HAPPY FALL 2023!

This edition of the Selna Partners’ Real Estate Law Newsletter updates readers on the progress of issues discussed at our East Bay Housing Now forum, which kicked off the summer. The news includes important real estate legislation approved by Governor Newsom by his October 14 deadline, and noteworthy housing development litigation.

STATE LEGISLATION

In 2023, Governor Newsom maintained a practice of approving numerous bills intended to break down local barriers to housing construction. We highlight just a handful that we believe have the most potential.

AB 976 and 1033 & SB 104:  These bills are intended to bolster the production of accessory dwelling units (“ADUs”) by allowing the leasing and sales of ADUs, making their financing easier, and issuing grants to cover some development costs.

Facing an impending ban on ADU leasing, AB 976 permanently authorizes ADUs to be rented to third parties, allowing homeowners to leverage the forecasted rental income for loans to build ADUs. AB 1033 repeals a state ban on selling ADUs separately from a main residence, and enables local governments to decide whether to permit ADU sales as condominiums. The changes are intended to allow property owners to leverage forecasted rental income or sales proceeds to obtain ADU construction loans and provide more affordable options for those in need of housing. SB 104 provides an additional $25 million to a successful state ADU grant program. It assists homeowners with up to $40,000 for pre-development costs such as design and site prep.

SB 423:  The bill extends and expands SB 35, the 2017 law that streamlined multifamily housing projects with least 50 percent affordable units in jurisdictions failing to meet their state-mandated housing production requirements. SB 35 was set to sunset on January 1, 2026.

In addition to extending the fundamentals of SB 35 until January 1, 2036, SB 423 made some important amendments: streamlining now applies to projects with as low as 10 or 20 percent affordable units, depending on the jurisdiction. And some projects may now be streamlined in the previously exempt “Coastal Zone” an approximately 840-mile band on California’s coast which is protected under California’s Coastal Act.

AB 1633:  Clarifies and expands the Housing Accountability Act’s (“HAA”) definition of “disapprove the housing development project” to include cases where a local agency declines to certify an EIR, fails to exempt a project from the California Environmental Quality Act(“CEQA”), or abuses its discretion by not adopting a negative declaration.

A statement from the office of the bill’s author, Assemblyman Phil Ting, summed up this way: “AB 1633 strengthens the HAA, clarifying that CEQA cannot be used to endlessly delay or block housing projects, once all legal requirements have been met. The legislation does not alter CEQA in any way.”

Ting’s office said a San Francisco project highlighted CEQA’s misuse. In 2021, The SF Board of Supervisors stalled a 500-unit infill project, which included affordable housing. The Board postponed the project’s approval even though it complied with all planning and zoning laws and CEQA, and demanded additional, unspecified, environmental review, placing the project indefinitely on hold.

LITIGATION

People’s Park case:  In response to an appellate court ruling, Newsom signed a bill amending CEQA, so that housing projects are no longer required to study the potential noise generated from their future residents.

Assemblymember Buffy Wicks sponsored AB 1307 after the First District Court of Appeal ruled last February that potential noise from “loud student parties in residential neighborhoods near campus” was a potential environmental impact under CEQA. The court said the potential noise had to be analyzed before a student housing project near Berkeley’s famed People’s Park could move forward.

The bill represented the second time in recent years that the State Legislature stepped into a court case to modify CEQA and support housing near the Berkeley campus. In 2022, state lawmakers removed public college enrollment as a separate CEQA environmental impact after a neighborhood group used the law to stop a project.

In a statement about her bill, Wicks said AB 1307 “reaffirms that people are not pollution” and “provides more certainty for housing projects across the state, instead of more red tape and higher construction costs.”

In addition to eliminating potential resident noise as a CEQA impact, Wicks added an amendment to the bill excluding public universities from having to consider alternative sites for a housing project on a site no larger than five acres in an urban area. Wicks’ amendment was clearly intended to ensure that the People’s Park project could not be stopped.

When it ruled last year, the Appellate Court said that the project applicant, UC Berkeley, also failed to consider alternative project sites.

The project is designed as a 148-unit complex for 1,111 students and a separate building with 125 beds — half of which would be for homeless residents who currently sleep in the park. The university has said that more than half the 2.8 acres would remain open space, with a new tree grove.

In May, the California State Supreme Court agreed to hear the case after the university and the Governor’s Office petitioned the court to review the lower court’s decision. The Supreme Court justices have not yet scheduled a hearing but could decide the case by early next year. The legislation all but guarantees a ruling in the university’s favor.

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The Builders Remedy Evolves

Under the “Builder’s Remedy,” residential projects are freed from the zoning regulations of the city in which they are proposed if the city lacks a state-approved housing production plan, and the projects include affordable housing.

As 2023 deadlines for cities to achieve compliant housing plans expired, some developers made headlines by using the Builders Remedy to advance extraordinarily tall and dense projects. This caused concern at the local level and reconsideration at the State Legislature. After all, the goal of the Builders Remedy was to push local governments to create ambitious housing production plans, not obliterate their zoning codes.

In that vein, AB 1893, a 2024 bill introduced by Assembly member Buffy Wicks, D-Oakland, would restrict the size of projects using the Builder’s Remedy to three times the allowable density in urban areas near transit, and double the density elsewhere. The bill would also lower the percentage of affordable housing required in mixed-income projects from 20 percent to 10 percent. Finally, it would exempt projects with 10 or fewer units from affordability requirements.

Tiny Forests and Urban Environments

In his spare time, Rob Selna is the director of a non-profit organization that plants trees and builds community gardens in Oakland. The organization planted eight African Sumac trees in October, adding to the trees it planted two years before and a large community garden it built in 2015.

Recently, the group happened upon a Japanese tree planting method that, in recent years, has been adopted in several cities around the world, partly in response to climate change. Now the method has started to show up in the United States. As one local example, in the past several years, the Berkeley School District has used the technique at four schools to reforest the campuses and teach students about environmental stewardship.

The Miyawaki method (named after Japanese botanist Kira Miyawaki) includes restoring soil and then planting layers of native tree species close together, so they compete for nutrients and sun. Doing so recreates the fertile conditions of the natural primitive forests and makes the trees grow quickly. The tree stands can reach maturity in 15 to 20 years, 10 times faster than average.

Because Miyawaki forests started out as a tool to revitalize polluted industrial land, they have often been employed in urban areas, and sometimes on very small lots. The “tiny” or “pocket” forests, are capable of thriving in a space as small as 50 square feet. As such, they are useful tools for greening long-vacant, small infill lots, and possibly helping developers meet their project’s open space requirements.

Thanks for reading and look for more to come!

Rob Selna

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.