95% of Bay Area Cities Lost Zoning Authority

In 105 jurisdictions of the Bay Area, anyone can build any residential projected at any height or density so long as 20% of the units are for low income.

Housing construction in the state of California since the 1940s till 2010. The shortage has been decades in the making. From California’s LAO Report: “California’s High Housing Costs: Causes and Consequences” (2015).

To reward the high number of subscribers from my first article on the Builder’s Remedy, this article will be subscriber-only for several days.

— Builder’s Remedy (Recap here). —

After a week of confusion and conflicting reports, California’s Department of Housing and Community Development (HCD) announced that 96 of 101 Bay Area municipalities had their housing elements rejected and are now subjected to a “zoning holiday” a.k.a the Builder’s Remedy. HCD rejected the housing elements of 8 out of 9 Bay Area counties, excluding San Francisco, meaning unincorporated areas in those counties are also subjected to the Builder’s Remedy. The housing element is the residential component of a city’s zoning map, and its rejection means effectively no residential zoning is in place until the state approves it.

For the first time, a housing project of any height, any density, with any lot coverage and any or no parking, can be constructed in the vast majority of the Bay Area. As long as developments are 20% low-income or 100% middle-income and are environmentally sound, they can be certified by local planning departments with a swift, administrative approval.

Only San Francisco, Alameda city, Emeryville, Redwood City and San Leandro had housing plans approved by the state and retained intact zoning and permitting authority. However, after two weeks only one confirmed Builder’s Remedy project was proposed, as experienced local developers have been mum about their intentions to make local governments irate.

When Do Other Cities Get Their Housing Elements Checked? There are dozens of ‘councils of governments’ in California, where HCD review’s a collection of cities in sections. Click here and check the date under “Sixth Housing Element (HE) Revision Due Date” column for a region’s deadline where if a compliant housing element isn’t submitted then Builder’s Remedy is enacted.

Where Can I See My City's Housing Element Status? Click on this link. Click on the “Housing Element Compliance Report” tab. Filter “Planning Period” to 6. Then filter by county or planning region for results. If the “Compliance Status” on the far right tab says “IN”, then the housing element’s been approved by the state. “OUT” means Builder Remedy is in effect.

— Los Altos Hills —

Los Altos Hills, California is one of the wealthiest communities in the world, home to Silicon Valley’s upper echelons of technology billionaires and millionaires such as the founder of Google and its current CEO. The non-diverse town boasts a median household income north of $400,000. Its zoning prohibits multifamily housing, whether apartments, townhomes or condos, along with commercial stores and shops in the entirety of its city limits.

The city had to re-zone to plan for the construction of 489 additional households, half of which to be affordable to low-income families. The city of nine square miles proposed to upzone just three sites (unbeknownst to its owners) for very low density multifamily housing and submitted the plan just hours before the deadline. HCD reviewed and rejected it, invoking the Builder’s Remedy on the suburb.

Now the wealthiest community in the United States has the unique distinction of also being the first community in the Bay Area to have a Builder’s Remedy project proposed. A young homeowner and computer engineer, frustrated that the town has been slow to permit the reconstruction of his water-damaged home, has announced plans to use the zoning holiday to build a 15-unit apartment complex and five townhomes on his property. Per the rules, four of those homes will house Los Altos Hills’ first low-income families.

It shouldn’t be a surprise that a place like Los Altos Hills was the first to see a Builder’s Remedy project. Many people asked me if they thought their towns would see a wave of residential development after February 1st in the event their city’s housing elements were rejected. In most cases I said no. Not only because this law is so untested and in uncharted territory, but because many of the towns were moderate-to-low income cities. In those places, a homeowner may add a few units to their properties, perhaps a small apartment complex, but high density housing is unlikely to be built there because of the inclusionary requirement.

Because 20% of the housing units must be deed-restricted to low-income households, the most expensive housing markets with astronomically high prices will subsidize the low rent units with the high rent ones, absent public subsidy. Most cities in California do not have inclusionary requirements for new housing. Of the few Bay Area cities with inclusionary requirements, most are around 10% and only a tiny handful have requirements approaching 20%.

