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Allen Matkins Legal Alert
October 2, 2017              

Governor Signs Package of Bills to Tackle California Housing Crisis

On Friday, Governor Brown signed a package of 15 housing bills to address California’s ongoing housing crisis. The suite of bills creates a variety of tools to address the crisis from authorizing bond funding for new affordable housing to regulatory changes aimed at encouraging housing production in the state. While passage of these bills is a step in the right direction, their long-term effect remains to be seen as there are several requirements, including prevailing wage, that may hinder the full development potential under the bills.

Below is a summary of the package’s key bills.

Senate Bill 35

SB 35 authorizes a ministerial approval process and limits certain types of reviews for multifamily housing development projects in a local jurisdiction that is not currently meeting its Regional Housing Needs Allocation (“RHNA”) goals. Projects qualifying for this streamlined treatment are required to: (i) conform with the local jurisdiction’s objective zoning and planning standards; (ii) be located on an infill site; and (iii) include at least 10% affordable housing units for households earning 80% or less of the area median income. Projects located in certain environmentally sensitive areas, including the California coastal zone, or on certain types of farmland do not qualify for the streamlined approval process. The bill also imposes prevailing wage rate requirements on construction of all project units. Skilled and trained workforce requirements may also be imposed on the project depending on its approval date and the number of market-rate units.

Insight: The streamlined approval process provided by SB 35 is win for developers because it will: (i) shorten the entitlements process for qualifying projects; (ii) give the local jurisdictions protection from NIMBY project opponents; and (iii) put pressure on cities and counties to meet their RHNA goals. However, the exception that prohibits the use of the streamlined process for projects in certain environmentally sensitive areas will severely restrict the infill sites that will qualify for the process. Thus, the bill create a potentially large loophole that will allow project opponents as well as local governments to continue to resist new housing development in these areas. Moreover, the ability of this bill to spur development is likely to be diminished by the prevailing wage requirements that are required to take advantage of the streamlined approval process. 

Senate Bill 167 and Assembly Bill 1515

SB 167 strengthens the existing Housing Accountability Act (“HAA”), which requires local jurisdictions to make certain findings before denying a housing project, by increasing the burden of proof a local jurisdiction must meet to deny a housing project from substantial evidence to preponderance of evidence. The bill allows a court to compel compliance with the HAA, not only when the local jurisdiction denies a housing project, but when a local jurisdiction conditions the project in a way that renders it infeasible or requires a lower density. SB 167 also adds additional teeth to enforcement for violations of the HAA by requiring a court to impose a minimum $10,000 fine per housing unit in the development on any local agency that fails to comply with a court’s order compelling compliance with the HAA within 60 days.

SB 167 also requires local jurisdictions to notify an applicant within 30 or 60 days (depending on the size of the project) in writing of its reasons for disapproving or conditionally approving a housing project on the basis that it is inconsistent, not in compliance, or not in conformity, with the local agency’s applicable plans, policies and standards.

SB 1515, also enacted on Friday, further strengthens the HAA by establishing that a housing development project will be deemed consistent with a local jurisdiction’s applicable plans, policies and zoning standards if there is substantial evidence that a reasonable person would conclude that the project is consistent.

Insight: By increasing the burden of proof a local jurisdiction is required to meet in denying a housing project, expanding the bases for finding a violation of the HAA, and mandating courts to impose significant fees for failure to timely remedy violations of the HAA, SB 167 and AB 1515 together make it harder for local jurisdictions to impede development of housing and establish meaningful consequences for local jurisdictions failing to remedy HAA violations. These bills should help increase the number of housing projects approved over time.

Assembly Bill 1505

AB 1505, referred to as the “Palmer Fix,” authorizes local governments to establish on-site inclusionary housing requirements for new residential rental projects, superseding Palmer/Sixth Street Properties, L.P. v. City of Los Angeles (2009) 175 Cal.App.4th 1396, that prevented jurisdictions from imposing such requirements. This bill also authorizes the Department of Housing and Community Development (“Department”) to review local ordinances that impose on-site inclusionary rental requirements of more than 15 percent of the total project units. As part of this review, the local jurisdiction may be required to prepare an economic feasibility study to demonstrate that the ordinance does not unduly constrain the development of housing.

Insight: Although AB 1505 opens the door for local jurisdictions to again require on-site inclusionary units in rental projects, it does include new oversight by the Department in an effort to ensure that the on-site inclusionary requirements are not so high that they have the effect of discouraging housing development. However, this review by the Department may be insufficient if housing development is stifled during the ten years that the Department has to conduct its review of a new or amended local ordinance after its adoption.

Senate Bill 166 

Under SB 166, a city or county cannot allow or take any action that would cause the inventory of affordable housing sites, identified in its General Plan Housing Element, to be insufficient to meet its remaining unmet share of its RHNA needs for lower and moderate-income households. Certain findings are required before a city or county may reduce, require, or permit the reduction of or allow the development of a parcel at a residential density lower than the density identified for that parcel in the General Plan’s Housing Element. If the city or county allows a density reduction that would render the remaining sites identified in the Housing Element inadequate to meet its RHNA, it must identify additional available sites within its jurisdiction with an equal or greater residential density to ensure there is no net loss of residential unit capacity.

Insight: SB 166 creates additional hurdles for cities and counties to overcome in order to reduce the density of proposed projects, thus increasing the likelihood that adequate housing will be available to meet RHNA goals for all income categories.

Senate Bill 540

This bill will allow local jurisdictions to establish a priority housing zone (containing between 100 and 1,500 residential dwelling units) by preparing an environmental impact report under the California Environmental Quality Act (“CEQA”) and adopting a specific plan that meets certain requirements. Once the priority housing zone is established, a local jurisdiction must approve all proposed housing developments within this zone that meet certain criteria. Housing developments proposed within the zone that meet six specified criteria would not require a separate CEQA review, and the local jurisdiction would be required to take action on such projects within 60 days after the application is deemed complete. No more than 50% of the total units in the priority housing zone may be market-rate units. The bill imposes prevailing wage rate requirements on construction of all project units. 

Insight: Though establishment of a housing priority zone should streamline the approval process and accelerate development of much-needed housing, the efficacy of these reforms will be determined by whether a local agency adopts a priority housing zone, how quickly the local agency creates such a zone, and the scope of the countervailing impact created by imposition of prevailing wage requirements.

Michelle Moore Allen Matkins Michelle Moore McDermott
Land Use & Development | Real Estate | Technology Companies | Shopping Center, Retail & Mixed-Use | Real Estate Transactions
San Francisco
(415) 273-7449
(415) 837-1516 (fax)
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Courtney A. Davis | Allen Matkins Courtney A. Davis
Senior Counsel
Environmental & Natural Resources | Land Use & Development | Real Estate | Industrial & Logistics | Infrastructure | Energy & Utilities | Real Estate Transactions
San Francisco
(415) 273-7474
(415) 837-1516 (fax)
Email Courtney