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State Housing Laws: Questioning The Constitutionality Of Recent Legislation

Community Venture Partners has been an outspoken critic of current public policies regarding the creation of affordable housing and a leading proponent of better methods to achieve our shared goals. Since 2013, we’ve been consistently pointing out the flaws of Plan Bay Area and the regional push to urbanize Marin County. We have discussed how urbanism will not reduce greenhouse gases or solve our affordable housing challenges.Marin 2016 – Part I: Is representative government slipping away, Marin 2016 – Part IX: Regionalism and Marin 2016 – Part X: Endgame, published on the Marin Post.

In May of 2017, I delivered a presentation before the Marin Coalition

Conventional wisdom these days believes that the “market” will produce affordable housing if we remove local control, institute development “streamlining” provisions and enforce annual growth “quotas,” and state mandated “by right” zoning control. There is simply no evidence of this. For an insightful and carefully documented article on this subject, please see When Affordable Housing Meets Free-Market Fantasy, by Zelda Bronstein.

However, there remains a list of untried methods available to incentivize developers to build affordable units that will probably never even be considered, to the great detriment of our communities and our democratic process. For a complete explanation of CVP’s proposals for change please see Housing Issues in Marin: Marin Coalition Luncheon comments: Part II - New Ideas.

All this considered many of us have followed the actions by our state legislature and unelected, state and regional agencies such as the Department of Housing and Community Development (“HCD”) and the Metropolitan Transportation Commission (“MTC”), with increasing alarm.

By January of 2017, MTC had consumed most if not all of the planning functions of the Association of Bay Area Governments (“ABAG”), yet MTC remains essentially unaccountable to our locally elected governments and Bay Area voters. As much as it has been a highly criticized organization, ABAG was ironically, the last tenuous link local government had to influence regional growth and planning funding decisions. I suppose this has been a case of be careful what you wish for.

A flurry of ill-conceived, emotionally-driven legislation

No less than 11 new bills were recently pushed through the state legislature and signed into law by Governor Brown. The essence of this legislation[1] is to eviscerate local zoning and high density development project approval, by

More significantly, these laws include critical changes to the very foundation of state law. The implications of this cannot be over-emphasized.

This legislation has for the first time, created a legal and punishable nexus between housing “planning and zoning” and actual housing construction: between Housing Element “goals” and completed development. Under this new legislation, if sufficient housing is not built in a city or county to meet its state housing quota (its Regional Housing Needs Assessment - RHNA), during a given state-mandated housing cycle, any developer, housing advocate or individual can conclude that a city is out of compliance and can file suit. And, if such actions prevail, the courts are now able to assess financial and legal penalties, even though it is broadly acknowledged that cities and counties in Marin do not build housing: private developers do!

A local government can also now effectively lose control of its multifamily, high density zoning decisions, simply because a state agency such as HCD, determines, in their sole opinion, that the local government is out of compliance with state regulations, regardless of whether that city has a certified Housing Element or not.

Worse still, the new “legal” criteria for over-riding local planning and zoning have now become arbitrary and subjective. Per AB678, the state has reduced the threshold for legally challenging whether or not a city or county is in compliance with its RHNA quota from an objective legal standard to a subjective and essentially meaningless legal standard: from requiring a lawsuit to be based on findings of specific violations by a city/county of its General/Community Plan or Housing Element (an objective standard), to allowing a lawsuit to be based simply on the opinion of “any reasonable person[2]” (a subjective standard).

Who is or is not a “reasonable person” remains for the courts to determine. For all practical purposes, this means virtually anyone now has legal cause to file suit against a city or county, for any reason, in order to force it to rezone and approve high-density multifamily housing to suit their own personal needs.

These new state laws have now essentially turned housing law compliance into a witch-hunt.

Housing developer profits on the backs of the taxpaying middle class

Although the state has been conjuring elaborate housing development schemes for more than a decade, there was always the lingering question of how such development would be paid for. That decision has now been made decisively: it will be on the backs of middle class residents in the guise of “fees” (the new way to tax residents without letting them vote on it) and the costs of running local government (assessments, bonds, sales taxes, etc.).

Armed with state-backed funding (SB2 and SB3), new fast-track requirements for ministerial review and the elimination of public hearings, developers, big labor, big finance and housing advocacy groups have more ammunition than ever to force local planners to approve their projects, regardless of local impacts or costs to those municipalities. In fact, consideration of impacts and the costs of local schools, infrastructure, public services, public health, traffic, parking, emergency preparedness, and environmental harm, to name a few, are no longer allowed as arguments against qualifying high density housing development projects, so long asthey include a modest 10 percent “affordable” component.

These new laws will unquestionably have profound long term financial impacts on cities and onerous consequences for taxpayers.

It is widely acknowledged that housing, as opposed to commercial and retail, is a net financial loss for cities. The public services (fire, police, administrative, etc.), infrastructure (roads, trails, water, sewers, power, etc.), and costs of schools far outweigh the property taxes and sales taxes generated by housing. This is particularly true in the past decade as fewer and fewer local real estate tax dollars come back to small cities from the state, and the federal government continues to cut back on funding programs, while also confiscating local earnings. It has gotten to the point that it seems our entire local government must now be run on extra sales taxes, special fees, and bond measures. Now, consider that traditional brick and mortar retailing is vanishing, taking all that local sales tax revenue with it, and then add our municipal unfunded pension liabilities to the mix and you can see that the very solvency of many municipalities is at stake.

