BILL ANALYSIS                                                                                                                                                                                                    






           SENATE TRANSPORTATION & HOUSING COMMITTEE       BILL NO: SB 303
          SENATOR ALAN LOWENTHAL, CHAIRMAN               AUTHOR:  Ducheny
                                                         VERSION: 3/22/07
          Analysis by: Mark Stivers                      FISCAL:  yes
          Hearing date: March 27, 2007



          SUBJECT:

          Housing element law

          DESCRIPTION:

          This bill requires cities and counties to update their general  
          plans at least every ten years to accommodate a planning period  
          of at least 20 years, expands the housing element planning  
          period from five to ten years, requires cities and counties to  
          complete any necessary rezonings to meet their housing needs  
          concurrent with adoption of the housing element, and makes other  
          changes to general plan and housing element law.  

          ANALYSIS:

          The Planning and Zoning Law requires cities and counties to  
          prepare and adopt a general plan to guide the future growth of a  
          community.  Every general plan must contain seven elements: land  
          use, circulation, housing, conservation, open-space, noise, and  
          safety.  While the law requires cities and counties to "prepare,  
          periodically review, and revise, as necessary" their general  
          plans, there is no established deadline for doing so outside of  
          the housing element.  Based on local planners' responses  
          compiled in the The California Planner's Book of Lists, 2006,  
          the Governor's Office of Planning and Research identified 304  
          cities and 39 counties that have not comprehensively revised  
          their general plans within the last 10 years.  

          Cities and counties must revise their housing elements every  
          five years, following a staggered statutory schedule.  Before  
          each revision, each community is assigned its fair share of  
          housing for each income category through the regional housing  
          needs assessment (RHNA) process.  A housing element must  
          identify and analyze existing and projected housing needs,  
          identify adequate sites with appropriate zoning to meet its  
          share of the RHNA, and ensure that regulatory systems provide  
          opportunities for, and do not unduly constrain, housing  




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          development.  

          Under current law, cities and counties are required to  
          demonstrate that sites are adequate to accommodate housing for  
          each respective income group based on the zoning after taking  
          into consideration individual site factors such as property  
          size, existing uses, environmental constraints, and economic  
          constraints.  With respect to the zoning, density is used as a  
          proxy for affordability.  Jurisdictions may establish the  
          adequacy of a site for very low- or low-income housing by  
          demonstrating that the site realistically allows the densities  
          established in statute (commonly referred to as the "Mullin"  
          densities) or by providing an analysis of how a lower density  
          can accommodate the need for affordable housing.  The  
          safe-harbor Mullin densities are 30 units per acre for  
          jurisdictions in metropolitan counties, 20 units per acre in  
          "suburban" jurisdictions, 15 units per acre in cities in  
          non-metropolitan counties, and 10 units per acre in  
          unincorporated areas in non-metropolitan counties.  

          To the extent that a community does not have adequate sites  
          within its existing inventory of residentially zoned land, then  
          the community must adopt a program to rezone land at appropriate  
          densities to accommodate the community's housing need for all  
          income groups.  With respect to sites rezoned to accommodate its  
          need for very low- and low-income housing, the new zoning must  
          allow multifamily residential use by right (i.e. without  
          discretionary review of individual projects other than design  
          review).  

          The Department of Housing and Community Development (HCD)  
          reviews both draft and adopted housing elements to determine  
          whether or not they are in substantial compliance with the law.   
          The rezonings that a city or county commits to in its program  
          often occur after the housing element is adopted and reviewed by  
          HCD, sometimes years into the planning period.  

           This bill  requires cities and counties to update their general  
          plans at least every ten years to accommodate a planning period  
          of at least 20 years, expands the housing element planning  
          period from five to ten years, requires cities and counties to  
          complete any necessary rezonings to meet their housing needs  
          concurrent with adoption of the housing element, and makes other  
          changes to general plan and housing element law.  Specifically,  
          the bill:





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          General Plan

           Requires every city and county to update the non-housing  
            element portions of its general plan as necessary but not less  
            often than every ten years and requires that the general plan  
            and each of its elements encompass a planning period of at  
            least 20 years.  
           Requires cities and counties to bring their zoning ordinances  
            into consistency with the general plan by the next required  
            update of the housing element and maintain consistency  
            thereafter.
           Specifies that in the case of residential land uses,  
            consistency means that the zoning allows development at the  
            density designated in the general plan without any additional  
            legislative or quasi-legislative land use approvals (e.g.  
            rezoning).  
           Allows a property owner to bring suit at any time, as opposed  
            to within 90 days, to bring the zoning on his or her property  
            into consistency with the general plan.

