Considering Changes to Streamline Local Housing Approvals

The 2016-17 Budget: Considering Changes to Streamline Local Housing Approvals MAC TAYLOR • L E G I S L A T I V E A N A L Y S T • MAY 18, 2016 This is an initial response to the Governor’s proposal—which was a part of the administration’s May Revision released on May 13, 2016—to change state law to streamline certain local housing proposals. The proposal has many complex interactions with state and local laws and our review was conducted quickly. (Should we learn of new issues or facts relevant to the proposal, we may update our online post in the coming weeks.) For more thorough discussions of the state’s housing challenges, see our earlier reports California’s High Housing Costs: Causes and Consequences and Perspectives on Helping Low-Income Californians Afford Housing. SUMMARY Local Resistance Is a Barrier to More Housing facilities, slow home price appreciation, and alter Development. For decades, California’s local the community’s character. communities—particularly coastal communities— Consequences of California’s Housing have built too little housing to accommodate all Shortage Are Extensive. At the same time, too those who wish to live here. California’s cities and little home building has serious adverse effects counties make most decisions about when, where, that extend beyond a community’s boundaries. and to what extent housing will be built. Many These consequences are extensive. Housing costs local communities have used this authority in in California have risen rapidly, posing a host ways that have constrained housing development. of challenges for many Californians—especially These community decisions understandably low-income Californians. The state’s economy also reflect residents’ concerns about the changes that has been hampered as the movement of workers new housing may bring. New housing—and the into the state’s productive local economies has been associated new residents—can exacerbate traffic slowed. There is good reason to believe that local congestion and parking shortages, stretch local communities do not fully account for these costs when deciding how much housing to build. 2016-17 BUDGET Change Will Be Difficult. California’s rapidly Strengthen and Expand Governor’s Proposal. rising housing costs pose a difficult dilemma for We also suggest the Legislature consider some state policy makers. If the status quo is maintained, modifications to strengthen and expand the there is little reason to believe local communities Governor’s proposal. Most notably, we suggest the will depart from their past practices. The state’s Legislature expand the number of housing projects housing challenges almost certainly will worsen. eligible for streamlined approval by lowering the At the same time, bringing about a meaningful affordability requirements developers must meet. increase in housing production would require a We also recommend changes to guard against major shift in the way cities and counties plan for possible actions some communities may take to and approve housing. Such a change likely would hinder the use of streamlined approval. be complicated and contentious. More Policy Changes Needed to Address This Governor’s Proposal Has Merit. Recognizing Issue. Looking beyond this year, the administration the need for policy changes to facilitate more home has committed to consider additional policy building, the Governor has proposed significant changes to encourage housing production. Along changes to how cities and counties approve these lines, we suggest the Legislature continue housing. These proposed changes have the potential to explore other ways to encourage more home to be an important first step toward addressing building in California’s coastal communities. California’s housing shortage. We believe the Additional policy changes aimed at ensuring Governor’s proposal warrants serious consideration local planning and zoning rules provide sufficient from the Legislature. opportunities for home building would be a critical complement to the Governor’s proposal. LOCAL GOVERNMENT PLANNING AND APPROVAL OF NEW HOUSING California’s cities and counties make most A community’s general plan lays the foundation decisions about when, where, and to what extent for all future land use decisions, as these decisions housing will be built. To provide context for the must be consistent with the plan. General plans are Legislature in considering the Governor’s proposed comprised of several elements that address various changes, we discuss in this section the basics land use topics. Seven elements are mandated of how local communities plan for and approve by state law: land use, circulation, housing, housing. conservation, open-space, noise, and safety. The land use element sets a community’s goals on the General Plan Defines a Community’s most fundamental planning issues—such as the Long-Term Vision distribution of uses throughout a community, as General Plan Charts Path of Future well as population and building densities—while Development. Every city and county in California other elements address more specific topics. is required to develop a general plan that outlines Communities also may include elements addressing the community’s vision of future development other topics—such as economic development, through a series of policy statements and goals. public facilities, and parks—at their discretion. 