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 SB 303 (DUCHENY) Page 2 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: SB 303 (DUCHENY) Page 3 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 SB 303 (DUCHENY) Page 4 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 SB 303 (DUCHENY) Page 5 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 SB 303 (DUCHENY) Page 6 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 SB 303 (DUCHENY) Page 7 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 SB 303 (DUCHENY) Page 8 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 SB 303 (DUCHENY) Page 9 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 SB 303 (DUCHENY) Page 10 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. SB 303 (DUCHENY) Page 11 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