Great expectations

During his successful campaign, Governor Gavin Newsom pledged that he would “lead the effort” to develop 3.5 million new housing units in California by 2025.

After the election, State Senator Scott Wiener re-introduced a bill that, its proponents say, will result in the construction of “millions of new homes with access to transit.”

At the regional level, a “blue-ribbon commission” appointed by the Metropolitan Transportation Commission and the Association of Bay Area Governments recently set a target for the Bay Area of building 35,000 new housing units every year.

Excuse us for being so parochial, but the Merry-Go-Round has two questions for the Governor, the Senator, and the authors of the so-called “CASA Compact”:

  • How many of these new housing units do you have in mind for the City of Alameda?
  • Where do you propose we put them all?

We don’t know the answer to either question.  But we have a pretty good guess.  If we’re right, our Council and Planning Board are going to have a number of hard choices to make in the coming years.  And it’s probably time for the public to start thinking about these issues as well.

Neither the Governor nor the Legislature is responsible for telling the City how many new housing units should be built in Alameda.  That’s the job of ABAG, which takes the quota assigned to the Bay Area by the state Department of Housing and Community Development – it’s called the Regional Housing Needs Allocation, or RHNA for short – and distributes it among the cities within its nine-county jurisdiction.

This process occurs in eight-year cycles.  For 2015-2023, ABAG gave Alameda a share of the Bay Area RHNA totaling 1,723 units, broken down into four income categories:  444 units for “very low” income households (defined as those earning up to 50% of area median income), 248 units for low-income households (51-80%), 283 units for moderate-income households (81-120%), and 748 units for above-moderate income households.

Under state law, a city is required to “make available” enough sites to “accommodate” its RHNA quotas in each income category, but it is not obligated to ensure that the number of newly built units actually hits those targets.  Assistant Community Development Director Andrew Thomas recently told the Planning Board that, midway through the eight-year cycle, the City already had “made available” enough sites to satisfy its 1,723-unit overall RHNA quota.  What’s more, Mr. Thomas predicted that, by the end of the cycle, the City actually will have issued building permits for more than 1,723 units.  To that extent, Alameda has gone above and beyond the state mandate.

(Before anyone starts handing out gold stars, Mr. Thomas also told the Planning Board that the City would fall short of its RHNA quotas in the very-low, low-, and moderate-income categories.  “High land and construction costs make it financially infeasible” to reach these goals, Mr. Thomas said.)

Planning for the next RHNA cycle for Bay Area cities won’t begin for awhile, but we fully expect that the number of new housing units eventually assigned to the City of Alameda will exceed the 1,723 units allotted for 2015-2023.

For one thing, the new-housing allocation process starts with the determination of regional housing needs by HCD.  If the state bureaucrats have been paying attention to the politicians – and we’re sure they have – they’ll undoubtedly conclude that the housing “crisis” requires many, if not all, regions in California to build more housing in the coming eight years than they did in the previous eight.  So the pie given to ABAG to slice up will be a bigger one.

Moreover, ABAG already has gone on record – in the “Plan Bay Area” and elsewhere – about the principles guiding the distribution of new housing units among Bay Area cities outside San Francisco, Oakland, and San Jose:  Municipalities located close to “job centers” and along the “transit corridor” should be given heightened responsibility for building new housing.  Moreover, these cities should provide housing for low-income workers who are now commuting long-distance to their jobs.

Sound like anywhere you know?  No?  Well, we don’t think that they’re talking about Petaluma or Vacaville (both ABAG member cities).

For the current RHNA, ABAG employed a methodology that focused on assigning new housing units primarily to “priority development areas.”  According to the Plan Bay Area, PDAs consist of existing neighborhoods that are “served by public transit” and have been “identified as appropriate for additional, compact development.”  There are more than 200 PDAs in the Bay Area, and the City of Alameda has two of them:  Alameda Point and the northern waterfront.  If the same methodology is used again next time, one can expect that the City will be given responsibility for supplying about one percent of the total new housing units allocated to the Bay Area.

But there is no guarantee that the methodology will remain the same.  If anything, ABAG very well may tweak the formula to assign an even greater share of the Bay Area RHNA to PDAs.  It may also find a way to tilt the balance even more sharply toward cities with proximity to job centers and access to transit systems.  And even if ABAG does not up the RHNA quotas for its member cities with those characteristics, legislation such as that sponsored by Senator Wiener may compel such cities to permit more housing anyway.  Indeed, SB 827 would override local single-family zoning codes and supersede local limits on new housing near public transportation.

