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The political war between state and local government officials over who has the last word on land use – particularly for housing – is entering a new and perhaps even more caustic phase.
Gov. Gavin Newsom and the Legislature, through new laws and directives from the state housing agency, are leaning hard on local governments, particularly cities, to make more land available for housing and eliminate zoning, design criteria, setbacks, parking requirements and other local rules that impede construction.
“More than just being a high number or an aspirational goal, the new housing need … target is a legal obligation that cities and counties must abide by,” the state’s housing plan declares.
“Through the implementation of a number of meaningful accountability reforms passed by the Legislature and signed by the governor in recent years,” it adds, “California’s 2.5 million unit target is no longer a paper exercise – it’s an expectation for the zoning, permitting, and construction of real, new housing units.”
While many cities have – albeit grudgingly – changed local housing plans enough to win state approval, some have held out, contending that locally elected city councils should have the last word on what happens in their neighborhoods.
Resistance has been particularly stout in high-income cities with spacious single-family homes on large lots and little or no multi-family apartment development. Their officials argue that high-density housing would spoil their bucolic ambience – a claim that pro-housing advocates say smacks of racial or economic segregation.
Unable to muster enough support in the Legislature, critics of the state’s build-it-now policies may turn to voters. The have submitted a proposed constitutional amendment that would restore local authority over housing projects, declaring “local land use planning or zoning initiatives approved by voters shall not be nullified or superseded by state law.”
There’s another new and ironic wrinkle in the years-long conflict. The state has just published new population projections that could undercut specific housing quotas the state has imposed on regions and indirectly on cities.
The state’s current housing plan assumes that California’s population will reach 42.3 million by 2030 with 14.4 million households. However, a few weeks ago the state Department of Finance’s demographers, reacting to the state’s recent population declines, issued a new set of projections that California’s population will show little or no growth through 2060.
The demographers now estimate that in 2030, California will have just 39.4 million residents – 3 million fewer than the previous projection – which would translate into about a million fewer households needing homes.
For example, in the nine-county San Francisco Bay Area, the state’s quota of 441,176 new units by 2030 is based on a projected population of 8.3 million but the state’s new 2030 estimate is just 7.6 million.
An even starker numerical gap is evident in the six counties that make up the Southern California Association of Governments, including Los Angeles. SCAG’s 1.3 million-unit quota assumes that the region will have 20.5 million residents by 2030 but the state now projects that its population will be markedly lower at 18.6 million.
Critics of the state’s quota system are already crunching the numbers to contend that it’s based on inaccurate projections of need and therefore should not be the basis of pressure from state officials.
California still has a big housing shortage, but it may be considerably smaller than the official numbers.
Note from Our Neighborhood Voices: Our “rebellion” is a grassroots movement made up of local elected officials, community leaders and neighbors who all believe that we don’t need to destroy local democracy to build the affordable housing our state needs. Tens of thousands of Californians have joined us because we know that neighbors should be in charge of the future of their communities – not developers looking to make a profit. If you agree, join us using the form below.
If any California news media had actually covered these two strongly-related stories, it would have been difficult to avoid seeing the irony in them.
On the same July day that California Attorney General Rob Bonta issued a stern warning to cities and counties around the state about alleged misuse of local “urgency” zoning rules designed to frustrate the increased housing density laws Bonta loves to push, the rebellion against those very laws formally began.
This happened when Bonta’s own office received a new initiative designed to make local governments — not the state — supreme in setting housing policies and patterns. Bonta’s warning cited laws passed in the last two years such as SB 9 and AB 2011, both of which demand that local governments approve multiple apartments or condominiums in areas that now feature single homes only on discrete properties.
However, the new initiative — which Bonta must formally name and summarize before supporters can seek signatures to place it on the November 2024 ballot — would give local officials or voters power to override those new laws and others that the Legislature passes or has passed to regulate housing and land use.
In short, if passed, this initiative would take lawmakers and Gov. Gavin Newsom to a figurative woodshed and stop them from trying to reshape California into a far denser place than it ever has been.
A two-year delay in putting forward and passing something like this initiative now means the myriad buildings under construction or recently completed will survive and remain standing even if the new measure passes.
This initiative reflects a change in tactics for local governments and their backers who originally sought to pass a referendum canceling 2021’s landmark SB 9 and 10 laws that allow, among other things, as many as six new housing units on almost every lot now occupied by just one home.
The referendum that never qualified for the 2022 ballot failed because the coronavirus pandemic drove the cost of gathering signatures to unprecedented heights – as much as $16 per signature in some parts of the Bay Area.
There was also the fact that it targeted only SB 9 and 10, which have for the moment all but ended R-1 zoning in California. Even if those laws were canceled, referendum backers came to realize, determined lawmakers like state Sen. Scott Wiener, D-San Francisco, could respond by writing new ones that would be only slightly different and still get the density they want.
Those lawmakers, aided by threats from Newsom and Bonta to cut off virtually all state funding to local governments, pay no heed to local preferences or the character and ambience of individual cities. They treat Altadena the same as Atherton, San Dimas like Santa Cruz. Their guiding principle: everyone, everywhere must welcome high-rise living. Never mind that they do little to promote housing affordability and never mind the fact that almost half of what’s been built thus far remains vacant.
Rather than going after just two specific laws, the new initiative states that its purpose is to “protect the ability of local communities to make land-use planning and zoning decisions,” that “one size does not fit all” and that “local land-use planning or zoning initiatives approved by voters shall not be nullified or superseded by state law.”
In short, local governments would make land-use and housing decisions in perpetuity if this passes. Bonta would in effect become a paper tiger making empty threats.
It’s possible the sponsors, including current and former leaders of cities around the state, could compromise with die-hard densifiers in the Legislature before this measure reaches the ballot, but that seems unlikely because some sponsors believe the new state housing laws are an attack against democracy itself.
“Taking this field away from local government is a way of wiping out democracy,” said Dennis Richards, a former longtime member of San Francisco’s planning commission. “People like Wiener are saying it does not matter what local residents think about their cities or how they’ve voted.”
That means the rebellion is on, and ironically it’s Bonta who now gets to make the first move.
Note from Our Neighborhood Voices: A developer who has no experience building anything is using laws passed by Scott Wiener and California YIMBY to shoehorn an 8-story apartment building into a single-family neighborhood. He doesn’t need to pay a single dime to fund traffic improvements, transit, police or schools. And local representatives have no say! Bring back democracy in local planning by joining us using the form below.
By: Liam Dillon
Up in arms over developer Akhilesh Jha’s proposal to replace a single-family home witha seven-story apartment complex, neighbors in the Harvard Heights community turnedto the city for help.
The Los Angeles Planning Commission obliged, ordering Jha to scale down the project.
But Jha, a 49-year-old aerospace engineer turned real estate developer, refused. Instead,when he returned to the planning commission months later, Jha had added an eighthfloor.
“He came back with something that was even worse,” said Brian Jett, who lives threedoors down from the proposed development. “It’s mind-boggling.”
Jha believed he had the law on his side, and after an hour-and-a-half hearing inFebruary, the planning commission agreed. His 33-unit apartment complex wasapproved unanimously, and Jha hopes to break ground within a year.
“I’m offended by it,” said Samantha Millman, the planning commission chair. “But I have no choice but to vote for it.”
Jha is banking his business on moments like these. Jha has spent the last six yearspaging through state laws and city zoning codes. His homework leads him to snap upsingle-family homes where he decides the law will let him build much bigger, no matterwhat anyone else thinks.
Jha is taking advantage of an opportune moment when California politics are turningaway from the slow-growth mantra that has dominated in established cities and suburbsover the last half century. In the face of a crushing housing affordability crisis andshortage of available homes, state lawmakers have approved more than 100 new laws insix years that are designed to incentivize new housing proposals and force localgovernments to approve them.
In Los Angeles, no one is pushing the envelope more than Jha. Besides the 33-unitHarvard Heights project nestled between the 10 Freeway and Koreatown, he has twoproposals in the San Fernando Valley to tear down single-family homes and builddozens of apartments and townhomes on the sites — all efforts that never before wouldhave stood a chance of getting built.
Jha’s plans are kicking up scorn and anger. Millman, the planning commissioner, called the Harvard Heights building a “middle finger to the community,” a reference both to the developer’s attitude toward his neighbors and the visual of an 89-foot-tall structure lording over the one-, two- and three-story buildings nearby. Neighborhood leaders in the Valley worry that Jha’s projects will bring in criminals or ruin the rustic suburban character sustained over decades.
While Jha’s ideas are far out of scale with nearby properties, he’s also not plopping the buildings in the middle of subdivisions. The projects are all within about half a mile of a major freeway with other multifamily housing and businesses nearby.
Jha has already won one court case vindicating his interpretation of city zoning rulesand is prepared to go back for more.
“There will always be conflict,” Jha said. “But the law is very clear: Resolve that conflictin the best interest of producing the housing.”
After immigrating to the United States in the late 1990s, Jha spent two decades designing rockets and planes while working for aerospace firms. He married, had a son and, as he entered middle age, decided he wanted something new and turned to real estate.
At first, Jha wanted to buy a small apartment complex. But when he was outbid for aproperty in San Pedro he thought a better way to make money was to find a house hecould tear down and replace with apartments.
He had absolutely no construction background.
“Never ever built a tent in my life,” he said.
A native Hindi speaker, Jha armed himself with an English dictionary to help with words he didn’t understand while scouring property listings, laws and zoning codes for places to build. He found the crumbling two-story Victorian in Harvard Heights in theWest Adams district for $840,000.
The contentious experience galvanized him. He spent a year fighting an effort to makethe home a historic landmark, which would have blocked its redevelopment. Afterwinning, he planned to build a 20-unit apartment complex under a city program thatprovides incentives for developers near mass transit.
But after months of work, he learned that rules requiring him to have a specifically sizeddriveway and room for an electrical transformer didn’t leave enough area on the lot toprovide sufficiently wide ground-floor commercial space. Jha abandoned hisapplication, but not before he had lost tens of thousands of dollars in permitting feesand design costs, he said.
His plans in a shambles, Jha returned to his research and found a state law known as the “density bonus.”
In the simplest terms, the law allows developers to build more dense housing on a lot inexchange for dedicating some of the units for low-income families. Jha will set asidethree of his 33 apartments for that purpose.
By doing so, Jha gets to bypass all sorts of city zoning and planning rules. The height ofthe building will be double what’s otherwise allowed, its width will cover nearly theentire lot and Jha only has to provide 20 parking spaces on the site. Most important forhim, the law says that as long as Jha testifies these waivers are necessary, the city’shands are tied.
“The city made me go through hearing after hearing after hearing,” Jha said. “Then they would sometimes put a hold on my project because they wanted me to reduce the
height, they wanted me to reduce the density. But I stuck to my project and I stuck tothe law.”
Strengthening the density bonus for developers was one of the key changes approved bystate legislators in recent years to increase both affordable and overall housingproduction, said Ben Metcalf, managing director of UC Berkeley’s Terner Center forHousing Innovation and former director of the state Department of Housing andCommunity Development.
“You can basically choose anything you don’t like in the zoning rules and you get freepasses to throw it out the window,” Metcalf said. “It’s kind of an amazing law.”
Like Jha, builders across the state have sought to redesign projects by adding low-income and veterans housing, while reducing parking and yard space so they can gettheir projects approved even if there’s community outcry, Metcalf said.
“The neighbors have no real leverage anymore,” he said.
Jha’s proposals have left community members apoplectic. In Woodland Hills, Jha wantsto replace a four-bedroom home with an apartment complex of 67 units, seven of which,because of the density bonus and related incentive programs, would be reserved for low-income disabled veterans.
Mihran Kalaydjian, vice president of the Woodland Hills/Warner Center NeighborhoodCouncil, said the development would hurt the area.
“When you’re taking single-family homes and replacing them with big apartmentbuildings, the residents and the tenants of those apartments are coming from differentbackgrounds,” Kalaydjian said. “The different backgrounds could be criminalbackgrounds. It could influence our neighborhoods.”
Kalaydjian, a landlord himself with seven properties around Woodland Hills, said the community has planned areas for commercial buildings and apartments. Departing from that blueprint, he said, could reduce property values and contribute to a general sense of disorder.
In Sylmar, Los Angeles’ northernmost neighborhood at the foot of the San GabrielMountains, community leaders believe Jha’s plan to build 40 townhomes on a one-acre site with a single-family home will destroy the area’s bucolic atmosphere.
