2017 Housing Law Update

It is no secret that California is in the grips of a serious housing crisis. According to one study, less than 50% of households in the state can afford housing.* Real estate prices have risen 15% since 2009, while median incomes have risen just 5%. And California has well over 100,000 residents without homes; 25% of the nation’s entire homeless population lives in California.

A significant factor contributing to this crisis is a simple lack of supply: more people competing for fewer houses and apartments drives up sales prices and rents. Another factor is the shortage of affordable units, i.e., units sold at below-market prices to households with limited incomes. The Legislature attempted to address both of these factors in 2017 by passing more than two dozen housing bills. Governor Brown signed all of these bills into law at the end of September.

While the ultimate goal of these bills is laudable—more affordable housing—many of the bills impose new requirements on cities and counties. Some will short-circuit typical local planning procedures. Others impose severe penalties on local jurisdictions for denying housing projects, reducing densities, or otherwise imposing conditions on housing development. In this article, we summarize the most significant new measures for cities and counties to be aware of.

Housing Accountability Act

For years, the Housing Accountability Act has prohibited cities and counties from rejecting housing developments (or making them infeasible by imposing onerous conditions) unless certain findings are made. Specifically, a local government cannot disapprove a housing project that complies with all “objective, quantifiable, written development standards” unless the city or county finds the project will have specific, adverse impacts upon public health or safety and there is no feasible way to mitigate these impacts other than reducing density. Cities and counties also cannot reduce the density of a proposed housing development unless these findings are made.

Several of the new housing bills amend the Housing Accountability Act to make it even harder for cities and counties to deny housing projects. These bills provide that it is no longer sufficient for cities and counties to support denial findings with substantial evidence; starting in 2018, they must support these findings with a “preponderance of the evidence.” Whereas courts will find substantial evidence as long as “a reasonable mind” might accept it to support denial findings, “preponderance of the evidence” must convince a decisionmaker that the findings are more likely than not true.

Moreover, if a local government denies a project, and that denial is successfully challenged in court, the new bills require the city or county to come into compliance with the law within 60 days or face mandatory fines. If the court finds the city or county acted in bad faith when it denied the project, the court can order the city or county to approve the project. And a housing developer who successfully challenges a denial in court will, under the new legislation, be entitled to recover attorneys’ fees from the city or county that denied the project.

Tip: Despite these new, harsh penalties for violating the Housing Accountability Act, all housing projects must still comply with “objective, quantifiable, written development standards.” Thus, cities and counties should take a close look at their existing development standards and make sure they are codified as “objective, quantifiable” criteria.

If a city or county believes a proposed housing development is inconsistent with these objective, written standards, it must provide notice to the applicant within 30 or 60 days (depending on the size of the proposed development). Given this short time frame, it is likely that staff, rather than decisionmakers, will need to provide this notice.

No Net Loss
Under current law, each city and county is required to adopt a housing element as part of its general plan. The housing element must describe existing and projected housing needs for all income levels, identify adequate sites to accommodate these housing needs, and analyze constraints to housing development. The housing element must be updated periodically to ensure that local governments are making progress toward meeting the state’s housing goals.

The “No Net Loss” rule prohibits cities and counties from reducing the permitted density on a site listed in the housing element as available for housing unless: (1) the remaining housing element sites are sufficient to meet the jurisdiction’s housing needs or (2) additional housing sites are identified. A city or county “reduces the density” on a particular site whenever it allows fewer housing units on the site than were projected in the housing element inventory.

SB 166, one of the bills passed in 2017, will make the “No Net Loss” rule even more stringent. This new bill requires cities and counties to continually ensure that their housing element inventories can accommodate their unmet share of regional housing needs throughout the entire planning period, rather than conducting this analysis only once every few years when updating their housing elements. Under SB 166, if a city or county approves a housing project at a lower density or with fewer units by income category than identified in the housing element, it must contemporaneously quantify the remaining unmet housing need at each income level and determine whether there is sufficient capacity to meet that need. If not, the city or county must “identify and make available” additional adequate sites to accommodate the jurisdiction’s share of housing need by income level within 180 days of approving the reduced-density project.