2 Legislative Analyst’s Office www.lao.ca.gov 2016-17 BUDGET Housing Element Outlines How a Community • Regional Councils of Government Allocate Will Meet Its Housing Needs. Each community’s Housing Within Each Region. Next, general plan must include a housing element, regional councils of governments (regional which outlines a long-term plan for meeting the planning organizations governed by community’s existing and projected housing elected officials from the region’s cities and needs. The housing element demonstrates how counties) allocate a share of their region’s the community plans to accommodate its “fair projected housing need to each city and share” of its regions housing needs. To do so, county. Cities and counties receive separate each community establishes an inventory of sites housing targets for very-low, low, moderate, designated for new housing that is sufficient to and above-moderate income households. accommodate its fair share. Communities also Each council of government develops its identify regulatory barriers to housing development own methodology for allocating housing and propose strategies to address those barriers. amongst its cities and counties. State State law requires cities and counties to update law requires, however, that each region’s their housing elements every eight years. allocation methodology be consistent with Regional Housing Needs Allocation Process their Sustainable Community Strategy—a Defines Each Community’s Fair Share of Housing. state-mandated long-range regional Each community’s fair share of housing is strategy to reduce regional greenhouse gas determined through a process known as Regional emissions through transportation and land Housing Needs Allocation (RHNA). The RHNA use planning. process has three main steps: • Cities and Counties Incorporate Their • State Departments Develop Regional Allocations Into Their Housing Elements. Housing Needs Estimates. To begin the Finally, cities and counties incorporate their process, the state department of Housing share of the regional allocation into their and Community Development (HCD) housing element. Communities typically estimates the amount of new housing each do so by demonstrating how they plan to of the state’s regions would need to build accommodate their projected housing needs to accommodate projected household in each income category. growth. Household growth projections Some Communities Do Not Comply With are based on an analysis of demographic Housing Element Requirements. State law requires trends and population growth estimates HCD to review each community’s housing from the state Department of Finance. Each element for compliance with state requirements. region’s housing needs are grouped into four In recent years, HCD has found that most (around categories based on the anticipated income 80 percent) housing elements comply with state levels of future households: very-low, low, laws. (Despite this, only a minority of communities moderate, and above-moderate income. actually meet their home building targets.) A (Very-low income is defined as less than minority of communities, however, have either 50 percent of an area’s median income, low adopted a noncompliant housing element or failed income 50 percent to 80 percent, moderate to submit their housing element to HCD for timely income 80 percent to 120 percent, and above- review. Communities without an approved housing moderate income more than 120 percent.) www.lao.ca.gov Legislative Analyst’s Office 3 2016-17 BUDGET element face limited ramifications. Noncompliant parking lots, reducing the number of housing units communities are ineligible for various housing- that can be built. related state grant funds, which represent a Zoning Key to Meeting Housing Needs. Zoning very small share of local government resources. rules determine the size of a community’s housing Courts may also suspend a local government’s stock by dictating how many sites housing can permitting authority until its housing element is be built on and at what densities. Zoning rules, approved, although this may have limited effect on therefore, must allow for new housing on a sufficient communities less inclined to development. number of sites and at sufficient densities if a city or county is to meet its community’s housing needs. Zoning Implements the General Plan Permitting Addresses Project Specifics Zoning Is the Primary Tool for Implementing the General Plan. Cities and counties enact Housing Developers Must Obtain City or zoning ordinances to turn the broad policy goals County Approval. Before housing developers can outlined in their general plans into property- build new housing, they generally must obtain specific requirements. A community’s zoning one or more permits from city or county planning ordinance typically defines each property’s departments and, in many cases, must also obtain allowable use and form. Use dictates the broad approval from local planning commissions and city category of development that is permitted on councils or