorded, and no changes to the original proposal would have been made.

Developers and their political allies might think that “streamlining” the process to eliminate review by the public, Planning Board, and Council would serve the greater good by making projects like the Del Monte warehouse cheaper to plan and quicker to approve. Tell that to the people who live in the surrounding neighborhood.

The original master plan for the Del Monte project provided that new residents would not get a parking space with their unit; rather, they would have to buy or lease one.  From the beginning, neighbors expressed concern that, rather than pay to park, the new residents would choose to park their cars – for free – on the nearby streets.  This would mean fewer available spaces for people living in the neighborhood.  The neighbors urged the developer, and the City, to provide more parking in and around the building and to include the cost of a parking space in the purchase price or monthly rent.

This preference was anathema to the Enlightened Ones on the Planning Board, who wanted not only to limit the total number of parking spaces but to force the new residents to pay for them.  (“Unbundling” parking, they argued, would lead to a reduction in single-vehicle usage.  The theory must be that it’s like sex:  if you have to pay for it, you’ll do less of it).  But the neighbors persisted.  They formed a grassroots organization and pressed their case at every meeting.  Ultimately, the majority of the Planning Board sided with the neighbors:  It increased the number of spaces and required the developer to “assign” one space to each unit at no extra charge.

There may be some who cringe at the idea of the hoi polloi being able to get the Planning Board to defy the will of Those Who Know Best, but we’re not among them.  Nor are we the only ones who would be appalled if the Legislature ultimately passed the Governor’s proposal (and if it were to be applied in Alameda).  Whatever you’re likely to read elsewhere, the opposition doesn’t consist just of anti-development troglodytes, either.

In fact, the most eloquent objection to the proposal we came across was stated in a letter signed by representatives of more than 50 community organizations, including Public Advocates Inc., the public-interest law firm, and a variety of tenant advocacy groups.  “Let us be clear: We are not NIMBYS,” the letter began.  It then continued:

We are staunch supporters of building more affordable housing in our own communities and elsewhere. But in our view a law that promotes building housing that is 90% or 95% unaffordable to the majority of people in our communities is not an inclusive “affordable housing” policy.

But our concerns go beyond a disagreement over affordability levels. We believe it is profoundly unjust and undemocratic for the state to take away from our communities the ability to review and engage in the decisions about development proposals. We cannot rely merely on zoning standards and the “ministerial” authority of city planning staff to prevent the displacement of existing tenants, small businesses, community institutions, and jobs. This puts disadvantaged neighborhoods at the mercy of real estate developers who already wield too much power at all levels of government.

Other community organizations – though, we hasten to add, not all of them – expressed similar sentiments.  “This is a terrible bill for San Francisco and other high-price cities where gentrification is a very real problem,” Peter Cohen, co-director of San Francisco’s Council of Community Housing Organizations, was quoted as saying.  “This proposal runs counter to important values of community input and informed decision-making,” the Alliance for Community Transit – Los Angeles wrote in a letter to the Governor.

Not surprisingly, both the California League of Cities and environmentalists also opposed the proposal.  But so did the State Building & Construction Trades Council, which represents construction-industry unions.  The labor group’s opposition probably didn’t shock Governor Brown, who had complained that organized labor had the habit of asserting bogus CEQA claims to try to force developers to agree to union-friendly terms like project labor agreements.

(Local angle:  The Governor may know whereof he speaks.  The only recent occasion in which we recall a project being challenged on CEQA grounds was the proposal for a new hotel on Harbor Bay Isle.  The hotel workers’ union objected to the hotel being non-union, but its formal objection was couched in terms of alleged non-compliance with CEQA.  After the Planning Board approved the project over the dissent of Board president and UFCW Local 5 bigwig Mike Henneberry, the union appealed to Council.  Mr. Henneberry personally appeared to support the position taken by his colleagues in organized labor in opposition to his fellow Board members.  Council denied the appeal.

(BTW, could conduct like this explain why Mr. Henneberry was not re-appointed to the Planning Board?)