The lot’s zoning requires that there’s enough space for horse stables, and townhomeswould prevent horse-owning residents from ever living there, said Peter Postlmayr, amember of the neighborhood council.
Jha “bought a piece of property and it’s zoned for horse keeping,” said Postlmayr, adding that there’s an extensive trail network the zoning designation aims to protect. “He’s trying to change that, which is to the detriment of those living near there.”
Jett and other neighbors in Harvard Heights insist that their opposition isn’t becausethey’re against housing, rather the specifics of Jha’s project. A 64-unit, four-storyapartment complex for low-income senior citizens opened two years ago across thestreet with community support, they said.
Jha’s design includes a two-story above-ground parking garage that’s so wide exhaustvents sit less than ten feet from the small apartments next door. All the negative effectsof the development plus the relatively few low-income units don’t justify itsconstruction, Jett said.
“We’re totally cognizant of the housing crisis and all for affordable housing,” said Jett,an independent film director. “But this isn’t that.”
Metcalf, of UC Berkeley’s Terner Center, said state lawmakers understood nearby residents might dislike newer, larger projects when they were debating the bills. But they wanted to ensure that neighbors’ objections would be less likely to trump housing, especially in areas more primed for growth.
Since the 1970s, apostles of growth have decried local control of land use as the evil that has to be stamped out if housing is ever to become abundant and broadly affordable. Today the gospel of market-oriented centralization has achieved hegemony—embraced by the planning profession, many environmentalists, virtually the entire news media, numerous academics, and the denizens of neoliberal think tanks from coast (Berkeley’s Terner Center) to coast (NYU’s Furman Center).
Most importantly, as documented by a February report from Terner and the Urban Institute, that doctrine has been read into state land use law across the country, with California leading the way.
So are the new laws working?
Yes and No.
In California, the state has effectively preempted local land-use prerogatives but failed to boost housing production or increase affordability. Despite mounting evidence of those failures, the state’s legislators are doubling down on their preemptive, market-friendly course.
SB 9’s paltry results
California’s disappointing housing outcomes were heralded in mid-January by Terner’s report on the impact of SB 9, Toni Atkins’ controversial 2021 bill authorizing property owners to split a single-family-zoned lot and then build up to three homes on each of the two new parcels “by right,” that is, without a public hearing. The law conclusively eliminated zoning for single-family homes in the state. SB 9 took effect on January 1, 2022.
A year later, Terner found that SB 9’s impact had been “limited so far,” with “some of the state’s largest cities report[ing] that they have received just a handful of applications for either lot splits or new units.”
San Francisco had received four lot-split applications and approved two; and received 25 applications for SB 9 units and approved four.
Staff sugarcoat the bad news
The news got worse on February 28, when the Senate Housing Committee and the Assembly Housing and Community Development Committee held a joint oversight hearing presided over by their respective chairs, Senator Scott Wiener and Assemblymember Buffy Wicks.
According to the background paper prepared by the committees’ staff, the goals of the hearing were “to understand the recent actions taken by the state Legislature to increase housing production in the state, to ascertain their effectiveness, and to discuss further measures that will be necessary to address the housing crisis.”
The staff paper recites the supply-side catechism. The crisis in California, “where homeownership is out of reach to all but the most affluent, lower income households struggle to pay the rent, and homelessness is rampant,” is due to a “lack of housing.” At fault are the usual suspects—“local permitting and zoning barriers [“loosen the ‘stranglehold’ of single-family zoning,” a favorite Yimby meme], opposition to neighborhood change, segregation and exclusion, mounting construction costs, and a shortage of labor”—plus a culprit that’s too rarely mentioned: “There have not been sufficient federal resources to build housing across the continuum in our state.”
Would that the staffers had delved into that factor.
The paper summarizes 74 housing bills that the state has enacted into law since 2017 and, curiously, one 2007 bill, Sen. Gilbert Cedillo’s SB 2. It groups the statutes into the following categories: Housing Streamlining, i.e. removing local discretionary review and approval; Housing Element and RHNA [Regional Housing Needs Allocations] Reforms; Oversight and Accountability; Density Bonus Law; Entitlement Reforms and Public Land for Affordable Housing; Accessory Dwelling Units [ADUs] Missing Middle Housing; and Reducing Barriers to Housing Access.
Though lengthy, the list is incomplete, as its authors acknowledge. A footnote to the Housing Streamlining Bills discussion states: “This list focuses on housing streamlining measures and is not an exhaustive list of CEQA [California Environmental Quality Act] exemptions available to specified housing developments (i.e., as the CEQA exemption for Homekey projects or infill developments).” Most notably, the staffers left out SB 375, the groundbreaking 2008 statute that sought to reduce greenhouse gas emissions by knitting together housing and transportation policies.
They also omitted a crucial point: CEQA only applies to projects that require discretionary review and approval. Eliminate discretion, and you block action taken under CEQA.
Despite these omissions, the legislative inventory is impressive. So, too, is the record of administrative activity entailed by the new laws. In the last seven years, California has:
—Increased the amount of land on which housing can be built within existing cities both by directly making it legal and by requiring local governments to increase development capacity via the RHNA process
—Expedited and simplified the approval process at the pre-entitlement, entitlement, and post-entitlement phases, including creating multiple pathways for by right approvals for ADUs, deed-restricted affordable housing, and market-rate housing.
—Substantially increase[d] the funding for development of affordable housing and simplified the process for applying for funding.
—Created and funded enforcement capacity of state housing laws at HCD [Department of Housing and Community Development]
—Established incentives to increase pay for construction workers, thereby creating a pathway to rebuild the construction workforce.
What, then, has this legislative and administrative juggernaut accomplished on the ground?
The staffers’ answer to that question is equivocal:
These changes have started to bear fruit. For example, ADU construction has exponentially grown from a handful each year statewide to over 10,000. In the past two years, affordable housing development has approached 20,000 units per year, doubling previous totals. And the adoption of local Housing Elements around the state has required cities to rethink how much housing they permit, where it is allowed, and the process to get it entitled. Nevertheless, there is certainly much more to be done before housing production reaches the levels necessary to ameliorate our housing crisis.
Much more needs to be done indeed. As the paper states, the Department of Housing and Community Development (HCD) currently estimates that “California must plan for the development of more than 2.5 million homes over the next eight years,” including a million homes for lower-income households. That works out to 312,500 units a year, of which 125,000 are affordable.
The paper includes a bar chart that shows the number of permits issued for residential construction and construction type per year between 1980 and 2020, with permit issuance serving as a proxy for construction.
The horizontal line across the top, at a little over 300,000, is misleading. It indicates the number of homes that, the state estimates, are needed to meet current statewide housing goals, not the goals for the entire 40-year period.
What the chart does make clear is that residential construction never recovered from the 2008 crash. Set against the state’s goal of 312,500 new homes a year, the permitting of 10,000 ADUs and nearly 20,000 affordable housing units is trivial.
The staff paper doesn’t consider that the gaping shortfalls might be due to basic flaws in the state’s approach, nor does it recommend future actions.
Hear no evil
Wiener and Wicks knew the numbers would be grim. Pointing to the meager production, especially the production of affordable housing, critics could question the effectiveness of the preemptive supply-side program at the very moment that legislators were starting to vet 2023 bills intended to expand it. The situation called for damage control.
Accordingly, the hearing was staged as a rally that featured attacks on CEQA and shout-outs to SB 423, Wiener’s amped-up version of his controversial 2017 bill, SB 35. The “witnesses” who’d been summoned to testify at the hearing all applauded the prior legislation and called for more of the same.
About an hour and a half into the meeting, Wiener even took a swipe at Terner for having reported SB 9’s dismal results. “The laws that we’re talking about,” pouted the senator,
have been in effect somewhere between two months and maybe five years really….We spent 50 years driving the car into the ditch….The Terner Center analysis about SB 9—great that that happened—but super-premature to read a lot into that analysis for a law that’s been in effect for 12 months.
The public rebuke of the Legislature’s go-to housing consultant was startling—and all the more so given that nobody at the hearing had mentioned the think tank’s January 18 study. Wiener must have been brooding over it for weeks.
Terner seems to have gotten the message. On April 11, it published “a review of California’s recent housing legislation” with the proviso that “[t]his brief..is not meant to be an evaluation of the effectiveness of these state laws” but “[r]ather…is an effort to characterize the breadth and goals of recent legislation, and to assess practitioner experiences”—Terner had interviewed unnamed planners and land use lawyers—“with using these laws to further housing production.”
Terner’s Metcalf: to see real progress, squint
The legislators attended most closely to the testimony of Terner Managing Director and former HCD Director Ben Metcalf, which opened the hearing. Like the committee staffers, Metcalf marked the “staggering” spate of recent housing legislation. California, he said, has enacted “more [housing] legislation than we see in other states in the nation.”
The first slide of his Power Point presentation provided an overview:
Since 2016, nearly 100 laws pertaining to housing have been passed and signed into law, collectively making over 275 changes to code sections (or creating new sections). State housing departments and agencies have promulgated hundreds of new guidelines, NOFAs [Notice of Funding Availability], regulations, and increased headcounts by unprecedented levels.
Another slide focused on affordability, stating that California “has invested substantially in new affordable housing, roughly doubling the construction of affordable housing to about 20K a year—through No Place Like Home (bonds funds), Affordable Housing and Sustainable Communities (cap and trade), Permanent Local Housing Allocation (doc recording fee, SB 2), Multifamily Housing Program, Serna CalHome (budget), and HomeKey [conversion of hotels to housing].”
Under “Planning and Enforcement,” Metcalf noted the “[m]uch larger regional housing goals (SB 828/AB 1771),” as well as “stricter requirement on what counts as a valid site” for RHNA; “no-net-loss” of zoning capacity (AB 1397/SB 166)’ and a “Fair Housing Overlay on allocations and sites (AB 1771/686)—all backed up by ‘[n]ew enforcement authority (AB 72) [that] has been used to keep cities honest.”
He also marked the state’s new “prescriptive zoning requirements,” observing that “[m]any new laws require localities to approve certain kinds of housing and override local zoning controls.” For example, SB 1096, SB 13, and AB 1881 expedite the approval of ADUs. SB 9 , which made approval of single-family lot splits by right, has had a “slow uptake” due to “local barriers” and “capacity issues,” “but [it’s] still early.” The state’s Density Bonus law, strengthened by AB 2345 and AB 1763, is “working well, but only in some places.”
Streamlining entitlement to make housing reviews and approvals faster has had “mixed results.” Stating that “it’s hard to quantify” the effects of “streamlining reforms,” Metcalf only detailed the successes: “Housing Accountability Act reforms (SB 167) have deterred cities from rejecting zoning-compliant projects.” SB 35, AB 2167, and SB 330 “all show some promise, particularly for ministerial approvals for subsidized affordable housing and ADUs.”
At first it seemed as if, unlike the staffers, Metcalf would not flinch from reporting the scant results of the energized housing regime. “The problem,” he said, “is that when you look at the numbers, you don’t see what you expect to see after all that activity.” From 2017 to 2020, housing permits issued “actually declined.” He headlined one slide with the question: “Bottom Line: Is it working?”
The blunt answer: “Housing unaffordability remains high, and production relatively stagnant.”
But then Metcalf struck a propitiatory tone. “So we’re coming up short, but I think it’s important to say that it’s early, and that it’s important to spotlight places where we’re seeing progress.” He focused on the same places as the background paper: SB 35 and ADUs.
SB 35 says that if a jurisdiction hasn’t permitted the same number of homes as its RHNA, the city loses its discretion over residential development approvals, depending on whether its permit issuance has fallen short for lower-income housing, market-rate housing, or both.
In Metcalf’s view, SB 35 “seems to be working for affordable housing: Nearly three-quarters (13,215)” of the units that have been proposed under the law “are for lower-income households.” And it’s “become a very helpful vehicle for contending with historic Nimby challenges.” The catch: SB 35 “has not delivered in terms of unlocking market-rate housing.”
Praising ADU affordability, Metcalf opined that “[t]he median statewide construction cost of an ADU is significantly less than similar forms of housing. Many units are naturally affordable to households at or below 80 percent of Area Median Income [the official cut-off for affordability] and often located in areas with few other affordable options.”
