It’s a NIMBY’s worst nightmare: high-rise apartment buildings going up in suburban neighborhoods — and local officials helpless to halt construction.
That scenario could soon become a possibility for Bay Area cities large and small should they fail to convince the state they’re doing enough to help solve a deepening housing crisis.
It’s all thanks to a little-used section of state housing law known as the “builder’s remedy.” Uncertainties remain, but the three-decade-old provision could enable developers to push through projects of virtually any size almost anywhere they please, as long as a portion of the building includes affordable units.
The builder’s remedy would only apply to Bay Area cities without a state-approved plan to meet their upcoming homebuilding goals, which are updated every eight years. The penalty doesn’t kick in until early next year, but many jurisdictions appear unlikely to have plans ready in time.
Housing experts and advocates say that means a surge of proposals may be on the horizon, especially in wealthier areas that have made it challenging to build denser housing, but where developers stand to see higher profits if they can build.
“If you’re not going to tell developers where they can build multifamily housing, the state is saying they don’t have to follow your rules,” said San Francisco real estate attorney Daniel Golub, adding he’s received “very substantial interest” about the builder’s remedy in recent months.
It’s already starting in Southern California – where over a hundred cities are behind on their housing plans due last year and developers have blitzed a handful of affluent enclaves with builder’s remedy proposals in recent months. That includes more than a dozen high-rise projects in Santa Monica and a 2,300-unit oceanside complex in Redondo Beach.
In the Bay Area, cities and counties have until Jan. 31 to get their housing plans certified and stave off a similar outcome. But so far, just two cities – Alameda and Emeryville – have approvals. However, the growing interest in the builder’s remedy is adding pressure to meet the fast-approaching deadline.
A big part of why developers see the provision as a viable option now, despite it being on the books since 1990, appears to be that new state laws and policies have added teeth to the planning process for housing.
Homebuilding targets set by the state have doubled or even tripled for many cities. As a whole, the Bay Area is on the hook for approving more than 441,000 units for all income levels over the next decade, representing a 15% increase in the region’s total homes.
For the current expiring eight-year cycle, the Bay Area permitted only about 190,000 units, according to state housing data. Of that amount, just 44,000 are for low- or middle-income residents, well under half the combined goal for those income levels.
This time around, state officials, including Gov. Gavin Newsom, have made clear they won’t simply rubber-stamp cities’ housing plans, and intend to hold jurisdictions accountable for actually meeting their new goals. The state is threatening fines, withholding affordable housing funding and loss of permitting authority for cities that skirt their housing responsibilities.
Paul Campos, a senior vice president with the Bay Area Building Industry Association, said despite the rush of builder’s remedy proposals in Southern California, the provision’s requirement that 20% of units be affordable makes it challenging for projects to actually “pencil out” – developer-speak for “turn enough of a profit to get built.”
In part because of that financial reality, Campos said it’s unlikely the Bay Area will see many projects that are drastically larger than what local zoning laws already allow. Instead, he views the provision as a way to “soften or eliminate some heavy-handed local regulations.” For example, developers could add a few stories onto apartment projects to offset city development fees.
The type of city where the builder’s remedy makes the most sense, Campos and other experts said, is one where rents are high and developers have often struggled to get large projects across the finish line.
Palo Alto, which has a population and median rent level roughly similar to that in Santa Monica, could fit the bill.
“(Santa Monica is) encountering now what we very possibly will be in three months,” said Palo Alto Mayor Pat Burt.
Burt said Palo Alto is “racing” to finalize its plan for where new housing should be built, but he doesn’t expect to meet the state’s Jan. 31 deadline. It’s unclear what the upscale Silicon Valley suburb, home to Stanford University, would do if faced with a flurry of builder’s remedy applications. Burt expects an eventual court ruling on the Southern California proposals will determine whether Palo Alto would need to approve them.
Sonja Trauss, founder of the San Francisco-based housing advocacy group YIMBY Law, which launched an online workshop to help take advantage of the builder’s remedy, acknowledged the scheme has not been legally tested. Potential sticking points include how the state’s strict environmental laws apply and whether a city can deny proposals by essentially self-certifying its housing plan.
Another question is whether a builder’s remedy proposal would still be valid if a noncompliant city gets its housing plan certified after the planning and permitting process for the project has already begun. The state housing department has said such projects must go through.
Still, Trauss said cities planning on challenging the provision shouldn’t expect an easy victory.
“They may go to court, and they could prevail, but it’s definitely going to be a fight,” she said.
For some local officials, a brewing clash over the builder’s remedy is only the latest result of what they say are punitive state laws and policies that are wresting away local control and threatening to damage the character of their cities. The specter of largely unrestricted development is creating a sense of urgency to push back.
“It’s the responsibility of the state legislature to step in and ensure we don’t witness a drastic overreach,” said Burt.
State Sen. Scott Wiener, a Democrat from San Francisco and one of the principal backers of recent laws that have cleared the way for the builder’s remedy, said he has no such intent.
“It’s time to actually have enforceable standards,” Wiener said. “What’s more important, local control or having enough housing for everyone?”
For now, he said the builder’s remedy appears to be serving its primary purpose by convincing cities to get their housing plans in order sooner rather than later.
“The goal is not to ever have to invoke the builder’s remedy,” he said.
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