county boards of supervisors. the property—such as single-family residential, Some Projects Permitted Via an multi-family residential, or commercial. Form Administrative Process. Some housing projects dictates building height and bulk, the share of land can be permitted by city or county planning staff covered by buildings, and distance of buildings without further approval from elected officials. from neighboring properties and roads (known These projects are typically referred to as “by right.” as setback). Zoning ordinances also often place By-right projects require only an administrative additional restrictions on property owners—such review designed to ensure they are consistent with as minimum parking requirements—to mitigate existing general plan and zoning rules, as well as a property’s potential effects on surrounding meet standards for building quality, health, and properties. safety. By-right approval is uncommon for large Zoning Determines the Type of Housing housing developments. Built. Rules about form effectively determine how Additional Public Review Often Required. many housing units can be built on a particular Most large housing projects are not allowed by site (referred to as housing density). A site with right. Instead, these projects are vetted through one- or two-story height limits and large setbacks both public hearings and administrative review. In typically can accommodate only single-family addition, local planning commissions and, in some homes. Conversely, a site with height limits cases, city councils or county boards of supervisors over one hundred feet and limited setbacks can must give their consent. Several factors can trigger accommodate higher-density housing such as multi- additional public review. Many communities have story apartments. Rules such as minimum parking policies that, as a default, require new housing requirements also can shape housing densities. If (particularly large, dense projects) to go through a a community requires abundant onsite parking, discretionary, public review process to safeguard a developer would have to dedicate more land to against potential effects to neighbors. Under 4 Legislative Analyst’s Office www.lao.ca.gov 2016-17 BUDGET these policies, planning commissions and elected CEQA, before approving new housing (or other officials review projects and can require developers development), cities and counties usually must to make changes to a project’s scale or design and conduct a preliminary analysis to determine place additional conditions upon their approval. In whether a project may have significant adverse some cases, projects may be denied even if they are environmental impacts. If it is determined that consistent with existing general plan and zoning a project might create significant impacts, then requirements. Many projects also require additional an environmental impact report (EIR) must be public review because they are not consistent with prepared. An EIR provides detailed information existing general plan or zoning requirements and, about a project’s likely effect on the environment, therefore, necessitate action from elected officials to considers ways to mitigate significant adverse waive or amend these rules. environmental effects, and examines alternatives to Projects Often Required to Undergo Design the project. Where an EIR finds that a project will Review. In addition to seeking approval of basic have significant adverse environmental impacts, building permits, housing projects are routinely a city or county is prohibited from approving required to go through a “design review” process. the project unless one of the following two Design review primarily aims to ensure that conditions is met: (1) the project developer makes the physical form and aesthetic of a proposed modifications that substantially lessen the adverse development are in line with the community’s environmental effects or (2) the city or county finds established principles and the character of the that economic or other project benefits override the surrounding neighborhood. adverse environmental effects. Review of Environmental Voters Decide Many Land Use Issues Impacts Often Required While most land use decisions are made by city The California Environmental Quality Act and county elected officials and staff, a considerable (CEQA) was enacted in 1970 in order to ensure that number of land use issues have been decided by state and local agencies consider the environmental voters in recent decades. Land use issues may be impact of their decisions when approving a public placed before voters by (1) an initiative proposed by or private project. Most housing projects that resident groups, elected officials, or other parties require discretionary review and approval are or (2) a referendum on a recent land use decision subject to CEQA review, while projects permitted made by elected officials. In some cases, voters are by right generally are not. asked to set broad general plan and zoning policies, CEQA Review Provides Information while in other cases they are asked whether or not About Potential Impacts to the Public. Under specific projects should be permitted. www.lao.ca.gov Legislative Analyst’s Office 5 2016-17 