His final slide asked: “Can Existing Housing Laws Deliver?” The answer was ambiguous: “Time will tell. Numbers are lagging, we may need more time to assess. Impactful legislation like ADUs has taken many rounds of legislative fixes….Cost issues remain untouched: Labor, building materials, ever more stringent code requirements, growing impact fees.” The last of these is “an area that we really haven’t tackled in the last few years.” Metcalf didn’t note that impact fees is an area that the Legislature commissioned Terner to examine. (Expect to see aggressive anti-impact fee legislation, such as the scheme floated at a recent SPUR forum by Chris Elmendorf and Darien Shanske.) In any case, we need “greater enforcement. The state must keep its foot on the gas with HCD’s Accountability Unit, the Attorney General’s Strike Force, etc.”
Metcalf looked hopefully at “one great leap of faith,” the next RHNA cycle. “The [current] Sixth Cycle greatly increased residential zoned land and forced localities to seriously consider constraints to development, such as high costs or uncertainty. Capacity and experience will be much greater in the Seventh Cycle for Localities, the State, and advocates.” We still lack “objective city-wide measures of constraints.” Such measure will provide “an opportunity for harnessing data and onboarding a common yardstick and may be a gamechanger.” The Seventh Cycle will “introduce more of an evidence-based approach” that will allow us to see “whether policies that cities have in place are moderately or substantially inhibiting development.” Translation: more surveillance is on the way.
His final comment: “if you squint, you might see an optimistic path forward on making real progress on California’s historic housing shortage.”
Legislators ask hard questions, get muddled replies
Midway in the 3.5-hour hearing, the legislators quizzed some of the witnesses who had just testified.
Senator Dave Cortese asked whether the state has the capacity to implement HCD’s Surplus Lands program. (48 hills readers may remember how Cortese, then a Santa Clara County supervisor, was the point man in MTC’s hostile takeover of ABAG.) Senator Sharon Quirk-Silva asked for an audit of the program.
But most of the questions were about affordability. Senator Anna Caballero said it was “not clear what’s working and what’s not and where. Blue-collar communities tend to build affordable housing, and wealthy communities don’t.” She asked Metcalf “where the majority of housing is occurring generally in the state, and where the affordable housing is going.”
Metcalf’s reply was garbled. “Your characterization is generally correct,” he said. “Most of the state’s historically affordable housing was in higher poverty neighborhoods. Now it’s getting built more evenly across higher and lower opportunity regions.” Ditto for ADUs. But the senator had asked about “communities”—presumably cities—not neighborhoods or regions.
Quirk-Silva wondered “who got those $40,000 grants for ADUs?” Senator Aisha Wahab said she’d heard “lots about production, but not much about preserving and protecting [affordable] housing.” She pointed out that many “ADUs are not rented out to non-family members” or are rented out at market rates. “There no real discussion about affordability,” said Wahab. “What are we doing to tackle the vacancies in multifamily housing?” The housing crisis is “not just a development problem.”
Metcalf dodged Wahab’s query: “We are still seeing ADUs as an affordable by design solution, even where there are no deed restrictions.” ADUs offer “a different rental price than single-family home new construction.”
Senator Steve Padilla, like Wahab, a rookie state legislator, was the most persistent. He noted that the Statewide Housing Plan annually allots more than $18 billion dollars for the next eight years “to underwrite 140,900 produced units every year” to address the needs of lower income households. Padilla asked, “Are we characterizing this as construction subsidies? Or direct rental subsidies? And what were the assumed qualifying income thresholds that we used to arrive at that number for underwriting?”
Padilla’s questions befuddled HCD Deputy Director for Housing Policy Development Megan Kirkeby. After a long silence, she said, “Those numbers don’t track exactly for me, but that doesn’t mean they’re wrong. We might need to follow up on the statewide housing planning goals,” which are based on the Area Median Income for each region. “There are extremely and very low-income housing goals, low-income, moderate, and above-moderate income goals, and then they would adjust to the regional AMIs.”
Padilla, a former police detective, replied:
I understand how we characterize the different segments of the market and the demand of low-income households….What I’m asking is, we have an estimated annual expenditure on the part of the state to bring at least the majority of that demand into affordability. So, is that based on construction subsidies? Is that based on direct rental subsidy? And if so, what were the assumed qualifying income thresholds that would be served by those subsidies? And I am reading from the 2022 Statewide Housing Plan, as it’s cited in the background paper.
After another silence, Kirekby said, “I will look into that and figure out what source that is citing so we can answer the question directly. I don’t want to misspeak.”
Padilla:
Lastly, 21,000 annual production of ADUs is quite a robust number….The assumption [is that] because they are ADUs they are always going to be relatively affordable. However, oftentimes those things are really driven by market factors, geographic factors….Do we have any other data yet about what kinds of rents are being demanded for those ADUs or even costs?
Kirkeby referred Padilla to the dashboard on the HCD website that has the data from cities’ annual progress reports on their RHNAs, including data that shows “where those rents are set relative to the incomes for the individuals… It gives you a sense of where those ADUs are coming online. Are they serving moderate income households? Are they serving lower income households for that community?”
Wiener must have sensed that his colleagues’ questions about affordability, coupled with Kirkeby’s halting replies, threatened the credibility of the supply-side narrative, because it was right after Kirkeby’s exchange with Padilla that he slapped Terner on the wrist and said it’s way too early to judge the effectiveness of the new housing policy regime.
Even if that were true, it’s well past the date to acknowledge that the supply-side narrative is full of hype. Take the claims about ADU affordability. It’s obvious that, as Metcalf claims, it costs less to build an ADU than a single-family home, and that ADUs offer “different rents” than single-family homes. But it’s not at all obvious that, given ADUs’ markedly smaller size and the inclination of many owners not to rent them to strangers, ADUs are an affordable alternative to single-family housing. Indeed, a glance at the HCD dashboard referenced by Kirkeby undermines the ADU affordability myth.
The SB 35 con
Far more devious—and consequential—than claims for ADU affordability is the promotion of SB 35 as an affordable housing success story. To show that “SB 35 seems to be working for affordable housing,” Metcalf displayed a pie chart taken from HCD’s Housing Implementation and APR [Annual Progress Report] Dashboard. Terner broke out the percentage of numbers of units.
What’s wrong with this picture:
First, the SB 35 numbers on the HCD dashboard are admittedly unreliable. A note on HCD’s SB 35 page cautions: “Many projects reported as SB 35 projects are likely reported in error. HCD encourages jurisdictions to confirm SB 35 projects and revise their APR [Annual Progress Report] accordingly if corrections should be made.”
Second, the chart shows the number of homes that have been proposed under SB 35. Proposed doesn’t mean approved, much less built.
Third, SB 35 only looks like an affordable housing success story when the affordable units are compared with the market-rate units. But the numbers for both kinds of housing are piddling.
Fourth, even if the numbers weren’t piddling, you can’t legitimately compare the production of affordable housing with the production of market-rate housing. That’s because market-rate housing depends for its financing on the market; and affordable housing mainly depends on funding from a government-created and government-administered source, the Low Income Housing Tax Credit program.
Metcalf showed a slide alluding to the LIHTCs. It stated that affordable housing is “[f]acilitated by state scoring systems,…but also compounding oversubscription problems.” Metcalf didn’t unpack that comment. Its meaning is essential to grasping the difference between funding for market-rate and affordable housing, and why SB 35 has facilitated more affordable than market-rate.
In his May 31 analysis of Quirk-Silva’s AB 346, Assembly staffer M. David Ruff explained that the LIHTC program
is an indirect federal subsidy developed in 1986 to incentivize the private development of affordable rental housing for low-income households. The federal LIHTC program replaced traditional housing tax incentives such as depreciation, with a tax credit that enables low-income housing developers to raise project equity through the allocation of tax benefits to investors. Each year the Federal Government allocates funding to the states for LIHTCs on the basis of a per-resident formula for the 9% credit. State or local housing authorities review the proposals submitted by developers and select projects based on a variety of prescribed criteria. In California, responsibility for administering the federal program is assigned to CTCAC [California Tax Credit Allocation Committee.]
The problem, as Eden Housing wrote in support of AB 346, is that “[w]ith demand for affordable housing growing, California’s tax credit financing programs are seriously oversubscribed.” In other words, there’s a long line of qualified projects seeking funding. (See Ann Silverberg’s testimony below.) AB 346 would change the funding formula in ways that would give the state more flexibility in awarding tax credits to affordable housing projects.
Meanwhile, SB 35 says that if cities don’t permit their allocation of low-income RHNAs, they will lose their discretion over projects with at least 50 percent low-income housing units. Developers aren’t going to pull permits for projects that can’t get funded. The terms of SB 35 show that the state’s real priority isn’t affordable housing but consolidating power in Sacramento on behalf of the private real estate industry.
Breed’s rep cozies up to Wiener and HCD, raps democratic planning
Next up were the witnesses from three very different cities, Arcata, Pomona, and San Francisco. Presumably they were chosen to demonstrate the wide range of municipal support for the state’s housing agenda. In a turn worthy of 1984, all three speakers thanked the state for preempting local control of land use—in other words, for mandating their disfranchisement.
But the testimony of the official from San Francisco, Lisa Gluckstein, Mayor London Breed’s housing and land use policy advisor, stood out. For starters, Gluckstein outdid her counterparts in paying tribute to the Legislature and HCD. She said that “recent legislation to streamline housing has benefited San Francisco immensely, especially SB 35 and the Density Bonus law.” She gave some details: Since 2018, SB 35 has authorized the approval of more than 3,000 housing units in the city, most of them affordable; and permitting is now four times faster—down from 18-24 months to three to six. Gluckstein applauded Wiener’s “work to extend SB 35” via SB 423, as well as former Supervisor, now Assemblymember Matt Haney’s AB 1114, “which would help us with the fact that a lot our building permits are discretionary.” Legislation aside, the February 1 certification of San Francisco’s Housing Element “reflects the strong partnership with HCD and the hard work of many state and city employees.” Her slide deck included a photo of Breed and HCD Director Gustavo Velasquez sharing smiles.
Moreover, unlike the speakers from Arcata and Pomona, Gluckstein extensively denigrated her town. “San Francisco’s housing crisis” she said, “is rooted in a long history of exclusion, population and jobs growth, and chronic underproduction of housing.” A big factor is the city’s “notoriously complex process for approving housing,” some of which is “baked into the Charter, which means they have to go to the voters to be changed.” Besides the problem of voter accountability, “we also have a very strong advocacy community that doesn’t always support new housing,” and “other decisionmakers” who can’t be relied upon to “do the right thing.”
Fortunately, in Gluckstein’s telling, the “mayor is taking decisive action to support new housing production very much in line with the state’s mandates….[W]e have to move quickly, because San Francisco’s RHNA obligation is quite sizeable”—82,000 units, including more than 46,500 units of affordable housing—by 2031. That, said Gluckstein, is “a 20 percent increase in the city’s total housing stock,” currently about 410,000 units, in eight years. It’s also an enormous (okay, absurd) increase over the nearly 5,000 new units that, she reported, have been built in recent years. “Our RHNA requires an average of 10,000 units per year, or roughly three times historical production.”
To meet the state’s fanciful goals, Breed has a two-pronged plan. First, said Gluckstein, the mayor proposes to increase zoning capacity in “well-resourced neighborhoods,” especially “those that haven’t seen much development in recent years.” Breed want to upzone transit corridors on the city’s westside to accommodate 36,000 homes. Gluckstein cautioned that “zoning capacity is meaningless if we can’t actually get those units built.” To that end, Breed also seeks to “reduc[e] government constraints by making housing approvals simpler and faster, limiting discretion and touch points in the process for decisionmakers to interfere, and reducing fees and exactions.”
Gluckstein didn’t name any names, but anyone with a passing familiarity with San Francisco politics would know that her reference to allegedly obstructionist officials was code for the progressive members of the Board of Supervisors who are in a pitched battle with Breed about housing and much more.
With an eye to eliminating such dissent and to “prioritizing Housing Element implementation,” earlier in February Breed had introduced Housing for All Executive Order 23-01. The directive “established oversight structures;…set clear and faster for certain legislative actions—for example, put[ting] forward ordinances that remove certain approval requirements such as conditional use authorizations; re-evaluate[d] the city’s inclusionary requirements, which are quite high compared with other jurisdictions across the state; and look[ed] at new financing mechanisms such as infrastructure financing districts.”
Given that San Francisco’s Sixth Cycle RHNAs includes 46,500 affordable homes, Breed’s proposal to lower the city’s inclusionary requirements might seem perverse. The unspoken rationale here is that, as we’ve just seen, affordable housing is very hard to finance. Requiring less of it in a mixed-income project would presumably entice development. (On July 25, the Board of Supervisors voted 10-1, with Dean Preston dissenting, to cut the city’s affordable housing requirements and reduce the impact fees that developers are charged to fund, among other things, Muni service and parks.)
