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Tuesday, June 25, 2024

Will This Bill Save or Scuttle California’s Builder’s Remedy?


Happy Tuesday and welcome to another edition of Rent Free. This week’s stories include:

  • A new bill introduced by Sen. John Fetterman (D–Pa.) and Rep. Lisa Blunt Rochester (D–Del.) aims to help localities reform their zoning codes through consultation with the U.S. Department of Housing and Urban Development.
  • The University of California, Berkeley, at long last, gets the California Supreme Court’s blessing to move forward with a contentious redevelopment of People’s Park.
  • Austin considers applying an “equity overlay” to its “missing middle” reforms, much to the alarm of some YIMBYs who say the new overlay will only reduce new housing construction.

But first, our lead story on whether a proposed California bill would give “more teeth” to the state’s builder’s remedy law or defang it entirely.


YIMBYs Divided on Reforms to ‘Builder’s Remedy’

Over the past few years, developers across California have been dusting off a little-used provision of state housing law called the “builder’s remedy” to try to get massive residential projects approved in communities that are out of step with state housing law. They’ve had limited success.

The builder’s remedy law prevents communities without state-approved “housing elements”—lengthy plans outlining how local laws will change to accommodate new housing—from denying residential projects just because they’re inconsistent with local zoning codes.

In theory, this would allow developers to build projects of unlimited density in the 183 jurisdictions that don’t have a state-compliant housing element. In practice, ambiguities in state law and persistent local intransigence have seen most builder’s remedy projects stalled in the courts or negotiated down to smaller projects with fewer units.

Proposed Fixes

Enter Assembly Bill (A.B.) 1893, authored by Assemblymember Buffy Wicks (D–Berkeley) and supported by California Attorney General Rob Bonta, which aims to make the builder’s remedy process more predictable and functional for developers and a little less scary and offensive for cities.

“The message to local jurisdictions is clear—the days of shirking your responsibility to your neighbors are over,” said Wicks in an April press release, when her bill was first introduced.

For developers, Wicks’ bill attempts to clarify the kinds of standards local governments can apply to builder’s remedy projects, streamline project approvals, and lessen project costs. For cities, Wicks’ bill would impose density caps on builder’s remedy projects and limit the areas where they could be built.

Given the difficulty that developers have had in getting builder’s remedy projects approved, the bill would seem to offer a win-win compromise.

Uncertain Improvements

But many YIMBY housing advocates are skeptical of the bargain the bill tries to strike: its process improvements are minimal and its density caps will undermine many builder’s remedy projects.

“When we look at the uncertainty that they’re trying to take away, it’s like 5 percent of the uncertainty,” says Sonja Trauss, the executive director of YIMBY Law. Meanwhile, “there are whole [categories] of builder’s remedy projects that are possible now that would become just off the table.”

The current builder’s remedy law says that local governments can’t disapprove projects for being inconsistent with local zoning, but they can require they abide by development standards consistent with meeting state housing goals, without defining what those development standards are.

A.B. 1893 attempts to clear this up by saying that cities can only apply “objective development standards” that don’t make a project physically impossible and don’t add to a project’s “actual costs.”

Trauss argues that this will do little to prevent builder’s remedy projects from ending up in court. A city eager to prevent a builder’s remedy project could impose expensive or impractical development standards and argue they don’t increase costs. A developer will disagree and sue over standards. At the end of the day, projects still end up in court.

Two Steps Back

Meanwhile, the bill would impose density caps on projects of between two to three times the base density allowed by existing zoning. Builder’s remedy projects could also only be built on land currently zoned for housing, retail, office, or parking. Current law has no such restrictions.

Some builders’ groups complain that these density caps would make many builder’s remedy projects financially infeasible.

“Builder’s remedy only applies when a jurisdiction’s housing element doesn’t comply with state law and if it does not comply with state law, chances are it has very low base density,” says Andrew Malick of the Council of Infill Builders.

Being able to build at three times a city’s existing duplex densities, he says as a way of an example, isn’t that much of enticement.

These density caps could also discourage cities from more broadly reforming their zoning codes.

Builder’s remedy projects are intended to work as a stick: If a city doesn’t broadly reform its zoning code to be more development-friendly, it runs the risk that it will have no ability to say no to residential mega-projects totaling thousands of units.

But if builder’s remedy projects are capped at lower densities, there’s less of an incentive to adopt a compliant housing element or risk a builder’s remedy project.

Much Ado About Affordability

A.B. 1893 also takes a contradictory approach to lessening project costs by lowering the affordability requirements of builder’s remedy projects.

Current law says that a builder’s remedy project must make 20 percent of its units affordable at below-market-rates to low-income households (households making up to 80 percent of area median income) or 100 percent of units affordable to moderate-income households (households making up to 120 percent of area median income).

A.B. 1893 would change that former requirement so that builder’s remedy projects would have to include 10 percent of units affordable to very low-income households (households making up to 50 percent of area median income).

So, in short, the share of units that would have to be below market rate is lower, but the actual rents developers would be able to charge on them would also be lower.

“That seems like progress in one respect and retrogression in another respect,” says Christopher Elmendorf, a law professor at the University of California, Davis.

The bill would eliminate all affordability requirements for smaller builder’s remedy projects of ten units on single-acre sites. That theoretically would enable smaller “missing middle” projects to use the builder’s remedy process.

But this provision too could be undermined by a proposed amendment that would allow local governments to apply their own affordability mandates to builder’s remedy projects. One tactic local governments use to stymie development is to require new projects to have a very high share of affordable, below-market-rate units.