BUDGET COMMUNITIES PLAN FOR AND PERMIT TOO LITTLE HOUSING In California’s High Housing Costs, we showed Angeles and San Francisco, where the housing that far too little housing is built in California’s stock grew by only around 20 percent. The rate coastal urban areas to accommodate all those who of housing growth along the state’s coast also is wish to live there. We noted that this shortfall low by California historical standards. During an results from a variety of factors. Most important earlier 30-year period (1940 to 1970), the number among them is that residents of California’s of housing units in California’s coastal metros grew coastal communities are hesitant to allow new by 200 percent. housing and, therefore, use their communities’ Similarly Desirable Locations Outside of land use authority to limit housing construction. California Build More Housing. Home building in Local resistance is amplified by two state California’s coastal metros has been significantly policies. First, California’s local finance structure lower than in metros outside of California that have often encourages cities and counties to favor similar desirable characteristics—such as temperate nonresidential development. Second, opponents of weather, coastal proximity, and economic growth— new housing can use the CEQA review process to and, therefore, likely have similar demand for delay proposed development and, in some cases, housing. For example, Seattle (a coastal metro with compel builders to reduce the size or scope of economic characteristics and average temperatures projects. Below, we discuss these findings in more that are similar to California’s Bay Area metros) detail. added new housing units at about twice the rate as San Francisco and San Jose over the last two Too Little Housing Built on the Coast decades. California Coast: High Demand Met With Coastal Communities Resist New Housing Constrained Supply. California’s coast is in high demand as a place to live and work. Its temperate Residents Often Anxious About New Housing. climate, scenic views, diverse populations, and Existing residents of a community often feel that economic opportunities make it a desirable location new housing is a threat to their well-being. Some for many. Various observations strongly suggest residents fear new housing will lower the value of that California’s coastal communities build too their home. Others fear new housing will bring little housing to satisfy this high demand. changes to their lifestyle or standard of living, Coastal Home Building Low by National such as increased traffic congestion or strained and Historical Standards. In recent decades, local resources. Hesitance about new housing construction of new housing in California’s coastal can lead residents to pressure local officials to metropolitan areas (referred to as “metros” below) use their land use authority to slow or block new was low by national and historical standards. development. Residents may call for elected officials Between 1980 and 2010, the number of housing to enact restrictive zoning rules or encourage units in the typical U.S. metro grew by 54 percent, elected officials to scale back or reject projects compared with 32 percent for the state’s coastal during discretionary review processes. In many metros. Home building was even slower in Los cases, residents also directly intervene in land use 6 Legislative Analyst’s Office www.lao.ca.gov 2016-17 BUDGET decisions via the initiative and referendum process. vote to limit housing development. Our review of These types of responses have been a major factor local elections data between 1995 and 2011 found in the undersupply of housing in California’s that voters in California’s coastal communities coastal communities. took a position that limited housing growth Benefits of New Housing Often Unclear to about 55 percent of the time. On average, coastal Existing Residents. While new housing can have communities as a whole approved five measures per drawbacks for a community’s residents, new year limiting housing growth (or rejected measures housing also brings benefits. Building new housing allowing new building). can help make housing more affordable both for Fiscal Incentives Exacerbate Local Dynamics renters and new home buyers. Improvements in housing affordability often are not limited to the Local Governments Weigh Fiscal Impacts of community where the building occurs, as regional Land Use Decisions. When property is developed, housing markets often are highly integrated. communities usually receive increased tax revenues Further, building more housing in a community but also often face increased demand for public provides opportunities for households to live in services and infrastructure. Because different types the community who otherwise could not. This is of developments yield different amounts of tax particularly important in communities with higher revenues and service demands, local governments wages and economic opportunities. Allowing commonly examine these fiscal effects when more households to move to these communities considering new developments or planning for likely helps them improve their personal future development. As a matter of fiscal prudence, economic