Inclusionary requirements are designed to get private developers to fund low income housing without public subsidy. Hotly debated among experts for its effectiveness and it deserves its own Substack, though I’m pro-inclusionary zoning. But it’ll usually not be profitable enough for lenders’ satisfaction in lower-income areas where market rates for housing are not as expensive. Which is why Builder’s Remedy projects beyond 5-units (20% requires at least five units) will be mostly in high-income neighborhoods of the Bay Area as we’ve seen in Southern California.

Local media speculates that this project may be out of spite by the young engineer regarding the NIMBY government of his town. Maybe, but it’s good nevertheless. Undoubtedly, this project will be sued by neighbors, but the courts have mostly ruled in favor of the Builder’s Remedy and other state housing laws so far.

Terrified of this prospect becoming a larger trend, the Los Altos Hills city government has quickly whipped up a new housing element and submitted it to the state government for review. All while local council members and anti-development residents gnash their teeth and groan while being reminded by the city attorney that they must fix their housing element or else even bigger projects will arise.

— Huntington Beach —

Huntington Beach in Southern California broke headlines in 2019 when the Governor of California sued the city for refusing to adopt a housing element whatsoever. State courts compelled the majority Republican beach town to start a housing element process, which HCD rejected along with other SoCal cities for being inadequate. The city is tasked with building or allowing the construction of 13,000 new homes over the next eight years.

In a gutsy attempt to give Sacramento the finger, the Planning Commission has proposed a law to simply deny any project approved under the Builder’s Remedy by simply exempting themselves out of state law. Nice try, says state attorney general Rob Bonta, who has put the city on notice for more legal challenges if they attempt to enact this proposal. Bonta is backed up by a new state agency of housing watchdogs called the Housing Accountability Unit, jokingly referred to as “the zoning police”, as part of Governor Newsom’s unprecedented effort to go after cities failing to build housing.

— Oakland —

Unlike Santa Monica, the Bay Area is off to a slow start due to the uncharted territory of the Builder’s Remedy. Most elected officials, developers and city planners believed that the state would just approve bad and useless housing elements, as is tradition, and that the Builder’s Remedy wouldn’t even be invoked. Now that it has, people still aren’t sure what it means. San Francisco Chronicle and Berkeleyside have hosted competing debates between HCD and city planners over what would happen if governments were non-compliant.

There was mass confusion about whether a rejected element that “was in substantial compliance” with state laws had a 120-day extension from the Builder’s Remedy. Developers and planners told the media they thought this was also the case, but HCD announced it wasn’t. So cities like Berkeley, which had its housing element rejected the day of the deadline, are now subjected to the Builder’s Remedy.

Oakland was among the many cities who re-submitted proposals and were still rejected. The city was flagged for not proving a likelihood that certain sites would see housing construction and also lacked non-zoning related public programs to encourage new housing for low-income, disadvantaged families. HCD noted Oakland did well to include down payment assistance for low-income families and conservation efforts for dilapidated housing but wanted to see more policies to maintain existing housing for low rent use. This is notable since tenant organizations in Oakland are pushing for the city to incorporate TOPA, a program that would allow the city to buy properties, into the housing element.

Lastly, Oakland was flagged for exclusively focusing its fair housing initiatives on upzoning white, segregated areas for more affordable apartments, and not proposing general infrastructure improvements such as better roads, lighting and parks for disinvested and segregated low income districts in Oakland..

Oakland planners and officials are likely working on a fix to submit to HCD as soon as possible. Again, I doubt any high density Builder’s Remedy projects will occur in the city besides in its exclusive northern and hillside neighborhoods, but it is possible homeowners in the flatlands who are keen on adding un-permitted housing units to overcrowded households may take advantage of the zoning holiday.

— Discretionary Approvals —

Berkeley’s planning director made a sound point reacting to the city’s subjection to the Builder’s Remedy: Santa Monica, a city with pretty furious NIMBYism, saw some developers blow past city council with the zoning holiday because the local government would never reasonably approve their housing projects.

In places where developers have tighter relations with city councils and community organizations, they will likely avoid the prospect of damaging those relations with super dense projects or any project. Even in Santa Monica, it was one single developer that proposed the vast majority of those projects I spoke about who clearly didn’t care. 

