How new laws are changing Silicon Valley real estate
There is not enough housing in California—a fact that contributes to this area’s high prices and price stability- even in a bad economy. Understandably, many are pushing to increase the amount of housing, especially affordable housing, throughout the state. While this goal is certainly laudable, the implementation of certain measures that seek to increase housing density have met with a great deal of resistance. Although some argue that opponents to these measures are merely resorting to “Not-In-My-Backyard” thinking, others admit that there are legitimate issues related to traffic congestion, parking, and safety that must be considered.
The three most often discussed, and controversial topics related to housing density are Proposition 9, Proposition 10, and the “Builder’s Remedy.”
California Senate Bill (“SB 9”)
On September 16, 2021, Governor Gavin Newsom signed SB 9 into law in an effort to increase housing production, streamline the permitting process for new construction, and increase housing density. This law took effect January 1, 2022.
Under this new law, local jurisdictions must ministerially approve two types of projects if certain basic and objective criteria are met. These types of projects are:
- Splitting a single-family residential lot (RD-1 to RD-10) into two lots (a.k.a., an Urban Lot Split); and
- Adding a second dwelling unit in areas zoned only for single family residences.
Taken together, local jurisdictions are generally required to allow owners of land that currently contain a single-family house to split the lot and build a duplex on each half. Thus, there would be four housing units where one had previously stood.
To prevent developers and speculators from taking advantage of these new rules, there are specific provisions that include, among others:
- The property cannot have been rented within the past 3 years;
- The owner must confirm that they have the intention of living in one of the properties for the next 3 years;
If an application fits within the contemplated criteria, then the local jurisdiction would not have the power to deny the permit even if it would otherwise violate the town or county’s zoning rules.
California Senate Bill (“SB 10”)
SB 10, which was passed and enacted concurrently with SB 9, takes the concept of increased housing density to an entirely new level if the parcel is in a “transit-rich area” or an “urban infill site.”
Under SB 10, local governments are given a streamlined process to rezone certain areas to allow for up to 10 units where there may have only been one before. This is intended to eliminate, or greatly reduce, the amount of delay that the city and developers would face from expensive legal appeals that would take several years or even a decade to resolve.
For example, this rezoning could take effect without the delay and cost often associated with the California Environmental Quality Act (“CEQA”) compliance. While SB 10 does exempt towns and other governmental units from CEQA litigation, it does not relieve the project developer of CEQA compliance, so the overall benefit may be limited.