In the 2017 legislative session, Gov. Jerry Brown signed into law a package of 15 housing laws in response to California's ongoing housing crisis. (See Holland & Knight's "A Closer Look at California's New Housing Production Laws," Dec. 6, 2017, and "California Governor Signs into Law Major Reforms to Housing Accountability Act," Sept. 29, 2017.)
One of the most notable laws in this legislative package is SB 35 (Chapter 366, Statutes of 2017; Sen. Scott Wiener). It requires most local governments to issue housing developers streamlined approvals in 90-180 days if a project 1) complies with the jurisdiction's objective planning standards applicable to the project site and in effect at the time the project application is filed, 2) pays construction workers prevailing wages, 3) includes a minimum of 10 percent (or any higher applicable local ordinance percentage) of deed-restricted, low-income affordable units if a city has failed to meet its market-rate housing Regional Housing Needs Assessment (RHNA) obligations, or a minimum of 50 percent affordable units if a jurisdiction has met its market-rate obligations but not its affordable housing RHNA production obligations, and 4) meets SB 35's other qualifying criteria, which generally focus on multifamily housing production on "infill" locations within developed areas of existing communities.
Significantly, by virtue of SB 35's "by right" (also called "ministerial") approval process, SB 35 projects are statutorily exempt from the need for environmental review – and cannot be challenged in lawsuits – under the California Environmental Quality Act (CEQA). Because such projects are required to comply with objective zoning and related local requirements which already triggered CEQA compliance obligations, SB 35 avoids the need for a second round of CEQA processing and litigation risks for projects that comply with these previously approved requirements.
The California Department of Housing and Community Development (HCD) has now issued an initial set of guidance documents on the 2017 housing laws. Highlights of these guidance documents are HCD's official determinations about which local jurisdictions are subject to SB 35 streamlining and what percentage of affordable housing a project must include to qualify, based on each jurisdiction's progress toward meeting its RHNA goal:
The complete list of jurisdictions now subject to SB 35's streamlined approval mandates was revealed, and HCD has prepared maps that show each jurisdiction's status in various areas of California: Statewide, Bay Area, Central Coast, Central Valley, Sacramento, San Diego and Southern California. For the processing benefits mentioned above, we encourage project applicants to utilize the recently released RHNA target evaluations to consider eligibility for streamlined permitting under SB 35.
Other highlights of HCD's guidance documents include the following:
For qualifying projects, SB 35 promises to cut entitlement time and associated costs for urban multifamily projects by more than half (to approximately six months), eliminate CEQA-related costs and processing times, and avoid the risk of CEQA litigation. Most housing experts have agreed that SB 35 is likely to increase housing production costs, based on the new law's labor mandate (requiring that all projects, even those not receiving public funding, pay all construction workers prevailing wages), as well as its inclusionary housing mandate. The market will decide if SB 35's regulatory streamlining, including its CEQA exemption, will save enough time and money to offset higher labor costs and applicable inclusionary housing requirements.
We anticipate that SB 35 will be most useful in producing multifamily housing in higher-cost areas with higher-wage workers in California's coastal regions such as the Bay Area, Los Angeles/Orange County and San Diego. These, of course, are the same areas with staunch and well-funded Not in My Backyard (NIMBY) opponents, as well as environmental, historic preservation and anti-gentrification advocates – and with local governments that are burdened by higher pension and service costs as well as aging infrastructure. That means SB 35's rollout is likely to be punctuated with litigation challenges to the applicability and legality of this state effort to speed up significant urban-area multifamily housing production.
Politically, SB 35 also backs up Gov. Brown's conclusion that CEQA reform has been blocked by construction unions that use CEQA litigation threats to get Project Labor Agreements (PLAs); the construction unions that make the most prolific use of CEQA litigation threats as leverage to secure PLAs supported SB 35 after the prevailing wage requirement was added.
For more information about the 2017 housing laws and to determine whether your project may qualify for SB 35's CEQA exemption and streamlined permitting process, contact Holland & Knight attorneys Jennifer L. Hernandez, Chelsea Maclean or Daniel R. Golub.
For an in-depth look at CEQA and the state's housing crisis, see "California Environmental Quality Act Lawsuits and California's Housing Crisis," Jennifer L. Hernandez, Hastings Environmental Law Journal, Vol. 24, No. 1 (Winter 2018).
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.
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