The new state housing bills and Alameda

At first glance, it might seem that two bills recently passed by the state legislature and now awaiting signature by the governor will further eviscerate the strictures placed by the Alameda City Charter on residential development in the city.

After all, by its terms SB 10 would allow construction of an apartment building with as many as 10 housing units, plus four Accessory Dwelling Units, on a lot that now contains only a single-family home.  Likewise, by its terms SB 9 would allow as many as four housing units to be built on a piece of land where now only one unit is permitted.

The Merry-Go-Round, however, would advise the pro‑housing activists to put their champagne back on ice – and the slow-growth advocates to stop crying in their beers.

In fact, as a practical matter neither new law is likely to have any dramatic impact on residential development in Alameda.  Today, we’ll explain why.

First, SB 10.

This bill is the latest effort by State Senator Scott Wiener to promote high-density residential development throughout the state.  (His immediately prior attempt, SB 50, was voted down in 2020.)

Under the bill, a local governing body may adopt an ordinance to zone any parcel for up to 10 housing units if it is located either in a “transit‑rich area” – i.e., within one-half mile of a “major transit stop” or on a “high‑quality bus corridor” – or on an “urban infill site” (as defined, the term seems to include almost every residential site in an “urbanized area”).  In addition, in a somewhat backhanded fashion, the bill allows up to two ADUs and two “junior ADUs” on the same parcel – for a total of 14 new housing units.

And the local governing body can enact the ordinance without having to go through the usual environmental review under CEQA.

Obviously, if our City Council availed itself of the authority granted by SB 10, the resulting ordinance would directly conflict with both the multi-family prohibition imposed by Article XXVI of the Charter (aka Measure A) and the residential density limitation established by the same provision.  (Article XXVI restricts density to one unit per 2,000 square feet or 21 units per acre; a 10‑unit apartment building on a typical 5,000 square‑foot lot would yield a density of 87.12 units per acre – more than four times the Charter limit.)

Ordinarily, under the pre-emption doctrine, this conflict would be resolved in favor of SB 10, and Article XXVI would fall by the wayside.

But not in this case.

Senator Wiener introduced SB 10 on December 7, 2020, and the Senate passed it on June 2, 2021.  But when the bill got to the Assembly, it was amended – by whom and for what purpose, we know not – on June 24 to add the following provision:

(4) If the ordinance [adopted by the local governmental body] supersedes any zoning restriction established by a local voter initiative, the ordinance shall only take effect if adopted by a two‑thirds vote of the members of the legislative body.

The word “voter” was deleted by amendment on July 5, but, as thus amended, this provision remained in the bill passed by the Assembly on August 23, “concurred in” by the Senate on August 30, and “enrolled” on September 3.

If the quoted language (as amended) means what it says – and we have no reason to read it any other way – the bill would require a super-majority vote by our Council to adopt an ordinance of the sort authorized by SB 10:  Article XXVI unquestionably is a “zoning restriction established by a local initiative,” and, since Council has five members, the two-thirds requirement means that four affirmative votes would be needed to pass such an ordinance.

So now count the votes.  We’ll bet that Mayor Marilyn Ezzy Ashcraft, Vice Mayor Malia Vella, and Councilman John Knox White would jump at the chance to enact a law permitting 10‑unit apartment buildings (with four ADUs to boot) on parcels now zoned for single‑family homes.  It may not be as satisfying as repealing Article XXVI altogether – which they tried and failed to get the voters to do with Measure Z – but at least they could boast that they had moved the city in a “progressive” direction.

On the other hand, we don’t see either Councilwoman Trish Spencer or Councilman Tony Daysog, both of whom have defended Article XXVI, going along.  And if they don’t, the ordinance will fail.

Mr. Daysog will be up for re-election to Council in 2022, Ms. Spencer in 2024.  One can imagine that the pro-housing crowd will be looking to replace the two incumbents with candidates committed to exercising the power granted by SB 10.  In the meantime, neither side in the housing debate in Alameda has any reason to gloat – or moan – because of the bill.

Now to SB 9.

In summary, the bill, carried by Senate President Pro Tem Toni Adkins, requires a local governmental body to approve, without any discretionary review or hearing, an application by a property owner to build two units on a lot currently zoned for single-family housing.  In addition, the body must approve a property owner’s application to subdivide her property into two lots, each of which can be no smaller than 1,200 square feet, and to build one or two units on each lot.  Four units – e.g., two duplexes or even four small houses – thus are possible on a parcel that previously contained only one single-family residence.

The bill, however, contains a number of exclusions and conditions, some of which were added by amendment as the bill worked its way through the legislature.  For one thing, the bill exempts homes in historic districts; it also does not allow alteration or demolition of homes that are deed‑restricted for low‑income households or subject to rent control, or where a tenant has lived for at least three years.

Moreover, with certain exceptions, a property owner who wants to put two units on a single‑family parcel may not demolish more than 25 percent of the existing exterior structural walls.  And a property owner who wants to subdivide her property and build new units must sign an affidavit stating that she intends to occupy one of those units as her principal residence for a minimum of three years from the date of approval of the lot split.

