Update on Housing Projects in Contra Costa Developers’ Innovative Ways to Help Cities Address the Housing Crisis

We have all read the headlines, and perhaps, have personally experienced the very real and significant housing crisis facing the Bay Area.  Here in Contra Costa County, housing prices increased nearly 10% in 2017, with the median sales price of a single family home in Walnut Creek coming in at a staggering $1,070,000.[1]  Housing sales dropped 11.4.% from 2016 to 2017.  It does not take an economist to understand what is driving these statistics; it’s simply a function of supply and demand.

The need for more housing—at all levels of affordability—is acute and reflects the demand side of the equation.  While there are more than enough qualified, well-financed and experienced developers eager to build housing throughout the county, the permitting and entitlement process is lengthy, enormously expensive and fraught with challenges from any number of sources.  Relative to the issue of expense, developers face development impact fees on average of $90,000 per unit, which does not include the cost to purchase the land, nor does it include processing and entitlement costs, building permit fees or school impact fees.  This affects the supply side of the equation.

Municipalities frequently find themselves caught between the state’s obligation to provide their regional share of housing units and vociferous opponents to new housing developments based upon fears of impacts to traffic, schools, air quality and quality of life. Other articles in this month’s Contra Costa Lawyer detail efforts by legislators to alleviate the housing crisis and will not be addressed here.  Rather, we would like to focus this article on just two recent housing developments and the innovative efforts developers and their land use counsel have used in seeking project approval.

Under the Housing Element Law[2], when a jurisdiction rezones properties in its General Plan Housing Element inventory to residential uses in an effort to accommodate its share of the regional housing need, those sites allow residential use on the properties “by right.”  This “use by right” authority means that, once an inventory site is rezoned to residential use, the jurisdiction’s review of a residential housing project proposed for the site may not require further discretionary review under the California Environmental Quality Act (“CEQA”)[3].

A recently approved apartment project in central Contra Costa County relied upon this statutory “use by right” authority. The apartment project was proposed for one of the city’s Housing Element inventory sites.  As a result, the city could not undertake any discretionary review typically associated with the  land use entitlement process (such as a conditional use or planned development permit) other than design review of the proposed project. Nor was the city permitted to undertake any CEQA analysis of potential environmental impacts or impose mitigation measures (other than those which had been identified as a part of the CEQA review of the rezoning of the Housing Element inventory site).

As CEQA is the most-relied-upon weapon in housing opponents’ arsenal, this statutory “use by right” provision is a powerful tool to acquiring approval of certain housing projects in a time- and cost-effective manner. This project approval will allow for the construction of 150 multi-family residential units, meeting the need for such housing while assisting the city in meeting its share of state mandated regional housing obligations.

Another example of developer creativity in securing project approvals is reflected in an infill development featuring mixed-use (residential and ground floor retail) that included hotel rooms which the city had envisioned for the parcel through a “specific plan” planning process.  That specific plan mapped out desired land uses on various parcels within the specific plan area, allowing parcels to be developed according to the particular land uses through a conditional use permit (“CUP”) issued by the Planning Commission.  As a result of allowing a change in land use (for example, from office zoning to residential zoning) by issuance of a CUP by the Planning Commission, a number of parcels in the city had seen a change in use from non-residential to residential.  Of course, this change has been market driven with developers understanding the need for more multi-family housing.

During the entitlement process for this particular project, the city considered a moratorium on developers’ use of the CUP process in connection with seeking project approvals.  The city was primarily concerned that too many mixed use projects were being approved using this streamlined CUP approach.  While the moratorium was, ultimately, not adopted by the city, it appeared the city was focused on providing hotel units on the site.

In an effort to address the city’s desire to add more hotel rooms, the developer offered to make just under a quarter of the residential units hotel units.  Creativity on the part of the developer was precisely what was needed to get the project approved, meeting both market needs and the city’s objectives for more hotel rooms within the city.

Despite public concern over crowded schools and streets, the Bay Area has far too few housing units to support the number of new employees flooding the region. Rather than working at cross-purposes, developers and public officials should strive to work cooperatively to meet the high demand for housing and to focus those efforts on under-utilized parcels in cities close to transit.

[1] http://rereport.com/ccc/
[2] Gov. Code § 65580 et seq
[3] Gov. Code § 65583.2(i)