Tip: This new bill “takes no position” on whether “identifying and making available” additional housing sites is a “project” subject to environmental review under the California Environmental Quality Act (CEQA). Presumably, if a city re-designates or re-zones land as residential to comply with this requirement, that action would be subject to CEQA. If environmental review is required, it may be difficult to comply with the 180-day deadline for identifying additional sites.

Streamlined Housing Approvals

In SB 35, the Legislature adopted new, mandatory streamlining requirements for cities and counties where housing development is not keeping up with local housing need, as determined by the state Department of Housing and Community Development (HCD). A city or county will be subject to these streamlining provisions if the number of units that have been issued building permits is less than the city or county’s share of its “Regional Housing Need Allocation” (RHNA) by income category for that reporting period. (The RHNA is a state-mandated process for identifying the total number of housing units, by affordability level, that each jurisdiction must accommodate in its housing element.) Given how difficult it is to achieve these RHNA numbers, it is anticipated that the vast majority of cities and counties will be subject to these streamlining requirements.

If a housing project is proposed in one of these streamlined jurisdictions, it must be approved if it:

(a) is multifamily (2 or more units);
(b) is within a city or “urbanized area”;
(c) is located on a site that is adjacent to urban development (75% of the perimeter must adjoin parcels developed with urban uses);
(d) is zoned or designated in the general plan for residential uses;
(e) dedicates a certain percentage of units as affordable (exact percentage to be determined by HCD on a jurisdiction-by-jurisdiction basis);
(f) is consistent with “objective standards and objective design review standards in effect at time application is submitted”; and
(g) is a “public work” or otherwise pays prevailing wages.

Under the statute, “objective standards and objective design review standards” involve “no personal or subjective judgment by a public official and are uniformly verifiable by reference to an external and uniform benchmark or criterion available and knowable by both the development applicant or proponent and the public official.” No parking requirements may be imposed on qualifying projects located in certain areas (e.g., within 1/2 mile of public transit). For all other qualifying projects, the reviewing city or county may require no more than one off-street parking space per unit. In addition, if the project involves a subdivision, it must pay prevailing wages and use “skilled and trained workforce” to qualify for streamlining.

Approval of qualifying projects is mandatory and must be “ministerial”—i.e., local decisionmakers will have no discretion in deciding whether to approve or deny the projects. Because approval is ministerial, no environmental review is required under CEQA. If a city or county determines that a proposed project is in conflict with “objective planning standards,” it must provide written notice and documentation of this conflict to the applicant within 60-90 days of the developer submitting the application. Approval must be complete within 90-180 days of submittal. Although approval must be ministerial, these timelines—which run from application submittal rather than completeness—will likely prove challenging.

Tip: As with the Housing Accountability Act, cities and counties concerned about losing control over design review for streamlined projects should focus on adopting “objective standards” that will govern these projects. Such standards could include height limits, set-back requirements, objective criteria governing aesthetics (e.g., color palettes, required or prohibited architectural features), etc. Jurisdictions should make sure, however, that these criteria do not make the housing projects infeasible or reduce the density allowed on housing element sites. If they do, they may run afoul of the Housing Accountability Act and No Net Loss requirements described above.

For local jurisdictions concerned about unmitigated environmental impacts caused by these streamlined projects, there are several safeguards built into SB 35. One is the requirement that qualifying projects must be located in urbanized areas, largely surrounded by urban uses. In addition, projects are not eligible for streamlining if they are located on certain environmentally sensitive or hazardous sites, including sites in the coastal zone, prime farmland/farmland of statewide importance, wetlands, delineated earthquake fault zone, floodplain/floodway, lands under conservation easement, or sites where housing has been occupied by tenants within the past ten years. These exceptions should go a long way to protecting wetlands, farmland, and other environmentally sensitive areas.

*Housing is considered “affordable” if it costs less than 30% of a household’s income.

For more information, contact SMW attorney Winter King.

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