If we’re right, Alamedans can expect that ABAG will tell them that the City needs to make possible construction of hundreds, if not thousands, of new housing units in Alameda in the eight-year cycle beginning in 2023.  What we won’t be told – and will have to figure out for ourselves – is where to put them all.

And that’s going to be a challenge.

The Housing Element adopted by Council in July 2012 contains an inventory of 24 sites “available” for residential development.  But development plans already have been submitted and approved for most of those parcels – North Housing, the Del Monte warehouse, Encinal Terminals, Shipways, Alameda Marina, and the Alameda Landing waterfront – so they can’t be regarded as “available” in the next round.  The remaining sites on the list hardly provide the capacity for building another 1,723 new housing units – or more – between 2023 and 2031.

But Mr. Thomas held one major site off the list:  Alameda Point.  (His explanation was that the land wasn’t yet “available” when the Housing Element was being prepared.)  And the Point may appear to be the logical place to put the additional housing units that the City may need to meet its anticipated future RHNA quotas.  It is not, however, as easy as it seems.

Take a look at the zoning map:

Alameda Point zoning map

Residential use is permitted as of right in the Waterfront Town Center and Main Street Neighborhood districts, and conditionally permitted in the Adaptive Reuse district for the former Bachelor Officers’ Quarters and Bachelor Enlisted Men’s Quarters.  Already, the City has approved plans for residential development in the former two districts:  800 new housing units at Site A in the Waterfront Town Center and 267 new units of “supportive” housing in the Main Street Neighborhood.  In addition, Council has selected two finalists for implementing a proposal to build 291 new housing units, including 260 market-rate units, in the so-called West Midway sub-district of the Main Street Neighborhood.

But these plans and proposals do not cover anywhere near the total acreage in the two districts.  Indeed, it would appear, at first glance, that there is plenty of land left in both areas for additional residential development:  The Waterfront Town Center compromises 129 acres, but the Site A development uses only 68 of them.  Likewise, the Main Street Neighborhood comprises 108 acres, but only 9.7 acres will be used for the supportive housing project and 22.8 acres for the West Midway development.  Do the math, and it looks like a total of another 136.5 acres will be “available.”  (And we’re not even considering the additional new housing units that might replace the BOQ and the BEQ.)

If all of this land were turned over for residential development, there is really no limit on the number of new housing units that a developer could seek to put on it.  Technically, Alameda Point is still subject to Measure A and its prohibition of multi-family housing.  But Alameda Point Partners relied on the density-bonus ordinance to get a waiver of that prohibition for Site A, and City staff has encouraged the finalists for the West Midway development to follow the same route.  If potential developers of the remaining acreage do so as well, it will be up to them to determine how many (multi-family) units will be built on the land.  Paging Pat Kelleher.

Now for the caveats:

First, although the City owns all of the land in the Main Street Neighborhood, portions of both the Waterfront Town Center and the Adaptive Reuse district have yet to be conveyed by the Navy to the City.  The staff report for the most recent conveyance – in July 2017 – didn’t give an estimated date for transfer of these parcels, but, obviously, the City can’t offer them to a residential developer until it owns them.

Moreover, the environmental remediation work undertaken by the Navy at the former Naval Air Station is still ongoing, and it is by no means clear that all of the land transferred to the City so far is “clean enough” – without more – for residential development.  When we asked Community Development Director Debbie Potter about this issue, she responded:

Most property can be used for residential use with the appropriate engineering controls which must be approved by the environmental regulators (EPA, DTSC and Water Board, along with the Navy).  There are a handful of sites that aren’t approved for residential uses and most of those are radiological impacted areas.  With that said, there is nothing preventing a future owner to petition the regulators to consider approving residential use if proper controls are put in place (i.e., if future technologies would allow ensuring health and human safety for example).

Richard Bangert, our go-to expert on all things Alameda Point, gave us a similar analysis:

Another answer to “how many acres are clean enough?” is “as many as you want.”  Here’s the thing about cleanup:  The Navy’s cleanup plans were driven by what the city told the Navy we were planning.  But cleaning up to commercial standards is not a permanent restriction on the land use.  There are deed restrictions, but the deed restrictions (at least for the most part) do not preclude a developer from spending extra money to comply with DTSC and EPA standards for residential construction.  It only means that if a developer wanted to put residential on land cleaned to commercial, the developer would have to do additional work, either with cleanup, or by spending additional funds on extra engineering.  For example, putting the residential on the second floor and above; constructing a podium-style foundation with ventilation, or putting parking on the ground floor, and/or establishing vapor barriers.

