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Richard Hall, Planning for Reality

Wiener's Even More Onerous Senate Bill 828

While Senate Bill 827 is getting all the attention it deserves, sitting in its' shadow is another equally onerous Senate Bill proposed by Scott Wiener and likely authored again his partner in crime Brian Hanlon - See Senate Bill 828 with the innocuous title "Land Use: Housing Element".

SB 828 is about "housing quotas." Housing advocates such as the YIMBYs are hoping that with all attention on 827, Senate Bill 828 will slip under the radar. Like Senate Bill 827, Senate Bill 828 demonstrates all the understanding of a child applying over-simplified logic when it comes to planning:

What are these housing quotas that you speak of?

For decades every city and county in California has been given a housing quota, or "Regional Housing Needs Assessment" allocation (RHNA, often pronounced ree-na) that it must plan for. Cities don't build housing or submit housing proposals (a fatal flaw in Wiener's Senate Bill 828 we'll come back to) but these quotas require that cities and counties produce specific numbers of units at different income levels.

These quotas are calculated by a number of regional government bodies such as the Association of Bay Area Governments (ABAG), the Southern California Association of Governments (SCAG), and the Association of Monterey Bay Area Governments (AMBAG).

Alternatively a city can appeal and receive their allocation number directly from the State of California through the Department of Housing and Community Development (HCD).

The quotas are set in 8 year cycles by these organizations. On a 2 year lag after the quota is allocated, cities and counties are obligated to respond with a "Housing Element" - a document that identifies the number of units that could theoretically be built based on current zoning at different income levels.

What happens if cities don't meet their quotas?

If a city or county either doesn't provide a housing element or presents a housing element that does not meet the required quota for certification, it can be forced to go on a 4 year reporting cycle and exposes itself to being sued by housing advocates. The cities of Pleasanton and Menlo Park have both been sued for failing to meet their housing quotas by Urban Habitat.

This is not a light slap on the wrist. Not only are the penalties substantial but the city must pay the petitioner's legal costs. This can amount to millions of dollars.

Today, cities face challenges balancing the books with onerous payments needed to stave off bankruptcy caused by the unfunded pension benefits crisis. When Vallejo went bankrupt the results were significant:

Author Michael Lewis, who wrote The Big Short, predicts in his book Boomerang that when the next recession hits many California cities are likely to go bankrupt like Vallejo. This author's own city, San Rafael, heads the list of California cities with the largest pension cost revenue ratio of 17.58%. This means 17.58% of all taxes collected go not to supporting city services, but simply to pay of unfunded pension debt.

Many local tax increases claimed to support enhancing city services - a new fire station, emergency radio system, sewer or water pipes - really disguise creeping unfunded pension costs.

So, the impact of not meeting these quotas is very real. It is almost the nuclear option for a city to fail to meet the quota - risking bankruptcy and inflicting misery on residents.

Wiener and his advocates like the YIMBY's know this and take full advantage.

What happens when quota's go wrong?

Ten years ago, the City of Corte Madera in Marin County, which sits on about 5 square miles of land that is mostly built out except for a few parcels at risk of flooding, was allocated a quota of about 230 units in a prior RHNA cycle; but it only had zoning identified for about 40 units.

The City had been successfully sued by housing advocates in the past, for failing to produce a certified Housing Element in a timely manner. So, they were under considerable pressure to meet the new quota and quickly rezone suitable parcels. A land owner convinced the City that the best option was to rezone the former WinCup polysterene cup factory, which he owned and which was about to be sold to a developer (if rezoned the value of his land increased considerably).

Faced with a gun-to-the-head decision, and with the strong encouragement of its planning staff, the city council caved in and rezoned the WinCup site for 182 units of residential development, without even requiring an environmental impact report, and lowered their General Plan's 20% affordable ordinance requirement to on 10% -- so, only 18 out of the 180 had to be "affordable" (even though some rent for 120% of the city's median income).

But, the quota was met. The rest is history.

Magically, within weeks of the zoning change, Macfarlane Partners (20% owned by Goldman Sachs) submitted plans to develop the site with housing. Nothing ever happens that fast in planning!

Meanwhile, Corte Madera's mayor went back to the Association of Bay Area Governments and demanded to see the methodology of how such a small city with limited remaining land was given such a large quota. What formula was used? ABAG hemmed and hawed and finally produced their spreadsheet, but conceded that they really did not have any set methodology or formula: they pretty much just made it up. On further protest, ABAG, without admitting fault, reduced Corte Madera's quota for the next cycle to just 80 units.

But it was too late - even though the quota was reduced, the zoning had been changed, and the developer of WinCup had got their approvals. The new development was beyond the point that it could be stopped.

Today Tamal Vista (still referred to locally as "WinCup") is looked upon by both sensible growth and fast advocates as a disaster. The 5-story, gaudy, box-like buildings overlook 101 and are out of scale with other buildings in the city. WinCup has become the poster child for the type of high density, rapid growth advocated by Scott Wiener and the YIMBYs.

It should be noted that Wiener's bills will potentially lead to buildings twice as high as WinCup with no design review or density limits.

Senate Bills 35 and 828 - A deadly cocktail

Now that readers understand the background - these housing quotas threaten to bankrupt cities if they are not met - the significance of Senate Bill 828 can be fully realized.

Senate Bill 35 (another Wiener bill), enacted in January, adds further penalties. Cities must not only plan to meet their quotas with zoning, they must actually approve a certain number of units - if not Senate Bill 35 allows developers with qualifying developments (paying union rates) to submit plans that bypass important processes:

Some have said that Senate Bill 35 is neutralized by two of its requirements:

  1. Compliant developments must pay "prevailing wage". This means paying union rates that typically are only affordable for large scale development in major cities like San Francisco or Los Angeles. However, the author is learning that construction salaries are increasing and closing the gap; so this obstacle many deem to have neutralized Senate Bill 35, may be removed.
  2. Compliant developments must include a specified amount of affordable housing. Typically this is 50% - a number that makes it difficult for market rate developers to make development pencil out. However, for cities missing their quotas by a large margin this percentage drops to just 10%. A much more feasible number.

The fundamental flaw of Senate Bill 35 is that cities do not control how many development proposals are submitted for approval. Yet, SB 35 holds cities accountable for how many units they approve. Anyone can easily understand this disconnect. Wiener and Hanlon who authored SB35 chose not to.

So, cities may meet the quotas with zoning, but they may not receive enough development proposals to meet their SB 35 units approved requirements, and end up being penalized, anyway. Alternatively, proposals that are submitted by developers may be so dreadful due to scale, aesthetics, traffic or parking impact that cities may try to reject them out of pure common sense defense of quality of life, but still end up being sued for an approval.

To illustrate the significance of SB 35 historically, 97.6% of California cities did not meet their full RHNA goals. Only 13 cities (2.4%) met their goals making them exempt from SB 35 streamlining.

SB 828 dramatically increases RHNA quotas

The ramifications of not meeting quotas are that all local and environmental review can be bypassed, and market rate development can occur with as little as just 10% affordable units when quotas aren't met.

Wiener's bills make a mockery of the years of city and community input put into their general planning processes. City's General Plans cost hundreds of thousands of dollars to generate and they so their best to capture communities' vision for their city's future.

Senate Bill 828, if enacted, also changes the way quotas are calculated and implemented:

So, Senate Bill 827 is the poster child for bad housing law. Opponents need to step back and understand the full barrage of the onerous bills Wiener and Hanlon are presenting - and their combined impact. Together these bills accelerate removal of local control and planning. They don't help build affordable units and solve the housing crisis - but they are a gift to market rate developers.

SB828 Bill Text


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