Gluckstein acknowledged the “affordable housing funding challenges.” Financing the mandated 46,5000 affordable units would require $19 billion in local funding, $30 billion from the state in tax credits and soft debt plus other sources. The city, she said, now funds about 40 percent of each affordable housing project locally. Noting that the “competitive CDLAC process [California Debt Limit Allocation Committee] has limited access,” Gluckstein said that the California Housing Accelerator “has filled the gap,” but there’s still “a lot of outstanding need.” She mentioned “new tools, specifically “new bond measures that are in the works” and Wiener’s 2023 “replacement housing bill,” SB 593. That measure would authorize the successor of San Francisco’s dissolved Redevelopment Agency, the City and County of San Francisco, to draw on the city’s Redevelopment Property Tax Trust Fund to finance certain affordable housing projects—an option unavailable to other cities and counties.
Smearing CEQA, fronting for UC
After the three city officials had made their presentations, Wiener invited Arcata Community Development Director David Loya to expand on his comment on the need to strengthen CEQA infill exemptions, adding:
A consistent refrain that I hear from city planning staff, from city councilmembers and mayors is that “Hey—we’re trying, and CEQA is making our lives a lot harder. We’re trying to comply with state housing law, we’re trying to build sustainable housing near jobs and transit, and we’re having CEQA appeals and lawsuits, and so forth.
Loya was happy to comply. He said that Wiener “had characterized [the situation] correctly.” A city could “go through its process” and “even” approve a housing project, and then someone could delay construction by filing a CEQA appeal. Unless the project was “protected by a CEQA exemption,” it might be required to go through an environmental review, which
could get pumped up to an EIR, which is added time and money. And even if [the jurisdiction] prevail[s], it’s been my experience that developers are looking at their holding costs as much as they’re looking at they’re looking at the cost of development. And so each of those procedures, every hearing, every legal challenge that they have to go through, is a holding cost. It creates less housing ultimately.
Loya recommended “clean[ing] up” the exceptions to the CEQA exemptions.
I’d just like to see more of that…It would support jurisdictions that are trying to do the right thing and to promote housing, in spite of the fact that in every community you’re going to have at least one person—and that’s all it takes—who’s ready to raise a legal challenge.
Loya’s remarks encapsulated the prevailing housing absolutism: New housing trumps everything, including environmental protection.
The Arcata official’s testimony was Wiener’s cue to go on an anti-CEQA rant. First, the senator derided the law as a tool of elitist opponents of housing.
Yeah. Anyone who can pay a lawyer—we’ve seen this with affordable housing in Lafayette—is it Lafayette? I can’t remember the East Bay city [someone says, “Livermore”]—Livermore. Their city council did the right thing and approved a great affordable housing project, and some mega-Nimbys who have money funded a CEQA lawsuit—they don’t represent a majority….It’s super-undemocratic.
Wiener then claimed that CEQA’s provisions against noise are being used to defame students.
And of course we’re seeing what’s happening right now at UC Berkeley, where the California Court of Appeal issued a decision that college students are pollution—they frame it in a rosier way—because everyone knows apparently that college students make noise. Human beings make noise, we all make noise at all ages [Wicks, seated to his immediate left, gives him an appreciative smile], but it was fun to be a college student.
Wiener’s anti-noise-regulation diatribe was joined by his colleagues. Senator Nancy Skinner volunteered that “[f]amilies with a lot of kids can be loud, too.” Wicks agreed: “Yes, a six-year-old and a two-year-old [the ages of her own children]—they’re very loud.” Turning to Wicks, Wiener said, “People who like music are loud, too. Lots of loud people.” Wicks flashed him another appreciative grin.
Milking his “college students are pollution” trope, which he now unconditionally attributed to the court, Wiener said the CEQA lawsuit over the university’s plan to build housing at People’s Park was dashing students’ aspirations to get an education and join the middle class.
College students, according to the court, are pollution, and so they have to be mitigated, as if they were like tailpipe exhaust or like fumes from a refinery. That’s literally how the California Appeals Court classifies college students, who are just trying to get an education and be part of the middle class, and yet they’re pollution [Wicks nods in agreement]. That’s how far CEQA has fallen from what it was intended to do, which was to protect the environment. We’re doing some work on that [another nod from Wicks], and CEQA has to be fixed.
What the First District Court of Appeal actually said was that, contrary to the university’s claim, the evidence presented by the plaintiff “amply supported a fair argument that noise impacts from the increased student population associated with the [school’s] plan and Housing Project no. 2”—a projected 9,008 increase in undergraduate beds, of which 1,110 would be in the project proposed for People’s Park—“might be substantial.” The court cited “an expert report on student generated noise prepared by Derek Watry, an engineer with almost 30 years of experience with an acoustical consulting firm that had prepared hundreds of noise studies for EIRs.” The university called his findings “speculative.” The court disagreed.
The record…establishes that UC Berkeley students have a long and well-documented history of disturbing Berkeley residents with loud noise. It is reasonable to assume that it will continue….What is speculative is the Regents’ notion that thousands of additional students placed in the same environment will behave differently.
The court also held that
without citing pertinent authority, the Regents suggest environmental impacts from social noise are not subject to CEQA. That is incorrect. Noise impacts are expressly included among the environmental effects subject to CEQA….Nothing in the statutes or Guidelines carves out noise from human socialization as an exception to this, and the case law suggests the contrary is true….Until the Legislature says otherwise, noise is noise.
It’s true that CEQA can be used to oppose worthy projects, such as the Livermore development, but that doesn’t make CEQA action per se objectionable—and certainly not undemocratic. As Natural Resources Defense Council attorney David Pettit wrote in 2013, no bureaucracy administers CEQA. Instead, the law is “typically enforced only by citizens going to court.” That said, government agencies, including cities, also can and do file CEQA challenges. If anything, it’s the law’s inherently democratic character that Wiener, Wicks, and Skinner find offensive.
The lawsuit against UC Berkeley is far more complex than the Livermore case, involving among other things the university’s failure to follow CEQA and to justify its decision not to specify alternative sites for the housing it wants to build on People’s Park.
Wiener berates cities for skirting their RHNA obligations; UC’s violation of CEQA doesn’t appear to bother him. This likely explains why: As neither he nor Wicks mentioned, on February 16, the assemblymember had introduced AB 1307, which would “fix” CEQA by specifying that under certain circumstances, “institutions of public education in an EIR for a residential or mixed-use housing project, are not required to consider alternatives to the location of the proposed project if certain requirements are met.” The proposed requirements would exempt UC’s plan to build student housing at People’s Park from CEQA review.
When introduced, AB 1307 also declared that “noise generated by the unamplified voices of residents is not a significant effect on the environment for residential projects.” According to the staff analyses, Wicks says that if the measure becomes law, “no longer could CEQA consider ‘people as pollution’”—as if that taunt came from the law rather than from Wiener and herself.
On March 16, she strengthened the measure, replacing “unamplified voices of residents” with “occupants.” On June 26, she strengthened it again. From the Legislative Counsel’s Digest: “This bill would specify that the effects of noise generated by project occupants and their guests on human beings is not a significant effect on the environment for residential projects for purposes of CEQA.”
In a nice irony, AB 1307 designates itself as
an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect.
The facts constituting the necessity:
Currently in California there is a substantial housing crisis. To ensure housing projects are not subject to further uncertainty, delay, or risk of lawsuit, it is necessary for this act to take effect immediately.
AB 1307 may be a timely legislative intervention: The California Supreme Court is poised to review the appeal court’s decision. The bill sailed through the Assembly—not a single No vote—and is now advancing through the Senate.
Skinner’s “good RHNAs” charade
The legislators’ CEQA hatefest was punctuated by a rambling, cryptic commentary from Sen. Nancy Skinner about funding the housing envisioned by the RHNAs:
I’m appreciative of the fact that both the cities’ responses but also of the HCD’s taking the RHNA enforcement process very seriously and you know holding our cities accountable. It’s very important that we do this. However, having good RHNAs is still not necessarily going to result in achieving the actual construction of the housing….We are of course facing problems of you know higher interest rates. We’re seeing a kind of drop in market housing—you know we’ve got projects that are permitted but haven’t broke ground and indications by developers that they might not. Anyway, I feel like we have to work together with our state agencies to kind of understand that landscape and see whether in the near term is there space for either more investments in the very affordable or low-income housing, and is there more ability to get that broken ground right now than some of these market-rate projects? Again, the financing on this side is not an expertise I have. One of our panelists talked about the loss of redevelopment. We do have in two areas the regional housing finance authorities, both in the Bay Area now and in LA. It seems to me that more of those would obviously help. I don’t know if any our city panelists spoke at all about whether they had efforts to put things on the ballot that might help them fund housing and that then failed due to the threshold,…the voter threshold that’s required to get those passed.
Failing to get a response from any of the city reps, Skinner repeated her question.
Finally, Gluckstein said that in 2019 San Francisco voters had approved a $600 million affordable housing bond “that passed at the current threshold.” She added that her city was “looking at BAHFA [Bay Area Housing Finance Authority] as an opportunity to get funding across the region. We understand in San Francisco that to succeed, we need all the jurisdictions to also be part of the solution. We’re very supportive of looking at the regional level for measures that would be helpful in building more affordable housing.”
Translation: After having authored some of California’s most aggressive preemptive housing legislation purportedly designed to make cities “accountable”—for starters, see SB 330, SB 167, and SB 168—Skinner suddenly appears to have discovered the influence of market forces. In fact, cities don’t build housing; developers do; and developers are not going to build housing unless doing so guarantees their profit margins. California’s new housing policy regime holds cities accountable for something—housing production—that they don’t control and thus shouldn’t be held responsible for.
Having stripped local jurisdictions of their land use authority, the lawmakers now confront the challenge of funding the preposterous, or as Skinner has it, “good” RHNAs. Despite her disclaimer about lacking expertise in housing finance, on February 13 the senator had introduced a bill, SB 440, that she and her colleagues see as one solution to the funding impasse: regional housing finance authorities. SB 440 would authorize the creation of such agencies throughout California, except in the Bay Area and Los Angeles, where they already exist. According to the Legislative Counsel’s Digest, SB 440
would authorize two or more local governments, as defined, to restablish a reigonal housing finance authority to raise, administer, and allocate funding for affordable housing in the jurisdiction of the authority, as defined, and provide technical assistance at a regional level of affordable housing development, including new construction and the preservation of existing housing to serve a range of incomes and housing types.
SB 440 would also “authorize an authority to, among other things, raise and allocate new revenue and allocate funds to the various cities, counties, and other public agencies and affordable housing projects within its jurisdiction to finance affordable housing project and preserve and enhance existing affordable housing, as specified, in accordance with applicable constitutional requirements.”
Like BAHFA and LACAHSA [L.A. County Affordable Housing Solutions Agency], these new regional housing finance authorities would be authorized “to impose various special taxes, including parcel taxes, certain business taxes, a special tax on real property, and a documentary transfer tax within its jurisdiction and to issue general obligation bonds secured by the levey of ad valorem property taxes.”
SB 440 extends the preemptive thrust of the state’s new housing regime. Legislative staffer Hank Brady’s analysis of the bill notes:
While this bill is modeled on BAHFA and LACAHSA, [SB 440] would grant newly formed Authorities additional powers not bestowed on those existing entities. These authorities, in addition to the ability to manage existing buildings, could hold and acquire existing buildings for purposes of attaching affordability requirements. For any property acquired, these Authorities, unlike BAHFA and LACHASA, will have the power to set the land use and development parameters for such property, including setting the request for proposal criteria and selection process for a developer partner.
In a subtler blow at municipal prerogatives, SB 440 provides that:
[a]n authority shall be governed by a board of directors consisting of a minimum of three directors. All directors shall be elected officials representing the cities, special districts, or counties that are members of the authority. The authority shall consist of members appointed by each of the cities, special districts, or counties that are a member of the authority in proportion to the population served by the member city, special district, or county. [emphasis added]
In other words, the new authorities will be governed along the same lines as BAHFA, whose Executive Board is the Metropolitan Transportation Commission, a body weighted toward the Bay Area’s big cities. Small jurisdictions: beware of teaming up with much bigger ones.
As journalist Michael Barnes observed to me, “the Legislature is just gutting local governments and turning them into cash cows for regressive taxes for their pro-growth agendas.”
