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RHNA Quotas, Unfunded Mandates, Buffer Sites, and the CA State Constitution
As more people wake up to the fact that new housing laws have forever changed the way our communities will grow and reduced the say California residents have in their town’s planning, zoning, and development decisions to pretty much zero, many are asking questions about how this new regulatory landscape came to be and the legality of all these new laws under the California State Constitution.
I'm sorry to say, the short answer is, yes, it is all legal. But as a practical matter, the long answer is much more convoluted.
“Zoning” is technically defined as a “police power” and according to the State Constitution, it resides in the hands of locally elected governments.
The CA State Constitution and Zoning
Article XI, sec. 7 of the State Constitution provides that,
"A county or city may make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws.”
This is well-supported by case law. Per our legal counsel,
“ ‘Land use regulation in California has historically been a function of local government under the grant of police power contained in California Constitution, article XI, section 7.’ [Citation.]” (DeVita v. County of Napa, supra, 9 Cal.4th at p. 782, 38 Cal.Rptr.2d 699, 889 P.2d 1019; and IT Corp. v. Solano County Bd. of Supervisors (1991) 1 Cal.4th 81, 89, 2 Cal.Rptr.2d 513, 820 P.2d 1023 [“The power of cities and counties to zone land use in accordance with local conditions is well entrenched.”].) Ruegg & Ellsworth v. City of Berkeley, 63 Cal.App.5th 277 (2021) [Emphasis added]
However, at the same, time it’s also well-established that state housing laws preempt local control. For example, the Ruegg case noted above specifically held that Senate Bill 35 preempts a charter city’s local ordinance because the Legislature has emphatically declared that the housing shortage is “a matter of statewide concern.” We are advised that general Law cities (all cities in Marin except San Rafael) would have an even harder time arguing non-preemption.
It should also be noted that although there has been much discussion about the faulty population projections that the Department of Housing and Community Development (HCD) is using to establish Regional Housing Needs Allocations (RHNA quotas), the legislature’s findings of California having an “affordability crisis" were not just based on population projections, correct or incorrect. Perhaps, the legislature saw this counter-argument coming so they made additional “findings” (e.g., the concept of “existing need”) to justify the RHNA quotas (which are even more vacuous than their population projections) to cover their butts?
For those who want to dig deeper into the legal questions regarding RHNA quotas and Housing Law, here is a review of the case law and the legislature’s findings, as explained by our legal counsel:
“The Legislature has repeatedly emphasized in express findings and declarations that the lack of affordable housing in the state is a crisis and that legislation including section 65913.4 and the Housing Accountability Act (HAA) is intended to address that crisis by encouraging and facilitating the construction of housing in general and affordable housing in particular.
“Although legislative declarations of intent to preempt local law are not determinative (DeVita v. County of Napa, supra, 9 Cal.4th at p. 783, 38 Cal.Rptr.2d 699, 889 P.2d 1019), courts “accord ‘great weight’ to the Legislature’s evaluation” of what constitutes a matter of statewide concern (Baggett v. Gates (1982) 32 Cal.3d 128, 136, 185 Cal.Rptr. 232, 649 P.2d 874) and “ ‘defer to legislative estimates regarding the significance of a given problem and the responsive measures that should be taken toward its resolution.’ ” (City of El Centro v. Lanier (2016) 245 Cal.App.4th 1494, 1503, 200 Cal.Rptr.3d 376, quoting California Fed. Savings, supra, 54 Cal.3d at p. 24, 283 Cal.Rptr. 569, 812 P.2d 916.)
“As observed by the court in Anderson v. City of San Jose (2019) 42 Cal.App.5th 683, 709–710, 255 Cal.Rptr.3d 654, judicial decisions have long “recognized the statewide dimension of the affordable housing shortage in relation to various impositions by the state into the realm of local affairs. (See Green v. Superior Court (1974) 10 Cal.3d 616, 625 [111 Cal.Rptr. 704, 517 P.2d 1168], [citing ‘enormous transformation in the contemporary housing market, creating a scarcity of adequate low cost housing in virtually every urban setting’]; Buena Vista [(1985)] 175 Cal.App.3d [289,] 306 [220 Cal.Rptr. 732], [finding ‘need to provide adequate housing’ is a statewide concern and rejecting home rule challenge to state provision that mandated charter city to include certain actionable components in its ‘housing element’]; Bruce v. City of Alameda (1985) 166 Cal.App.3d 18, 22 [212 Cal.Rptr. 304] [‘locally unrestricted development of low cost housing is a matter of vital state concern’]; Coalition Advocating Legal Housing Options v. City of Santa Monica (2001) 88 Cal.App.4th 451, 458 [105 Cal.Rptr.2d 802] (City of Santa Monica) [noting the Legislature and courts have declared housing to be a matter of statewide concern].)” [Emphasis added]
The bottom line is that RHNA quotas are here to stay even if their requirements make no sense and are based on nothing more than a politically motivated agenda. (E.g., politicians advocate for “housing” or run the risk of being labeled ‘NIMBYs.’)