Finally, a local governmental body may establish “objective” design standards for units added pursuant to SB 9, and it may reject a project if it would adversely affect public health and safety.

On its face, SB 9 does not violate the multi-family prohibition imposed by Article XXVI.  The ordinance adopted to implement the Charter provision states that a two-family unit – i.e., a duplex – does not constitute a “multi‑family dwelling,” and the only structures allowed by SB 9 are single‑family homes and duplexes.

It is, however, possible for a homeowner or developer who relies on SB 9 to violate the density limitation established by Article XXVI.  It depends on the size of the lot.  For example, suppose a property owner subdivides a 5,000‑square‑foot lot into two parcels of equal size and builds another unit on the new parcel.  The new unit would satisfy the density requirement, since it is built on a 2,500-square-foot lot.  But suppose the lot the property the owner subdivides into two equally sized parcels is only 2,400 square feet.  As in the prior hypothetical, SB 9 would allow her to put another unit on the new parcel – but this time the new unit won’t satisfy the density requirement, since it is built on a lot containing only 1,200 square feet.

Would the second property owner in our hypothetical be allowed to proceed with her plan anyway?  Probably so, since once again, under the preemption doctrine, the state law will trump the Charter.

So much for the legalities.  We now turn to the practical issue of whether SB 9 would lead to construction of a significant amount of new housing in Alameda.

Perhaps the best place to start is the report by the Terner Center at the University of California – Berkeley published in July.  Its purpose was to determine, using an economic analysis, the extent to which SB 9 would increase the supply of housing in California.

To answer that question, the Terner authors developed what they called a “financial feasibility model” to assess the “market‑feasible housing capacity” on existing parcels with detached single‑family homes throughout the state.  They then calculated both the total number of parcels on which SB 9 would enable more “market‑feasible” units to be built and the total number of new “market‑feasible” units that would result.

Statewide, the report found, the impact of SB 9 was less than overwhelming:  the bill would facilitate the development of additional units on only 410,000 of the 7.4 million “single‑family parcels” in the state.  And the total number of new units would be only 714,000.

The estimates for the City of Alameda followed suit.  Of 13,000 “single-family parcels” in the city (according to the Terner report), 12,200 were “eligible” under SB 9.  But the new law would increase the number of “market‑feasible” units on only 500 of those parcels.  And the total number of new units would be only 700.

(The Terner authors, we should note, did not attempt to determine how many of the new units made possible by SB 9 would be “affordable.”  Indeed, their model appears geared toward the construction of market‑rate units.  And the bill itself does not contain any affordability requirement.)

Now we would be the last to argue with scholars as distinguished as those at the Terner Center.  But we do believe, for several reasons, that their forecast of 700 new units for Alameda may be overstated.

The first issue is methodological:  SB 9 applies only to parcels “within a single‑family residential zone.”  In Alameda, there is just one zoning district that may be fairly described that way:  R‑1, where single‑family homes are the only type of residence that is permitted.  And parcels zoned R‑1 do not predominate in Alameda.  Indeed, one study stated that “single‑family residential zoning” represents just 43 percent of all residential zoning in the city.  Update: City Planner Andrew Thomas told us Wednesday that 9,655 parcels in the city are zoned R-1.

We can’t vouch for that specific percentage, but it seems consistent with the City’s official zoning map:

In the map, the single‑family R‑1 parcels are those with a white background (which may come out grey when reproduced), which are concentrated in the Fernside district, the Gold Coast, Harbor Bay Isle, and the southwest side of the West End.

The Terner report indicates that 94 percent of “single-family parcels” in Alameda are “eligible” under SB 9.  But it is unclear if this figure includes parcels located in zoning districts other than R‑1, since there are single-family homes in the other five districts as well.  If it does, the report inflates the universe upon which the projection of a 700‑unit gain is based.  Update:  Based on the information provided by Mr. Thomas that 9,655 parcels in the city are zoned R-1, the Terner report’s statement that 12,200 parcels in Alameda are “eligible” for SB 9 does, in fact, overstate the case. Moreover, the concentration of R-1 parcels in wealthier neighborhoods may affect how many Alameda homeowners accept SB 9’s invitation to develop additional units on their property.  It’s not unreasonable to posit that some homeowners in these areas would prefer the status quo.

The second issue is contextual.  After the state legislature enacted a series of bills expanding the ability of homeowners to build ADUs, our Council amended the local ordinance to permit the owner of an R-1 zoned parcel to put an ADU as large as 1,200 square feet on her property.  The Terner authors recognize that building an ADU is an alternative to exercising one of the options made available by SB 9, but they suggest that a homeowner will choose the latter because the SB 9 options are easier to finance.

Maybe so – but if a slew of Alameda homeowners finds it more palatable (even if less profitable) to build a large ADU rather than convert a single‑family home into a duplex or add a second single‑family home, the projected 700‑unit gain resulting from SB 9 would be reduced accordingly.