SB 440 also belies Skinner’s professed solicitude for “very affordable or low-income” housing. As Bob Silvestri recently pointed out in The Marin Post, California’s definition of affordable housing is notable for its plasticity. Thus, citing Section 50093 of the California Health and Safety Code, SB 400 authorizes “an authority board” to
make a finding that market rate rents or housing costs are unaffordable to households at 120 percent of the area median income [AMI] in a particular geographic area of the district. An authority that makes this finding may utilize a higher income limitation for housing developed and preserved within that particular geographic area of the district, provided that the income limitation does not exceed 150 percent of the area median income.
The current AMI in Sacramento County is $102,400 for a household of four. In San Diego County it’s $116,800. In other words, SB 440 authorizes regional housing finance agencies to promote market-rate housing.
Just as Wicks omitted to say that she had just introduced AB 1307, Skinner never disclosed that she had just introduced SB 440. The senator’s reference to “voter thresholds” for “things on the ballot that might help [cities] fund housing and that then failed due to the threshold” was similarly devious.
“Things on the ballot” means revenue measures. Thanks to Prop. 13, the voter threshold for passing such measures in California is 67 percent. BAHFA, in concert with Enterprise Community Partners, is leading a campaign for a 2024 statewide ballot measure that would amend the California Constitution by lowering the threshold to 55 percent. (In 2017, ECP got $500K from the Chan Zuckerberg Initiative, i.e. Facebook money, to draft and then lobby for David Chiu’s AB 1487, the 2019 legislation that authorized the BAHFA’s creation.) BAHFA and ECP are also pursuing a regional bond measure to go on the 2024 ballot that would raise $10 or $20B for “affordable” housing in the Bay Area. If the lower voter threshold measure passes, it would apply to the bond measure as well.
When Skinner asked for examples of housing revenue measures that failed because they didn’t meet the voter threshold for approval, she was looking for evidence to support BAHFA-ECP’s twofold campaign. Gluckstein piped up, presumably to spare the senator the embarrassment of getting no response at all. But the example she gave, San Francisco’s passage of a huge housing bond (by 71%), was exactly the opposite of what Skinner sought. Gluckstein then got with the program, lauding BAHFA and “measures that would be helpful in building more affordable housing.” But like Skinner, she said nothing about the big measures that are in the offing.
SB 440 has passed the Senate and is moving through the Assembly.
The developers 1: Ann Silverberg on the dire lack of affordable housing money
The final set of witnesses comprised three developers, Mark MacDonald, Ann Silverberg, and Steve Eggert. Only MacDonald appeared on the hearing agenda. He appeared to have invited the other two, whom he called “my panelists.” Unsurprisingly, each member of the trio lauded the state’s housing agenda, albeit from varied perspectives and in distinctive voices.
Of the three, Silverberg, was the only affordable housing developer proper. She described herself as “the CEO for Related’s Northern California and Northwest Affordable Division,” a role in which she’s currently overseeing the development of more than 5,000 units of affordable housing. She said that in its 30-year history, Related California has been “one of the larger developers of affordable and mixed income housing in the state,” where it has built more than 18,000 units.
But Silverberg is more than a developer; she’s also a political activist who advocates the preemptive, supply side position in a wide range of private and public contexts. Her profile on the Related website states that she chairs the Board of Directors of the California Housing Consortium, described on that organization’s website as a coalition that advocates “the production and preservation of housing affordable to low- and moderate-income Californians”; co-chairs California State Treasurer Fiona Ma’s California Debt Limit Allocation Committee/Tax Credit Allocation Committee Working Group; serves on SPUR’s Housing Policy Committee; sits on the board of the San Francisco Housing Action Coalition; belongs to the ULI San Francisco Local Product Council; and is past president of the Board of Directors of the Non-Profit Housing Association of Northern California.
After expressing her “deep, heart-felt gratitude” to the lawmakers, “most particularly the housing committees,” and to the Newsom administration for their “clear commitment to combating this severe housing shortage that we’re in,” Silverberg marked “what’s working:” the “recent suite of land use reform and land use laws, starting with SB 35 but now also including SB 330 [Skinner’s Housing Crisis Act of 2019], AB 1763 [David Chiu’s 2019 bill drastically expanding the state’s Density Bonus law for 100% affordable housing projects], AB 2923 [Chiu’s 2018 bill giving BART land use authority], and soon-to-be-implemented AB 2011 [Wicks’ 2022 bill authorizing by right approval of 100 percent affordable housing in commercial zones and mixed-income housing projects along commercial corridors].”
Citing her “30 years in the industry,” Silverberg enthused that these statutes “have literally revolutionized how we’re proceeding with entitlement of affordable housing. Instead of spending years and years of time and millions of dollars to defend and process and often fight for affordable housing, affordable developers now can choose from a menu of laws in streamlining entitlements and CEQA clearance in ways that we didn’t dream of even decade ago.”
She singled out SB 35 for extra praise. Under Wiener’s 2017 bill, “Related has entitled 818 units in seven projects since SB 35, with another 1,176 units in process—just months away.” (I emailed Silverberg asking for a list of those projects; she didn’t reply.)
She went on to urge the passage of SB 423: “I know there’s more to be done with CEQA and streamlining, to expand applicability and make permanent the sunsetting legislation of SB 35,” which is due to expire in January 2026; SB 423 extends that date to January 2036. “So SB 423, if I have my number correct—it’s really, really important to see those changes,” which would bring “time savings, providing certainty to the process, and housing dollars.”
Silverberg didn’t mention that the California Housing Consortium is one of the four co-sponsors of SB 423. (The other three are California Yimby, the Nor Cal Carpenters Union, and the Southwest Mountain States Regional Council of Carpenters.) CHC has also endorsed Wicks’ AB 1307.
Then she turned to what’s not working: “Our greatest challenge today is funding.” Affordable housing is “getting bottlenecked at the financing stage.” The state’s “LIHTC program and tax-exempt bond program” are the “main engine” for 100 percent affordable housing,” funding about 20,000 units a year. “Not nearly enough, but at least it’s something. We’re worried about falling short of that.”
At the very least, the state should “at least support the production levels we’ve had over the last couple of years.” The “critically needed soft debt to complete the capital stack for affordable housing…is running dry….The recent HCD Super NOFA [Notice of Funding Availabilities] round for state-level financing was oversubscribed by five to one….The MHP [Multifamily Housing] program was oversubscribed by ten to one—3.5 billion in requests for 650 million in resources. Those are projects that are ready to go.….The CDLAC process was “seriously oversubscribed in the last round.” Silverberg implored the state to follow up its “groundbreaking and legacy-producing” streamlining legislation and to “stabilize affordable housing production longterm with a reliable, ongoing, dedicated source” of money for affordable housing.
The developers 2: Mark MacDonald and 300 De Haro
The first of the two market-rate developers to speak was Mark MacDonald, CEO and founder of the San Francisco-based firm DM Development. DM, said MacDonald, “focuses on market-rate, ground-up, multi-family developments, both for-sale condominium properties, as well as programmed communities.” He added, “I’m proud to say that in almost all our market-rate developments, we also build on-site below-market units to create mixed-income communities.”
MacDonald said he’d been asked to give an overview of the development process. He proceeded to list the steps in that process and how long it typically takes to accomplish each in San Francisco: site selection (one year), site acquisition (one year), design and entitlements (two years), permits and financing (one year), construction (two years), and leasing (one year)—six to eight years in all. He said that DM considers 100 deals for every one it actually does. Detailing the complex work involved in each action, MacDonald emphasized that the entitlement process “is very lengthy, time-consuming, and extremely risky.” In San Francisco, he said, it usually takes 18-24 months, “or in many cases much longer, depending on neighborhood opposition.”
And today there’s a bigger challenge: financing. “We as market-developers,” MacDonald said, “work at the behest of our investors, who need our development projects to meet certain return thresholds,” and who have “a lot of options where they can place their capital to achieve the best-risk-adjusted returns….If the capital markets turn against you, as they have in the current environment, as a result of rising interest rates, it could take considerably longer to lock in financing to get a project off the ground.” He said that in his view, “the primary issue” now
is that many housing developments don’t pencil, given the high costs to build, and that rents in San Francisco have not recovered their pre-Covid levels. The returns to develop projects ground-up now are simply not there for may investors to deploy capital….So to jump-start housing, we really need to focus on creative ways to make housing less costly to build in California.
By “creative ways,” MacDonald presumably meant more policies like the state’s recent housing laws. He thanked the California Legislature for having done “an excellent job over the last number of years passing legislation to help make more attractive land available for housing development and to streamline the development process through bills such as SB 35 and AB 2011.” MacDonald said DM had availed itself of many of these bills, such as SB 35, but didn’t give any details. Indeed, a striking aspect of the entire hearing was that nobody explained how any specific project had been facilitated by the new state’s recent housing policy regime.
As it happens, one of DM’s current developments, the project at 300 De Haro, was facilitated by SB 35 and the state’s Density Bonus laws. Its history was recounted in August 2021 by San Francisco Chronicle reporter J.K Dineen. Under the headline “How one S.F. housing project is using state law to circumvent neighborhood protest,” Dineen told how early in 2020, DM had approached the site’s neighbors with a plan to build a seven-story tower at 300 De Haro.
Residents said they would support a slightly shorter six-story project — abuilding consistent with zoning — and asked for more retail and tweaks to the exterior design…. But instead of bending to the neighbors’ wishes and dropping the height of the project, DM Development went in the opposite direction, increasing the proposed 80-foot building to 120 feet [eleven-stories], and raising the original 290 units to 450 units.
Dineen commented: “[W]hile conflict between neighborhood groups and developers is the bread and butter of San Francisco’s land use politics,” the fight at 300 De Haro is “different.” Thanks to SB 35 and the State Density bonus program, “DM Development doesn’t need the support of residents”—including residents who sit on the city’s Planning Commission or its Board of Supervisors. 300 De Haro is “by right.”
I asked Dan Sider, chief of staff at the San Francisco Department of Planning, exactly how SB 35 and the State Density bonus program authorized MacDonald to expand 300 De Haro from 290 to 450 units and from six to eleven stories.
SB 35 mandates that when a city—in this case, San Francisco—has not permitted its RHNA share of low-income units, a project with 50% affordable units is subject to ministerial approval. 300 De Haro will have 450 units, of which 181, fewer than 50%, are affordable. What is the base number of units on which the affordable units were calculated? How did the applicant avail himself of the Density Bonus Law in arriving at these numbers?
Sider replied:
It’s a good question. State Law over laid upon local law makes for a complex analysis. An SB 35 project must construct at least 50% of units as affordable units (to 80% AMI or below).
An SDB [State Density Bonus] project is eligible for up to a 35% floor area bonus when no fewer than 20 % of the units are restricted as affordable units (to 80% AMI or below).
When we combine those two programs, as was the case for 300 De Haro, the 50% SB35 figure (the greater of the two) is applied to the “base” density of the SDB project.
Of the 450 units in this project, 337 are base units, so 169 of them must be restricted to 80% AMI or below.
Note that, in another ploy that belies the state’s professed dedication to affordable housing, the state Density Bonus applies the inclusionary requirement stipulating the amount of affordable housing to the original number of units, not to that number plus the bonus.
I replied: “You’ve explained the effects of SB 35 on 300 De Haro, and how the project qualified for Density Bonus. But DM Development came in with 181, not 169, affordable units. So did they go beyond what the law required?”
Sider’s reply further illustrates the state’s cynicism about affordable housing:
The short answer is that at the time the project was approved, the affordability tiers required under out local inclusionary affordable housing program essentially required that additional affordable units be provided in order to satisfy both local and state law. Since then, the state has changed its position such that our local affordability tiers can be “collapsed.” This has the effect of lowering the total number of affordable units required in cases like this. As for overall unit count in a bonus project like this, we look at floor area rather than unit count. A developer can slice the floor area into however many units they choose.
At 300 De Haro, DM sliced and sliced. Each of the project’s “group” units will be between 280 and 300 square feet, with access to lounges and communal kitchens on each floor. MacDonald described them as “‘an attractive option for those who can’t afford a $3,000 studio.” Jeff Alexander, president of the homeowners association at Showplace Lofts at 370 De Haro had a different take: “’It’s a glorified Airbnb hotel.’”
Citing San Francisco Planning Director Rich Hillis, Dineen wrote that 300 De Haro was the first majority market-rate project in the city to take advantage of SB 35. Hillis told him that “DM Development’s approach to 300 De Haro is a harbinger of what’s to come—that developers will increasingly use state law to circumvent local codes.”