“It is far too easy for bad actor local jurisdictions to enact high [inclusionary zoning], or deeper levels of affordability requirements that would undermine the effectiveness of a Builder’s Remedy tied to their local requirement,” wrote YIMBY Law and YIMBY Action (another housing advocacy group) in a May 10 letter to Wicks.

The current public version of the bill does not include this provision but that version also hasn’t been updated since April 30. Its inclusion is still reportedly under discussion. Wicks’ office did not respond to multiple requests for comment about the bill.

The Devil Is in the Details

YIMBY housing advocates look more positively on provisions of A.B. 1893 that would allow builder’s remedy projects to make use of incentives and waivers offered by the state’s density bonus law, and streamlined approval processes created by new state laws S.B 423 (which covers projects in cities behind on their state housing production targets) and A.B. 2011 (which covers projects along commercial corridors).

Those latter laws allow qualifying projects to skip onerous environmental reviews required by the California Environmental Quality Act (CEQA). Currently, builder’s remedy projects still have to comply with CEQA.

Trauss argues A.B. 1893 should be amended to create a second, voluntary builder’s remedy process, with its alleged additional legal clarity and density caps. Developers could still opt to use the existing process.

Elmendorf says that, in theory, a builder’s remedy process that includes some density caps but offers a smoother process isn’t inherently a bad idea, but the “devil is in the details, and the details are still being worked out.”

A.B. 1893 has passed the California Assembly and is currently being considered by the California Senate.


A New Federal Zoning Bill Tries To Make Up for Past Mistakes

In the 1920s, the federal government produced model zoning legislation and encouraged states to adopt it. These state zoning enabling acts helped create today’s regime of red tape and restrictions on new housing production.

Now, a new federal bill attempts to undo some of the damage.

This past week, Sen. John Fetterman (D–Pa.) and Rep. Lisa Blunt Rochester (D–Del.) introduced the Reducing Regulatory Barriers to Housing Act. The bill would direct the U.S. Department of Housing and Urban Development (HUD) to publish model zoning frameworks that state and local governments could use to guide their own zoning reforms.

These frameworks would include recommendations for increasing density limits, shrinking minimum lot sizes, allowing more types of housing “by right” (meaning projects are subject to public hearings and discretionary approval processes), and even creating state zoning appeal bodies that could approve projects that have been rejected at the local level.

The bill also directs HUD to provide technical assistance to localities looking to adopt recommended policies in the framework.

Most other YIMBY bills introduced at the federal level have had bipartisan support. The Fetterman-Rochester bill currently only has Democratic sponsors at the moment, but it does have wide industry support. Affordable housing groups and industry trade associations (rarely on the same side of federal housing policy) both support the bill.

“There are a whole host of communities across this country that would like to engage in this policy work but lack the staff, lack the capacity, lack the resources to do so on their own,” says Mike Kingsella of Up for Growth, which supports the bill. “I think this is the exact right role for the federal government to play in supporting local governments and zoning jurisdictions to tear down barriers and create more homes.”


California Supreme Court Rules Noisy Students Not Pollutants After All

After a ruling by the California Supreme Court, the University of California, Berkeley, will be able to proceed with building a 1,200-unit student housing project on the site of the famous People’s Park, reports CalMatters.

For the past three years, the project has been held up by legal challenges from neighborhood groups who argued that the university had violated the California Environmental Quality Act (CEQA) by approving the project without studying the polluting noise that the new student residents would make.

In 2023, a California appellate court agreed with that argument and paused the People’s Park project. That ruling generated immense controversy from CEQA watchers, who worried that such an expansive reading of the law could be used to stall basically any housing project.

“Family housing, which may mean a colicky infant crying for the first three months of her life, is that a CEQA impact? How about crime rates for different kinds of housing?” Jennifer Hernandez, a land use attorney with the law firm Holland and Knight, told Reason last year.

In 2023, the California Legislature passed a very narrow bill declaring that residential noise doesn’t count as an environmental effect that needs to be studied under CEQA. Given that law, this latest Supreme Court ruling allowing the People’s Park project to go forward wasn’t a surprise.

Nevertheless, some legal scholars have argued the decision marks a turning point whereby California courts will be less willing to endorse the broadest possible scope of CEQA.


Austin Considers Handicapping Zoning Reform With ‘Equity Overlay’

Austin, Texas, has earned a lot of YIMBY plaudits for the zoning reforms it passed over the last year that, in part, allow three-unit homes on all residential lots and shrink the city’s minimum lot size down to 1,800 square feet.

But now, the city council has paused implementation of the latter reforms in census tracts that are “vulnerable to displacement” and is considering a permanent “equity overlay” that would limit new development in the same areas.

Over at his Austin Politics Newsletter, Jack Craver argues these policies are based on outdated data and the flawed premise that areas with lower land values will see the most new development under Austin’s latest zoning reforms.


Quick Links

  • New York Gov. Kathy Hochul’s last-minute decision to “indefinitely” pause implementation of a plan to toll drivers entering lower Manhattan has commuters breathing a “sigh of relief” and transit advocates incensed at the loss of toll revenue that would have been dedicated to subway improvements.
  • The YIMBY Act unanimously passes the House Financial Services Committee.
  • The Cincinnati City Council has given final approval to a suite of zoning reforms that will allow multi-unit development in more areas of the city.
  • National Public Radio covers a developer’s plans to build the country’s tallest building in Oklahoma City, Oklahoma.
  • Over at National Review, Judge Glock covers the alarming growth of government-sponsored mortgage companies.
  • Over at Bloomberg, a takedown of the bad economics of the “15-minute city.”

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