Friday, February 16, 2018

Wiener's Even More Onerous Senate Bill 828

Wiener's Even More Onerous Senate Bill 828

Posted by: Richard Hall - February 16, 2018 - 9:47am

While Senate Bill 827 is getting all the attention it deserves, sitting in it's 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 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 they 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, then it can be forced to go on a 4 year reporting cycle and exposes itself to liability and can be sued. 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:
All city hall employees bar 2 were made redundant;
Fire and Police were severely cut back;
Maintenance of basic city infrastructure was deferred -- traffic lights would break down flashing yellow resulting in major traffic delays

Author Michael Lewis, who wrote The Big Short, predicts in his book Boomerangthat 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. It should be noted that many local tax increases claimed to support enhancing city services (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.

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

What happens when quota's go wrong?

Ten years ago, 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.

To meet the quota the city had to quickly rezone. While several parcels could have been rezoned, a developer working with the city planner convinced the city council that the best option was to rezone the former WinCup polysterene cup factory, which about to be sold. If rezoned the value of the land increased considerably.

Faced with a gun-to-the-head quota, and with the encouragement of its planning staff, the city council caved in and rezoned the WinCup site for 182 units of residential development. The quota was met. The rest is history.

Within 2 weeks of the zoning change, Macfarlane Partners 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. ABAG produced their spreadsheet, but concealed the calculations in the cells. On further protest ABAG, without admitting fault, reduced Corte Madera's quota for that cycle to just 80 units.

But it was too late - the zoning had been changed, and the developer of WinCup had got their foot in the door. The new development was beyond the point that it could be stopped.

Today Tamal Vista (referred to locally in Marin as "WinCup" even though that was really the name of the polystyrene cup factory) is looked upon by both sensible growth and fast advocates as a disaster. The 5 story, gaudy, box like building overlooks 101 and is out of scale with other small city buildings in the county. WinCup has become the poster child for the type of high density, rapid growth advocated by Scott Wiener and the YIMBYs.

Senate Bills 35 and 828 - A deadly cocktail

Now 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 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:
No environmental review
No local review
No city council approval required
Only objective, pre-written design requirements can be applied; e.g. planning commissions cannot subjectively require set backs, green space or light wells - items important for livability

The redeeming aspect of Senate Bill 35 are it's two requirements:
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.
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 mis-step with Senate Bill 35 is that cities do not control how many development proposals are submitted. But SB35 holds them accountable to how many units they approve. Readers should understand this disconnect. Wiener and Hanlon who authored SB35 chose not to. So cities may meet the quotas with zoning, but if they are unlucky they may not receive enough development proposals to meet their SB35 units approved requirements.

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

Now the full ramifications of not meeting quotas is clear: 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 community input put into citys general planning process. These plans can cost hundreds of thousands of dollars to generate and capture the communities vision for their city in the future.

The author is a steering committee member for his own city's general plan and is observing the great time and care put into general plans.

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

It authorizes the department of Housing & Community Development to challenge and update the methodology for calculating quotas
It rolls over unbuilt quotas to the next cycle, like mobile phone rollover minutes. At present quotas are reset for each 4 year cycle. Now housing quotas can compound, cities can easily get into a quota debt they may never climb out of - and since these depend on developers submitting proposals (they only approve proposals) they can become trapped in a quota deficit they never climb out of. They then lose all control of planning and community input is systematically bypassed.
It requires cities plan for 200% of quotas. This forces cities to upzone and zone more land than they otherwise might to meet the quota. Typically the only areas remaining available are in the least suitable locations - locations at risk of flooding due to sea level rise or in industrial areas or next to freeways and transit corridors where mortality rates for asthma, heart disease are considerably higher and the areas are less safe and noisy.

So while Senate Bill 827 is the poster child - opponents need to step back and understand the full barrage of onerous bills Wiener and Hanlon are presenting - and their combined impact. These bills together 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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