situation. It also can promote regional development that does not generate sufficient and statewide economic growth by enhancing revenues to fund a local government’s new costs employers’ access to skilled workers. These benefits, often is revised or rejected. however, are often unclear to existing residents California Communities Often Benefit because those who may benefit often live outside Less From Residential Development. In the community. Because of this, communities often California, many cities and counties find that focus on the potential drawbacks of new housing housing developments lead to more local costs while undervaluing the potential benefits. This than offsetting tax revenues. This is because imbalance can lead communities to plan for and these properties do not produce sales or hotel permit less housing than may be optimal from a tax revenues directly and the state’s cities and regional or statewide perspective. counties typically receive only a small portion of Concerns Over Housing Appear to Be the revenue collected from the property tax. In Heightened on California Coast. Compared contrast, cities and counties typically find that with the rest of the country, efforts to restrict commercial developments that generate sales or housing appear to occur more often in California’s hotel taxes yield the highest net fiscal benefits. Not coastal communities, suggesting that community surprisingly given these incentives, many cities and opposition to housing is heightened in these areas. counties have oriented their land use planning and For instance, over two-thirds of California’s coastal approval process disproportionately towards the cities and counties have adopted policies explicitly development of commercial establishments and aimed at limiting housing growth. Additionally, away from housing. residents in California’s coastal communities often www.lao.ca.gov Legislative Analyst’s Office 7 2016-17 BUDGET CEQA Can Be Used to Delay or costs. In addition, after a local governing board Reduce Building Activity approves a project, opponents may file a lawsuit challenging the validity of the CEQA review. As a The CEQA process can provide valuable result of these factors, CEQA review can be time information to decision makers and help to avoid consuming for developers. Our review of CEQA unnecessary environmental impacts. The CEQA documents submitted to the state by California’s review process also provides many opportunities ten largest cities between 2004 and 2013 indicates for opponents to raise concerns regarding a that local agencies took, on average, around two project’s potential effects on a wide array of and a half years to approve housing projects that matters, including parking, traffic, air and water required an EIR. The CEQA process also, in some quality, endangered species, and historical site cases, results in developers reducing the size preservation. A project cannot move forward and scope of a project in response to concerns until all concerns are addressed, either through discovered during the review process. mitigation or with a determination by elected officials that benefits of the project outweigh the GOVERNOR’S PROPOSAL TO STREAMLINE MULTIFAMILY HOUSING APPROVALS California’s local communities often fail to fully By-Right Approval of Certain Housing recognize the benefits of new housing. Because of Projects. The administration proposes that cities this, they have and likely will continue to approve and counties require only by-right approval for less housing than is ideal from a regional or housing projects that meet certain conditions. statewide perspective. This will result in continued Cities and counties would not be allowed to require challenges for many Californians and slowed any type of discretionary approval process for economic growth. To avoid this outcome, state qualifying housing projects. To be eligible for policy makers would need to make major changes by-right approval, a housing development would to how cities and counties plan for and approve need to: housing. Consistent with this, the Governor’s May • Conform With Existing General Plan and Revision proposal includes proposed changes Zoning Rules. A project generally must be to how cities and counties approve multifamily on a site designated for housing by a local housing. These proposed changes have the potential general plan or zoning laws. The project to be an important first step toward addressing also must be consistent with “objective California’s housing shortage. We believe the general plan and zoning standards” in Governor’s proposal warrants serious consideration place at the time the project applies for from the Legislature. city or county approval. No definition Below, we describe the Governor’s proposal. In for objective general plan and zoning the next section, we offer some ways the Legislature standards is provided. could strengthen the Governor’s proposal. 