          Housing Element

           Maintains the five-year update schedule for housing elements  
            but expands the RHNA to cover a ten-year period.  As a result,  
            the bill requires a housing element to identify adequate sites  
            to accommodate the ten-year housing need.
           Requires a city or county to include in its housing element  
            quantified objectives (i.e. production estimates) for the  
            development, preservation, and rehabilitation of housing for  
            extremely low-, very-low-, low-, and moderate-income  
            households and for special housing needs.
           Requires that the zoning for sites needed to meet the  
            jurisdiction's share of the RHNA be in place at the time the  
            housing element is adopted.
           Requires that the housing element identify policies and  
            incentives to promote infill development and the efficient use  
            of land.  
           Requires that sites identified to accommodate the need for  
            extremely low-, very low- or low-income housing meet the  
            Mullin density standards.
           Requires that any sites rezoned after the housing element due  
            date to accommodate the need for extremely low-, very low- or  
            low-income housing shall permit the development of multifamily  
            housing by-right.
           Requires the city or county to make a finding, based on  
            substantial evidence in the record, that each site designated  




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            to meet the jurisdiction's share of the RHNA will  
            realistically accommodate all the units allowed under the  
            density for the site.  The finding shall show that each site  
            has appropriate size, configuration, physical characteristics,  
            access, infrastructure, availability, and market demand and  
            does not suffer from environmental constraints or  
            inappropriate adjacent uses.
           Requires the city or county to conduct an environmental impact  
            report (EIR) to cover all the sites identified in the housing  
            element to accommodate the jurisdiction's share of the RHNA.   
            The EIR shall address cumulative impacts, growth inducing  
            impacts, off-site impacts, and alternative sites.
           Provides that any approval sought in connection with a project  
            that is consistent with the housing element is subject to the  
            Permit Streamlining Act.
           Prohibits a city or county from denying or reducing the  
            density on a project that is consistent with the housing  
            element except by a 4/5 vote and with written findings that  
            the project has a specific, adverse impact upon the public  
            health or safety and there is no feasible method to  
            satisfactorily mitigate or avoid the adverse impact.
           Prohibits a city or county, except by a 4/5 vote and with the  
            written findings described above, from changing the zoning on  
            a property without the consent of the project applicant after  
            an application has been submitted that is consistent with the  
            housing element.
           Provides that if a court finds that a city or county has  
            failed to identify adequate sites or has failed to make the  
            findings related to the ability of each site to realistically  
            accommodate the allowed density, the court shall issue an  
            order requiring compliance within 120 days, retain  
            jurisdiction, and award reasonable attorney fees to the  
            prevailing plaintiff.  The bill also provides these provisions  
            are in addition to, not in lieu of, existing remedies  
            available under housing element law.  
           Repeals the requirement for cities and counties in the coastal  
            zone to include in the housing element a review of the number  
            of affordable housing units converted, demolished, or  
            developed within the zone.  
           Clarifies that all deadlines within housing element law are  
            mandatory, not directory.
           Declares that the Court of Appeal opinion in  Mira Development  
            Corporation of San Diego v. City of San Diego  (1988) is  
            inconsistent with the Legislature's intent that the phrase  
            "health or safety" be construed narrowly and that evidence to  
            support of a health or safety finding be of ponderable legal  




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            significance, reasonable in nature, credible, and of solid  
            value in light of all of the evidence in the record.
          
          COMMENTS:

           1.Purpose of the bill  .  According to the author, a University of  
            California Berkeley study concluded that California's housing  
            affordability crisis stems from a lack of supply.  The main  
            reason for this lack of housing is a local government planning  
            and permitting process that is broken.  In many jurisdictions,  
            there is little land zoned for residential development.  Where  
            residential uses are allowed, it is often at lower densities  
            at which only higher-income units are economically feasible,  
            and even these sites are often subject to discretionary votes  
            by the local government that can prevent housing from being  
            built.  A University of California report found that there is  
            virtually no certainty that a project consistent with a  
            general plan will be approved, much less in a timely,  
            cost-efficient manner.  In fact, it can take nearly a decade  
            for new projects to receive approval while project costs  
            skyrocket.  A separate Harvard University study found that  
            local barriers to development in California add 40% to home  
            prices.  

