Zoning Holiday Takes Off in Silicon Valley

Update #3 of the Builder's Remedy.

Update #2 is now free to read.

— Builder’s Remedy Update #3 —

There’s now five known Builder’s Remedy projects that have been submitted in the Bay Area and all of them are in Silicon Valley. In addition to the disgruntled homeowner of Los Altos Hills and his 15-unit apartment and 5 townhomes, another developer named Forrest Linebarger has submitted four sites for multifamily construction. Two 44-unit condominium complexes on two separate parcels in Los Altos Hills, one 85-unit project in Mountain View, home of Google HQ, and another in the same city with details currently unknown.

Like Zbrozek from Los Altos Hills, Linebarger is an aggravated local developer who had been trying to develop his properties into senior housing since 2006. Faced with constant local criticism of excessive density in his project (eight-units) Linebarger has gone rogue and invoked the Builder’s Remedy to build 5-7 story housing complexes.

Like Santa Monica, it’s only been two developers and very small, largely inexperienced ones at that. Again, I don’t expect any of the big corporate developers to toss away years of lobbying and financial gifts made with local politicians, neighborhood organizations and nonprofits to invoke an untested law. But small developers who don’t have any skin in the game may go nuts.

Both Zbrozek and Linebarger have speculated to The Business Times that they’re certain they’re not the only ones who’ve filed Builder Remedy projects. Shortly after publishing my last article, several Peninsula homeowners contacted me asking how to go about filing a Builder’s Remedy project. For readers, I recommend going to YIMBY Law that has created a page to easily help people file Builder’s Remedy projects.

Unfortunately, the debate about whether Builder’s Remedy is even in now 94% of the Bay Area’s cities is still being contested online. YIMBY legal activists on Twitter still dispute this figure and think that technically, cities with “substantial compliance” are not subjected to the zoning holiday. This seems true because the law actually (moronically) allows cities to refer to themselves as substantially in-compliance. How many cities actually both knew this and designated themselves as substantially in complaince versus assuming it’s a designation sent by HCD is unknown. I suspect vast majority believed the latter — I mean they couldn’t even get the deadline correct, I doubt they understood that provision clearly. HCD, which actually administers the housing element process, have confusingly implied to defiant cities that any city not in compliance is subject to the zoning holiday.

This lack of legal clarity is obviously a major cause as to why more housing isn’t being proposed besides a few gutsy property owners. We won’t get a clear answer until the courts rule on Builder Remedy projects and by then many more cities may be in compliance.

Meanwhile, cities are attempting an eleventh hour subterfuge by imposing application fees as high as $50,000 (many being mulled even higher) to just file a Builder’s Remedy project, as is the case in Mountain View. Huntington Beach is going to war against the state. Daring the attorney general to sue them, they’re outright refusing to allow Builder’s Remedy projects or even backyard granny units/ADUs to be filed.

Imposition of high fees to just file a project will make the zoning holiday entirely useless. It’s a classic NIMBY strategy of making projects unfeasible by making soft costs extremely high. It inflates the market-rates into the high luxury prices to compensate. It also squeezes out small builders and homeowners who can’t acquire tens of thousands of dollars in financing just to file an application to build a home. The public of course is none the wiser about soft costs contributing to high rents.

An interesting observation was made by a project director at a low income housing nonprofit as to why Builder’s Remedy would probably not see widespread use. For affordable housing developers, they’re heavily dependent on localities for funding. Unless the county was offering enough funds, some amount of dollars must come from city governments. Thus, any city government can stifle any dissident low income nonprofits by withholding funding. That leaves only market-rate developers, whose projects would be subjected to frivolous CEQA environmental lawsuits according to the director.

— La Canada Flintridge —

A high income Southern California suburb is the next city to have a confirmed Builder’s Remedy project initiated. La Canada Flintridge is a suburb 99% zoned for single-family housing. Over the last decade, neighborhood opposition has stopped a three story, mixed-use office project with 47 units of senior housing. With the suburb now subjected to Builder’s Remedy, the site owner has now filed for a five story, 88-unit apartment complex.

