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SB35: Taking power from the people

Uploaded: Aug 31, 2017
Who would ever think that the way to increase affordable housing would be to make it more expensive? That what the backers of California Senate Bill 35 (SB35) would have you to believe. It is expected to be approved by the State Senate tomorrow or next week. So who is it really intended to benefit? Construction trades unions and developers. Who are the losers? People needing affordable housing, taxpayers and other residents.

Note: The discussion here is based on reading multiple summaries. Not being a lawyer, I don't have the skills to translate legalese into ordinary English (words, phrases and syntax can have distinct meanings).

SB35 would require housing projects built under this mandate to pay the "prevailing wage" for all work, including subcontractors. This will raise the costs of all units in those projects, both Market-Rate and Below-Market-Rate (BMR).(foot#1) So how are those more expensive units to be made affordable? Higher subsidies from taxpayers. And with higher subsidies per unit, there will be fewer units that can be subsidized. Note: These subsidies cannot be made directly and explicitly -- that is prohibited by state law. The usual method of laundering public subsidies is to provide the developer with a valuable benefit in exchange for the developer using part of that to lower the rent/sales price of the BMRs. The convention in Palo Alto (and many other places) is that the benefit given by the government to the developer greatly exceeds the value of the public benefit produced in return.

So why would a developer choose to have higher building costs? There has to be much more money to be made elsewhere in such projects. SB35 makes it "worth their while" by taking away from cities and their residents much of their ability to limit the negative impacts of projects on their immediate neighbors and the larger community. What could possibly go wrong with having "the fox guarding the chicken coop"?

The California Environmental Quality Act (CEQA) is one of the targets of SB35, and has been the target of bills in the state legislature for quite some time. It requires governmental bodies to perform an analysis of the impacts of a proposed project and means of mitigating them, and to include that in the public decision-making process. It includes impacts on the urban/built environment as well as the natural environment. For example,
- Would the proposed location of a driveway create traffic problems, such as creating unnecessary congestion or routing its traffic toward a park, elementary school or other area frequented by small children?
- Are the proposed buildings designed to benefit occupants by moving noisy facilities to the periphery and directing the noise at the neighbors. ("Beggar thy neighbor").
One of the frequent complaints about CEQA is that it is exploited in questionable lawsuits that use our dysfunctional legal system to block projects or to "extort" developers with the threat of delays. Notice that it is CEQA that gets blamed, not the legal system. Funny, I don't hear people making those same arguments for eliminating laws against murder.

Without a hint of irony, one of the major provisions of SB35 would be to open up cities to more abusive lawsuits. SB35 would make a city into a target if doesn't meet its Regional Housing Needs Allocation (RHNA). These numbers are set by the State through regional bureaucracies such as this region's ABAG-MTC (Association of Bay Area Governments - Metropolitan Transportation Authority). (Aside: The names and acronyms are provided for your web-searching pleasure.) These regional governments set "allocations" that are unobtainable -- they seem to operate under the delusion that anything that can be done in spreadsheets can be done in the real world.

Details: Housing goals are subdivided into multiple categories, with 4 levels of BMR ("affordable") housing. Most of the BMR housing built in Palo Alto comes from inclusionary zoning (acronym-less). The city's zoning code specifies that larger housing developments include a certain percentage of BMR units that are roughly equivalent to the Market-Rate units. Depending on your view of market dynamics, either the market-rate units are made more expensive because they are effectively subsidizing the BMRs or the subsidies come from the developer's profits or a combination of both. Unsurprisingly, most of the BMRs built under inclusive zoning are for the uppermost level of BMR: They require the least subsidy.

The lower three levels of BMRs are built primary with funds from the state and federal governments and fees and taxes collected by the local government (developers can pay into this fund in lieu of including BMRs). There isn't enough funding available from these sources to build more than a small fraction of the targets. Consequently, cities will be perpetually in violation of their RHNA numbers. And should a city somehow meet those numbers, the next round of RHNA numbers will put them back into violation. In the fantasy world of Sacramento and the ABAGs (regional governments), meeting these numbers in one round is taken as evidence that the city can produce even more housing in the next round, rather than understanding that meeting the numbers used up the best locations for housing and that less should be expected in the next round. Remember that this is a state government that claims that zoning changes that make a property more valuable won't increase its price.(foot#2)

SB35 is yet another in a long line of bills by Democratic Party state legislators to transfer power from the citizenry to remote bureaucrats and corporations.(foot#3) The California League of Cities successful opposed a similar bill last year, and is opposing SB35. However, this is likely to be an ongoing battle: Over 100 bills on this topic were introduced at the beginning of the current Legislative session (according to news media stories). Why was SB35 the one that made it to this point? I haven't seen any explanations, nor expect to (deal-making in the Legislature tends to be kept out of sight).

