We believe the Builders Remedy will have a big impact in the next few years in unlocking projects, while making cities create real plans to solve the housing crisis.

Here are five predictions, based on our conversations with dozens of developers, land use lawyers, and real estate investors.

Prediction 1: The builders are coming

Hundreds of developers will file Builder’s Remedy projects in 2023 as awareness spreads and more cities become eligible. YIMBY-Law is keeping track of city-by-city status.

The motivation for developers is clear. The SB 330 pre-application is simple to file and inexpensive. It gives the developer an option to pursue the zoning-optional project with a full application within 6 months, or use it as leverage to extract concessions for a zoning-approved project.

The clearest downside is the potential to damage the developer’s relationship with city staff. This risk looms large to repeat players in larger cities—think Tishman Speyer in San Francisco—but not to others.

An emerging tactic is to submit a legal letter alongside the SB 330 pre-app, explaining the developer’s intent to use the Builder’s Remedy. Multifamily developer Scott Choppin recently tweeted his letter as an example.

Scott’s project was somewhat unique in already completing CEQA in an earlier submission, which as you’ll see below, is a sticking point. Scott is not using Builder’s Remedy to bypass density constraints, but rather to bypass a broken discretionary approval process.

Prediction 2: CEQA is the fulcrum

CEQA is the California Environmental Quality Act. It was adopted in the 1970s, and envisioned as a way to ensure environmental protection in government decisions. Over decades of court decisions expanding the law’s scope, it’s been weaponized to block housing development in clearly suitable locations like Stevenson St. in San Francisco’s SoMa neighborhood.

Builder’s Remedy projects bypass zoning rules, but not CEQA. How developers navigate CEQA will separate projects into 3 buckets.

Bucket 1) Follow adopted plans for CEQA streamlining

California law requires both regions and cities to plan for future growth, and makes CEQA streamlining a carrot for developers to make the plans become a reality.

At the regional level, SB 375 (adopted in 2008) unified planning for housing and transportation infrastructure, with a goal of reducing greenhouse gas emissions from vehicle trips. Building dense housing close to transit is an obvious way to do this. SB 375 creates multiple CEQA streamlining options for qualifying projects. A full breakdown is available from SCAG.

The most developer-friendly exemption is for "Sustainable Communities Projects". These can qualify for full CEQA exemption if they meet a number of criteria, including a limit of 200 units and location within a 1/2 mile of a major transit stop. Meeting local zoning requirements is not one of the criteria, so Builder's Remedy projects should be able to take advantage of this exemption if they otherwise qualify.

At the city level, the Housing Accountability Act requires cities to identify exactly where future housing will be built in their General Plan, of which the Housing Element is a part. NIMBY cities will often use their General Plan to create a fantasy of future growth, knowing they can kill any proposed project via discretionary approvals in their zoning regs. Builder’s Remedy projects are immune to those discretionary approvals, suddenly making the city accountable to their General Plan. Sometimes dreams come true!

Being a discretionary process, adoption of General Plans are subject to CEQA. Therefore, cities bear the burden of preparing an EIR that covers all the housing proposed in the General Plan. This EIR can be leveraged to reduce CEQA scope for a developer proposing a specific project, down to project-specific significant effects which are peculiar to the project. This eliminates entire categories of CEQA scope, like traffic impacts, making the process more manageable.

Projects like this can actually be quite large, as cities have in many cases created very large allocations in their general plans. For example, look at 3030 Nebraska Ave, part of the wave of Builder’s Remedy applications in Santa Monica. The project proposes 2,400 units in 15 stories. It’s an upgrade from an earlier 190 unit proposal, which is covered in the just-submitted Housing Element (part of the General Plan), and close to a light rail stop.

Both regional and city level CEQA streamlining options are appealing, but a caveat applies. Every option includes at least some discretionary interpretation by a local agency. These ultimately roll up to a political body that can make bad faith arguments—got mountain lions?—or frivolous delaying tactics. By contrast, statutory and predictable CEQA exemption paths do exist, like those offered by AB 2011 or SB 35.