However, this may be about to change. Legal actions are in motion to challenge the actual numbers of units HCD comes up with and how those are allocated, such as the lawsuit brought by Pam Lee of Aleshire & Wynder against HCD for violations of state statutes and other actions that are placing illegitimate housing quota burdens on California cities and counties -- quotas that are unsupported by facts and actual data about future housing needs.
CLICK HERE to learn more.
Dillon’s Rule and State Mandates
Historically, the ability of the state to impose mandate programs for local government stems from actions taken in the 1990s, when the legislature adopted a new twist on an 1869 court ruling called Dillon’s Rule. Simply put, Dillon’s Rule said that cities derive their powers from the state. So, if the “state” (the legislature) made a “finding” that something was “a matter of statewide concern,” then the state could create regulations that overrule local laws. Thus, the explosion of “state mandates” that would follow.
The RHNA (Regional Housing Needs Allocation) housing quotas set by the Department of Housing and Community Development (HCD) and allocated (divided up) in the SF Bay Area by the Association of Bay Area Governments (ABAG), our regions "Metropolitan Planning Organization," are an example of a state mandate. RHNA quotas have been in existence since 1969. Compliance was originally on a "best efforts" basis. What has changed are the penalties for non-compliance.
"Unfunded" Mandates?
The California State Constitution contains a very short list of instances when the state can impose unfunded mandates on local governments. Under Article XIII. B. Government Spending Limitation [Sec. 1 – Sec. 14] Sec. 6(a)]
(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.
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 in this language that suggests the state legislature can blithely continue to pass regulations that pile endless direct and indirect financial impacts onto the shoulders of local government, its constituents, and taxpayers, without compensation.
This would suggest that the State’s “mandate” that cities and counties zone for more housing and provide infrastructure, schools, parks, adequate roads, and public services (police, fire, etc.) to support that development, without financial reimbursement for the negative impacts and costs, is an illegal "unfunded mandate" and a violation of the State Constitution. And every new housing law passed in the last 15 years admits that by stating,
"The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state."
However, a caveat appears in the law that a mandate is cannot considered "unfunded" if
"the local agency or school district has the authority to levy service charges, fees, or assessments sufficient to pay for the mandated program or increased level of service" Govt. Code Section 17556(d).
Hence, after the California State Legislature made findings that housing development is “a matter for statewide concern” every time they have passed a new housing law, voila, the Constitutional requirements to reimburse cities and counties for the impact costs of new development are inapplicable because local governments can increase “service charges, fees, and assessments” to cover the financial impacts of state mandates.
As a practical matter, however, the logic of this is nonsensical. The financial impacts of population growth are not linear and predictable, as academic-minded policymakers believe, but are always multi-dimensional and inherently unpredictable. And local governments have tipping points for failure just like any other human enterprise.
At the same time, to keep up with inflation, most cities have already raised service charges, fees, or other assessments (that do not require a public vote) such as registration fees, planning fees, permitting fees, affordable housing impact fees, filing an appeal, etc.) to the breaking point to cover only a small portion of the enormous impacts of population growth, public services, social services, infrastructure renovation and maintenance, etc. As a consequence, this has produced an unending stream of tax increase proposals: special district tax assessment ballot measures, bond measures, sales tax increase measures, and all the rest, most of which pass because they come with dire warnings of school or local government services’ catastrophe (which is increasingly the case) if they don't.
The result is that the vast majority of the financial cost burdens of unplanned development of new housing, driven by mandates, have become the burden of the residents, businesses, shoppers, and taxpayers in each city and county.
(NOTE: There is a caveat about fees. A city/county can increase fees to the general public
(if they'll stand for it) but they can't assess new fees against a new
project (above what they were at the time of application). Or, if the
developer claims fees will reduce the amount of affordable housing or make the their project "financially infeasible," the developer can demand that there be no fees or special assessment at all, as a waiver / concession if their
project qualifies under SB 330 or the State
Density Bonus Law.)