If you want to oppose SB35, you need to quickly contact your State Senator--Jerry Hill for Palo Alto and nearby cities. In the process, add in your State Assembly member (Marc Berman)--because the Assembly will be the next step--and your local officials. The online addresses of these officials as well as a sample letter can be found in an online copy of a message by Palo Alto Council member Lydia Kou.

Another analysis: "Scott Wiener's housing straw man" by Calvin Welsh -, 2017-05-02.

1. "Affordable" vs "Below Market Rate (BMR)":
BMR has very specific meaning and is defined in relative to the Area Median Income (AMI). "Affordable" is often used as a synonym for BMR, but it is also used for housing for those whose incomes are far above qualifying for BMRs, for example, a couple with high paying jobs in tech with an income 3-4 times the BMR cut-off.

2. Economic illiteracy in State government:
The notion that one can increase value without a consequent change in price can be found in the report "California's High Housing Costs: Causes and Consequences" by the Legislative Analyst's Office and dated 2015-03-17. I mentioned this in an earlier blog "California Democrats seek to revive the Republican Party: Republicans expected to resist" (2017-07-16) in the section State policy on development. There are many other gems of bias and deception in this report if you know how to spot them. For example, it claims in subsection Why DO Coastal Areas Not Build Enough Housing?: Community Resistance to New Housing: Environmental Reviews Can Be Used to Stop or Limit Housing Development that "...approving fewer housing units than the developer proposed. ... Over two-thirds of cities and counties in California's coastal metros have adopted policies (known as growth controls) explicitly aimed at limiting housing growth. Many policies directly limit growth--for example, by capping the number of new homes that may be built in a given year or limiting building heights and densities." (emphasis added) Notice that it classifies a city as resisting new housing if it has any limits on growth, for example, if it caps building height at 20 stories. It implies that concerns about carrying capacity of the infrastructure--schools, streets...--are not legitimate, but rather measures to "stop or limit" housing development.

3. Taking power from the people:
In the 2012 Presidential campaign, Republican Mitt Romney famously said "Corporations are people too", and was widely criticized by Democrats. Clearly, corporations need to be treated as superior to people.

An abbreviated index by topic and chronologically is available.

----Boilerplate on Commenting----
The Guidelines for comments on this blog are different from those on Town Square Forums. I am attempting to foster more civility and substantive comments by deleting violations of the guidelines.

I am particularly strict about misrepresenting what others have said (me or other commenters). If I judge your comment as likely to provoke a response of "That is not what was said", do not be surprised to have it deleted. My primary goal is to avoid unnecessary and undesirable back-and-forth, but such misrepresentations also indicate that the author is unwilling/unable to participate in a meaningful, respectful conversation on the topic.

If you behave like a Troll, do not waste your time protesting when you get treated like one.
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Posted by Curmudgeon, a resident of Downtown North,
on Aug 31, 2017 at 7:36 pm

"SB35 would require housing projects built under this mandate to pay the "prevailing wage" for all work, including subcontractors."

That will totally kill the employment market for undocumented construction workers. It's obviously a sly plot to undermine the momentum for Trump's Wall. Republicans, Resist!

"In the fantasy world of Sacramento and the ABAGs (regional governments), meeting these numbers in one round is taken as evidence that the city can produce even more housing in the next round, ... "

It works in private enterprise also. At one place where I worked, divisions that failed to make their periodic income targets were penalized with lower bogies on the next round, and conversely.

Lesson: learn the system and game it. You can bet Atherton, Woodside, Hillsborough, Los Altos Hills, Portola Valley, Monte Sereno, etc., etc., will or have already. Why should our town be such an eager patsy?

Posted by Richard Hall, a resident of another community,
on Aug 31, 2017 at 8:28 pm

Posting some great news from Marin County where we've been very concerned by SB35 removing local review. We spread the word and had many people call our assemblyman Marc Levine - it looks like his vote is going to be pivotal and he's going to vote no.