Bucket 2) Use the small infill exemption

CEQA has two exemptions for infill development: Class 3 and Class 32.

Class 32 has no unit limit, but projects must explicitly follow local zoning rules. Hence it's not a fit for Builder’s Remedy projects.

Class 3 is limited to 6 units in urban lots, and doesn’t rely on local zoning. This implies a 5-unit Builder’s Remedy project on a single family lot qualifies, with one affordable unit fulfilling the BR 20% affordable requirement. We believe there is an opportunity for small scale developers—and enterprising property owners—to take advantage of this exemption, which we’re calling BR-5 projects. These can fulfill the unmet intention of SB 9, the “end single family zoning” rule which has been bogged down by local regs.

As in Bucket 1, a city agency must still approve a Class 3 exemption request, so its not bulletproof. The eligibility language in CEQA is clear, but NIMBY cities are known to be creative in abusing CEQA to create delays.

We don't know of any Builder's Remedy project using this pathway yet. If you do, please let us know! We'd be excited to help, and we have some programs in the works.

Bucket 3) F*ck plans, go BIG

Builder's Remedy creates the option to ignore both zoning and the general plan, and propose lots of housing anywhere. This is a boogeyman scenario, almost guaranteeing a protracted CEQA battle. We think it’s unlikely such a project would come to fruition, but it’s possible for projects with enough margin. That can be enough to provide a developer with negotiating leverage in otherwise-stalled projects.

An example is the 2,300 unit beachfront project that drew national attention to Redondo Beach in September. The site of an aging power plant, the lot is zoned for public utility and park space. Prior attempts to rezone the site were shot down by public referendums. By using the Builder’s Remedy, the developer can just proceed directly to their project application.

Prediction 3: More housing is coming, no matter what

Most cities will adopt compliant housing elements to avoid Builder’s Remedy projects, laying the groundwork for future projects.

Santa Monica provides a compelling example. One can see their city council’s reaction to the Builder’s Remedy evolve in real time in their Oct 11, 2022 meeting. The context was whether to approve their staff-prepared housing element, which met state requirements to the chagrin of local NIMBYs.

Council member 1: Every day we don’t adopt [a compliant housing element], then more people get the opportunity to beat the clock with 15 story projects.

Council member 2: Has HCD said we’re stuck with these projects? 😳

City Staff: Yes. They sent us a letter from the housing accountability unit.

In other words, approving a compliant housing element will become a top priority for most California cities. As council member Brock describes later in the above video, local electeds will justify this to their NIMBY constituents with a simple question: “would you rather we had 15 story projects that can ignore zoning, like Santa Monica?”.

Unlike in past cycles, reaching compliance is a serious matter. It requires a viable, data-backed plan to reach RHNA targets turbocharged by SB 828. Cities that take the process seriously are making tough land use tradeoffs. That includes significant rezonings and other streamlining, like R-30 overlays in Encinitas and upzoning transit corridors in western San Francisco (pending approval).

Here’s a sub-prediction: After adopting compliant housing elements, most cities won’t keep up with their RHNA targets. This will open up multifamily lots to streamlining by SB 35 and related laws in the coming years. SB 35 exempts CEQA and subjective design reviews, and can be coupled to the state Density Bonus Law for density bonuses and allowances. (A note while we’re on SB 35. The labor wage requirements don’t apply for projects below 11 units. We’ve seen a lot of misreporting here.)

Even if the Builder’s Remedy isn’t used, it’s doing its job by forcing cities to accommodate growth instead of fighting it.

Prediction 4: There will be lawsuits

The Builder’s Remedy is yet untested in courts, but this will change.

Chris Elmendorf laid out the arguments that cities will use in denying projects. Appeals are expected to take years and reach the Supreme Court of California. We expect cases in the following areas.

• Development standards. Projects are required to be “appropriate to, and consistent with, meeting the jurisdiction’s share of the regional housing need”. Can cities define “appropriate” as conforming to their zoning regs? A student of Chris firmly argues no.