Now people hear “relations” and think of corruption. Well, it’s quite normalized, but it is corrupt and is a byproduct of what pro-housing groups have largely been warring against: discretionary approvals. This will get complicated so I’ll explain more in an upcoming Substack, but as a quick summary:

Discretionary approval means that a proposal for a development must acquire approval after a vote by a local board or council that can veto or approve based on any arbitrary, subjective reasoning. Typically, a development is submitted to a Planning Department, who check if the proposal is zoning compliant, has safe environmental impacts etc. essentially all objective metrics, and is granted a permit. It also must go to subjective-based boards that act as proxies for community opinion, and finally the city council, who grants or denies entitlement based on subjective evidence. Together the entitlement and permitting (not construction) of housing usually takes, on average, one-to-two years in California.

Prior to 2017, all housing proposals in California were defacto discretionary. Even though the Housing Accountability Act of 1990 stipulated that development projects that complied with the objective rules of a city’s zoning and permitting had a legal right to eventually be approved by discretionary boards. But this wasn’t challenged until 2017 when Berkeley City Council rejected a 4-unit condo proposal replacing a vacant single-family home due to parking concerns in a zone that allowed for four homes. Charging that it was allowed under Berkeley’s own zoning and thus legally entitled, a YIMBY legal group sued the city and won.

This was a loud shot heard around the state and fundamentally codified all development approvals from de facto discretionary to de jure “ministerial.” If a project complies with a city’s rules, the project must be approved by the “discretionary” boards eventually, so it becomes more ceremonial. If a project doesn’t comply, a city’s discretionary boards have the right to reject or approve if it pleases.

(Note that the Builder’s Remedy not only eliminates zoning restrictions, but eliminates the discretionary subjective process altogether. Now a builder only needs to meet the objective standards that are not about density and height to acquire entitlement.)

Proponents of discretionary approvals argue that discretionary approvals allow for community input. But I argue codifying ministerial approval was good for democracy, true community input, and bad for corruption. Now the rules for what constitutes a development worthy of approval are clear to everyone: the zoning map and planning code, written democratically by the entire community and not just people who show up to meetings.

Discretionary approvals of development not tied to the legal authority of zoning let real estate lobbying and bribery run rampant for decades. Arbitrary approvals by councilmembers allowed small groups of big developers to get exclusive project approvals with minimal competition by bribing either the councilmember or that councilmember’s favorite political organizations. Oftentimes discretionary approvals didn’t even do it’s stated job and cities were letting tenants be directly displaced by development projects until another state law, SB 330 (2019), came in and stopped most of it.

Small developers, low income nonprofit builders and average homeowners could seldom acquire approvals to build housing, keeping housing supply limited and construction only conducted by a deep pocketed cabal. This resulted in high profile cases of bribery by developers funding political campaigns, bureaucrats and politician’s vacations, and local political organizations running extortion rackets in exchange for development approvals. Here’s some highlights in Los Angeles and San Francisco. 

In response to this, there are some urbanists who think there should be no zoning, but I disagree. Zoning is good, but it’s used more often than not to exclude residents rather than protect residents in the United States. There are some places where homes should not be built, and city governments have a service to the public to protect their health and safety with zones. That’s what makes the recent housing element saga so disappointing.

The vast majority of Bay Area cities didn’t take their housing element process seriously. Comfortable with the status-quo, the overwhelming majority of cities started late or submitted awful housing elements that didn’t abide by fair housing laws and HCD’s rules despite knowing the deadline several years in advance! Urban planners hired by these local city governments didn’t even seem to know what they were doing. City electeds and paid planners, representing major cities like San Francisco, had to get their information on the deadline from housing nerds on Twitter like me posting about it for free.

The housing element is important. The Builder’s Remedy is nice, but we want compliant housing elements to house population growth, combat segregation, reduce home prices and combat sprawl. Zoning is supposed to protect the health of residents, both current and future, from the harms of unchecked development. Yet our zoning maps are obsessed over subjective aesthetics of what developers build: heights, rental prohibitions, unit counts, parking lots and mandating yards rather than protecting health.

That’s why the majority of Bay Area jurisdictions failed and saw much of their zoning voided. Once they submit plans that abide by federal and state fair housing laws, their zoning authority will be returned.

—

Correction: Los Altos Hills has no grocery stores to upzone. I mixed up Los Altos Hills with Los Altos.