United States: A Closer Look At California's New Housing Production Laws

Chelsea Maclean is a Partner for Holland & Knight's San Francisco office

With the statewide housing crisis at the forefront of the California Legislature's 2017 agenda, legislators unleashed an avalanche of more than 130 bills this year. Housing advocates have argued, back by staggering statistics, that California's local land use approval process has slowed housing production and made it more expensive.1 After vetoing housing bills in the past, Gov.

Jerry Brown approved 15 housing bills for the first time in his tenure on Sept. 29, 2017. Some of these laws streamline entitlement processing and attempt to reduce local agencies' discretionary approval rights in order to remove local hurdles to housing. These laws provide political "coverage" to decision-makers in development-friendly jurisdictions looking to approve projects in the face of vocal community opposition and also increase the ability to enforce development rights in less friendly jurisdictions where decision-makers oppose new development. More generally, other laws evidence the statewide goal to encourage housing production now that the lack of housing supply is reaching emergency levels.

The following analysis summarizes each new law, grouped into the following categories: (I) Enforceability, (II) Streamlining and Other Incentives, (III) Housing Element Law Amendments, (IV) Funding and (V) Other.

I. Enforceability

  1. SB 167 (Skinner)/AB 678 (Bocanegra) and AB 1515 (Daly) Housing Accountability Act amendments. These laws strengthen the Housing Accountability Act (HAA), also known also known as the "Anti-NIMBY (Not In My Backyard) Act." As background, the purpose of the HAA is to limit the ability of local agencies to deny or make infeasible qualifying housing developments without making specified findings that require the analysis of the environmental, economic and social effects of the action. In short, SB 167/AB 678 strengthens the HAA by increasing the standard of proof required for a local government to justify a denial of low- and moderate-income housing development projects. AB 1515 provides for a broader range of housing projects to be afforded the protections of the HAA if the project is consistent with local planning rules. Taken together, and as reported previously (see Holland & Knight's alert, " California Governor Signs into Law Major Reforms to Housing Accountability Act," Sept. 29, 2017), amendments to the HAA include the following:
  1. Increased Eligibility for Mixed-Use Projects. The HAA previously permitted a limited set of mixed-use projects to qualify for the Act's protections. Under the revised HAA, a mixed-use project qualifies as long as at least two-thirds of its square footage is designated for residential use.
  1. Tightening the Definition of "Objective Standards." Some anti-housing jurisdictions have attempted to avoid the HAA by making claims that a project does not comply with the jurisdiction's "objective" standards and criteria. The reformed HAA establishes a standard that is very favorable to housing developers and advocates: A project must be considered consistent with objective standards as long as "there is substantial evidence that would allow a reasonable person to conclude" that a project complies. If a local government determines that a project does not comply with the jurisdiction's objective standards, it must inform applicants of the basis for this conclusion on a specific timeline, and if the local government fails to do so, the project is legally deemed to be consistent. The new law also clarifies that a project's eligibility for a bonus under California's Density Bonus Law does not render it inconsistent with the local jurisdiction's objective standards.
  2. Jurisdictions Can Apply Only Those Standards in Effect at the Time the Application Is Complete. Some jurisdictions have attempted to adopt new objective standards for the purpose of avoiding the HAA. The revised act clarifies that, for affordable housing projects as well as market-rate projects, changes to the change to the zoning ordinance or general plan made subsequent to the date the application was deemed complete are not a valid basis to disapprove a project.
  1. Increasing the Burden on Jurisdictions that Reject Housing. Any local government that disapproves or reduces the size of a housing development project must now meet the more demanding "preponderance of the evidence" standard – rather than the more deferential "substantial evidence" standard – in proving that it had a permissible basis under the HAA to reject the project or reduce its density.
  1. Increased Availability of Attorney's Fees. California's Fifth District Court of Appeal had previously interpreted the Act to authorize an award of plaintiff's attorney's fees only when a local government rejects an affordable housing project. The revised HAA overrules this interpretation, making attorney's fees available – and presumptively required – regardless of whether the project contains affordable housing.
  1. Increased Fines and Increased Authority for Court to Order Projects to Be Approved. The Act previously limited the circumstances under which a court could issue fines or directly order a local government to approve a project. Under the revised HAA, after a successful court challenge, a court must issue an order compelling compliance with the HAA, and any local government that fails to comply with such order within 60 days must be fined a minimum of $10,000 per housing unit and also may be ordered directly to approve the project. If an agency does not carry out a court order within 60 days, a court may also directly order the jurisdiction to approve the project rather than merely order it to comply with the Act. If a local jurisdiction acted in bad faith when rejecting the housing development, the applicable fines must be multiplied by five.

2. AB 72 (Santiago/Chiu) HCD oversight. This law strengthens the ability of the California Department of Housing and Community Development (HCD) to enforce housing laws that

require local governments to achieve housing goals.

  1. Increased HCD Oversight of Local Agency Compliance with Housing Element Law. Specifically, it requires HCD to review any action or failure to act by a local agency that it determines is inconsistent with an adopted housing element and to issue findings whether the action or failure to act substantially complies with the housing element. If HCD finds that the action or failure to act by the agency does not substantially comply with the housing element, HCD may, after allowing no more than 30 days for a local agency response, revoke its findings until it determines that the city, county, or city and county has come into compliance with the housing element.
  2. HCD Obligation to Report Violation to Attorney General's Office. The law also requires HCD to notify the city, county, or city and county as well as authorizes HCD to notify the Office of the Attorney General that the city, county, or city and county is in violation of state law (including the HAA, state density bonus law and "no net loss" in zoning density law) if HCD makes certain findings of noncompliance or a violation.