• Substantial compliance. Cities will argue that HCD’s determination of housing element compliance is not binding. Therefore a city can self-certify as compliant, following their self-serving reading of housing law, rendering Builder’s Remedy projects moot. For developers, the best way to avoid this ambiguity is to target cities with substantial gaps in compliance, like failing to submit a housing element at all.

• CEQA delays. Cities are so used to abusing CEQA they now say the quiet part out loud: most CEQA delays are not about the environment at all, but rather about blackmailing developers to extract concessions for politically-engaged stakeholders. There are ongoing legislative and court efforts to reform this. If these efforts are successful, they will unlock Builder’s Remedy projects from the threat of CEQA purgatory.

Conclusion

2023 will be an exciting year for housing development in California.

There are two buckets of AB 2011 projects: 100% Affordable and Mixed Use. Both have capital-A Affordable Housing requirements enforced by deed restrictions. Here we focus on identifying Mixed Use projects in California’s urban areas.

First we present a summary, followed by definitions of key terms, ending with risks for prospective developers to watch out for.

Photo by paul scherer

AB 2011 Mixed Use eligibility summary

Finding eligible lots isn’t easy. We’re building a tool combining the following checklist and local parcel information—get in touch to try it.

Lot Requirements

• Commercial zoning with office, retail or parking as principally permitted uses

• On Commercial Corridors: 70 to 150 feet wide, generally 4 to 8 lanes

• NOT within 500 feet of a freeway

• NOT within 3,200 feet of active oil or gas extraction or refinery

• NOT within a very high fire hazard severity zone

• NOT replacing Mobile Homes, RVs, or special occupancy parks

• NOT containing tribal cultural resources

• NOT swapped with a separate, non AB 2011 site by the city

• Can’t replace existing housing serving tenants within the past 10 years

• Can’t demolish a historic structure

Density and Height

The bill sets height limits and densities that vary based on the lot size and road width. The highest intensity is reserved for cities over 100k population, outside coastal zones, within 1/2 mile of major transit stops.

There is no mention of FAR or gross floor area in the bill. Rather, projects will borrow from the closest zone in the city or council that allows the density above.

Affordability requirements

All AB 2011 projects have minimum affordability requirements.

Affordable housing cost defines a limit on the percentage of household annual income spent on housing. This limit is combined with income levels, specifically the Area Median Income (AMI), to determine a maximum monthly “all-in” housing cost of 25-30% of income that includes mortgage or rent, insurance, and utilities.

There are 4 relevant tiers of income limits, defined as percentages of AMI: “extremely low” (30%), "very low" (50%), "low” (70%) and “moderate” (110%). Income limits are also adjusted by household size, which maps to number of bedrooms. A studio can fit a household of 1, a 1 bed can fit 2, etc.

As an example, the city of San Diego offers a helpful table of affordable housing costs (“gross rent”) for 2022. We’ll cover HUD adjustments in a future post.

Area median income is a county-level income metric, published by HCD and updated annually. Interestingly, the same affordable limits apply everywhere in a county, and are based on the county’s average income. Thus the income limits in working-class East San Diego take into account wealthy La Jolla. The affordability restriction may not be a limiter at all if you’re building in a lower-cost area in a county with wealth.

AMI varies widely in California. For example, the table below shows the 2021 AMI and income limits for 3 California counties of increasing income. San Francisco County's limits for a 2-person moderate income household (mapping to a 1 bedroom unit) is $143,600. Note the corresponding limit in lower cost San Bernardino is almost half.

Coastal Zone

An AB 2011 project in a coastal zone is subject to additional permitting requirements. Coastal zones are defined areas close to the Pacific Ocean, or extending inland along rivers and lagoons. See, for example, the blue line in the map below. The California Coastal Commission enforces this, and has maps on its website for the whole California coast.

Commercial Corridor

An AB 2011 project must be on a road that is considered Commercial Corridor: a high-use road, as defined by its capacity and access points to abutting lots.