            This bill seeks to lay the foundation for meeting California's  
            housing needs by focusing on two key issues: land supply and  
            certainty in the entitlement process.  The bill requires every  
            general plan to encompass a planning period of 20 years and  
            every housing element to set aside enough land with  
            appropriate zoning in place to supply housing at all income  
            levels to accommodate the ten-year projected population  
            growth.  The bill also limits the ability of local governments  
            to deny or reduce densities on proposed development that are  
            consistent with the housing element.

           2.Increasing land supply by extending the planning period  .   
            Current housing element law generally establishes a five-year  
            planning period.  Due to various statutory extensions,  
            however, these planning periods have historically covered  
            anywhere from five to eight years.  This bill still requires  
            councils of governments (COGs) to distribute the RHNA every  
            five years, but the allocation each city and county receives  
            would cover a ten-year period.  The intent is to make  
            available a greater supply of land for housing and to ensure  
            that sites are available at the end of each five-year housing  
            element cycle.  The RHNA process, however, is often very  




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            contentious.  Because accommodating new housing, especially  
            affordable housing, is such a politically sensitive topic in  
            many communities and the allocation of housing need is a  
            zero-sum game, the pressure on the COGs is intense to allocate  
            the need to someone else.  While providing a ten-year land  
            supply for housing should help increase production, it is  
            unclear how increasing the total number of housing units to be  
            allocated will impact the RHNA process.  It may make the  
            process even more politically contentious.

           3.Requiring upfront zoning  .  Current housing element law allows  
            cities and counties to meet their zoning obligations over some  
            period of time.  If a particular jurisdiction does not have  
            adequate sites in place, it must commit in its housing element  
            program to rezone the requisite number of acres at specified  
            densities within a specified time frame.  In such cases, HCD  
            will often issue a conditional approval letter holding the  
            jurisdiction to the agreed-upon time frame, generally one to  
            two years from approval of the element.  This provides  
            flexibility to cities and counties and allows them to be "in  
            compliance" while they work out where to rezone and conduct  
            the necessary environmental review.  The downside to this is  
            that sites are not available early on in the planning period.   
            In cases where HCD's approval comes in the middle of the  
            planning period, it can mean that the required rezoning occurs  
            almost at the end of the five-year planning period.  Because  
            development is itself a multi-year process, this almost  
            guarantees that the housing will not be constructed during the  
            planning period.  In other cases, the rezoning never occurs.   
            In these cases, HCD has rescinded its approval letters, but  
            years have been lost, during which time the jurisdiction  
            enjoyed a legal safe harbor from enforcement.  

            This bill requires that all necessary sites be rezoned prior  
            to or concurrent with the adoption of the housing element.   
            This will ensure that sites are in fact available early on in  
            the planning period.  On the other hand, because conducting  
            the environmental review and rezoning do take a significant  
            amount of time, it is likely that many more jurisdictions will  
            fail to meet the established housing element revision deadline  
            for their region.

           4.Increasing certainty  .  In addition to increasing the land  
            supply for housing, the second major focus of this bill is to  
            increase the certainty that local governments will approve  
            projects that are consistent with the housing element.  The  




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            bill seeks to accomplish this by requiring a supermajority 4/5  
            vote and findings of significant adverse impacts to public  
            health or safety for a local government to deny a project,  
            reduce the density on a project, or changing the zoning on a  
            site after a project has been proposed if the project is  
            consistent with the housing element.  In addition, the bill  
            requires a full EIR on all the sites identified in the housing  
            element.  This EIR must address cumulative impacts, growth  
            inducing impacts, off-site impacts, and alternative sites.   
            The intent of the this provision is to analyze all the "big  
            picture" issues upfront and in a comprehensive fashion, which  
            allows the project level review to focus on the  
            project-specific impacts in a more streamlined way.  