II. Streamlining and Other Incentives

  1. SB 35 (Weiner) "By Right" Approval Processing. This law streamlines the approval process for infill developments in local communities that have failed to meet their regional housing needs.
  1. Ministerial Approval Processing. The law authorizes a development proponent to submit an application for ministerial processing where a multifamily housing development satisfies specified planning objective standards and specified criteria. The law includes a long list of qualifying criteria, including payment of prevailing wages, use of a "skilled and trained workforce, and consistency with objective development standards. The law will apply only if it is shown in a housing production report (the first reports are due April 1, 2018) that a city is not achieving affordable housing targets. The law requires a local government to notify the development proponent in writing within 90 days of submittal (for projects of more than 150 units) if the local government determines that the development conflicts with any of those objective standards; otherwise, the development is deemed to comply with those standards. Design review or other public oversight of the development may still be conducted but is directed to the "objective and be strictly focused on assessing compliance with criteria required for streamlined projects, as well as reasonable objectives design standards published and adopted by ordinance or resolution by a local jurisdiction before submission of a development application, and shall be broadly applicable to development within that jurisdiction." The design review or public oversight process must be completed within 180 days (for projects of more than 150 units) of submittal of the development.
  1. Limitations on Local Government Imposition of Parking or Other Requirements for Qualifying Projects. The law limits the authority of a local government to impose parking standards on a streamlined development approved. The law also prohibits a local government from adopting any requirement that applies to a project solely or partially on the basis that the project receives ministerial or streamlined approval pursuant to SB 35.
  1. Limitations on Approval Expiration. The law provides that if a local government approves a project pursuant to that process, that approval will not expire if that project includes investment in housing affordability where more than 50 percent of units are affordable. The approval of a project that contains less than 50 percent affordable units expires automatically after three years, unless that project qualifies for a one-time, one- year extension of that approval. Separately, the law provides that an approval shall remain valid for three years from the date of the final action establishing that approval and shall remain valid thereafter so long as vertical construction of the development has begun and is in progress; it also authorizes a discretionary one-year extension.
  2. Local Government Housing Production Reporting. The law also requires local governments to include in the annual general plan report specified information regarding units of net new housing, including rental housing and for-sale housing that have been issued a completed entitlement, building permit or certificate of occupancy. The law also requires local governments to report on the housing produced pursuant to SB 35's requirements.
  1. SB 540 (Roth) Workforce Housing Opportunity Zones. This law streamlines the environmental review and planning process for certain housing projects located within to-be- established "Workforce Housing Opportunity Zones" and meeting affordable housing, prevailing wage and other specified criteria.
  1. Workforce Housing Opportunity Zone Planning and Environmental Review. The law encourages local agencies to prepare an environmental impact report (EIR) under the California Environmental Quality Act (CEQA) and adopt a specific plan. A local government may submit an application to HCD for funding to support the local government's efforts to develop a specific plan and EIR within a Workforce Housing Opportunity Zone.
  1. Streamlining for Compliant Housing Project Processing. Housing projects meeting certain criteria (including providing affordable housing and paying prevailing wages), would not require a separate CEQA review, and the local jurisdiction would be required to take action on such projects within 60 days after an application is deemed complete.

 

  1. AB 73 (Chiu) Housing Sustainability Districts. This law gives local governments incentives to create housing in "Housing Sustainability Districts" on infill sites near public transportation.
  1. Creation of Housing Sustainability Districts. The law prescribes the contents of the ordinance that must be established to create a Housing Sustainability District, including the obligation to require that at least 20 percent of the residential units constructed within the district are affordable. The law requires the agency to prepare an EIR when designating a Housing Sustainability District. However an EIR is not required if, when reviewing a housing project, the agency has certified an EIR within 10 years of the lead agency's review of a housing project.
  1. Zoning Incentive Payment for Compliant Housing Sustainability Districts. The law requires HCD to approve a zoning incentive payment for those agencies that apply for such payment if its housing sustainability ordinance meets the specified requirements and the city's housing element is in compliance with specified law. The law requires HCD to issue a certificate of compliance if the agency meets specified criteria pertaining to the continued compliance.
  2. Streamlining Compliant Housing Project Processing. The law authorizes a developer to develop a project in a Housing Sustainability District in accordance with the housing sustainability ordinance or the agency's otherwise applicable general plan and zoning ordinances. The law imposes deadlines for an agency's processing of a project within a Housing Sustainability District and limits the instances in which an approving authority may deny a qualifying project.
Notably, the law requires that prevailing wages be paid and a skilled workforce be employed in connection with all projects within the Housing Sustainability District. The law establishes procedures for review of an application by an approving authority, including requiring the approving authority to conduct a public hearing on an application and issue a written decision within 120 days of receipt of the application. The law also prescribes procedures for review of a decision of the approving authority to deny or approve with conditions an application for a permit within a Housing Sustainability District in the appropriate superior court.
  1. HCD Obligation to Prepare Housing Sustainability District Program Report. The law requires HCD to publish a report containing specified information about the Housing Sustainability District program on its website no later than Nov. 1, 2018, and each Nov. 1 thereafter.

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