How then can small cities possibly afford to build and maintain the infrastructure, public services, schools and public safety agencies needed to serve large-scale housing development? How, for example, can a town like Mill Valley, with approximately 10,000 adult taxpayers, almost one third of whom are at retirement age or older, support affordable housing to meet unrealistic state quotas, honor our public debts, rebuild our aging infrastructure and maintain high quality public services, all at the same time?

The answer is they cannot. As astutely pointed out in his recent Marin Voice piece, Niccolo Caldararo reinforces an argument CVP has been making for years: that the only truly affordable housing being built in the world or that has ever been built in this country for that matter, was done with government subsidy and support. Without that support or incentive, the market will never be able to address affordable housing needs.

That considered it is on the point of increased costs and negative financial impacts on local government that CVP takes particular issue.

CVP questions the constitutionality of this new legislation with regard to unfunded mandates

The California State Constitution notes a very short list of instances, when the state can impose unfunded mandates on local government. Under Article XIII. B. Government Spending Limitation [Sec. 1 – Sec. 14] Sec. 6(a): (click here to read original text)

(a) Whenever the Legislature or any state agency mandates a new program or higher level of service on any local government, the State shall provide a subvention of funds to reimburse that local government for the costs of the program or increased level of service, except that the Legislature may, but need not, provide a subvention of funds for the following mandates:

(1) Legislative mandates requested by the local agency affected.

(2) Legislation defining a new crime or changing an existing definition of a crime.

(3) Legislative mandates enacted prior to January 1, 1975, or executive orders or regulations initially implementing legislation enacted prior to January 1, 1975.

(4) Legislative mandates contained in statutes within the scope of paragraph (7) of subdivision (b) of Section 3 of Article I.[3]

And under Sec. 6(c) it clarifies that:

(c) A mandated new program or higher level of service includes a transfer by the Legislature from the State to cities and counties, or special districts of complete or partial financial responsibility for a required program for which the State previously had complete or partial financial responsibility.

There is nothing unclear about the Constitution’s intent. There is nothing in the language that suggests the state legislature can to continue to pass regulations that pile endless direct and indirect financial obligations onto the shoulders of local government (i.e., its residents and taxpayers), without compensation: despite the legislature’s habit of adding disclaimers in each piece of new legislation that reimbursements of direct and indirect costs are not required.

How can they get away with this?

The ability of the state to mandate programs for local government without monetary compensation to cover costs all relies on actions taken in the 1990’s, when the legislature adopted a new twist on an 1869 court ruling called Dillon’s Rule[4]. Simply put, Dillon’s Rule said that cities derive their powers from the state (it had nothing to do with unfunded mandates). But, the California State Legislature decided that this meant unfunded mandates were okay, so long as the State says it’s okay every time they do it. In other words, in its own “post facts” world, the legislature decided if they say something has no impact, then it doesn’t, regardless of any reality or evidence to the contrary.

As a result, the legislature continued abuse of the practice and unfunded mandates has been a bigger and bigger problem for our cities ever since.

When is enough, enough?

If the fundraising drive this season, for Community Venture Partners, results in receiving sufficient financial support, CVP intends to seek legal counsel to undertake a comprehensive review of the constitutionality of these new laws and research the feasibility of challenging them at the State Commission level or through the courts through a private attorney general action, to cure this inequity.

The costs to taxpayers are rising

The push to urbanize Marin has never been greater and the complacency of the general public probably assures that will happen. Driven by the explosive jobs growth in the tech sector, increasingly powerful regional agencies such as the Metropolitan Transportation Commission and ad hoc industry led groups such as the Bay Area Council, aligned with well-funded labor, corporate and housing advocacy groups have recently managed to push through the far-reaching, pro-growth legislation noted above.

We anticipate that this is just the beginning of a long list of new fees, taxes and debt measures that will come forward in the next five years to fund top-down control of local land planning, zoning, housing development and even construction worker’s wages. At the same time, we also anticipate the further deterioration of local government services.

The State’s increasing need for more taxpayer dollars is further exacerbated by California’s unfunded pension liabilities and the state’s apparent attempt to take on centralized control of challenges such as affordable housing and healthcare, which have historically been funded by the federal government. While we are sympathetic to the fact that the federal government continues to give us back fewer of our federal tax dollars and provides us with fewer and fewer services and benefits, California is not a sovereign country and so, its grand plans and debt burdens will eventually have to be paid on the backs of its dwindling middle class.

All of this adds urgency to our being more thoughtful in how we zone and plan for growth, and more realistic in terms of how we address the challenges of housing affordability. Although we clearly have a responsibility to plan for growth and housing demand as best we can in a market driven economy, I believe the methods our state agencies and local governments are pursuing will ultimately fail, harm our middle class and unfortunately lead to the worst possible outcomes for those most in need.


Bob Silvestri is the president of Community Venture Partners, Inc., a community serving, 501(c)(3) nonprofit organization. To support the work of CVP please click here to donate.



[1] See Broad Affordable Housing Bill Package Signed by Governor on the Marin Post for more information.

[2] See AB678 - https://legiscan.com/CA/text/AB678/2017

[3]

[4] For a more detailed discussion see The Best Laid Plans: Our affordable housing challenges in Marin, Chapter IX, pg. 100.