8 Legislative Analyst’s Office www.lao.ca.gov 2016-17 BUDGET • Be Multifamily Housing. Only projects proposal, a developer of a project that meets the with two or more housing units per above conditions must notify the appropriate city structure would be eligible. or county of its intent to seek by-right approval. After receiving this notification, the city or county • Be Infill Housing. A project must be would have 30 days to review the project and surrounded by “urban uses,” defined inform the developer in writing if it believes the as housing, commercial buildings, project is not consistent with general plan and public facilities, or transportation zoning standards. If the city or county does not infrastructure. Specifically, a site proposed provide a written determination within 30 days, for development must either (1) neighbor the project is automatically deemed to meet general urban uses or (2) have at least 75 percent of plan and zoning standards. its perimeter bordered by urban uses. Expedited Design Review. The Governor’s proposal does not preclude cities and counties from • Meet Affordability Requirements. A conducting design review of housing projects. The project must set 20 percent of its housing proposal, however, likely would reduce the scope units at prices affordable to low-income of some communities’ design review processes. households for at least 30 years. These Specifically, design review could not take longer requirements would be lower for projects than 90 days nor could it interfere with the by-right within one-half mile of an existing or approval of an eligible project. planned transit stop. In these cases, Eligible Projects Would Not Require CEQA developers would need to set aside Review. Under the Governor’s proposal, the either (1) 10 percent of the housing for by-right approval of eligible projects generally low-income households or (2) 5 percent for would not be an action subject to CEQA review. As very-low-income households. a result, eligible housing projects would not need to • Not Develop Certain Types of Land. undergo a CEQA analysis. The site proposed for development also Requires Relocation Assistance for Displaced generally could not be prime farm land, Households. The Governor’s proposal would wetlands, or a hazardous waste site nor require a developer to provide relocation assistance within a very high fire hazard area, an to households if they are displaced by a housing earthquake fault zone, or a flood plain. project that takes advantage of by-right approval. Sets Timeline for Cities and Counties to Object to Streamlined Approval. Under the Governor’s MODIFICATIONS COULD STRENGTHEN GOVERNOR’S PROPOSAL The Governor’s proposed by-right approval made to the Governor’s proposal to bring about rules, if enacted, would be an important step even more home building and, consequently, even toward increasing housing production in greater improvements in housing affordability. California. Nonetheless, we feel changes could be www.lao.ca.gov Legislative Analyst’s Office 9 2016-17 BUDGET Expand Number of Housing Projects the Governor’s proposed 20 percent requirement Eligible for Streamlining for housing not near transit. This suggests that, in at least some of these communities, a 20 percent Practical Limits on How Much Housing requirement may be infeasible for many home Can Be Set Aside as Affordable. The cost of builders. For example, after San Francisco’s set building, operating, and maintaining housing aside requirement was increased to 15 percent for low-income households often exceeds the in 2006, the San Francisco Bay Area Planning rents these households are able to pay. When new and Urban Research Association noted that housing is set aside for low-income households, these requirements were so high that they “were these excess costs may be covered by (1) subsidies beginning to suppress housing production from federal, state, and local governments; except in the most expensive parts of town.” In (2) reduced expenditures for land and construction; 2012, voters approved a measure to reduce the or (3) reduced profits for builders and investors. All requirement to 12 percent. (This requirement is not three of these options are limited. Federal, state, perfectly comparable to the Governor’s as it applies and local funds are finite and often oversubscribed. to moderate-income households, which generally Developers have limited control over costs for require smaller subsidies.) labor, building materials, and land. And those who Important to Encourage All Types of Housing finance housing require a minimum return on their Construction. The Governor has correctly noted investment, below which they will chose to invest that heightened public pressure and sometimes elsewhere. These factors place a practical limit on unreasonable demands arising from local how much housing can be set aside for low-income discretionary reviews can force housing projects to households without making a project infeasible. be scaled back or abandoned entirely. If the state’s Local Conditions Vary. The amount of housing housing shortage is to be addressed, discretionary developers feasibly can set aside for low-income review likely will need to be scaled back for households varies across communities. Many all types of housing development. As we have factors contribute to this variation. Costs for labor, discussed in California’s High Housing Costs and materials, and land vary, as does the availability Perspectives on Helping Low-Income Californians of