The RHNA "Buffer"
The RHNA quotas for each SF Bay Area City/County are allocated by ABAG/MTC, our metropolitan planning organization (MPO). Agencies create Housing Elements with “site opportunity lists,” which include properties that are either already zoned or pledged to be rezoned for multifamily housing, to address those unit counts. Cities and counties are entitled to certification by HCD once they have adopted a Housing Element that is “substantially compliant with state housing law.”
However, increasingly, the concept of providing “buffer” sites to a site opportunity list, in addition to the RHNA quota, has become part of the unofficial ‘negotiation’ surrounding Housing Element certification by HCD. But where does this “buffer” concept come from? The potential number of buffer sites that cities and counties and HCD agree to don’t seem to correlate to any type of formula or percentage.
“Buffers” are not mandatory in state housing law. However, they are “recommended” in HCD’s Sites Inventory Guidebook (2020). In other words, the concept of having buffer sites has been crafted by a politically appointed, unelected, unaccountable state agency (ostensibly, in their role as ‘interpreters’ of state housing law), and not voted for by the state legislature or any other elected body.
In their Guidebook it states,
To ensure that sufficient capacity exists in the housing element to accommodate the RHNA throughout the planning period, it is recommended the jurisdiction create a buffer in the housing element inventory of at least 15 to 30 percent more capacity than required, especially for capacity to accommodate the lower income RHNA. Jurisdictions can also create a buffer by projecting site capacity at less than the maximum density to allow for some reductions in density at a project level.
In some cases, this is a reasonable decision. Cities/counties might choose to include a buffer because it gives them flexibility to approve projects in the future with fewer units, without running afoul of the “no net loss” rule (i.e., if a city’s quota in a ‘housing cycle’ is 500 units and it’s spread over 30 sites and they’ve counted on specific numbers of units on each site, to meet their quota, they can’t approve a project that has fewer units than they planned for without adding more units somewhere else). Still, cities and counties are not legally required to do this to have their Housing Element certified by HCD.
But try telling HCD that.
I’ve had numerous conversations with planning staff in Marin cities, who have said that in their “consultation” sessions with HCD the agency has demanded more buffer sites as a condition of certification, as if they are more prescient than local officials about the local housing market and land use potential.
But even with all this aside, the entire RHNA quota/opportunity site counting system is fundamentally hypocritical.
Housing Opportunity Site Lists: Heads They Win, Tails We Lose
State housing laws (which have now essentially abandoned the original goal of creating more low-income housing) do not technically mandate that anything is actually built. The RHNA mandates only require zoning/rezoning (increases in zoning density) of a sufficient number of “opportunity sites” to allow for the construction of the RHNA housing quota (“affordable housing” units at various income levels, which typically vary from 30% of Area Median Income up to 150%+ of AMI).
But recently, HCD's interpretation of whether a city’s or county’s Housing Element (HE) is in “substantial compliance” with state housing law has moved from providing enough opportunity sites for "zoning for housing" development to judging HE compliance based on the number of units “permitted” for construction in the prior 8-year Housing Element cycle. And this is where things have run off the rails.
Over the past ten years, CVP has studied the residential development potential in Mill Valley and Sausalito. We assessed every buildable lot zoned for single-family, multifamily and realistically convertible or renovate-able or suitable for commercial, mixed-use housing (based on highest and best-use principles). We considered lot sizes, existing lot coverages FAR restrictions, geological conditions, and other factors that might provide new or added housing development potential. We also evaluated sites in the cities for potential ADUs (two accessory dwelling units allowed per house) and lot splits/new housing development under SB 9 (one house becomes 2 to 4 units).
As you can imagine, just based on the evaluation of ADU and SB 9 sites--all of which are already zoned for multifamily housing by state housing law--the number of potential, new residential units was staggering and enough to fulfill each city’s housing quota for decades to come.
However, according to the city staff we’ve talked to, when this argument was raised, HCD refused to count potential development of any new units, under SB 9, toward the city's RHNA quota. And they would only accept a very limited number of units resulting from ADU laws -- despite the fact that all single-family parcels in California are now "zoned for multifamily housing" and this development is legally, "by right," meaning no one can stop multifamily development
on any residential parcels unless they are either non-compliant with the state law's building regulations (lot sizes, setbacks, height restrictions, etc.) or there is evidence of a threat to the health and welfare of other
residents. As for counting future ADU units toward the RHNA quota, HCD said the city had to base their projected unit counts on the number of ADUs that were actually issued building permits in the last housing cycle (even though both the ADU laws and SB 9 were passed mid-cycle and the law only requires rezoning not building permits).
So, that's how state housing laws really work.