After the Governor submitted the trailer bill, closed-door “negotiations” with the pooh-bahs in the Legislature ensued.  According to published reports, an agreement was reached setting aside $400 million in the budget for low-income housing, but “only if” the Legislature passed a version of the Governor’s “streamlining” proposal.  (One critic was more blunt:  “The situation continues to be that the governor is holding affordable housing funding hostage for approval of a deal with his developer allies.”)

In any event, if we’re lucky, Alameda may escape the consequences of the Governor’s attempt to do away with development review.

For reasons unbeknown to us (and not mentioned in any published article), the Governor slipped the following sentence into the second draft of the proposal released on June 1:  “(f) This section does not relieve an applicant or public agency from complying with the Subdivision Map Act (Division 2 (commencing with Section 66410)).”

This insertion caught the keen eye of Assistant Community Development Director Andrew Thomas.  Typically, a residential developer will subdivide the land it intends to develop for sale to individual buyers.  Under the Subdivision Map Act, subdivisions creating five or more parcels (or condominiums) require approval of a tentative and final map.  A local agency must deny an application for a tentative map if it finds that the project is “likely to cause substantial environmental damage,” or is “not consistent with applicable general or specific plans,” or is “not physically suitable” for the type of development or the proposed density of development.  Such findings cannot be made, of course, unless the agency conducts reviews similar to those undertaken for the Del Monte warehouse.

According to Mr. Thomas, all of the major development projects approved in Alameda over the last 10 years have been subject to the Subdivision Map Act, and all of them have received the standard environmental and discretionary reviews.  Any future project in which the developer proposes to sell individual lots or residences will need to undergo such reviews, too.  Because the Governor’s proposal, as revised, expressly preserves the developer’s and city’s obligations under the Act, “I don’t anticipate this legislation having a huge impact” on Alameda, Mr. Thomas told us.

We certainly hope he’s right.  But one can never be sure.  Since the Subdivision Map Act applies only to for-sale residential developments, the provision highlighted by Mr. Thomas would not exempt purely rental projects from the “streamlined” process.  Can anyone think of a developer devious enough to buy, say, the North Housing site from the Navy, throw a handful of very-low income units into his proposal, and then – “as of right” – build a high-rise apartment building and lease the units to the wealthy for premium rents?  Nah, that kind of guy doesn’t exist – does he, Donald?

(Editor’s Note:  The Merry-Go-Round thanks Mr. Thomas and Councilman Jim Oddie for their guidance in walking us through state legislative procedures.  Neither, of course, is responsible for our interpretations or opinions).

Sources:

Governor’s proposal: 707StreamliningAffordableHousingApprovals (original)707StreamliningAffordableHousingApprovalswithTechnicalModifications (2nd draft)707StreamliningAffordableHousingApprovals (3rd draft

Del Monte warehouse: 2014-12-02 staff report re Del Monte DA; 2014-11-10 staff report to PB re Del Monte TDM plan2014-10-27 staff report to PB re Del Monte TDM plan2014-09-22 staff report to PB re Del Monte; 2014-06-23 staff report to PB re Del Monte master plan2014-04-28 staff report re DelMonte master planDel Monte Warehouse – initial study

Harbor Bay hotel: 2015-09-01 staff report re Harbor Bay hotel2015-09-01 CC minutes

About Robert Sullwold

Partner, Sullwold & Hughes Specializes in investment litigation
This entry was posted in Development, Housing and tagged , , , , , , , , . Bookmark the permalink.

7 Responses to The “right” to market-rate housing

  1. Robert Schrader says:

    There is a continued (and it seems, permanent) claim that California housing should be ‘affordable’ as a public policy. Actually, it already is. I see little decrease in the population growth in California, and in particularly the Bay Area – where housing has always been un-affordably expensive – unless, of course, you struggle to meet the economic requirements to live here.
    There is an underlying question here. Do we really want to use public funds to encourage population growth? Apparently we do, even though it is rife with negative consequences. (I was thinking of using the words “unintended consequences”, but it is clear that this drive is intended.)
    I struggled with the cost of California housing when I moved here from Michigan – in 1970 – and not much has changed since that time. Point is that struggle is sometimes not only worth it, but necessary to achieve the desired results.
    The reason housing costs so much here is that this is the best place to live. Public policy should not be used to counter sound economic principles, or ameliorate the struggle to achieve.
    Just the opinion of one who has struggled, and ultimately achieved his goals.
    I love this place.

