Gravel2Gavel Construction & Real Estate Law Blog
Cities in the San Francisco Bay Area are frantically working to finalize their state-mandated “housing elements” in their General Plans by the January 31, 2023, deadline imposed by the California Department of Housing and Community Development (HCD). For Bay Area cities like San Francisco, Oakland, San Jose and Berkeley, the plans must be approved by HCD on or before January 31, 2023. California municipalities have extra incentive to get their housing elements approved this year, because the failure to meet the deadline may subject them to a remedy known as the “builder’s remedy.”
The failure of cities in California to adopt and implement adequate housing elements as part of their General Plans has contributed to the state’s serious housing affordability crisis. The “builder’s remedy” incentivizes cities to meet housing element deadlines, because failure to do so could cause cities to lose control over certain land use entitlement decisions for projects that include housing under the state’s Housing Accountability Act (HAA).
The concept of a housing element is not novel. California’s housing element law, in effect since 1969, has required California cities to produce a plan to meet the housing needs of all individuals at all income levels within the city. According to the LA Times, however, only two of 539 cities and counties met their housing production goals during the eight-year period ending in 2014.
In 2019, only 33 cities or counties in California out of 539 issued enough permits to meet housing targets. The city of Los Angeles was a particularly egregious offender, issuing fewer than half as many permits as recommended for very low, low and moderate-income housing.
Under the HAA, passed in 1982 and most recently amended in 2017 by Senate Bill 167, cities or counties whose housing elements are not compliant with state requirements lose authority to approve or deny projects which involve affordable housing as defined in the HAA (i.e., very low, low or moderate-income housing). Low-income households include persons or families whose incomes do not exceed 80% of the median income in the area. Moderate-income households include “persons and families of low or moderate income whose income exceeds the income limit for lower income households” or “persons and families whose income does not exceed 150[%] of the median income for the county in which the persons or families reside.” In other words, affordable housing may extend to housing for individuals and families whose income is not more than 150% of the median income for the county where they live.
The HAA provides that a city must not disapprove housing development projects for very low, low or moderate-income households, or an emergency shelter, unless the city proves one of the following conditions exists:
- The city’s housing element is substantially compliant with the Housing Accountability Act, as determined by HCD, and has met or exceeded its regional housing needs for the housing type provided by the project.
- The project may result in significant, unavoidable, quantifiable and direct impact on public health or safety.
- The project cannot feasibly comply with state or federal law without the project losing its status as affordable housing.
- The site for the project is zoned for resource preservation or agriculture or does not have adequate services for water or wastewater.
- The city’s zoning and designation for land use does not allow the project, and a housing element has been adopted by the city in accordance with statutory deadlines.
Prior to 2017, there was limited means of enforcement in the HAA. However, in 2017, the state of California passed Senate Bill 72, which granted HCD authority to determine if a city or county’s housing element is out of compliance and to refer violator cities to the California attorney general. The bill conferred authority onto HCD to enforce the housing element law by reviewing housing elements presented by local jurisdictions and taking action. Also in 2017, Senate Bill 35 was passed to streamline local agencies’ approval of multi-unit housing projects. Senate Bill 35 amended Government Code Section 65913.4 to require local entities to streamline approval of certain affordable housing projects by providing a process of ministerial approval.
Additionally, Senate Bill 828, passed in 2018, now requires the inventory of land for local governments to meet 125% of housing needs for all income levels. The bill achieved this through requiring cities and counties to rezone land in their communities to permit substantially more homes than previously planned. Together, these changes put pressure on cities to either meet state requirements or become subject to the Housing Accountability Act’s builder’s remedy.
If deadlines have passed and HCD deems the cities not “substantially compliant” with the housing requirements set by the state, cities will not be able to use their general plan or zoning standards to disapprove a housing project, so long as the housing project meets certain affordability requirements as defined in the HAA. Specifically, for the project to qualify, either 20% or more of the units must be affordable to low-income residents, or 100% of the units must be affordable to moderate-income residents.
The “builder’s remedy,” therefore, allows developers of affordable housing-related projects to bypass existing zoning codes and general city plans that are not in compliance with the state’s housing element law. Developers taking advantage of the builder’s remedy would thus have the opportunity to build larger and denser projects than would otherwise be allowed under normal city planning rules.
This isn’t just theoretical—builder’s remedy projects have already been pushed through in cities elsewhere in California, where the deadline for an HCD approved housing element has already passed. For example, Santa Monica missed its deadline to update its housing element to meet HAA requirements. Developers took advantage of this opening and applied for 16 housing projects. These projects involve 4,562 housing units in buildings up to 15 stories tall. The projects were allowed to proceed. Similarly, when Redondo Beach missed its deadline for a HCD-approved housing element, Next Century Power submitted a proposal to replace a former beachside powerplant in Redondo Beach with 2,300 homes, and more than 450 units qualifying as affordable housing.
The builder’s remedy window in Santa Monica, which was open for nearly a year after its October 15, 2021, deadline, closed on October 14, 2022, when HCD approved the city’s housing element. However, the remedy may still present an opportunity for developers in northern California cities like San Francisco, Berkeley, Oakland and San Jose. If cities in the Bay Area miss their January 31, 2023, deadlines to approve new, compliant housing elements approved by the HCD, the builder’s remedy could require the city to approve building permits for a qualified housing development project larger than would otherwise be allowed under the existing zoning laws of the city, provided a developer submits an application for such a project before the city updates its housing element to the satisfaction of the HCD.
Some cities have started pushing harder to meet their housing element deadlines. San Francisco’s Planning Commission, for example, had to make amendments to their housing element in real time to address issues raised by the HCD before unanimously approving it on December 15, 2022, in a race to meet the January 31 deadline. The San Francisco Board of Supervisors unanimously approved that updated housing element at its first reading on January 24, 2023, and is thus potentially on track to adopt it at second reading at its January 31 meeting, with approval by the Mayor to follow. Prior to the January 24 approval, HCD gave a preliminary approval to the San Francisco Board of Supervisors, indicating that this housing element is likely to be approved on January 31. So San Francisco just might have an HCD-approved housing element in place by its HAA-mandated deadline.
The San Francisco Board of Supervisors is scheduled for a final vote on the proposal on January 31, but whether it will be approved on time remains to be seen given ongoing investigation and discussion regarding the current draft.
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