funding for public subsidies. Further, localities Afford Housing, all types of housing construction differ in the design and build quality standards are needed to tackle the state’s housing shortfall they require. These differences are displayed in the and improve housing affordability—including variation of local inclusionary housing policies— affordability for low-income Californians. local requirements for developers to set aside a Requiring developers to set aside 20 percent of portion of newly constructed housing for lower- housing for low-income households, however, may income households. In the San Francisco Bay Area, prevent many developers from taking advantage nearly three-quarters of cities have inclusionary of the proposed streamlined approval. This could housing policies. Set aside requirements vary substantially limit how much new housing the from 4 percent to 20 percent, with most requiring Governor’s proposal will produce. 10 percent to 15 percent of units to be set aside for Expand Number of Housing Projects Eligible lower-income households. for Streamlining. In light of California’s need 20 Percent Probably Too High for Many for a dramatic increase in housing production, Housing Projects. Many local inclusionary housing we suggest the Legislature reduce the Governor’s policies have set aside requirements that fall below 10 Legislative Analyst’s Office www.lao.ca.gov 2016-17 BUDGET affordability requirements to expand the number taken advantage of this complexity to lessen the of projects that will be eligible for streamlined effectiveness of state requirements. Examples of this approval. Local variation and the complexity of include: development finance make it difficult to know • Second Housing Units. In 2002, the for certain what threshold would be feasible for Legislature enacted Chapter 1062 of 2002 most developers. The Legislature, should it enact (AB 1866, Wright), requiring by-right the Governor’s proposal, would need to pick a approval for second housing units (also reasonable starting point and monitor whether or known as “granny flats”) that meet not it proves to be feasible for developers over time. specified standards. After the passage Consider Aligning Affordability Requirements of Chapter 1062, some cities modified With Density Bonus Law. One possible starting their local zoning rules in an effort to point could be for the Legislature to align these limit its effect. For example, a city in Los requirements with the state Density Bonus Law—a Angeles County adopted local zoning state policy that offers incentives and regulatory rules that limited second units to lots that relief to housing developers that set aside a portion are 15,000 square feet or larger—larger of their housing for low-income households. than 80 percent of residential lots in Los Developers are eligible for benefits under the Angeles County—and capped citywide Density Bonus Law if they set aside 10 percent construction of second units at 20 units per of their housing for low-income households or year. 5 percent for very-low-income households. (While these are the minimum eligibility requirements, • Growth Caps. Beginning in the 1970s, projects setting aside additional housing may in response to the various pressures to receive additional benefits.) Aside from expanding increase housing production—including the pool of housing projects eligible for streamlined state housing element requirements—over approval, aligning affordability requirements also 100 cities and counties enacted annual could enhance the effectiveness of the Density housing caps. These caps permitted only Bonus Law by increasing the benefits provided to a certain amount of housing to be built eligible developers. in a community each year. Often, these restrictions precluded cities and counties Preempt Local Efforts to from satisfying their housing element Avoid Streamlining Rules requirements to plan for their future Past Efforts to Encourage Housing Have Met growth needs. Courts have more recently Local Resistance. Over the years, the Legislature invalidated many of these growth caps has enacted many laws to encourage or compel for conflicting with housing element cities and counties to build more housing. In many requirements. Nonetheless, many caps cases, local communities have pushed back against were in effect for many years prior to being these changes. Local communities have broad invalidated, likely leading to substantially authority to set planning and zoning rules. These less housing construction. rules often are very complex, specifying dozens of • Housing Moratoriums. The state restrictions and standards property owners and Housing Accountability Act—enacted builders must follow. Some communities have www.lao.ca.gov Legislative Analyst’s Office 11 2016-17 BUDGET in 1982—prohibits a city or county from present development practices. In these cases, denying a proposed housing development housing projects must routinely request “variances” that is consistent with general plan and from zoning rules. Cities and counties may attempt zoning standards unless the project to use theses ambiguities to deny eligibility for would jeopardize public health and safety. by-right approval, forcing developers