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HomeMy WebLinkAboutStaff Report 14942 (2) City of Palo Alto (ID # 14942) City Council Staff Report Meeting Date: 11/7/2022 Report Type: Action Items City of Palo Alto Page 1 Title: Supplemental Report for Item #12: Legislative Update From: City Manager Lead Department: City Manager This supplemental memo is being transmitted to respond to evolving discussion and inquiry of the so-called “builder’s remedy” and specifically as it may relate to the Council’s discussion regarding its 2023 legislative workplan discussion. In the past few weeks, news media have reported that several developers in Southern California have filed applications for housing developments using the “builder’s remedy.” This FAQ provides information to community stakeholders regarding the builder’s remedy. What is the “builder’s remedy” and how does it work? The builder’s remedy refers to a provision of the Housing Accountability Act (HAA) that obligates a city that does not have a compliant housing element to approve certain housing projects even if they are inconsistent with local Zoning Code or the Comprehensive Plan. This provision has been in the HAA since 1990 but was rarely invoked before this year. When the builder’s remedy is available, a city cannot “disapprove” or “condition approval in a manner that renders the housing development project infeasible for [affordable housing].” A city can apply conditions that do not render the affordable elements of the project infeasible, but in practice, the builder’s remedy may require a city to approve a housing development that varies significantly from local code requirements. There are a number of open questions about how the builder’s remedy should be interpreted and applied. These issues will likely be determined by the courts in litigation involving California cities and local developers. A legislative solution might reduce the issues in contention, but at this time there has been no indication of legislative activity on the issue given legislative session has not yet started. What projects are eligible to use the “builder’s remedy”? The builder’s remedy applies to two different types of housing developments (projects where at least 2/3 of the square footage is residential): City of Palo Alto Page 2 • Developments where at least 20% of the residential units are affordable to low-income households, which are households earning 80% or less of the Area Median Income (AMI); and • Developments where 100% of the residential units are affordable to moderate income households (households earning 100%-120% of AMI) or middle-income households (households earning up to 150% of AMI). In Santa Clara County, AMI for 2022 is $117,900 for single individuals, $134,800 for 2-person households, and $168,500 for 4-person households. When is the builder’s remedy available to developers? According to the California Department of Housing and Community Development (HCD)—the State agency charged with administering the Housing Element process—the builder’s remedy becomes available on the date provided in State law for cities in a region to adopt a compliant Housing Element. In Northern California, this date is February 1, 2023. (Southern California and Sacramento had earlier Housing Element adoption dates, which is why a number of projects invoking the builder’s remedy have already been filed in these regions.) Some jurisdictions have argued that a 120-day “grace period” after the Housing Element adoption date should apply; HCD recently opined, however, that there is no grace period for the builder’s remedy. What can Palo Alto do to preserve local control? It is important for Palo Alto to adopt a substantially compliant housing element as soon as possible. Staff and residents, including a Council-appointed Housing Element Working Group, have been working for many months to prepare a draft Housing Element for submission to HCD. Staff expects to submit the draft to HCD in December 2022. By law, HCD is permitted to use 90 days for initial review and comment. The City is able to adopt its Housing Element after responding to HCD’s comments and completion of the environmental analysis. Staff is aware that HCD may seek more than one round of revisions to a city’s initial Housing Element submittal. Depending on the nature and extent of recommended revisions, the City will evaluate whether to adopt the Housing Element while concurrently considering additional revisions that will result in HCD certification. In addition, upon City Council direction, the City’s legislative lobbyists can advocate with Palo Alto’s State representatives regarding potential State law changes to housing element deadlines or implementation of the builder’s remedy. Cities across the state are discussing this issue, so a coordinated approach may be possible. How can I learn more about the “builder’s remedy”? The Association of Bay Area Governments has issued a circular on the builder’s remedy here. Additional materials from law firms and experts are here and here.