SF Housing Neighborhood

People are worried that California isn't producing enough new housing, and that housing is too expensive. Many local jurisdictions employ the California Environmental Quality Act (CEQA) to force proposed housing projects to shed units.

To combat the problem, a state senator proposed a bill to force local governments to approve projects that meet their zoning criteria. "This bill would promote a climate favorable to the production of affordable housing in the state," the senator wrote about his bill, SB 2011. The state agreed. "SB 2011 will encourage higher densities and, possibly, lower housing costs," says the bill's analysis. SB 2011 unanimously passed the Senate, and passed the Assembly by a 58-13 margin. Later in the summer, Governor Jerry Brown signed SB 2011 into law.

Incredibly, that all happened in 1982. California built 80,000 new housing units that year, the lowest number of units built in any year between 1955 and 2007. Since 2007, housing production in California has fallen off a cliff. As the state recovered from the financial crash, it added many new residents and jobs, but not much housing. 80,000 units, once a record low, would have tied for second most in the past decade.

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This has sent California's home prices and rent prices skyrocketing, and groups throughout the state in search of new solutions. It's also brought SB 2011, better known as the Housing Accountability Act, back into the foreground.

The bill prohibits cities from rejecting or trying to reduce the number of units in housing applications that comply with 'objective plan or zoning standards.' In plain English, cities are allowed to define where and how high people are allowed to build housing. But once they set the rules, they have to stick to them.

Done correctly, this introduces predictability into the application process. A developer building a 4-story apartment complex in an area zoned for 4 stories should not have to worry that the City Council will later reject the proposal for being too tall. Reducing the number of stories might make the project unworkable, or force the developer to renegotiate a loan with their bank. It also delays the availability of new homes.

The HAA says: It's fine to reject buildings for being too tall, you just have to define "too tall" in your zoning code, and not in an ad hoc manner at a City Council meeting in the face of local opposition.

But a number of cities are ignoring their obligations under the HAA, and rejecting projects that state law says they should not be allowed to reject. If my personal experience is any guide, the HAA does not dampen the enthusiasm of neighbors who show up to City Council meetings and recite a litany of complaints about projects that the local government should not, by law, be allowed to consider.

That's where the enforcement clause of the HAA comes in: If a city violates the HAA by rejecting a project that complies with zoning codes, any "interested party" (the developer, anyone who could conceivably have lived in the project) can sue the city. If a judge rules in favor of the plaintiff, the city has 60 days to reconsider the project.

The HAA became law in part due to the fallout from building the Larkspur Ferry Terminal in Marin County. The terminal's construction required destroying some wetlands along the coast. To mitigate the impact on the environment, the Golden Gate Bridge District wanted to condemn property on other parts of the coast and designate them as protected wetlands. The landowners on the condemned property sued, arguing the District had no authority to do this. A judge sided with the District. This bill was proposed in in the wake of that lawsuit, to confirm two things:

  1. Cities and districts can take action to mitigate environmental impacts by charging fees to developers or designating other land for protection.
  2. They cannot mitigate the environmental impact by reducing the number of housing units in a project.

So, once an environmental impact report has been prepared and certified, a city can charge fees, but they can't reduce the number of units in a project.

This has come up in two recent cases. Against the advice of their attorneys, the Los Gatos Town Council voted 3-2 to reject an application to build 300 units in the North 40 area bounded by two freeways last September. The developers sued, and in June a judge ordered the Town to reconsider the application.

Last week, Los Gatos decided not to appeal the order. In response to the HAA decision, Town Council member Steven Leonardis told me, "I think we should start making less jobs, less cars, and less houses." (Jobs are generally seen as good things because they provide people with incomes, and homes are generally seen as good because they are warm at night and provide privacy and a secure place for people to keep their belongings).

In Berkeley, a small business owner wanted to tear down a dilapidated lot at 1310 Haskell Street and build three two-story units. In July 2016, in the face of fierce local opposition, the City Council voted 5-0 (with 4 abstentions) to deny a permit to build the new units. The SF Bay Area Renters Federation (SFBARF) sued Berkeley for violating the HAA, and in November, a judge ordered them to reconsider the application. In February, they voted to approve the project, but deny a demolition permit necessary to destroy the dilapidated house currently on the lot. SFBARF sued the city again, with a legal filing that said, essentially, "Come on, man."

SFBARF has won the second lawsuit; not surprising given that Berkeley's own attorney argued at the City Council hearing that denying the demolition permit would violate the HAA. But Berkeley has succeeded in delaying the project by a year. That may not matter in this case, but many times a delay can kill projects. Interest rates could rise, commodity prices could make a project infeasible, the project may be conditional on state or federal funding that has deadlines attached, or a bank may get cold feet and withdraw a loan approval. It also costs a significant amount of money to file a lawsuit.

A bill before the California State Legislature is designed to make it easier to sue, and to increase the penalties for cities that deny housing under the HAA. SB 167, introduced by Senator Nancy Skinner, would allow judges to levy penalties of $10,000 per housing unit incorrectly denied under the HAA. If the judge finds that the city acted in bad faith to deny the project, those penalties go up to $50,000 per housing unit. The judge may also award attorneys fees to the plaintiff, which should make it easier to file HAA cases.

That said, financial penalties imposed by a judge have not stopped cities from denying housing in the past. The city of Yonkers, New York, famously paid penalties of $1 million per day to ignore a judge's order to build affordable housing throughout the city. Yonkers City Council and residents wanted to concentrate the housing in a single area. The fight between residents, the judge, and recalcitrant city officials fight was covered by the HBO miniseries Show Me a Hero.

The HAA ties cities hands in important ways, and developers and housing activists have started using the law to fight back against cities. In my next piece, we'll look at how cities are working around the HAA to limit the amount of housing that they have to build.

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Photograph by Vladimir Kudinov

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