If SB 423 becomes law, Hillis will look prescient. It might seem that SB 35 should have generated more market-rate than affordable housing. After all, California developers are building many more market-rate than affordable homes. The HCD dashboard shows that the great majority of permits issued in the current, Sixth RHNA cycle have been for above-moderate homes., p. 11
So why are these outcomes reversed under SB 35?
In his analysis of SB 423, as amended on June 19, Assembly staffer Steve Wertheim suggested two reasons. First,
SB 35 only applies for market-development in jurisdictions that are not meeting their RHNA for above-moderate income households. Because more than half of the state’s jurisdictions met this target in the 5th RHNA cycle, SB does not apply for market-rate housing in these locations. The list of cities to which SB 35 currently does not apply for market-rate housing includes all of the state’s major coastal cities, including Los Angeles, San Diego, and San Francisco.
Let’s read between the lines. Currently SB 35 does apply for market-rate housing in the 251 jurisdictions that have not met their above-moderate RHNAs—more than half of the state’s 482 cities. But many of the 251 are in areas where market-rate housing has a limited market compared with the coast.
Wertheim commented that the RHNA targets in the 5th RHNA cycle were “very low…, particularly in wealthier coastal cities”; and that given the “substantially higher” targets in the 6th cycle, “it is anticipated that eventually SB 35’s market-rate provisions will apply to most of the state.” In other words, those provisions will be apply to the now-exempt, larger and wealthier coastal cities where most of the market-rate housing has been built to date—in many cases more than enough to satisfy the city’s market-rate RHNA. Not incidentally, SB 423 would extend the terms of SB 35 into the coastal zone.
The developers 3: Steve Eggert and labor standards in California’s new housing laws
Even if that happens, it might not generate many market-rate homes. Wertheim said that’s because SB 35’s labor standards “essentially require a union-only workforce for each of the crafts involved in building housing.” Developers have argued that there are not enough workers in the state to meet the bill’s “skilled and trained” standards; and thus that “it is not financially feasible to take the risk of investing the up-front costs to design and entitle a housing project given the substantial risk that there would be no eligible workers to build it.” Wertheim offered no example of a potential SB 35 project that never got off the ground because the developer could not find workers eligible to build it.
The legislative staff background paper for the hearing also identifies a shortage of construction workers as a major problem. To answer the question “why has insufficient housing been built in California?” the staff says that “the preponderance of costs” in housing “come from the construction of the project itself, including the materials and labor.” As to the latter:
A useful rule of thumb is that here is a 1:1 between residential construction workers and the number of housing units that can be built. As recently as 2006, when over 200,000 units were built in California, there were approximately 200,000 residential construction workers in the state. With the bursting of the housing bubble and the onset of the Great Recession, that number had decreased to 100,000 by 2018. Despite the massive economic growth that occurred in the subsequent decade, the construction labor force never rebounded – and neither did production. This is for a number of reasons, including that the work is typically poorly paid and thus make it difficult to attract new workers to the profession, high housing prices make it difficult to lure out-of-state construction workers, and changes to national immigration policy have decreased the number of undocumented workers that historically have made up a high percentage of the residential construction workforce.
SB 423 addresses the developers’ claims by removing the union-only “’skilled and trained’ workforce requirement from market-rate SB 35 projects…less than 85 feet in height. For projects over 85 feet in height, the bill…add[s] ‘off-ramps’ that enable [a] project to proceed should a general contractor not receive three bids from subcontractors that guarantee that they can provide a skilled and trained workforce.” Under those circumstances, “the prime contractor need not require that a skilled and trained workforce be used by the subcontractors for that scope of work.” On June 19, Wiener amended the bill, changing the 85-foot threshold for skilled and trained labor requirements so that they apply only to “floors used for human occupancy that are located more than 85 feet above the grade plane.”
SB 423 has widened the split in the building trades unions that opened up in 2022 during the bitter fight over Wicks’ AB 2011. Co-sponsored by the California Council of Carpenters (the other co-sponsor was the California Housing Consortium), AB 2011 was opposed by the State Building and Construction Trades Council of California. SB 2011 was also endorsed by several other building trades unions.
Like AB 2011, SB 423 has also been endorsed by the Nor Cal Carpenters Union, and other building trades unions, including the District Council of Plasterers and Cement Masons of Northern California and the Laborers and Operating Engineers Union, and is opposed by the State Building and Construction Trades Council. The split is significant, because the building trades unions have been one of the few political forces in the state with enough clout to block state legislation.
As a March 2023 article in the Sacramento Bee explained,
*California law defines a “skilled and trained workforce” as one where all workers on a project must either be journey-level workers or apprentices enrolled in state-approved apprenticeship programs. At least 30% of journey-level workers in most trades must have graduated from state-approved apprenticeships. Some crafts, such as plumbers and electricians, must have at least 60% of journey-level workers graduate from state-approved apprenticeships. Many view “skilled and trained” requirements as mandating the use of union labor, since unions run the vast majority of apprenticeship programs.
The Bee cited California Labor Federation President Lorena Gonzalez, a former Assemblymember: “Prevailing wage is simply — it’s good. However, prevailing wage is a job-by-job issue,” she continued. “We want people to go into a career for construction — not just a job.” The State Building and Construction Trades Council, for its part, argues “that [SB 423] should not amend the labor provisions of SB 35, because the skilled and trained workforce provisions of existing law are better for workers. Paying workers fairly does not ensure that workers will be treated fairly, and this approach embraces only short-term benefits for workers with no pathway to the middle class.’”
Like the developers, the carpenters unions argue that given the shortage of unionized construction workers, requiring a skilled and trained workforce delays housing construction. They further contend that unions, not the state, should bear the responsibility of unionizing workers. Jay Bradshaw, executive secretary and treasurer of the Northern California Carpenters Union told the Bee: “It’s the job of the union to organize, not the government to organize for us. Our mandate is to help workers, and our best protection for our current workforce is to grow.”
At the hearing, the first speaker who mentioned labor standards was the final witness, developer Steve Eggert. Eggert is the president of AntonDevCo., the Sacramento-based firm that he founded about 30 years ago. He said AntonDevCo has built 12,000 units, about half of them affordable.
Like Silverberg and MacDonald, Eggert expressed gratitude to the state for the recent housing legislation—specifically, SB 330—“whoever wrote that law knows what we deal with with cities”—and for “trying to close all the loopholes” with the ADU law and the Density Bonus Law. “HCD has been enormously helpful.” And he cheered the “overall …focus on production—because that’s the way to make anything more affordable whether it’s housing or widgets or anything—more supply.”
In fact, increasing supply does not make everything more affordable. Houses are not like widgets. In a hot market, allowing more units to be built on a lot raises the amount of profit that can be squeezed of that space and thus the value of the property. Even supply side eminence Chris Elmendorf concedes that point.
Having declared his support for the new housing laws, Eggert went to voice his reservations. “SB 35 and SB 330 are really just nibbling around the edges. I mean, if we’re gonna be just level with each other, if we really want to see housing built.” He unfavorably contrasted the Bay Area with Phoenix and Denver, where “they’re getting serious, serious production,” because “they don’t have CEQA or prevailing wage requirements. The laborers are protected, the environment is protected—and it’s working great—okay?” (In June, drought-ridden Arizona prohibited new housing development in the Phoenix area.) Eggert recommended exempting all infill housing from CEQA, “period.”
But Eggert’s biggest gripe was about the requirement to pay prevailing wages—typically union level wages. “SB 35,” he said, is so close to being such a great law. I just want to concur with Ann, how much it helps with the affordable housing, but for market-rate housing, it does not help, because we must pay prevailing wages” and maintain a “skilled and trained workplace,” meaning that workers must have proof that they graduated from an apprentice program.
He contrasted the wages for “rough framer” carpenters in Colorado, which he said are $40 an hour, or $85,000 to $95,000, a year to their counterpart in the South Bay at $86 an hour and $110,000 to $120,000 a year. “Prevailing wage carpentry” is “a no-go.” “If you rewrite SB 35 to eliminate the prevailing wage requirement, that brings market-rate housing into play.”
For the record, according to the California Department of Industrial Relations, as of February 22, 2023, the prevailing wage for “Carpenters”—nothing about “rough framers”—in Santa Cruz County was $83.71 an hour.
Like Terner’s report about SB 9’s meager results, Eggert’s tirade against prevailing wages was at odds with the official narrative, in this case the state’s support for construction workers, a story line in whose credibility Wicks has a large stake. In a move that paralleled Wiener’s reprimand of Terner, the assemblymember pushed back. “Respectfully,” she said,
I wanted to just disagree with the last panelist….If you look at a bill like AB 2011, yes there are prevailing wage components in it,…but this was also a bill that was supported by the affordable housing developers, as well as the carpenters union and others. We sought to strike a balance, to ensure that we can provide such wages,…it’s important to have the wage set protection, the health care component, the apprenticeship requirement, the so we can build the workforce that we need to. And we believe that providing the CEQA streamlining and the ministerial approval, that streamlining process will then allow developers to ensure that they are paying their workers what we believe they should be….As someone who’s a big supporter of prevailing wage and the labor movement, but also someone who’s a big housing production person, our goal is to ensure that we do both of those things.
Despite her avowed support for “the apprenticeship request,” Wicks didn’t note that AB 2011 has no requirement for housing developers to use a skilled and trained workforce.
SB 423 has advanced through the Senate and is now being heard in the Assembly.
Coercion as collaboration
The February 28 hearing was a highly orchestrated piece of political theater in which deviations from the state’s housing narrative were suppressed. But despite Wiener’s and Wick’s assiduous efforts at crowd control, the testimony of one witness exposed a major fault line in the official scenario.
HCD Deputy Director Megan Kirkeby displayed a slide stating that RHNA is “a contract with the state of housing commitments for eight years, and the Housing Accountability Unit will hold jurisdictions to those commitments.”
In law, parties cannot enter into a contract under duress. Kirkeby’s usage of “contract” implies that cities freely negotiated the terms of their RHNAs with the state. That implication is false. The state sets the RHNAs for each region in California, after which each regional agency divvies up its areas allocation among its cities.
Timothy Grayson’s AB 879 (2017) required that a city’s preparation of its Housing Element has to meet “standards” adopted by HCD and eliminated the requirement that HCD formulate those standards pursuant to the state’s Administrative Procedure Act. AB 72 (2017), authored by David Chiu and Miguel Santiago, authorized HCD to refer to the state attorney general cities whose housing element the agency has deemed out of compliance with state housing law. Wiener’s SB 828 (2018) shifted the RHNA mandate from planning for housing to producing it and prohibited a city from arguing that underproduction in a previous RHNA cycle or a stable population justified a lower allocation. Alan Lowenthal’s AB 2158 (2004) eliminated the provision in California law that subjected HCD’s RHNA determinations to judicial review.
On July 27, the Second District Court of Appeals repeatedly referenced AB 2158 (by date, not name) as it affirmed the Superior Court of Los Angeles County’s denial of the Orange County Council of Government’s challenge to the RHNAs that HCD had assigned to the Southern California Association of Governments:
*To the extent that the RHNA statutes authorize the Department of Housing to act in multiple capacities, a single administrative agency may legally combine investigative, prosecutorial, and adjudicative functions.
There’s nothing collaborative about the RHNAs. Local governments must do what HCD tells them to do or invite prosecution by the state attorney general. Kirkeby’s attempt to pass off cities’ relationship with HCD as contractual was the clumsiest cover-up at the hearing. That it emanated from a high-ranking HCD official may explain why Wiener, Wicks, and their fellow legislators let it pass in silence.
Note from Our Neighborhood Voices: Sacramento politicians wrote a blank check to developers – and one of the first to cash it is a Russian oligarch, and associate of Vladimir Putin. You can’t make this stuff up. The oligarch is using the so-called “Builders Remedy” to squeeze in a massive high-rise in Menlo Park at one of the most congested corners in the Bay Area. This is the direct result of the new laws championed by Scott Wiener, Matt Haney, California YIMBY, and YIMBY Action. If you want to bring back local democracy when it comes to community planning, join us using the form at the bottom of this page.
The son of Russia’s former Energy Minister under President Vladimir Putin controls the LLC that owns the former Sunset Magazine property in Menlo Park where massive towers have been proposed.