Other land-use restrictions will reduce the extent of additional residential development in the Waterfront Town Center and the Main Street Neighborhood as well.

According to the Waterfront Town Center specific plan, 48 acres in that district constitute “public trust” property on which no residential uses are permitted.  Yet still available for new residential projects are 5.5 acres along the taxiways next to the Seaplane Lagoon where a developer once proposed to build a hotel and condominiums.  (The deal fell through.)  In addition, right behind the taxiways is another chunk of land that also could be converted into a site for housing.

Similarly, according to the Main Street Neighborhood specific plan, 23 acres in that district lie within the NAS Alameda Historic District.  In that area, “infill” development is allowed, subject to guidelines intended to “ensure that new buildings respect the historic cultural resources, facilitate the introduction of new uses in new and existing buildings, and support the creation of a vibrant new Alameda neighborhood that celebrates the historic military legacy.”  Whatever that means, we take it as a sign that no developer is going to be allowed to knock down the Big Whites and replace them with high-rise apartment buildings.  But the 34 acres now used for supportive housing will become available for new residential projects after the Alameda Point Collaborative and its partners move to their new digs.

Finally, we come to what may be the biggest hurdle of all to building additional housing at the Point:  the no-cost conveyance agreement between the Navy and the City.  Under the agreement, the Navy transferred the land comprising the former Naval Air Station to the City for free – on condition that the City agree to allow no more than 1,425 new housing units to be built on the property.  If the City wanted to exceed this cap, it would owe the Navy a penalty for every extra market-rate unit.  The penalty was set originally at $50,000 per unit, but it was subject to increases based on the San Francisco metro home price index.  We’re told that the amount now is close to $100,000 per unit.

The projects already approved, or currently proposed, for the Point have eaten up all but 67 units of the cap.  (As noted above, Site A contains 800 units, and the supportive and market-rate housing in the Main St. Neighborhood together total 558 units.)  If the City decided to abide by the ceiling, it could seek proposals for a 67-unit project, but a development of that size wouldn’t make much of a dent in the City’s anticipated future RHNA obligations.

Alternatively, the City could ask for proposals for projects with more than 67 units, but it would need to disclose that the costs for every market-rate unit beyond number 67 would include a $100,000 per unit penalty.  As a practical matter, few developers – outside of, maybe, Tim Lewis Communities – would be foolish enough to submit a proposal under these circumstances.  If there aren’t any takers, there won’t be any additional residential development at the Point.

There is, of course, a potential solution to this dilemma:  renegotiate the no-cost conveyance agreement with the Navy to eliminate (or reduce) the cap and/or the penalty.  As it happens, we have an advocate for this approach in our own household.  The ostensible purpose of the cap and penalty, she argues, was to prevent the City from making windfall real-estate profits from the land the Navy was giving it for free.  But that rationale no longer applies:  the City wants to allow additional residential development at the Point not to swell the General Fund but to quell the housing “crisis.”  (We’d add that losing a couple million bucks from Alameda isn’t going to bankrupt the Navy in any event.  Congress can just take it out of the appropriation for the Border Wall.)

For all of these reasons, Alameda Point may not provide as ideal a location for building additional housing units as it originally seemed.  But if not there, where will the City find the sites needed to meet its future RHNA quotas?  Maybe that’s question our politicians and planners should start asking themselves sooner rather than later.

Sources:

Plan Bay Area (ch. 3): 3-Where_We_Live_Where_We_Work

RHNA methodology: ABAG memo re methodology for 2014-22 RHNA

2015-23 Housing Element: 2015-2023 Final Housing Element Background Report

Housing Element update: 2019-02-25 Ex. 1 to staff report – General Plan and Housing Element Annual Report

Waterfront Town Center specific plan: 2014-07-01 Ex. 1 to staff report – WTC plan

Main Street Neighborhood specific plan: 2017-10-24 Ex. 1 to staff report to P.B. – Main Street Neighborhood Specific Plan

About Robert Sullwold

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

1 Response to Great expectations

  1. carol says:

    Two things: Robert, you meant to say SB 827, not 837.[kindergarten bill]
    No matter what our city planner says, the majority of State votes are in LA, and the grass roots opposition is only getting stronger: https://www.citywatchla.com/index.php/2016-01-01-13-17-00/los-angeles/17278-finally-happy-news-from-city-hall-council-motions-oppose-scott-wiener-s-senate-bill-50
    I wish our city council had the same strength of will as LA’s city council..

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