Web Link

Posted by Inclusionary zoning?, a resident of Green Acres,
on Sep 1, 2017 at 12:01 pm

You make the claim that "Most of the BMR housing built in Palo Alto comes from inclusionary zoning".

I had believed that most came from 100% BMR projects that were funded from a combination of tax credit financing and in-lieu fees (ie, not inclusionary zoning).

Do you have a source for your claim?

Posted by Douglas Moran, a Palo Alto Online blogger,
on Sep 1, 2017 at 3:07 pm

Douglas Moran is a registered user.

@Inclusionary zoning?

This is my recollection of presentations by Staff during discussions of the Housing Element (of the Comprehensive Plan) as well as graphs. (Aside: Palo Alto was well above the targets for market-rate housing) These were long-term cumulative numbers. Recognize that using short periods to project the future is problematic. On one hand, you want to do this because of changes in circumstances:
1. The economics and legal requirements that push developers to choose between BMRs in their developments vs. in-lieu fees.
2. The ability of Palo Alto to get grants for all-BMR developments: There have been long stretches where Staff complained that applications from Palo Alto were being rejected because we were so rich that we didn't need any help. The needs of the Buena Vista Mobile Home Park were put into the Comprehensive Plan in the late 1990s, but it took two decades to get the funding.

On the other hand, the building of housing--both inclusive and all-BMR developments--is sporadic and thus attempts at getting a trend may involve including projects built under condition very different from current ones.

Posted by CrescentParkAnon., a resident of Crescent Park,
on Sep 2, 2017 at 5:20 pm

I've said it many times before .... a class of low wage virtual slaves with no citizen rights that drags down wages and created second class citizenship for working people is in complete opposition to what America is supposed to stand for. Wonder why we have such income inequality in the US it is because the very rich are the only ones who can get something for nothing and expect to be entitled to demand it, based on economic myths while they wag their fingers at everyone else and say there is no free lunch. This is the reason Donald Trump has over 8000 lawsuits against him. He regularly finds contracting companies to hire outside companies and workers and then stiffs them. There are many plaintiffs with the same story of incredibly devious and weaselly way to find new marks to screw over ... we have a criminal President -the icon of much of the upper ruling class

Posted by Itsa Tradeoff, a resident of Mayfield,
on Sep 3, 2017 at 6:46 pm

"Taking power from the people" - Moran

"Democracy is a pathetic belief in the collective wisdom of individual ignorance." - Mencken

Posted by Douglas Moran, a Palo Alto Online blogger,
on Sep 3, 2017 at 7:02 pm

Douglas Moran is a registered user.

"it has been said that democracy is the worst form of Government except for all those other forms..." - Winston S. Churchill

Posted by Itsa Tradeoff, a resident of Mayfield,
on Sep 4, 2017 at 1:16 pm

"it has been said that "

Do you notice how Churchill hedged his statement by implying attribution to the crowd? One must read that sly dog carefully.

We can wonder what Mencken would think of giving power to today's collection of climate change deniers and Trump voters. However, it has worked well for the Republican Party for several decades. People will stubbornly vote against their own best interests if demagogues appeal to their baser inclinations. Democracy can be sweet for unscrupulous elites.

Posted by CrescentParkAnon., a resident of Crescent Park,
on Sep 5, 2017 at 6:11 pm

-- "Democracy is a pathetic belief in the collective wisdom of individual ignorance." - Mencken

There is a great book out there from a while ago - "The Wisdom of Crowds: Why the Many Are Smarter Than the Few" by James Surowiecki. Surowiecki gave a talk on his book when it came out over at Keplers.

If you set the problem up right in most cases the collective wisdom of individual ignorance does outperform the experts. Really odd though to call the belief that our governing system is based on, whether you collectivize everyone or just the rich and powerful, why describe that as a pathetic belief?

Not necessarily true if you feed everyone fake news though.

Posted by Curmudgeon, a resident of Downtown North,
on Sep 6, 2017 at 3:21 pm

"The Wisdom of Crowds: Why the Many Are Smarter Than the Few"

It just occurred to me: that is a compelling argument to abolish our hoary dysfunctional Electoral College. Twice in this young millennium it has annulled the wisdom of the crowd and inflicted on us our two most inept, misdirected presidents ever.

