Housing experts: Mere threat of “builder’s remedy” fast-tracks affordable housing development

In this Opp Now exclusive, three experts (SJSU’s regional planning professor Kelly Snider, Bay Area Council’s senior VP Matt Regan, and California YIMBY’s research director Nolan Gray) parse the builder’s remedy provision of CA’s Housing Affordability Act—which lets developers bypass local zoning laws for affordable housing projects if that city’s Housing Element is noncompliant. The provision has yet to be tested in court, as many jurisdictions are negotiating with—or, like SJ, throwing their hands up at—developers to prevent lawsuits.

Kelly Snider, San Jose State University Urban and Regional Planning professor, Real Estate Development certificate program director:

From an applied economics perspective—looking at the actual reality of things—I don’t think the builder’s remedy makes a big difference on its own. This is mostly because it’s untested; it hasn’t been tried in the courts. So when that happens, we’ll be able to determine if it’s really the hammer people think it is. That will take a year or two or maybe more.

What is quite effective is that the threat of the builder’s remedy carries a lot of power. In 2023, we’ve already seen this effect in cities across California. Let’s say a small town planning director or city manager gets a builder’s remedy application from a powerful developer, on some fancy letterhead, demanding they get permits for an ambitious new project. The planning director/city manager goes, “Shoot, we have to say yes to this; we can’t just keep saying no.” So what often happens is they call up the developer and strike up a negotiation (e.g., “We’ve been saying zero units, your app says 500, so how about 250 units and call it a day?”). In that sense, the threat—not the remedy itself—gets cities to say yes to things they might have rejected in other situations.

Matt Regan, Bay Area Council senior vice president:

This is a provision that’s near and dear to us at the Bay Area Council, as we sponsored the mid-’80s legislation that created the builders’ remedy. But up until relatively recently, it hadn’t been used. The primary reason is that most cities in California historically had a compliant Housing Element. It was fairly effortless to produce a compliant Housing Element because RHNA (Regional Housing Needs Allocation) numbers were reported as ridiculously and incorrectly low. These bogus numbers downplayed cities’ true level of demand, so it was easy to create plans that accommodated them. Then, in 2018, we sponsored SB 828, which requires the state to use real scientific methodology to calculate overall demand, based upon factors like overcrowding rates and rent increases. It also requires that previous housing production deficits be factored into a jurisdiction’s future RHNA number. Now, the State Housing Community Development Department has to come up with a realistic, much larger number. This number gets filtered down to the cities, which must produce Housing Elements that in many cases require them to zone for 3–4x more units than what they’ve ever dealt with.

With that, many cities across California are struggling wildly to meet the law because the RHNA numbers that they must plan for finally reflect actual demand. So they’re having to zone parcels and densities that they’ve never zoned before.

The Housing Accountability Act (builder’s remedy provision) states that a jurisdiction without a compliant Housing Element temporarily loses zoning restrictions. Thus, for any proposed development project that has 20% affordable housing at the low-income level or 100% at the moderate-income level, it can’t be inhibited by local zoning controls. Yes, it still has to go through processes like CEQA, but the city can’t mandate a certain size or density.

SB 828 created a scenario where far more cities than ever before are out of compliance in their Housing Elements. This makes the builder’s remedy a useful tool, and it is becoming harder than ever before for anti-growth cities to block good projects and much-needed housing.

And here’s the thing: The builder’s remedy is like the boogeyman. It scares cities, but we don’t know yet if the threat is real. Let’s say a developer goes to a city without an approved Housing Element, and this developer constructs a 50-story high-rise that has 20% low-income units. It’s unclear if the city could stop the project or the developer would make it through a legal challenge. That type of proposal has yet to be tested.

What we have seen is developers proposing large projects and forcing cities to the table to negotiate. City Attorneys are clearly advising their Councils that the boogeyman might be real and they’d be wise not to find out in court. Particularly in Southern California (e.g., Santa Monica), cities are realizing how mindful they must be of the threat of the builder’s remedy. They’re approving projects that they would have, in the past, rejected with “over our dead bodies.” Developers have more leverage now to force cities to “take this project or a builder’s remedy project.” So then we’re getting projects built in cities that have traditionally been anti-growth and have refused to accommodate their share of our population growth in associated housing needs. These are positive things.

Another clever part of the legislation states that if a site has been in three previous Housing Elements but has not been used by a developer, a city can’t include it in future Housing Elements. This helps eliminate steep, inaccessible sites and ensures jurisdictions are making honest efforts to promote future growth.

Nolan Gray, city planner, California YIMBY research director, author:

Everyone’s aware that California has a severe housing shortage. It’s why we have some of the highest housing costs and lowest home ownership rates in the country. It’s why, for the first time, the state is losing population.

What’s driving our housing shortage? It’s downstream of local rules and regulations that make it hard to build new housing, especially in areas near jobs and transit where shortages are most acute. The extent to which local rules and regulations block housing varies, of course, but many cities use zoning regulations essentially to block all new housing (or at least to impose fees and mandates that render construction more expensive).

In the last few years, the State of California has come in, saying, “We’re going to find out ways to reduce the local regulatory burden.” So they now require that jurisdictions come up with local plans to remove some of these barriers and, at least theoretically, allow for the market to provide some share of the housing California needs. That process sometimes involves preempting certain regulations. For instance, jurisdictions can no longer impose minimum parking requirements within half a mile of transit, and they can’t ban residents from constructing accessory dwelling units. After all, we don’t want jurisdictions to come up with “rules” that are essentially bans.

Many jurisdictions have complied and are either in the process of removing regulatory barriers or will soon do so, but many have said, “We’re not going to comply with state law. We’re going to fight it as much as possible.” When this happens, those jurisdictions are subject to the builders’ remedy. A builder can essentially say, “I’m going to build this project,” and they can get permits without being obliged to comply with arbitrary local regulatory barriers for new housing.

The builder’s remedy is beginning to make headlines. Results are starting to trickle in, and jurisdictions testing state housing laws are realizing that there’s going to be consequences for continuing to block market efforts to address the housing shortage. Developers and residents are benefiting from fast-tracked projects that are affordable.

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