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January 2024 Real Estate Law Newsletter

Dubious Labor Laws and New Legislation

HAPPY NEW YEAR!

We kick off 2024 by showcasing new California real estate laws that could impact the firm’s clients, including property owners and developers.

The laws implemented in 2024 are likely to perpetuate the tug-of-war between the State Legislature and local governments around residential development and the state’s housing crisis. The laws attempt to support residential projects of all types, from small Accessory Dwelling Units (“ADUs”) on single-family lots, to large, in-fill apartment buildings.

Critics see this legislation as a threat to local control, prompting resistance, and in some cases, fomenting litigation that pits cities against the state (see below).

A third major player is the construction trades, focused on maintaining influence over laws that benefit members and maximizing control over work conditions and wages.

Please contact Selna Partners Law with questions about the information below.

New Berkeley Labor Law Likely to Impede Housing and Hurt Local Contractors

The powerful State Building and Construction Trades Council of California (“California Trades”) has, for years, inserted wage standards into state laws intended to reduce regulatory barriers to housing development.

More recently, local trades have pressured cities to inject labor requirements into municipal codes and apply them to private development projects.

New City of Berkeley labor legislation, which took effect on Jan. 1, was backed by Mayor Jesse Arreguin and his supporters, the Building and Construction Trades Council of Alameda County (“Alameda Trades”). The legislation amended the City code so that contractors are eligible to perform work on projects of more than 50,000 square feet (an approximately 25-unit apartment) ONLY if they financially support apprenticeship programs, make specified contributions to workers’ health care benefits, and document their compliance.

Prior to the amendments’ approval, developers told the Berkeley City Council that the new requirements would increase midrise housing development costs by 25-30%, the equivalent of $135,000 per unit, which currently run $450,000 to build. Unless offset by a reduction in city fees, the increase would halt residential projects in Berkeley’s development pipeline and discourage future building, they said.

Meanwhile, local, small contractors – which in the Bay Area, are often minority owned – balk at externally imposed labor requirements, sometimes known as project labor agreements (or “PLAs”), because they cannot afford to pay into apprenticeship programs or process mounds of compliance paperwork in the way that large contracting firms can. In two prominent examples, both the National Black Chamber of Commerce and the Bay Area Black Builders have long opposed PLAs.

In late summer 2023, the Alameda Trades tried to convince the City of Oakland to mimic the new Berkeley labor ordinance and impose a citywide PLA on private projects by way of zoning changes in the City’s General Plan update. There is not enough space here to fully explain why the Alameda Trades’ plan failed in Oakland this time. But, no one expects them to stop trying.

The City of Oakland has raised serious concerns about the trades and PLAs’ excluding small, local contractors, minorities and women, concluding that the city needs to address the “historical exclusion of Black, Indigenous, and People of Color (BIPOC) and women from building trade membership and employment.” City reports point to U.S. Bureau of Labor Statistics showing that nationwide, the number of Black construction workers has stayed “roughly at a flat 6% for more than 25 years,” since 1995, even with the creation of PLAs. And, the City noted that local trades have poorly or inconsistently reported race and gender membership information.

See here Rob Selna’s commentary on PLAs in the San Francisco Chronicle. Selna Partners Law plans to publish a more in-depth analysis of the trades and PLAs in the coming weeks.

More Support for Accessory Dwelling Units

State data indicates that currently 20% of the housing units built in California annually are Accessory Dwelling Units (“ADUs”), which is the equivalent of 20,000 new homes. In the 2023 legislative session, lawmakers continued to boost to this smaller, lower-cost form of housing as follows:

AB1332 mandates that all local governments provide preapproved ADU plans for public use by Jan. 1, 2025. Cities and counties may provide their own ADU plans, and they must preapprove plans submitted by individuals and entities if they meet state ADU law requirements under Government Code Section 65852.2. Preapproved ADU plans must be posted on the local government’s website, providing property owners with a collection of ADU plans to choose from.

The bill also provides that a detached ADU proposal that has been preapproved by the local agency’s program, must be permitted within 30 days – half the time required under Government Code Section 65852.2.

With AB 976, homeowners may now lease their ADUs to third parties without restriction. The bill addressed an impending statewide ADU owner-occupancy requirement, that would have banned ADU rentals in 2025. The bill also allows homeowner/ADU developers to leverage forecasted rental income in obtaining ADU construction loans.

Under AB 1033, a state ban on sale of ADUs separate from main properties was repealed, allowing a parcel with a primary residence and ADU to be treated like a condominium and for the separate sale of each residence. The bill authorizes local governments to determine whether and how to permit such sales.

SB 104 provides more state funds for ADU planning. The bill added $25 million to the existing and successful state ADU grant program. The bill provides homeowners with up to $40,000 for pre-development costs such as design and site prep.

Lot Splits

After fizzling last year, SB 450 is expected to get a second chance. It aims to eliminate roadblocks that local jurisdictions have erected against the use of SB 9, the 2021 bill that eliminated single family zoning.

SB 450 requires that an application for a duplex or a lot split be approved or denied within 60 days from the date the local agency receives a completed application. If such an application is denied, the agency must provide a detailed written explanation for doing so. SB 450 also prohibits local agencies from imposing zoning, subdivision, or design review standards on duplexes and lot splits that are different from other developments in the same zone.

SB 9 was unpopular in some cities and towns because it paved the way for more density than originally intended in single family zoning. It allows property owners to: 1) apply to split their single-family lot in two to build housing; and 2) apply to construct two homes on one lot, effectively allowing four dwelling units on a property that previously allowed just one.

Litigation

As of January 1, 2024, the State Attorney General’s Office has the unconditional right to enter any lawsuit filed over a local government’s purported housing law violations. 2023 bill AB 1485 removed a requirement that the Attorney General petition the court to represent the interests of the state in any such lawsuit.

Even before the unconditional right to enter housing law litigation, State Attorney General Rob Bonta showed an interest in enforcing state housing production laws. As an example, in December 2023, Bonta filed a request to intervene in a builder’s remedy lawsuit against La Cañada Flintridge, a well-to-do hamlet in the foothills of the Verdugo Mountains, north of Los Angeles.

If you have not already done so, please sign up for the Selna Partners Real Estate Law Newsletter at our website, and let us know if you have any questions at robert@selnapartners.com.