Capacity is set by Right-of-Way (ROW) of between 70 feet and 150 feet. It’s measured from parcel-to-parcel (including sidewalks) and equivalent to about 4 to 8 lanes of traffic.

Access means adjacent lots can connect directly to the road. Its defined via exclusion as “not a freeway”. Freeways are defined as roads with access limited to dedicated onramps.

See Risks below for potential challenges to how ROW and freeways are defined. The relevant Vehicle Code sections are unfortunately not precise, creating some ambiguity in how the legal definition will be interpreted.

Major Transit Stops

An AB 2011 project gets extra density when close to a Major Transit Stop, as described above under Density and Height. A Major Transit Stops serves commuters via frequent bus, rail or ferry service.

There are three ways to qualify as a major transit stop:

(a) An existing rail or bus rapid transit station.

(b) A ferry terminal served by either a bus or rail transit service.

(c) The intersection of two or more major bus routes with a frequency of service interval of 15 minutes or less during the morning and afternoon peak commute periods.

On (a), note rail and bus rapid transit stations must be existing. Planned stops don’t count.

We see a lot of misreadings of (c). The requirement is the intersection of two or more frequent bus stops. This includes planned stops, which can be found in the regional transit plan and can be substantial.

Stops along a single, high frequency bus line don’t count. That’s a high-quality transit corridor, not a Major Transit Stop. We don’t make the rules, we just interpret them!

Metropolitan Jurisdiction

For maximum development intensity, an AB 2011 project must be in a metropolitan jurisdiction, as defined by the US Census Bureau. The relevant map from the Census Bureau shows almost all of California's populated areas are metropolitan (dark green), with exceptions for micropolitan (light green) in the mountainous North and Sierra Nevadas.

Neighborhood Plan

The existence of a Neighborhood Plan affects AB 2011. Unlike “general plans”, which every city has, a neighborhood plan is much more specific. It must include detailed maps of land use, utilities and development standards, and the financing and development plans to build them. An example of Foster City’s neighborhood plan is shown below. We’re building a list of plans that we believe meet this criteria.

If the property is subject to a Neighborhood Plan, AB 2011 eligibility is limited to sites that permit multifamily residential.

Note that Neighborhood Plans proposed after January 2022 don’t count, so NIMBYs can’t suddenly create them to stop development.

From the Neighborhood Plan for Foster City

Principally Permitted Use

AB 2011 requires a parcel to be eligible for office, retail, or parking as a Principally Permitted Use. This is defined by zoning. Zoning codes define both (i) what’s allowed in a lot and (ii) the process to request a building permit. Principally Permitted Uses are by-right or “automatic”, and do not require public hearings.

As an example,. there are 4 types of permitted uses in the city of San Diego. “P” stands for principally permitted uses.

Specific zones have different requirements for different uses. Here we see that in zones CC-1-1 to CC-5-6, Retail is principally permitted, making these zones eligible for AB 2011.

Known Unknowns and Unknown Unknowns

While AB 2011 creates a lot of opportunity, there are some uncertainties that a developer will have to keep in mind until they are settled by courts or follow up legislation.

Risk: Commercial Corridors right-of-way definitions

The Commercial Corridor definition is built on the definitions of right-of-way width and freeway.

(a) “Commercial corridor” means a highway…that is not a freeway, as defined in Section 332 of the Vehicle Code, and that has a right-of-way, as defined in Section 525 of the Vehicle Code, of at least 70 and not greater than 150 feet.

The definition of right-of-way is vague. Section 525 states:

“Right-of-way” is the privilege of the immediate use of the highway.

The public can use sidewalks, but that is not made explicit here. There’s an argument that sidewalks are not included, which shrinks the ROW and makes some roads not eligible.

We believe parcel-to-parcel is the right measurement, but some cities or anti-development groups may try to argue otherwise.