Willow Project LLC is controlled by Vitaly Yusufov, the son of Igor Yusufov, a prominent Russian politician with close ties to Putin and worth about $1.1 billion, according to Forbes. Attempts to reach the younger Yusufov yesterday were unsuccessful.
Yusufov’s Willow Project LLC bought the 80 Willow Road property in May 2018 from Embarcadero Capital Partners and the asset-management arm of Deutsche Bank, which co-owned the property, according to reporting by the Wall Street Journal and New York Times in 2019. The bank was bought into the property on behalf of clients in 2016, according to the Wall Street Journal. Yusufov’s LLC bought the property for $72 million, but not before a kerfuffle occurred over the purchase at Deutsche Bank, the Times and Journal reported.
Representatives for neither Embarcadero nor Deutsche Bank responded to the Post’s inquiries about the sale yesterday.
Some bank officials were worried about the appearance of doing business with Yusufov and his ties to Putin.
A New York-based Deutsche Bank executive committee tried to halt the transaction, citing the potential reputational damage it could do the bank, according to the New York Times. The decision was overruled by a committee in Europe. After the decision on the sale was overruled, an employee of the bank filed a suspicious activity report to the U.S. Treasury, according to the Wall Street Journal.
Sebastian Kraemer-Bach, a spokesman for Deutsche Bank, told the New York Times that the bank did due diligence on the sale and didn’t find evidence that it would violate money-laundering laws or sanctions.Not subject to sanctions
An online database of sanctions imposed by the U.S. Treasury Department’s Office of Foreign Assets Control does not list any sanctions against Yusufov or his father.
Yusufov’s purchase of the former Sunset building, which was mislabeled in some Russian media as a “sprawling $72-million mansion in California,” is hardly his first time being mentioned in the media.
In 2009, former German Chancellor Angela Merkel brokered a deal with then-Russian President Dmitry Medvedev for the then-29-year-old Yusufov to purchase the Wadan Yards shipbuilding company, which provided 2,700 jobs. Before becoming the owner of Wadan Yards, Yusufov had worked as the head of the Moscow branch of the Russian pipeline company Nord Stream AG.
Wadan Yards was renamed to Nordic Yards and then sold in 2016.
Yusufov, along with his father and other family members were included in the leaked Pandora Papers in 2021, which exposed that Yusufov is the beneficiary of multiple British Virgin Islands offshore companies.
In April 2011, Yusufov bought an approximately 20% stake in the Bank of Moscow, Reuters reported at the time. He sold the stake later that year.Menlo Park proposal Returning to the subject of the Sunset building, Yusufov’s LLC is proposing to build between 800 to 1,150 apartments, 150 hotel rooms, between 50,000 and 240,000 square feet of office space and 8,400 square feet of retail space. The project would be spread across four buildings, one of which would be up to 348 feet tall.
Sunset left its Menlo Park campus in 2015 for new headquarters in Oakland’s Jack London Square.
The Sunset campus includes the headquarters for the investment company Robinhood at 85 Willow Road, though that’s not included in the towers proposal. Time Inc. sold the Sunset campus to Embarcadero Capital Partners, a real estate investment firm in Belmont, for $78 million in 2014. Embarcadero sold the property to Willow Project LLC in 2018 for $72 million.
A Note from Our Neighborhood Voices: California residents aren’t against building more affordable housing – and neither are we. In fact our initiative exempts 100% affordable projects. But we are against Sacramento allowing for-profit developers to bulldoze and gentrify single-family neighborhoods for profit. We believe residents have the right to have a say about the future of their communities. That’s what our initiative is about, and that’s why so many Californians have joined our coalition. If you want to learn more, or get involved, join us using the form below.
THE BUZZ — A TEARDOWN: Amid soaring home prices — and rising homelessness — the debate about where and how to build more housing in California is about to get more intense.
At least 110 mayors and members of city councils have mobilized into a coalition aiming to take a sledgehammer to the state’s efforts to force local governments to approve more multi-family housing.
Our Neighborhood Voices is collecting signatures for a ballot initiative that would kneecap housing legislation by giving cities and counties wide latitude to sidestep California housing law if it conflicts with local land use and zoning rules, i.e. those that tend to favor single-family homes that have become out of reach for many people.
It’s a direct challenge to Gov. Gavin Newsom, who signed the legislation and has pushed reluctant cities to build more multi-family housing, and the lawmakers associated with the Yes-in-My-Backyard movement that has sought to challenge restrictive zoning.
In other words, it’s the YIMBY’s vs. the NIMBY’s — and some of the former see it as an existential threat.
“It’s dangerous,” Assemblyman Matt Haney, the YIMBY-aligned chair of the legislative Renters Caucus, told Playbook. “When you say you can’t build here or there or there, we find ourselves in a housing crisis.”
Our Neighborhood Voices argues that the state’s requirements lead mostly to new luxury and market-rate apartments, doing little to increase the supply of affordable housing and fueling gentrification. It’s “based on a trickle-down model,” says Kalimah A. Priforce, an Emeryville councilmember and proponent of the initiative, which includes a carve out for 100% affordable projects.
Early indications are that voters have shifted toward the YIMBY camp. The Public Policy Institute of California found in a recent survey that 59 percent of likely voters support changing local permitting rules and state environmental regulations to make housing more affordable while 39 percent oppose that approach.
But, as they say, all politics is local. Opinions could change between now and November 2024, when the coalition hopes to make the ballot — and how much money they can raise.
It had looked like the measure’s angel investor would be Michael Weinstein, the head of the nonprofit AIDS Healthcare Foundation. But Weinstein, whose organization is focused on its third statewide rent control push in four cycles, is adamant he doesn’t plan to get involved despite giving $50,000 to the group in late 2021.
Meanwhile, lawmakers will be anxiously waiting to see if Our Neighborhood Voices has another mega donor — and if Weinstein remains out of the fight.
A newly-proposed project at Willow and Middlefield roads would rise to 328-feet – taller than the Statue of Liberty, and Stanford’s Hoover Tower. This massive project would tower over the surrounding single-family neighborhoods, and would add to the already insane amount of rush hour traffic in the area.
This development will be made possible because of the “Builders Remedy” – a once-obscure provision in state housing law that allows developers to push massive projects like this through without any input from the community, or our local elected leaders. We believe that neighbors should have right to speak out about the future of their neighborhoods – and we are fighting back to restore our voice in neighborhood planning. If you agree, join our fight using the form below.
‘Builder’s remedy’ development at former Sunset Magazine campus would be taller than the Statue of Liberty
A towering development has been proposed in Menlo Park’s Linfield Oaks neighborhood under builder’s remedy laws, with one of its proposed buildings even taller than the Statue of Liberty.
The development company N17 has proposed a gargantuan four-building plan for the single-story former Sunset Magazine headquarters at 80 Willow Road in Menlo Park, as allowed under SB 330, known as builder’s remedy. The surrounding Linfield Oaks neighborhood is largely made up of one- or two-story homes and small apartment buildings, but N17’s plans include 800 residential units, an approximately 90,000-square foot hotel, and 8,400 square feet of retail and 280,000 square feet of office space.
N17 is a real estate development company started by Oisin Heneghan, the former vice president of Trammell Crow, a global real estate firm headquartered in Dallas, Texas. According to his LinkedIn page, Heneghan started N17 in June after leaving Trammell Crow, and the new company does not have a website yet.
“I started a new real estate developer company called N17,” his LinkedIn biography said. “We have some exciting announcements coming soon #buildersremedy.”
The Almanac reached out to Heneghan but has not yet gotten a response.
According to his LinkedIn, Heneghan is licensed by the California State Bar and has worked as both an engineer and an executive at real estate development company Trammell Crow. Architectural company Skidmore, Ownings and Merrill, whose architects designed One World Trade Center, is also currently attached to the project.
Under builder’s remedy, cities and towns without a housing element accepted by the state could be required to approve any project that has 20% of its units designated as affordable for low-income households or 100% for moderate-income households, even if the project exceeds the zoning and general plan density requirements, according to a Nov. 10 staff presentation to Portola Valley’s Ad Hoc Housing Element Committee.
The Menlo Park City Council has so far failed to get its housing element approved by state housing officials. The council on June 27 approved the third iteration of the document, a plan showing how its quota of new housing could be developed over the next eight years, to be sent to the state. Compliant housing elements had to be submitted to the state by Jan. 31 to avoid repercussions such as builder’s remedy.
A 28-story residential building planned for the property would sit at the corner of Middlefield Road and Willow Road, near the San Francisquito Creek and the Palo Alto border, with 320 residential units and 535 parking stalls. It would be a towering 328 feet high, taller than the 305-foot Statue of Liberty. The development plans also include 90,000-square-foot hotel with 150 keys, a designation based on the number of beds, as well as about 4,200 square feet of retail.
Another, 22-story building fronting on Willow Road would rise to 259 feet. It would contain 480 residential units and 4,200 square feet for retail. A 15-story building along Middlefield Road would be designated for office space, labs, and research and development at 226 feet high, with 280,000 square feet of office space. The fourth building, a one-story structure on Willow Road, would rise 30 feet and is designated for residential building amenities.
Sunset Magazine’s parent company sold the property to Embarcadero Capital Partners in 2015 and moved the storied magazine’s offices to Oakland. In late 2017, it changed hands again, sold to Regent L.P., a Los Angeles-based private equity firm.
The iconic Menlo Park campus was designed by residential architect Cliff May and was his first commercial building, created to resemble an early Spanish ranch home. Set on 7 acres adjacent to San Francisquito Creek, the adobe building with the patios and test kitchens was surrounded by spacious gardens designed by Thomas Church.
It had been headquartered in Menlo Park since 1951, when Sunset moved out of San Francisco. The following year Mel and Bill Lane took over company operations from their father, Laurence W. Lane, who had bought the publication for $65,000 in 1928 when it was a fledgling travel magazine. The Lane brothers later sold the company to Time Warner in 1990 for $225 million.
Note from Our Neighborhood Voices: Californians aren’t against building more affordable housing – and neither are we. In fact our initiative exempts 100% affordable projects. But we are against Sacramento allowing for-profit developers to bulldoze and gentrify single-family neighborhoods for profit. We believe residents have the right to have a say about the future of their communities. That’s what our initiative is about, and that’s why so many Californians have joined our coalition. If you want to learn more, or get involved, join us using the form at the bottom of this page.
If it’s wrong to want to live in a bucolic neighborhood largely populated by people who can comfortably afford exorbitantly high housing prices, most Americans don’t want to be right.
That is the central challenge facing the YIMBY (“Yes in My Backyard”) movement, an ideologically diverse collection of scholars, policy makers, and grassroots activists committed to the disarmingly simple idea that building new homes in the nation’s most prosperous cities and towns would be a really good thing to do. As an intellectual project, YIMBYism has been wildly successful, and for good reason. The evidence that boosting housing supply to meet housing demand can foster economic growth and spur upward mobility is overwhelming. There is even tentative evidence to suggest that curbing local land-use regulation could help reverse the collapse of marriage among working-class families, which is no small thing. Among economists and legal scholars who work on local land use, the debate over zoning reform is essentially over.
Yet the YIMBY movement has failed to overcome deep-seated skepticism among voters, who intuit that new homes mean new neighbors, and that new neighbors can mean new headaches.
Consider California, where YIMBY lawmakers have made their greatest strides. Since 2016, the California state legislature has passed a series of measures preempting some of the most egregious local land-use regulations, prompting a boomlet in accessory dwelling units. But despite incontrovertible evidence of a housing-affordability crisis, one that is still driving hundreds of thousands of low- and middle-income families out of the state, many Californians are bitterly opposed to the recent housing push, so much so that there is a real danger that voters will pass a ballot measure in 2024 rolling back the reforms.
To understand why California voters have proved so hard to win over, the Chan Zuckerberg Initiative, one of the leading philanthropic champions of YIMBYism, commissioned a series of focus groups and surveys, culminating in a report published last year. According to the authors, “Most renters and owners we heard from expressed that they are wary of affordable housing solutions in their neighborhood, citing worries that it will result in crime, noise, litter, illegal dumping, and a general lack of property upkeep.” Moreover, although a large majority of respondents “broadly embraced diversity as a current or aspirational feature of their neighborhood,” they expressed deep discomfort with the idea of having neighbors significantly poorer than them.
This skepticism is not unique to the Golden State. In January of this year, Governor Kathy Hochul unveiled the “New York Housing Compact,” an ambitious set of reforms aimed at boosting housing production in New York City and its notoriously expensive suburbs. By May, the Housing Compact was dead. Statewide zoning-reform proposals in Colorado, Arizona, and Texas also went down to defeat.