to either go Faced with this requirement, but hesitant through discretionary reviews or challenge the to approve proposed housing projects, determination in court. To forestall this scenario, several local communities enacted housing the Legislature could more clearly define what moratoriums in an effort to avoid the general plan and zoning standards a project must Housing Accountability Act. In 2001, the meet to be eligible for by-right approval. Legislature enacted Chapter 939 of 2001 Facilitate Enforcement (SB 1098, Alarcón), to limit local housing moratoriums to 45 days. Developers May Be Reluctant to Challenge Local Noncompliance. Disagreements may Given past experiences, the Legislature arise between cities and counties and housing may wish to consider adding provisions to the developers seeking streamlined approval. Should Governor’s proposal to guard against possible this occur, the developer of an eligible project actions some communities may take to hinder the (or other interested parties) would need to ask use of streamlined approval. the courts to compel the city or county to allow Prevent Locals From Applying Different Rules by-right approval. Project developers, however, to Streamlined Projects. Cities and counties may may be reluctant to challenge a city or county in attempt to make it less feasible for developers to court. Developers often build multiple projects take advantage of streamlined approval by creating within the same city or county over a number other barriers to these projects within their zoning of years. Because of this, developers may find it and planning codes. To avoid this, the Legislature is in their long-term best interest to maintain a could prohibit cities and counties from applying good relationship with the city or county by not more stringent zoning rules, higher permitting challenging it on any particular project. or development fees, or any other differential Facilitate Enforcement by Other Interested treatment to a project because it wishes to take Parties. As a project’s developer may be reluctant to advantage of streamlined approval. The Legislature assert its eligibility for by-right approval, it could be also could prohibit cities and counties from beneficial to ensure that other interested parties— enacting annual caps on the number of projects such as potential residents of the development, that may seek by-right approval. affected residents of the locality or region, or Define Objective General Plan and Zoning organizations that advocate for more home Standards. General plan and zoning laws are very building—are able to bring these challenges. To complex and often highly prescriptive. Because of facilitate these types of challenges, provisions could this, it may not be immediately clear which general be added to the Governor’s proposal to clarify that plan and zoning standards are considered objective these groups have standing to bring a challenge and and whether a proposed development meets those may recover attorney’s fees in a successful suit. standards. Further, some city and county zoning rules were adopted decades ago and do not reflect 12 Legislative Analyst’s Office www.lao.ca.gov 2016-17 BUDGET LOOKING AHEAD The Governor’s proposal to change how local Importantly, while the Governor’s proposal communities approve housing projects would be an could change significantly how local communities important first step toward addressing California’s approve housing, it does little to address whether housing shortage. We believe the Governor’s or not they plan for sufficient housing. Hesitant to proposal warrants serious consideration from the permit the additional housing this proposed new Legislature. law could bring, local communities might change No one policy change, however, can solve their planning and zoning rules to reduce home California’s housing challenges. Looking beyond building opportunities. In prior years, this has been the budget cycle, the administration has committed a favored approach of local communities concerned to consider additional policy changes to encourage about growth. For this reason, additional policy housing production. Consistent with this, we changes aimed at ensuring local planning and suggest the Legislature continue to explore zoning rules provide sufficient opportunities for other ways to encourage more home building in home building would be a critical complement to California’s coastal communities. While it may not the Governor’s proposal should it be enacted. be obvious to existing local residents, new housing The Governor’s proposal, as well as any future development can bring important benefits for their efforts to address the state’s housing shortage, are community, their region, and the state as a whole. likely to be contentious and difficult. Our view is that the severity of California’s housing challenges calls for putting all policy options on the table. www.lao.ca.gov Legislative Analyst’s Office 13 2016-17 BUDGET LAO Publications This brief was prepared by Brian Uhler and reviewed by Jason Sisney. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This brief and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814. 14 Legislative Analyst’s Office www.lao.ca.gov