State law says cities and counties do not have to build anything and only have to provide "zoning" for development, which means identifying existing zoned parcels of land or rezoning other parcels on their "opportunity site" list. But then, HCD turns around and ignores sites that are already zoned for additional housing under current state law when it suits their purposes. By doing this, they can pressure cities to add even more properties to their opportunity site list for mandatory rezoning.
The system is essentially, “heads they win, tails we lose.”
So, who is violating state housing law, the cities and counties or HCD? And why is HCD taking this unsupportable position? Who benefits?
Those who build and manage ADUs and small, infill, lot split housing as prescribed in SB 9 are, by and large, homeowners and small local developers. It’s a grassroots, bottom-up-driven market. In other words, those who have no “political voice” (aka: paid lobbyists).
Meanwhile, major real estate development players and their financial partners and well-funded tech foundations and major construction unions – who are the biggest housing development advocates and also the biggest contributors to the election campaigns of Sacramento legislators who champion of HCD’s marketing messaging don’t participate in ADU and SB 9 lot split housing development, at the local level.
Perhaps, if HCD followed the law and allowed all land zoned for multifamily housing to be counted in a city’s Housing Element, none of their supporters would be able to justify their mega-projects in small communities?
The Bottom Line
Un-affordability is a socioeconomic phenomena that manifests itself in the cost of housing just as it does in the costs of healthcare, insurance, good food, and a good education. And all the generic, supply/demand theories and official statistics in the world are worthless to explain housing dynamics because markets are multi-dimensional and real estate development is about a specific opportunity at a specific time in a specific place for a specific housing type.
Meanwhile, HCD and the state legislature’s answer to all this is their trickle-down economics belief that building more and more housing is the best way to bring prices down and create more affordable housing.
A recent study in Australia concluded that as a practical matter, new supply will not significantly bring down housing prices. Only a recession can do that because it reduces demand, buyers and sellers, and liquidity all at once and builders are forced to liquidate inventory at fire sale prices. The history of housing prices across the country bears this out.
In a market economy, in good markets (cheap debt, financial liquidity, abundant opportunities, high demand, and rising prices) developers will skew toward building high-end, luxury housing because it is the most profitable. And in bad markets (expensive debt, restricted liquidity, limited opportunities, low demand, and falling prices) developers will only build high-end, luxury housing because those are the only people who can afford to buy/rent anything.
The reality of truly affordable housing development is that without public subsidy, we will never, ever, ever build enough affordable housing without massive, public, financial subsidy. And public subsidy and particularly federally-funded subsidy, inflation-adjusted, has been decreasing for decades since the 1980s. Everyone in the industry and any politician with a brain knows this.
So, what the state is really doing (to appease big construction unions and real estate financial interests/donors?) is trading all the decades of your private investment in your home and your community and your support for your schools and parks and local social services in exchange for a gigantic giveaway to private developers so they can maximize profits while doing as little as possible to address the housing crisis for those most in need – low and very low-income residents and their glimmer of hope to fulfill their dream of ownership.
Home ownership is the biggest investment the average person will ever make and ownership is the engine that drives support for local schools, public services, and social institutions, without which the healing power of “community” ceases to exist, to the detriment of everyone, rich or poor.
But it gets worse.
HCD’s ideology-driven, housing reviewers, most without the benefit of professional qualifications other than university degrees and having worked at politically appointed positions (there are no professional licensing requirements for "planners" as there are for architects and engineers), are now intervening at the local level on behalf of private developers with projects undergoing planning and zoning review and trying to dictate how a city’s General Plan and Zoning Ordinance must be interpreted by locally-elected officials, along with an unveiled threat of legal action by the State Attorney General for non-compliance.
In our opinion, HCD's actions are now so far afield that the only thing that’s more amazing than HCD’s brazenness is the astonishing cowardice that most cities are exhibiting in the face of these threats for failing to band together and take HCD to court to challenge them.
Ironically, residents and taxpayers -- who ultimately pay for all this folly -- have no legal "standing" to bring this challenge. Our only choice is to pass a ballot initiative to reinstate the constitutional "police" powers of locally elected government.
Yes, we need to build more low-income housing for those most in need, but the system we have now has lost sight of that original goal and is failing miserably in attaining it.
Bob Silvestri is a Marin County resident, the Editor of the Marin Post, and the founder and president of Community Venture Partners, a 501(c)(3) nonprofit community organization funded by individuals and nonprofit donors. Please consider DONATING TO THE MARIN POST AND CVP to enable us to continue to work on behalf of all California residents.