None of this is to suggest that YIMBYism is doomed. But if YIMBYs want to nudge more Americans in their direction, they’d do well to hector less and listen more.
Convinced of their righteousness, some of the most ardent YIMBYs have adopted a moralistic posture, denouncing recalcitrant homeowners as snobs or bigots, and calling for sweeping legislative measures that would strip local governments of their land-use authority and further circumscribe the ability of landlords to choose their tenants. Richard Kahlenberg’s new book, Excluded, is a perfect distillation of this sensibility.
Best known for his contrarian critique of racial preferences at selective colleges, Kahlenberg has dedicated his public life to making the case for racial and economic integration. Not content to make a prudential case against exclusionary zoning that might appeal to the self-interest of homeowners, Excluded argues that the practice is a moral outrage—classist, and implicitly racist as well—and that we need a moral campaign to eradicate it backed with the full force of the federal government, one modeled on the fight against Jim Crow in the previous century. To that end, Kahlenberg calls for an Economic Fair Housing Act that would allow lawsuits to challenge zoning policies for discriminating against the poor or having an unnecessary disparate impact by class, with judges deciding what counts as necessary. This would amount to a de facto federal ban on single-family zoning, would threaten countless other zoning policies as well, and would work, in large part, by cowing local governments with the threat of expensive lawsuits based on vague, subjective legal standards.
While this line of argument is sure to resonate with some number of social-justice progressives, it is unlikely to persuade anxious homeowners and renters who dread the prospect of neighborhood change. Chris Elmendorf, a professor of land-use law at UC Davis, has warned that framing zoning reform as a matter of economic justice is likely to backfire. Today’s affluent suburbanites might resent the suggestion that they’re guilty of racial animus, but they’re entirely comfortable with being accused of colorblind class prejudice.
Opponents of new housing in their backyard might not be especially enlightened, but they aren’t delusional either. Exclusionary zoning is, as the name suggests, a strategy for improving the local tax base by deploying local land-use regulation to attract rich residents and deter poor ones. Local public services in the U.S. are largely financed by local property taxes and other municipal revenues, such as sales taxes and parking and sewerage fees. One needn’t be a hateful snob to recognize that while some newcomers will generate more in local revenues than they receive in services, others will not.
Indeed, these local fiscal pressures are arguably the central force shaping America’s fragmented metropolitan geography. As the Princeton economist Leah Boustan argues in Competition in the Promised Land, the “white flight” of the postwar era was driven in no small part by these fiscal concerns. As poor Black migrants made their way to urban centers in the Northeast, Midwest, and West, large numbers of more affluent white families moved to suburban jurisdictions with higher average incomes than the cities they left behind. Some of this outmigration was undoubtedly driven by white reluctance to live alongside Black neighbors, but because U.S. cities were so intensely segregated in this period, most of the flight was from neighborhoods that remained exclusively white. Urban departures from these white neighborhoods were motivated less by fear of social intermingling with Black neighbors than by fear of fiscal intermingling with lower-income neighbors who had different needs and priorities. “Moving to the suburbs,” Boustan writes, “allowed white households to isolate themselves from the changing bundle of local public goods and fiscal obligations offered in the central city.”
Given these powerful fiscal incentives, NIMBYism in small suburban jurisdictions is almost inevitable. Rather than expect moral suasion to change the politics of zoning in these communities, YIMBYs would do well to embrace a more humble and realistic approach, one that endeavors to meet suburban NIMBYs halfway.
One straightforward way to win over suburban homeowners is to advance housing reforms that help them build wealth, as Elmendorf has recommended. Legalizing accessory dwelling units, for example, enriches ordinary homeowners, who enjoy more public sympathy than large-scale developers, fairly or otherwise, and who can be mobilized against cost-increasing municipal-impact fees and discretionary review procedures. As an added bonus, this brand of reform allows YIMBYs to make a more optimistic appeal grounded in respect for property rights and personal freedom, a pitch that’s helped pass zoning-reform laws in Oregon, Utah, and Montana.
When faced with determined suburban resistance, as in downstate New York, where Hochul’s Housing Compact proved an immense political liability, YIMBYs ought to focus their efforts on dialing back land-use regulation in large cities. Opposition to housing production tends to be less intense in more populous jurisdictions, in part because their ratio of rich to poor residents is by definition harder to change. Urban neighborhoods are also more dynamic than suburban neighborhoods: They’re disproportionately populated by renters, young adults, low-income families, and other populations that experience above-average levels of housing churn. Neighborhood change is a fact of life in these communities. If zoning reform in urban cores proves successful, the case for housing growth in smaller communities will be that much more compelling.
At the risk of rankling anti-business progressives, YIMBYs should also do more to cultivate large employers as political allies. Lower housing costs are a powerful tool to attract and retain workers, and large employers can exert significant influence in state legislatures. That employers in California’s technology sector have played an important role in the fight against tight zoning is no coincidence—they’re keenly aware that as housing costs in the Golden State rise, they can either pay higher wages or watch as their workers decamp for cities in Idaho or Nevada.
And finally, YIMBYs should work to soften the local fiscal incentives that drive exclusionary zoning in the first place. Zachary Liscow of Yale Law School found that when states take on a larger share of school funding, rich people become more willing to move into poorer jurisdictions, likely because doing so would no longer saddle them with the special burden of supporting services for large numbers of neighbors who pay little in taxes. Consistent with this pattern, he found that centralized school funding led to lower taxes in lower-income municipalities.
A similar logic would apply to state funding for policing and public-safety efforts. If NIMBYs worry that an influx of lower-income migrants will lead to a surge of crime and disorder, as the Chan Zuckerberg Institute’s findings strongly suggest, increased state aid to local law-enforcement agencies might allay their concerns. Some arch social-media leftists have disapprovingly dubbed this blend of support for zoning reform and “broken windows” policing “carceral urbanism,” but of course social-media leftists are not the target audience.
Granted, changing local fiscal incentives would be a significant undertaking, one that would meet with resistance from voters who’d fear losing out under the new fiscal dispensation. But 30 percent of local-government revenue already comes in the form of transfers from state governments. Increasing state-government responsibility for funding local policing or public education would represent a relatively modest and potentially very welcome change, especially when compared with, say, fair-share requirements that mandate the production of deed-restricted affordable-housing units and other priorities of the YIMBY left.
Tinkering around with local fiscal incentives, forging alliances with regional business elites, and helping some property-rich homeowners get richer won’t usher in an egalitarian new millennium of integrated neighborhoods from coast to coast, but it will help YIMBYs build a more persuasive case that housing growth is in the enlightened self-interest of suburbanites who might otherwise be concerned about rising tax burdens and sinking home values. That’s not a bad start.
Note from Our Neighborhood Voices: We all know we need more affordable housing all over California – especially in San Francisco. We just believe that Sacramento politicians should not give for-profit developers a blank check to build luxury towers without ANY community input. We believe neighbors and their local elected leaders have the right to shape the future of their own communities. Our coalition is surging. Join us and help fight back for our neighborhood voice using the form at the bottom of this page.
Within hours, the group “Our Neighborhood Voices,” which opposes Sacramento’s efforts to force cities to increase housing production, pushed out fundraising ads on social media showing the proposed 589-foot tower rising from the low-slung waterfront community.
“This isn’t a joke,” warned the ad. “It’s a real proposal in San Francisco and neighborhoods all over California could be next — including yours.”
At a time when Mayor London Breed and city staffers are working to meet state housing mandates by upzoning the west side’s commercial corridors — San Francisco is supposed to plan for 82,000 units over the next eight years — opponents to that effort have grabbed hold of the proposed 680-unit tower at 2700 Sloat Blvd. and are using it as a 589-foot cudgel with which to bash the broader policy objectives.
Sunset resident Renee Lazear, an organizer for the group Save Our Neighborhoods San Francisco, said the tower rendering “woke up the neighborhood.” She opposes plans to put multi-family apartment buildings on the city’s westside and warns that the tower is “the kind of building the state of California wants to build everywhere.”
“It is pretty much the talk of the neighborhood,” she said. “You can’t avoid it. It comes up in every meeting I’m in, among my social circle, my friends, on Nextdoor. Everywhere you go.”
The timing of the proposal for the site, currently the Sloat Garden Center, could not be worse for city planning staff and for Sunset District Supervisor Joel Engardio, who are trying to build community support for a rezoning that would allow five or six story apartment blocks along Judah, Irving, Taraval, and 19th Avenue.
Engardio, who was elected supervisor with the support of the pro-housing YIMBY movement, called the 2700 Sloat proposal “a bad PR stunt from a frustrated developer who has not been getting his way.”
“It’s causing people unnecessary concern and anxiety,” he said. “Everything about it is farcical and ridiculous but it’s distracting from the real work we need to do to build real housing that is actually needed to allow families to stay in San Francisco.”
Whether or not the proposed building is legal comes down to an interpretation of an obscure zoning rule around “bulk code,” or how many square feet of building can be squeezed onto its footprint. The developer argues that the project would actually be four razor-thin towers sitting on a single podium. Combined they would violate bulk code requirements, but individually they comply, the developer argues.
So far, the city Planning Department’s zoning administrator has rejected the argument, a decision the developer has appealed to the Board of Appeals. That hearing is on July 26th.
Planning Director Rich Hillis said the one-acre garden center is an appropriate place for density — within reason.
“We are trying to be aggressive and thoughtful about where we put additional housing,” he said. “We all question whether this is a serious proposal and what the motivation is because it doesn’t feel real.”
Planning Department Chief of Staff Dan Sider said the proposed tower is “drastically out of step with what the state and city allows.”
“The disservice that this pipe dream of a project is causing to the city and state’s effort to keep pace with housing demand is worrisome to say the least,” he said. “It’s a lot of fear-mongering.”
Whatever the outcome of the Ocean Beach tower fight, it’s likely to be an opening salvo in the battle over the broader rezoning of the westside, which will happen over the next six months.
Lazear’s organization, Save Our Neighborhoods, has gathered 3,000 signatures opposing the project. And she said the Sloat project is making residents aware of the upzoning likely to be adopted early next year. Lazear said she would only support two-story townhomes on the Sloat site, and in the Sunset, generally.
Even eight or 10 stories, she said, is “too big and would be more appropriate in SoMa or downtown.”
“People move out here because they don’t want to live in a high-rise condo,” she said. “People don’t want to live in Sacramento’s idea of some planned modern utopia.”
Engardio said that the extremists on both sides of the housing debate are enjoying the Sloat Boulevard battle, but that it’s not helping the city deal with the housing issues he hears from Sunset District constituents — including the lack of elevator buildings suitable for seniors or the deficit of two-bedroom apartments for young families.
He said extreme YIMBYs and ardent opponents to development are both using the proposal to score political points.
“What is lost is the vast majority of people in the middle who want a functioning city,” he said. “We all need to take a breath and use some common sense.”
YIMBY Action Executive Director Laura Foote argued that the developer only resorted to the 55-story tower after neighbors had opposed two earlier proposals, for an eight-story, 213-unit building and a 12-story, 400-unit building.
She said the concerns that the 50-story tower would cause a big “backlash” against pro-housing policies is overstated.
“People have been worried about backlash since the beginning of the pro-housing movement,” she said. “The NIMBYs will obviously want to use this project to freak people out, but I don’t think they are going to be very successful.”
She said hand-wringing about neighborhood character and architectural aesthetics is “not very compelling” when compared with a housing deficiency that has forced many into homelessness.
Meanwhile, developers Raelynn and John Hickey, will make their case on July 26 before the Zoning Board of Appeals — and it will not be the first time the couple has clashed with city officials.
In 2004, John Hickey proposed three 500-foot towers on India Basin in San Francisco’s Bayview-Hunters Point neighborhood. While that project was shot down by city planners, Hickey was convicted by a federal jury on two counts of securities fraud and eight counts of mail fraud after a three-week trial in U.S. District Court in San Francisco. He was found guilty of defrauding more than 700 investors and sentenced to 97 months in prison.
In a recent text, Raelynn Hickey said she has “been involved with affordable housing most of my life and it gives me great pleasure to have an opportunity to take part in developing more of this badly needed housing stock.”
Hickey said, in texts, she has “surrounded” herself with “some of the best quality consultants in the business, including architects, civil engineers, (mechanical) engineers, affordable housing consultants, land use attorneys, litigation attorneys, marketing consultants, land use attorneys, and many more.”