Risk: Exclusion zones based on nearby freeways

Certain section of avenues and expressways might be argued to be freeways, which creates a 500 ft exclusion zone. Freeway is defined in Section 332 in regards to access from abutting lands, and nothing more:

“Freeway” is a highway in respect to which the owners of abutting lands have no right or easement of access to or from their abutting lands or in respect to which such owners have only limited or restricted right or easement of access.

There are many avenues and expressways in California where abutting lands don’t have direct access, at least for certain stretches. It’s not clear if these are freeways for purposes of the 500 ft proximity exclusion.

Risk: Excessive local affordability requirements make projects infeasible

Cities may try to neuter the mixed-use bucket with arbitrarily large affordability requirements. These must apply everywhere, not just in AB 2011 eligible lots. Cities may be unable to pursue this by the pursuit of an HCD-approved housing element.

Risk: Future policy changes

As of October 2022, AB 2011 is the law of the land and comes into effect on July 2023.

It’s possible that future legislative action or a citizen’s referendum will change this.

In the event of a policy change, projects that are submitted while AB 2011 was active should retain their development rights under SB 330.

Disclaimer: this is NOT legal advice. Consult a land use attorney before investing in a project.

More eligible sites

Before AB 2011, developers had a hard time finding good sites to build dense housing on. Due to local anti-growth pressure, the majority of residential zoning in California is for low density single family. For example, in the Bay Area, 85% of residential lots are single family.

(source: https://belonging.berkeley.edu/single-family-zoning-san-francisco-bay-area)

Lots zoned for dense residential are largely built out. Redeveloping them into larger buildings has significant costs in acquisition and tenant disruption.

Many sites zoned for commercial uses could be excellent for dense development. They’re in high-demand locations and well served by transit. However, residential use of these sites requires a variance, a land-use exception granted by a local political body. Variances are hard to get, by design. They require political capital, which current residents have but potential future residents do not. Experienced developers are experts at getting variances by trading “community benefits”. But this process is political and opaque, ripe for corruption, and uncertain and impossible to plan for. Variances often become a tool for the connected to cash in on political favors. That’s no way to plan a city.

AB 2011 creates compelling eligible sites that don’t need variances. It overrides local zoning codes to allow dense housing in commercially zoned lots, with clear requirements that developers can plan around. These include:

• Commercial corridors. Lots must be on streets that are 70 ft to 150 ft wide, or about 4 to 8 lanes. This requirement is eliminated for 100% affordable projects.

• “Missing middle” height and density. Projects can be 3 to 6 stories tall, with a density equivalent to 5-10 units in a typical single family lot. Lots within a half mile of major transit stops get the most allowances.

• Affordable units. For mixed-income projects, between 13% and 30% of units are rent capped and reserved for means-tested tenants.

AB 2011’s eligibility is quite broad. As an example, San Francisco’s planning department published a preliminary map of eligible lots for mixed-income projects. It’s striking to imagine that each of these lots—in highly trafficked corridors like Geary Blvd and Market St—could become new, dense housing.

All in all, AB 2011 is expected to create 1.6-2.4M new housing units, of which 300k-400k will be affordable.

AB 2097 lowers development costs by eliminating minimum parking requirements

Parking requirements may sound mundane, but they loom large in the cost of construction and the type of construction that’s feasible. Required parking often dominates the physical space of construction. Look at some examples of what parking requirements do:

The former Qualcomm (née Jack Murphy) stadium in San Diego is an extreme example. About 94% of the land was dedicated to parking. Stadiums are kind of a worst case. And in fact, that stadium is a rare success story, thanks to San Diego’s forward-leaning housing policies. It is being redeveloped into an extension of the SDSU campus, with lots of housing and transit links replacing a sea of asphalt.

Your everyday strip mall has similar problems. Here’s a typical example in Sunnyvale, California. Less than 35% of the property is actually used by a building.

Of course, people have to actually get to a store. But in transit-rich areas, you can significantly reduce the parking provided — these are significantly overparked.

It’s also important to note that parking isn’t being made illegal, it’s just no longer mandated near transit. That means developers can determine how much parking will be needed, with their knowledge of the specifics of a site.