Finally, the Terner analysis focuses on whether it is “financially feasible” for a homeowner to build the additional units SB 9 makes possible.  But, as the authors themselves acknowledge, economics alone do not drive homeowners’ decisions:

[T]he most economically feasible use does not consider the motivations and preferences of individual property owners.  Any change in use requires the cooperation of the owner, either to sell the site or to redevelop it themselves.  The economics may suggest that the highest value of a house may be to tear it down and rebuild it into a much larger house, but if a homeowner prefers a small house or the existing architecture, they’re not going to rebuild.  Converting a house to a duplex and renting out half may be most profitable for a homeowner, but that will not happen if that homeowner is uninterested in living more closely with others in what was formerly “their” space or in becoming a landlord or home seller. Even when a property owner does wish to redevelop their site, they may lack the upfront capital and sophistication to initiate the process; and then may be unable to access financing due to a low credit score or other underwriting barrier.

The effect of these individual idiosyncrasies may be impossible to quantify, but there is no doubt they exist – and because they do, the number of new units resulting from SB 9 may very well be lower than the 700 a strictly economic analysis would predict.

The Terner report concluded that SB 9 “will not lead to the overnight transformation of residential neighborhoods” in California.  That conclusion is as true in Alameda as it is statewide – and, for the reasons just discussed, it may be even more apt here than elsewhere.  By contrast, SB 10 would be “transformative” (see, we can use the lingo, too), but, given the current political makeup of Council, it isn’t likely to happen here right away.  In short, for Alameda’s pro‑housing activists, the legislature could have done better; for the local slow‑growth advocates, it could have done worse.

Sources:

SB 9: SB 9 (as amended 8-16-21)

SB 10: SB 10 (as amended 7-5-21)

Terner Center report: Terner Center, Will allowing duplexes. . .

Terner Center model results: Terner-Center-SB9-model-jurisdiction-output

About Robert Sullwold

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

3 Responses to The new state housing bills and Alameda

  1. permanentevigilante says:

    Nevertheless, the Mayor of Redondo Beach, Bill Brand, has written a proposed initiative constitutional amendment, hopefully to be on the California state ballot in Nov 2022, which has grassroots bipartisan support up and down the state. It is called the “Californians for Community Planning Initiative”. Currently in the 30 day comment period.
    You can find it here: https://www.communitiesforchoice.org/

  2. Really says:

    Thanks for the in-depth analysis Robert. As you point out, neither state bill accomplishes much, and local politicians with an eye on higher office would do well to maintain the status quo given the overwhelming defeat of Measure Z.

    Facts: so many people have left high tax California that we have lost a Congressional seat, and more taxes are on their way courtesy of the Biden administration. Major businesses are streaming out of State. The cities have been hollowed out due to high crime, unfettered homelessness, dangerous transit, and Covid restrictions. Local school enrollment is way down. The city maintains strict rent control capping return on investment, while construction costs have skyrocketed due to inflation, labor shortages and supply chain problems. Most landlords and property owners are just trying to survive endless local Covid restrictions and eviction moratoriums, much less subdivide lots, or take on new projects.

    This is more Sacramento smoke and mirrors.

  3. Pro-housing supporter says:

    Several mistakes and glaring omissions here. SB9 affects any lot with a probation of multifamily housing. That’s more than R-1 as every residential zoning type has measure A prohibition enshrined in it from R-1 to R-6.

    The ordinance adopted by a later council right after measure A passed to implement measure A is bad interpretation that duplexes are not multifamily and it is not how it’s currently interpreted nor is it what was passed by the voters in 1973. No one can reasonable person can assume measure A voters meant that multi-family didn’t include duplexes. Every standard definition of multi-family includes duplexes.

    In either case it’s moot since wether or not you interpreted that duplexes violate the charter or not, Sb 9 offers you a ministerial right to build one or two units on any lot. Combined with other laws passed in the last few years (like the HCA) you can do so without discretionary review and only reasonable objective design standards. SB 9 also changes set-backs on rear and sides to 4 feet and changes minimum lot sizes too. With lots splits we can get attached quadplexs.

    On SB 10 you missed the elephant in the room. The way we currently zone areas to meet our RHNA and housing element is with the charter violating MF overlays that come with some legal risk with using and implementing (see the AB 1322 discussion earlier this year). However SB 10 offers a less legally risk method for rezoning we could use during the housing element process that would better than the MF overlay process. If a council member voted against using SB 10 rezone for light residential density and forced the rest of council to vote to use the MF overlays instead to meet our requirements under state law, they would be putting the city in unnecessary legal risk and violating their fiscal responsibility and duty to protect the city from unnecessary litigation, especially in cases that could cost the city legal fees. If Trish and Tony don’t want to be seen as not needlessly exposing the city to legal risk they best consider voting with the rest of council to use it if and when it comes up during the site inventory up-zoning process.

    We already know we have to look at up-zoning some residential to make up for the 500 unit deficit we have to meet with current the site inventory.

    Thankfully we have some time after we submit the housing element to HCD to go about actually rezoning so we might be able to just to repeal measure A by then or replace them on council with more reasonable folks.

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 )

Connecting to %s