    • “Do we really want to use public funds to encourage population growth?” I fail to see how this measure will encourage population growth. It won’t create new land. It will only effect the demographics of the growth. There are other policies that encourage growth, such as those related to infilling every available nook and cranny with as much housing as possible at any price in order to cut down on commute times. It’s then just going to be a question of “who’s going to be doing the driving to get to their jobs.”

      In November of this year, Alameda County is planning on placing a bond measure on the ballot that would raise funds to be used to fill the shortfall on affordable housing projects. The county is not going to build housing with the money. It will be doled out to projects that have a site and most of the money, but are still short. Instead of waiting for hundreds of market rate homes to be built in order to get the necessary infusion of funds from a private land developer, the project can move forward on its own.

      “Public policy should not be used to counter sound economic principles, or ameliorate the struggle to achieve.” The federal government used public policy and public money to counter the sound economic principle of “if you go broke, you go out of business” when it bailed out failed financial institutions. And as far a ameliorating the struggle to achieve, no one is going to quit their job making $15 an hour if public funds are used to underwrite a small percentage of housing units. That’s nonsense.

      • Robert Schrader says:

        “public Policy” here refers to the California housing law (Government Code Section 65584). This is the law that requires California municipals – in the Bay Area, it is the Association of Bay Area Governments – (see http://www.hcd.ca.gov/housing-policy-development/housing-resource-center/plan/he/abag_5rhna022412.pdf) to build housing to meet ‘anticipated growth’ – as determined by the California Department of Housing and Community Development, and specified as RHNA – Regional Housing Needs Allocation. Once the RHNA is established by the State, the ABAG breaks it up into municipalities – and has assigned Alameda their portion, further broken down by income category. The municipalities are then legally required to meet their allocation – and relative cost. This means that not only is population growth in California legally required, (no ‘limited or slow growth’ policies allowed) but local public policy must also accommodate the relative cost of housing by specifying the portion of new housing that will be directed to very low and low income categories.
        I question the merit of this public policy, as it is likely to yield profound consequences – as it addresses the structure of a very basic economic entity, and dials it away from natural market pressures.
        Alameda is an island. It has special circumstances with respect to the increase in housing, and should be left alone to determine just how much growth it can afford, and in what income categories. The method above is too restrictive – and does not allow the flexibility we need to nurture our uniqueness.
        Secondly, the concept of someone “quitting their $15.00 an hour job if public funds are used to underwrite a small percentage of housing units” – is likewise misguided. If one is speaking only of those directly subsidized housing units, then the percentage may be small (currently there are 1,845 Section 8 units in Alameda, out of about 15,000 total rental units – or 12%), the ABAG dictated allotment for Very Low and Low Income (‘affordable’) housing is 40%. That means 40% of the new housing units have to be subsidized by the other tenants. There is not direct government funding of them, but the builder has to provide them to meet the planning requirements – which means his profit is apportioned to a higher level on the other units on the property. So, public policy is making 40% of the new housing less expensive than it would naturally be, at the expense of the other 60%.
        Just how does this motivate achievement?

  2. Paul S Foreman says:

    On May 22 I sent an email to all Alameda Councilmembers, The City Manager, and our development officers, Mr. Thomas and Ms. Potter. the Subject line read,”URGENT ACTION NEEDED – GOV. BROWN’S PROPOSED BUDGET TRAILER BILL STRIPPING YOUR DISCRETION TO LIMIT RESIDENTIAL DEVELOPMENTS WHICH OFFER 20% AFFORDABLE HOUSING” and contained the following text:

    “The Governor has proposed a Budget Trailer which may come before the legislature for a vote sometime on or before the budget deadline of June 15, 2016 and would have a devastating impact on Alameda. The Trailer Bill can be viewed at http://budgettrack.blob.core.windows.net/btdocs2016/1185.pdf Below is a quote from a news article that gives you the core elements of this proposed legislation. (See http://www.bizjournals.com/sanfrancisco/blog/real-estate/2016/05/brown-affordable-housing-development-approval-ceqa.html for the full article.)