           5.Balancing accountability and local control  .  When it comes to  
            developing new housing, local governments control what gets  
            built and what does not within their boundaries through the  
            land use entitlement process.  This bill increases the amount  
            of land that each local government must zone to accommodate  
            its housing needs, ensures that this zoning is in place at the  
            beginning of a planning period rather than at the end, and  
            ensures that projects that are consistent with zoning and  
            local development standards are not derailed by discretionary  
            denials.  In doing so, this bill increases the accountability  
            of local government with respect to housing development.   On  
            the other hand, while the bill maintains local control over  
            where these sites are and the development standards that will  
            apply, it limits the ability of local governments to deny or  
            reduce densities on individual projects.  
          
           6.Promoting infill or inducing sprawl  ?  Proponents argue that  
            this bill will promote infill development.  Opponents argue  
            that the bill will induce sprawl.  In both cases, the  
            arguments are highly speculative.  While this bill will open  
            up more land for housing development, it is unclear and  
            impossible to predict what exact impacts this bill will have  
            on urban form in California because of the many variables that  
            exist.  

            First, the impacts will depend on how the higher housing needs  
            are distributed through the RHNA process.  In most of the  
            large regions, COGs are increasingly using regional growth  
            plans, known as blueprints, as a basis for allocating housing  
            needs.  To the extent that these blueprints are currently  
            based on smart growth scenarios, it is likely that a large  
            percentage of the RHNA will be allocated to the most urbanized  




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            portions of a region, especially those with extensive public  
            transit networks.  Most jurisdictions in this category will  
            want to or have to look to infill development to accommodate  
            their RHNA need.  There is no guarantee, however, that COGs  
            will continue allocating the RHNA in this manner.

            Second, this bill's impacts will depend on each jurisdiction's  
            ability to expand.  Most incorporated cities do not have large  
            amounts of vacant greenfield land within their existing  
            boundaries.  Cities often rely on annexation of unincorporated  
            land for such development, and annexation is a lengthy and  
            somewhat uncertain process.  To the extent that this bill  
            requires rezoning of sites concurrent with adoption of the  
            housing element, annexation may be a less likely outcome than  
            under current law because it will not be possible to complete  
            an annexation in such a short time frame.  In addition, for  
            each city that has the ability to expand outwards, there are  
            other cities that cannot expand due to neighboring cities or  
            geographical constraints.  All cities that are unable to  
            expand will have to look to infill development to accommodate  
            their share of the RHNA.  

            Third, the impacts of this bill will depend on local political  
            decisions.  Cities and counties have the ability to choose  
            sites that accommodate growth in the most appropriate way for  
            their community.  Some communities will maximize infill  
            opportunities.  Others will look to greenfield development as  
            much as possible.  

           7.Site-by-site findings overly burdensome  ?  Current law requires  
            cities and counties to demonstrate that sites are adequate to  
            accommodate housing after taking into consideration individual  
            site factors such as property size, existing uses,  
            environmental constraints, and economic constraints.  Except  
            for community-wide environmental or resource constraints, this  
            analysis must be conducted on a site-by-site basis.  HCD  
            checks the adequacy of the information as part of its review  
            process.  This bill further requires cities and counties to  
            analyze the realistic development capacity of each site based  
            on access, location, adjacent uses, and market demand.  Market  
            demand, in particular, may be a difficult factor to assess and  
            may not reflect where a community is able to or wants to grow.  
             More importantly, this bill requires cities and counties to  
            make a finding, based on substantial evidence in the record,  
            on the adequacy of each site.  While requiring such findings  
            may improve the quality of sites and the accountability of  




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            local governments, compiling and presenting the substantial  
            evidence will likely be a cumbersome task that adds minimal  
            value to what current law already requires.  The committee may  
            wish to consider amendments to delete the finding requirement,  
            delete the reference to market demand, and incorporate the  
            other factors into the existing inventory requirements.
          
