California’s most controversial homebuilding bill just died. What will Newsom do now?

Feb 7, 2020 | Government

By Matt Levin | CalMatters

Developers, landlords, Facebook, construction unions, the state Chamber of Commerce, Realtors, environmental groups and even the AARP wanted to see the bill pass.

So did big city mayors including San Francisco’s London Breed and San Jose’s Sam Liccardo. Not to mention Sen. Toni Atkins, Democratic leader of the state Senate, who typically has a pretty big say in which bills make it out of her chamber.

Nonetheless Senate Bill 50, a measure that would have forced cities to allow more mid-rise apartment buildings around public transit and next to some single-family homes, failed to get enough votes in the California Legislature to survive in 2020 before time ran out.

The question now is how Gov. Gavin Newsom plans to meet one of his signature campaign goals: building millions of new homes. And if cities, anti-gentrification activists and suburban homeowners could stymie the assortment of powerful interests backing that bill, what pro-development policy options are left?

“California’s housing affordability crisis demands our state pass a historic housing production bill,” Newsom said in a statement shortly after the bill was voted down by Democratic and Republican lawmakers.

So what does that housing production bill actually look like?

Here are some options. The governor may not like many of them.

Put zoning changes in a bill package — with redevelopment 

The governor set a campaign goal of 3.5 million new housing units by 2025 to help relieve the state’s crippling affordability crisis. In his first year in office, California was on pace to permit roughly 120,000 units — nowhere near Newsom’s audacious rate or what experts say is needed to offset rising rents and home prices (final numbers for 2019 are expected soon).

After intervening to help pass a tenant protection bill last year, Newsom vowed to focus on housing production in 2020 — legislation that would make it easier for developers to create new market-rate and low-income housing.

Despite never receiving the governor’s explicit endorsement, backers of the housing-near-transit bill presumed it would serve as the de facto legislative vehicle for the governor’s ambitions.

UCLA analysis found that cities across California would likely have to dramatically “upzone” — allow much denser development where it is legally prohibited now — for Newsom to come close to 3.5 million new homes. That’s exactly what SB 50 attempted to do.

“A housing production agenda without zoning reform is incomplete,” said Sen. Scott Wiener, the San Francisco Democrat who authored the bill. “Restrictive zoning puts a mathematical cap on the new housing you can build.”

In order to lift that cap, upzoning may now have to be combined with a sweetener for cities who resent the state encroaching on local control over housing decisions. That sweetener could be redevelopment — a state program that cities used and misused to fund affordable housing before former Gov. Jerry Brown dissolved the program nearly a decade ago.

Cities have desperately clamored for that lost revenue ever since.

“A hard production bill can pass the Legislature, and if you pair it with funding it makes it even much less challenging,” said Wiener. “I would love to see major zoning reform paired with SB 795,” a bill from San Jose Democratic Sen. Jim Beall that attempts to revive redevelopment.

But redevelopment is the kind of sweetener that could nauseate Newsom. The governor vetoed Beall’s redevelopment bill last year, and is loathe to commit the state to the billions in ongoing spending it would entail.

Wiener also hinted that any production bill would benefit from being included in a broader package of other housing bills — some serving tenant and anti-gentrification groups, others serving cities. Ironically, Newsom’s housing achievements last year may have doomed SB 50 in 2020.

“The idea was to pair SB 50 with a renter protection bill and with a funding bill and the (accessory dwelling unit) bills…and have a real package,” said Wiener. “Once the renter protection bill passed without SB 50…the leverage diminished significantly.”

Wait for your new housing sticks and carrots to kick in

On and off the record, Newsom administration officials asked about their housing plans  invariably offer up some version of the following: Just wait until the stuff we’ve already done starts kicking in.

They’re referring mostly to administrative efforts — some of which happened under the Jerry Brown administration — to force cities to allow more housing. Newsom’s housing department has tripled the number of units Southern California have to plan for. Huge new housing quotas are on the horizon for the Bay Area.

“Since we are already getting much larger numbers, our cities are going to have to contemplate greater density and greater height anyway just to comply with these laws,” said Jason Rhine, assistant legislative director for the League of Cities, which opposed Wiener’s bill. “A lot of the objectives of SB 50 will be realized just based on existing law.”

But there are legitimate questions about whether new state penalties will effectively coerce California cities, which have a long history of flouting state housing law.

Newsom’s original proposal to withhold gas tax revenue from cities stubbornly failing to meet their state-imposed housing goals failed to garner much support. A replacement scheme that allows a judge to fine non-compliant cities has yet to be tested.

Reform the California Environmental Quality Act

Good luck. If Wiener’s bill was comparable to climbing Half Dome, so-called CEQA reform would equate to ascending the Himalayas.

His bill was the rare piece of housing legislation that united developers, unionized labor and most environmental groups.

Those groups — major sources of campaign donations for Democratic lawmakers would go to war against each other over changing the California Environmental Quality Act. Developers have long contended the act is a burdensome tool that labor and neighborhood groups use to block and delay new developments, adding unnecessary costs to projects.

“It is difficult,” said Dan Dunmoyer, president of the California Building Industry Association, the lobbying group for developers in the Capitol. “If labor and the environmental community and trial lawyers and local governments are opposed to it, it’s very difficult to get it passed.”

Newsom tried to broker a deal between developers and labor to modify the law last year, to no avail. And reports of ongoing tension between construction workers’ unions and the Newsom administration make the prospects of compromise increasingly remote.

The Legislature isn’t yet considering any proposal to seriously alter the act.

Cut impact fees 

Another cost that developers constantly say inhibits new housing from being built? Fees that local governments impose on new developments for parks, schools and other infrastructure to serve a new development’s residents.

Here Newsom may find some wiggle room. Cities could be receptive to lowering how much they’re allowed to charge as long as they get that revenue from another source.

“There’s probably no avoiding a conversation about impact fees,” said Rhine, the League of Cities’ lobbyist. “We are open to finding new ways of funding it. We just have to make sure we’re made whole. You can’t build a house without sewer and infrastructure and roads.”

There may be a legislative vehicle for Newsom to push here — a bill from Concord Democratic Assemblyman Timothy Grayson to bring more transparency to how much cities charge per new unit of housing. Supporters want to expand the bill to have it cap how much cities can charge.

Even so, the impact such a cap would make on California’s housing shortage falls far short of more sweeping options.

“We strongly support that bill,” said Louis Mirante, legislative director for California “Yes in My Backyard”, which sponsored the defeated Wiener bill. “But I want to be clear that nothing in the Legislature responds to the housing crisis with the proportionality of SB 50.”

CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

The author wrote this for CalMatters, a public interest journalism venture committed to explaining how California’s Capitol works and why it matters.

Header Photo: A BART train runs through a neighborhood of single-family homes in Albany. California lawmakers again rejected a bill that would have led to denser development along public transit routes. Photo by Anne Wernikoff for CalMatters

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