Posted by Douglas Moran, a Palo Alto Online blogger,
on Sep 6, 2017 at 4:06 pm

Douglas Moran is a registered user.

Curmudgeon: "Wisdom of crowds"

This is a misuse of the concept. The Clinton campaign, by its own accounts, focused on turning out supporters rather than trying to persuade people to vote for her. This is not uncommon behavior by many candidates. Her campaign made poor decisions on where to spend money on bolstering turn-out, for example in California where she was at no risk of losing.

These sort of behaviors are equivalent to skewing the representativeness of "the crowd". Many have argued that the election results were more a measure of the wisdom of the two campaigns, rather than the electorate (the crowd).

Posted by Curmudgeon, a resident of Downtown North,
on Sep 6, 2017 at 5:14 pm

"This is a misuse of the concept."

Sorry. Wrong. The raw vote totals--which in most democracies determine the winner--speak for themselves: Clinton 65,844,954; Trump 62,979,879 Web Link Clearly the wisdom of the crowd chose Clinton.
[[ Blogger: Rhetorical question: If I were to assemble a crowd in a manner that ensured that a majority agreed with me, should I be able to claim that my opinion was supported by "the wisdom of crowds"? Please note: This is about the concept, not the election results.]]

But I do agree with your analysis--campaigning with hindsight, Clinton might have squoze out an Electoral College victory (Trump's crucial wins were razor thin) and spared the country its deepening nightmare. Her campaign put much too much reliance on technology and algorithms.

[[ deleted: name-calling ]]

"We have met the enemy and it is us." - Pogo

Posted by Curmudgeon, a resident of Downtown North,
on Sep 7, 2017 at 4:24 pm

[[ Deleted: troll-like behavior - repeatedly conflating very different concepts.]]

Posted by Todd, a resident of Another Palo Alto neighborhood,
on Sep 7, 2017 at 5:57 pm

[[ Deleted: unwilling to engage in civil discourse.]]

Posted by Joe, a resident of another community,
on Sep 8, 2017 at 2:39 pm

They screwed up sb35 by adding the prevailing wage requirement.

The general idea SB35 I think is sound. You can complain all day about the removal of "local" control.

However the point you miss is there is no party more local than a property owner.

The property owner should have the most control over development. That is as local as it gets.

I own land in a metro area in California, in order to develop I have to run a gauntlet through the local committees, which at this point in time adds a huge risk to my project.

I haven't done anything, waiting in the hopes that California can pass something to eliminate the NIMBY assault that I would have to work through. I actually plan on matching the nearest complex my property borders, and have a design that will not block anyones view. The truth is there are some that are so anti growth that they oppose every project.

In so far as the year of addressing the housing affordability crisis, the legislature is failing miserably. Not a single bill will assist younger working middle class families. SB-35 comes the closest to what is needed, cutting fees, removing environmental studies in already urbanized areas, and streamlining approvals.

Posted by Douglas Moran, a Palo Alto Online blogger,
on Sep 8, 2017 at 3:18 pm

Douglas Moran is a registered user.

RE: Joe

"However the point you miss is there is no party more local than a property owner. The property owner should have the most control over development."

Properties are not isolated units, but can have significant impacts on neighboring properties.
And property owners do "have the most control" here in Palo Alto (I can't speak for every other municipality in California).

"removing environmental studies in already urbanized areas"

As the blog states, environmental studies apply not just to the natural environment, but the built environment. In a built environment such as most of Palo Alto, the most controversial environmental factors tend to be traffic generated, parking, noise and recently dewatering. There have also been instances of concerns about rainwater runoff from big developments, both onto neighboring properties (there are rules intended to prevent this) and into storm drains that may not have sufficient capacity.

SB35 elimination of CEQA measures potentially allows a developer to profit from irresponsibly taking water from a neighboring property (de-watering) or flooding that property during heavy rains. Background: In the big storms in the 1990s, various neighborhoods had flooding because the storm drain system was overloaded by the rain falling on that neighborhood -- in some cases, the storm drain system in the neighborhood shutdown because the creek that those drains dumped into were too high to accept any more water.

Posted by V. I. G., a resident of another community,
on Sep 8, 2017 at 8:26 pm

Observing your response to Curmudgeon, now I understand meaning of the phrase to annihilate ones opponent. It does not seem quite sporting. Curmudgeon gave a valid point. Are you not able to answer it?