           8.Funding the planning process  .  One of the reasons that current  
            planning is so reactive is that a rezoning only occurs when a  
            developer steps forward to pay for it, and developers only do  
            that when it will benefit their proposed project.  One problem  
            with moving towards a more proactive planning process is local  
            governments' lack of funding to do upfront planning.  Local  
            governments currently have the authority to charge fees  
            "necessary or appropriate for the work of the planning  
            agency," including the housing element itself and any  
            rezonings required to meet the jurisdiction's share of the  
            RHNA.  In communities without a lot of development, however,  
            there can be a timing problem.  Fees are generated only when  
            development occurs, not before hand.  This bill requires  
            upfront zoning and an EIR on all sites included in the housing  
            element, but unlike a similar related bill from last year, SB  
            1800 (Ducheny), this bill does not include a mechanism to  
            provide additional funding to local governments for upfront  
            planning activities.  The committee may wish to consider  
            levying a surcharge on each new residential building permit  
            statewide to capitalize a planning grant program for local  
            governments.  In addition, the committee may wish to consider  
            earmarking $5 or $10 per unit of the fee to fund the RHNA  
            process.  While the RHNA is key to the state's entire housing  
                                           planning framework, lack of funding has often resulted in  
            planning periods being extended and delayed.

           9.Arguments in opposition  .  Writing in opposition, the League of  
            California Cities, argues that the combination of extending  
            the RHNA to ten years and requiring upfront zoning will  
            trigger significant sprawl because no time is provided to  
            phase in the availability of housing sites.  Due to the lack  
            of apparent sites in developed areas, prezoning will be easier  
            in suburban and rural communities that can more readily plan  
            on annexations.  The League also objects to site-specific  
            findings, the requirement to establish market demand for each  
            site, the attorney fees provisions, and the lack of a funding  
            mechanism to accomplish the requirements of the bill.  

           10.  Double referral to Rules  .  This bill has been referred to  




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            the Senate Transportation and Housing Committee and then back  
            to the Rules Committee for possible reassignment to another  
            policy committee.  If the committee approves this bill, the  
            motion should be to re-refer the bill to the Rules Committee.   


           11.  Technical amendments :

                 In Section 65301(b) after "plan" strike the comma.
                 Restore the by-right language in Section 65588.2 to  
               Section 65583.2(h) and track the existing by-right language  
               with respect to sites zoned after the housing element  
               deadline in Section 65588.
          
          RELATED LEGISLATION

          AB 414 (Jones) limits the ability of a jurisdiction to meet its  
          share of the RHNA by identifying sites for which the zoning  
          allows substantially all of the site to be developed without  
          residential use.

          AB 1497 (Niello) prohibits a jurisdiction from including lands  
          under Williamson Act contracts or owned by the state or federal  
          governments in their housing element.
          
          POSITIONS:  (Communicated to the Committee before noon on  
          Wednesday,                                             March 21,  
          2007)

               SUPPORT:  California Major Builders Council (sponsor)
                         Access to Independence
                         AFSCME
                         Allied Housing
                         Alvarado & Associates, LLC
                         Asian Law Alliance
                         Asian Pacific Islander Small Business Program
                         Barratt American, Inc.
                         Beyond Shelter
                         Brehm Communities
                         California Association of Realtors
                         California Building Industry Association
                         California Council for Environmental and Economic  
                         Balance
                         California Council of Churches Impact
                         California State Firefighters Association
                         Calistoga Affordable Housing, Inc.




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                         Cal-Nevada Conference of Operating Engineers
                         Coalition of Women from Asia and the Middle East  
                         (CWAME)
                         Communities Actively Living Independent & Free
                         Congress of California Seniors
                         Corman Leigh Communities
                         Delco Builders & Developers
                         Father Joe's Villages
                         HomeAid Northern California
                         Los Angeles Conservation Corps
                         Martha's Village & Kitchen, Inc.
                         National AIDS Foundation, Josue Homes
                         Neighborhood Housing Services of Orange County
                         Ponderosa Homes II Inc.
                         Samaritan Reach
                         San Diego Regional Chamber of Commerce
                         Self Help for the Elderly
                         St. Vincent de Paul Village
                         Toussaint Youth Villages - Toussaint Teen Center
                         Tri-City Homeless Coalition
                         United California Mortgage and Financial Services
                         West Bay Housing Corporation
          
               OPPOSED:  City of Alhambra
                         City of Bell
                         City of Burlingame
                         City of Selma
                         City of Taft
                         City of Temple City
                         League of California Cities