The developer appears to be quite frustrated and angry at the town’s residents. Locals have gotten remarkably vicious at the prospect of adding dwellings that would block their mountain view and add traffic. One opponent even put a dead-rat in the previous senior housing developer’s mailbox before they dropped out. Yet again, it’s these types of situations where Builder’s Remedy projects are most likely to be filed.

— Exclusionary Zoning & Rent Gaps —

It’s been notable that all the Builder’s Remedy projects so far have been in the epicenters of Silicon Valley or affluent Southern California suburbs. Senate Bill 9, which allowed for duplexes in single-family zones statewide (but was gutted by an anti-renter ownership requirement and complicated lot splits to get it over the finish line) has had highest per-capita use in wealthy California cities. Moreover, ADU laws have been disproportionately used by middle to higher income homeowners in wealthier areas.

I don’t think this is great because it means low income homeowners lack the capital and legal know-how to utilize these complicated laws. But it’s worth noting that the bombastic but failed Senate Bill 50 proposal to upzone throughout California had strong opposition from some prominent tenant organizations. Chiefly because of the theory that large-scale upzonings would disproportionately focus development in low income areas. This theory is called “rent gap”, where cheaper land values and unrealized market-rents lures gentrification-inducing development and displacement.

A prominent SB 50 proforma research paper from gentrification and development researchers at UC Berkeley, suggested that actually widescale upzoning would attract development in wealthier areas over poorer ones since profitability was much higher. Years later, with a decent quantity of housing production laws passed, the study appears to have been right. Indeed, developers care more about absolute rents over relative discounts in land costs, especially when doing infill in high land value areas like coastal California.

I covered this before, but the idea that developers prefer lower income areas because of cheaper land values, is largely based off of a lack of understanding that zoning has focused development in low income areas. And it usually requires hyper-focusing on select few urban, gentrifying enclaves rather than looking at low income and gentrifying areas broadly, which by and large, are ignored and redlined by big developers except to houseflip or reduce units.

San Francisco city leaders, both moderates and progressives, zoned for all new development in its most gentrifying neighborhoods while excluding wealthy ones. Los Angeles passed a transit-oriented zoning plan that purposely exempted single-family neighborhoods. NYC’s famed Bloomberg-era upzonings of low income areas, were actually downzonings of middle class neighborhoods with little overall housing capacity increases. This was all exclusionary zoning, not universal or broad upzoning. It was the norm in California until the big housing laws like Senate Bill 828 and Senate Bill 35 gradually forced cities to not segregate apartment zoning.

— Oakland —

HCD recently announced that Oakland now has a compliant housing element and is no longer subject to Builder’s Remedy. I’ve been informed of a single project under Builder’s Remedy that may have been proposed in Oakland, but I’m unsure of the status. Evidently, the city submitted draft revisions rather than a whole new draft.

Personally, I thought Oakland’s denial after committing to re-zoning its wealthy areas was somewhat baffling. Oakland should commit to infrastructure improvement in low income areas and acquiring homes to keep off the speculative market. But this is not in HCD’s jurisdiction when rating a housing element.

— Snitch Hotline —

HCD’s housing element and affirmatively furthering fair housing enforcement has come from nerdy urbanists on Twitter rather than any coherent system of accountability. The state has no way to keep track of cities conspiring to violate state law by imposing road blocks on housing. So HCD has unrolled a web portal in which citizens can submit violations to HCD’s enforcement arm, the Housing Accountability Unit (HAU).

In addition to the aforementioned radical increases in filing fees and Huntington Beach, here’s a few very recent examples of cities conspiring to violate state law:

• In Berkeley, elected officials are openly debating on the dais about whether they’ll fulfill any of their housing element promises to HCD to get out of Builder’s Remedy.

• In Santa Monica, the city council is openly hosting conversations with Palmdale (a city over an hour away), to build Santa Monica’s housing requirements in a contractual agreement.

• Several wealthy Silicon Valley suburbs are mulling laws to only allow low income housing for people with disabilities. The reason being that low income disabled residents can’t commit crimes against residents that able-bodied ones would.

Edit: latest version of this article has clarified the income distribution of homeowners using ADU laws.