What’s the impact of all this parking? CA YIMBY reports that parking adds about $40,000 in construction costs per space to housing. A lot of that is the opportunity cost of not being able to build actual housing instead.

That extra cost is substantial, and is ultimately borne by the home renter or buyer.

AB 2011 sets clear and consistent development rules

AB 2011 projects bypass Discretionary Review. Issuance of a development permit requires either a “discretionary” or “ministerial” review by local planners. Discretionary review can be arbitrary and capricious. A project might be killed because a committee member with no architectural training dislikes a design element, or pretends to. Or a local ballot initiative ca be used to kill an approved 60-unit affordable senior housing project, resulting in 16 $5M homes being built instead . The uncertainty and delays while the different constituencies battle it out, add massive risk and cost to projects.

By contrast, ministerial review is objective and can be described in a checklist. Developers using AB 2011 and similar regulations can know exactly what standards they have to follow. As long as developers follow the standards, they have confidence that their projects will be approved. There’s still a lot of nuance and detail required, but the process is inherently streamlined.

AB 2011 projects are exempt from CEQA. CEQA is California’s environmental protection law. It requires extensive ****documentation and mitigation of environmental concerns, real or imagined. CEQA was signed in the 1970’s as a way to give citizens a voice in shaping projects with environmental impact. It’s now one of the most effective anti-growth tools, often abused to extract wage concessions or maintain exclusivity of wealthy neighborhoods. CEQA reports can add years and arbitrary costs to projects, which deter developers from ever attempting them. Exempting transit-friendly housing developments from CEQA removes this potent and misused tool from the NIMBY toolbox.

Summary

In the coming years, California will get a lot of new housing thanks to legislation signed today and in the past few weeks. Much of it will be in under-used commercial lots, in the heart of vibrant and in-demand neighborhoods. Reserved parking will fit the local demand, encouraging walking, biking and transit use. Developments will still be expensive and risky, but an entire category of discretionary and environmental reviews will be skipped. It's time to build that future!

What we recognize as modern zoning started in Berkeley, CA in 1916. White and wealthy residents of growing communities did not want non-white, lower income neighbors. To prevent this, they created land-use requirements that enforced economic segregation. Only large lots with single family homes would be allowed in their “nice” parts of town. Recent books by Nolan Gray and Jenny Shuetz have all the sordid details.

The general pattern now holds in much of America, with notable exceptions like Houston. Grimes explains why.

California is an outlier due to its history of economic booms and unique topology. Sprawl is limited by physical barriers like the San Francisco Bay and commuting distance. High-pay tech and media created hundreds of thousands of jobs, attracting ambitious people from all over the world. The supply of new housing did not keep up with the growth of the economy. The newcomers bid up the price of existing units, displacing existing residents.

Two policy responses grew in the mid 2010’s, with opposing shapes.

The “left-NIMBY” group bet on tenant protections and blocking market-rate construction. They cast developers as the bad guys, since developers seek to maximize their profit and new units generally cost more than what they replace. Existing tenants benefit from this approach, as do local advocacy groups with political leverage over developers. The tradeoff is that housing costs increased for everyone else, as the competition for existing units increased. This movement appears to be losing steam as local and national left-wing leaders embrace the need for more housing, not less.

“Don’t Blame Developers For The Housing Crisis. “ - tenant advocate Randy Shaw, author of Generation Priced Out: Who gets to live in the new urban America

The YIMBY group bet on more supply. They support an “all of the above” solution, including new market rate housing, more affordable housing, and tenant protections. YIMBYs built momentum with legislative wins starting in 2016. Scott Wiener’s SB35 streamlined new supply in cities that don’t meet planning goals. Multiple laws unlocked ADUs in single family homes, effectively eliminating single family zoning. YIMBY as an advocacy group has its share of critics. Left-NIMBYs call them shills for developers, while some developers chide them for not building housing directly. YIMBY is growing.

Next up, part 2: It’s time to build housing in California: The impact of AB 2011 and AB 2097.