For Palo Alto's housing advocates, the broad package of bills that Sacramento lawmakers signed into law this fall are exactly the type of disruption that the city needs after years of sluggish residential construction and a deepening crisis of affordable housing.
The 15 bills, which sailed through the state Legislature in September and then signed into law by Gov. Jerry Brown, create a streamlined approval process for residential developments; make it harder for municipalities to reject housing proposals on subjective grounds; and pave the way for a $4 billion housing bond that will go to the voters in 2018.
They also require cities to approve accessory-dwelling units in all single-family residential zones; ensure that inclusionary-zoning requirements apply to residential developments, including rental properties; and make it harder for cities to dance around their regional housing requirements.
But for the Palo Alto City Council, which has made housing one of its top priorities for the year, the Sacramento-administered medicine comes with a host of unpredictable side effects. The new laws could upend the city's policies on everything from parking requirements to architectural reviews. And with the new laws kicking in on Jan. 1, City Hall staff are scrambling to understand the implications and come up with new procedures and policies to address them.
Perhaps the most transformative bill in the bunch is Senate Bill 35, known as the "by right" housing bill. Authored by state Sen. Scott Weiner, D-San Francisco, the bill would apply to jurisdictions that have not been issuing enough building permits to satisfy their regional housing allocations for various income categories.
Though the state Department of Housing and Community Development hasn't yet determined which agencies will be subject to the bill, city officials are expecting Palo Alto to be among them, a memorandum from Planning Director Hillary Gitelman and City Attorney Molly Stump indicates. That's because based on data through 2016 (which covers the first two years of the 2014-2022 planning cycle), the city has only issued permits for 16 percent of its allocation for market-rate units (310 total units) and 8 percent of its allocation for affordable-housing units (121 total).
In cities that fall short of the housing goals, as determined by Regional Housing Needs Assessment, Senate Bill 35 creates a streamlined approval process for multifamily residential projects that meet certain criteria. The projects must be located in zones that allow residences, have at least two units and be consistent with "all objective zoning standards." The bill also bars cities from adopting laws to prevent a project's eligibility for the streamlined review.
Under SB 35, cities have 60 days to determine whether a project is eligible for streamlining and then an additional 30 days to review the project, with a focus only on "objective criteria."
"In some ways, SB 35 is a game-changer for multifamily housing development in Palo Alto because of its potential to influence the size and location of multifamily housing applications that the city receives," the memo from Gitelman and Stump states.
The memo notes that large projects requiring local legislative action (e.g. rezoning) or design exceptions will still have to go through the city's regular process, which gives council members wide discretion to approve or deny them. But more than 13 percent of the land in Palo Alto has zoning designations that could accommodate housing, and "property owners in these areas could choose to shape their proposals to be eligible for streamlined review," the memo states.
As an example, staff considered a scenario in which a developer seeks to build a mixed-use project on El Camino Real, with housing over ground-floor retail. As long as residential use makes up 75 percent of the project, it would qualify for a streamlined review. One project of this sort was recently approved at 3877 El Camino Real, the former site of the Compadres Bar and Grill. The new three-story development will include 11 townhouses and six condominiums, along with about 4,000 feet of commercial space.
The law could also have major ramifications for Stanford Research Park, where zoning allows some residential space. Even though the density of residential development is capped by a floor-area-ratio of 0.4 to 1 (the built square footage can only be 40 percent of the site's area), the large size of the parcels in the Research Park could lead to many new units getting approved "by right."
Currently, the city requires developers to receive use permits for residential projects in the Research Park. The new law, Gitelman said, would prevent the city from requiring these permits, provided the project meets the bill's qualifications.
Another significant change is an update to the Housing Accountability Act, which limits a city's ability to deny a zone-compliant housing project or to require less density even though it falls under the zoning maximum. Two bills, Assembly Bill 678 and Senate Bill 167, both raise the burden of proof for local agencies that reject housing projects. Another, Assembly Bill 1515, requires courts to give less deference to cities in rulings on zoning consistency.
"All three of these bills would strengthen existing provisions in the law and increase penalties for non-compliance, making it much more difficult for the city to disapprove or reduce the number of units in a housing project," the memo states.
For the City Council, the new bills could significantly shift the community conversation about housing, Mayor Greg Scharff said at Monday night's council meeting. The council's recent debates as to whether the city should plan for 3,000 or 10,000 housing units in the new Comprehensive Plan could become moot under the new rules, which could force the city to approve more housing units than it planned to.
"If you're talking about changing the community, this has the potential to do it," Scharff said.
Some of these changes can be very positive, he said. The new laws, for instance, can spur a housing boom in downtown, California and El Camino Real -- areas that the council believes are particularly suitable for the development. At the same time, the pace of development could be faster than what residents are accustomed to, he predicted.
"When you talk about changing the character of the community and having rapid change -- this is the kind of thing that can actually achieve it in a way that could be very different from the kind of stuff we talk about," Scharff said.
Several council members, including Cory Wolbach and Tom DuBois, lamented the diminishment of local control under the new state bills even as they praised the new legislation for addressing a problem that council members have been struggling to solve. DuBois said the focus on "affordable housing" is particularly positive.
Council members have been "wishy-washy" in defining what the term means, he noted. Under the new state requirements, devising a single definition is moot, as municipalities will be required to make progress on new homes in each income category.
SB 35 isn't the only new law that tracks a city's progress on meeting its regional allocation. The package of legislation also includes three Assembly bills -- 879, 1397 and 72 -- that concern themselves with the Housing Element, the state-mandated document that each city has to approve detailing its plans for encouraging housing construction and listing potential housing sites.
The new laws require cities to file annual reports on their housing progress, track whether cities are acting consistently with their Housing Elements (and potentially revoke the certification of the documents for those agencies that aren't) and make it difficult for cities to list already developed sites on their housing inventories.
DuBois wanted to add even more clarity by recommending that the council establish its own specific target for the percentage of new housing units that should be designated for low-income residents.
"I think it's going to take that kind of focus in our area if we're really serious about affordable housing," DuBois said.
His proposal did not, however, sway the majority. Some council members, including Scharff and Vice Mayor Liz Kniss, suggested that creating new local requirements would be premature at this point. City staff are already drafting a new work plan for possible code revisions to encourage more housing development -- an effort that was sparked by a recent colleagues' memo from Councilman Adrian Fine, Kniss and Wolbach.
Kniss noted that for all the talk about encouraging the construction of affordable housing in recent years, there has been little action on that front.
Until the council actually votes to approve an affordable-housing project, Kniss said, she will not believe that her colleagues are serious about providing affordable housing.