[[ Blogger: First, the national election results are off-topic, but I was willing to let that pass.

Primarily, he kept extending the argument: popular vote, Electoral College, then gerrymandering. Except in Maine and Nebraska, the Electors are elected on a state-wide vote, so gerrymandering has negligible influence. This is a basic troll behavior -- constantly shifting the arguments. Gerrymandering is when he was well across the line, and got deleted.

Hillary Clinton (forthcoming book) may not have given up refighting the election, but most people are long past that.

Posted by Tom_Fielding, a resident of another community,
on Sep 13, 2017 at 9:30 am

The Author is ignoring some important provisions of SB35:

1. Under SB35 cities can retain control of the planning process as long as they create their "fair share" of housing. SB35 essentially says cities can decide how things get built, but not how much gets built. The planning process is only circumvented when cities do not meet their growth requirements.

2. SB35 does not increase the cost of housing, even in the narrow sense that the author uses. If a city does not create it's fair share of housing, SB35 simply gives developers a second avenue to obtaining a building permit. The developer is still free to go through the city planning process to avoid paying the prevailing wage.

All a city must do to avoid circumvention is guarantee the developer an expedient planning process with fewer concessions than the SB35 pathway, and the city can retain control.

Posted by Douglas Moran, a Palo Alto Online blogger,
on Sep 13, 2017 at 2:22 pm

Douglas Moran is a registered user.


Part of Palo Alto's "fair share" includes housing for people with "Very Very Low Income". Please explain what for-profit developer is going to build housing for this category. For a family of 4, the maximum household income for this category is $37,205 and the BMR (Below Market Rate) rent for a 1-bedroom apartment for this family is $698 (assumes the children sleep in the bedroom and the parents sleep in the main room).
Details from: "Below Market Rate (BMR) Rental Housing: Income Standards & Rent Limits for Use in Palo Alto BMR Program - 2016" (PDF).

Since no for-profit building is going to build such units, it is up to the city's taxpayers to fund such housing.

And advocates like Tom_Fielding ignore all the infrastructure costs associated with that growth. They don't even have an idea of how much it would cost to widen various arterials - El Camino, Alma, Middlefield, Page Mill/Oregon, Embarcadero, University Ave, Charleston/Arastradero. I don't either -- the big costs involve condemning properties/buildings to make room for the extra lanes.
Oh, don't say "public transit" -- we have just gone through yet another round of shrinkage imposed by the County/VTA.

The typical "solution" offered by advocates for market-rate housing is to raise the height limit and allow dense, tall apartment building to be located in single-family zones wherever it is convenient (profitable) for the developer.

The purported advocates for affordable housing are a major impediment to reducing the problem because they inhabit an alternate reality where none of the costs or practical problems exist.

Posted by Michael Goldman, a resident of another community,
on Nov 13, 2017 at 12:10 pm

Just found this blog which I find interesting and intelligent. Permit me to add a couple of little notes.

On transit: This is really key. It is not a question of whether one can build high rise buildings. Nothing in the laws of physics stops you from putting up Empire State Buildings every block. The question is how are you going to get people in and out? You have the foothills on one side and SF Bay on the other. This means Palo Alto is limited to one bridge, a railway line and 2 major highways.

With one optimization or another you can increase the capacity of these a bit, maybe even doubling their capacity. CalTrain electrification can double capacity but that maxes you out - short of adding more rail lines. So you can increase capacity but to what end? Would it not be simpler and easier to put up the high buildings where there is already more access, flat plains in all directions for building housing and roads, more public transit and a sufficient concentration of people to justify investing in yet more transit? Like downtown San Jose which gives tax breaks to builders putting up high rise apts?

On VTA: This is a loss-making operation. They have between 9% and 11% "fare recovery" meaning 90% of their funding comes from taxes - mostly sales tax. Every $2 ticket gets an $18 subsidy from the county. And that is *it* - there is no more funding available. This means, if you do the math, that if you *doubled* ridership, you would get 10% more funding available from fares, since the taxes won't increase at all, much less proportionately. This would add a few more lines, but not really solve any problems. It gets worse. Bus ridership is declining, not increasing. Light rail ridership is falling off a cliff. Good luck doubling ridership when the opposite is happening.

See my post on VTA's finances (from their own reports)
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