    “Under the proposal, new projects with 20 percent affordable housing for tenants making no more than 80 percent of the area median income or projects with 10 percent affordable housing near transit would be exempt from most local reviews. That would be a sharp break from the current policy of most Bay Area cities, including San Francisco, where each new housing project is subject to discretionary review and usually takes years for approval.”

    A city resident, Travis Wilson, has spoken with Kendra, the housing lobbyist for the League of California Cities. She advised that the City send a letter to LCC explaining that Alameda 1) is already serious about housing affordability and is taking steps to address it; and 2) would be devastated if it had to accept every housing project that qualified under the new law. Kendra also advised that, as a vote on the Bill is imminent, she would ideally like to have such a letter in her hands by the end of this week.

    I would suggest that the letter contain the following. My information may not be complete or totally accurate and you may not agree with all of it or may see the need for more data. My intention is to give you an idea of what I think Kendra is seeking.

    1. Alameda has a certified RHNA housing plan for the current cycle (2015-2023).
    2. In the short time span of a little over a year Alameda has approved residential development plans that will yield 1800 new housing units, 14-25% of which will be affordable, with applications soon to be received for another 1500 units, thus we are already committed to nearly twice as many market rate units than our RHNA allocation and are making significant progress on meeting our 975 affordable unit allocation. (I am sure Ms. Potter and/or Mr. Thomas can add even more data to demonstrate our commitment.}
    3. Notwithstanding our commitment to housing, there are unique conditions in Alameda that make it imperative that we have the ability to intelligently plan, control and pace housing development. They are as follows:
    A. We are a small island with limited and already overtaxed means of ingress and egress, all over or under water.
    B. We are in a very high risk earthquake zone, including large areas in a liquefaction zone.
    C. The vast majority of our police and firemen live off of the island and thus impacted by A above in an earthquake or other disaster.
    D. We already have one of the worst commercial/housing balances in the bay area with housing predominant. The high service demands of primarily residential community creates severe budget problems with nearly 80% of our annual expenditures going to public safety.
    E. Alameda has become the prime target of residential developers due to proximity to San Francisco and the abundance of vacant land at the former Naval base and
    abandoned industrial properties along the Estuary. Giving developers the “right” to development without local control would inundate our community with new housing before we can develop the infrastructure, transportation, public safety and other requirements of servicing such a large population increase.

    It is my hope that City Council and Staff will work out a process to get such a letter out a.s.a.p. with copies to the Governor and the appropriate legislators. I would also think that our lobbyist, Mr. Perata, should be activated on this. I look forward to hearing from all of you as to your positions and actions on this matter.”

    TO THIS DATE I HAVE ONLY RECEIVED ONE VERY BRIEF RESPONSE FROM TONY DAYSOG THANKING ME AND INFORMING THAT HE WAS GOING TO FORWARD MY EMAIL TO THE LEAGUE OF CALIFORNIA CITIES. I THINK THAT IT IS IMPORTANT TO LEARN WHAT, IF ANYTHING WAS OR IS BEING DONE COLLECTIVELY OR INDIVIDUALLY BY OUR CITY OFFICIALS TO OPOSE THIS DRACONIAN MEASURE. I INVITE THEM TO RESPOND PUBLICALLY VIA THIS FORUM.

  3. carol says:

    Well, Paul, at least you can say “I told you so”. Meanwhile the City of Alameda is about to greenlight an assisted living facility on the part of Bay Farm Island most remote from the nearest hospital-17 minutes away-when there is no traffic–from either Kaiser San Leandro or Alameda Hospital. I emailed both the Planning Board and the Mayor back in November 2015 regarding the Westmont deathtrap being planned, but received no acknowledgement or response. My email does not even appear in the Correspondence attached to this agenda item for this Wednesday’s Planning Board meeting.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s