SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2019 - 2020 Regular

Bill No:	SB 940	Hearing Date:	5/11/20
Author:	Beall	Tax Levy:	No
Version:	4/17/20	Fiscal:	No
Consultant:	Favorini-Csorba

Housing Crisis Act of 2019: City of San Jose

Grants the City of San Jose flexibility in meeting the no net loss in residential capacity requirements of SB 330 (Skinner, 2019).

Due to the COVID-19 Pandemic and the unprecedented nature of the 2020 Legislative Session, all Senate Policy Committees are working under a compressed timeline. This timeline does not allow this bill to be referred and heard by more than one committee as a typical timeline would allow. In order to fully vet the contents of this measure for the benefit of Senators and the public, this analysis includes information from the Senate Housing Committee.

Background

The California Constitution allows cities and counties to “make and enforce within its limits, all local, police, sanitary and other ordinances and regulations not in conflict with general laws.” It is from this fundamental power (commonly called the police power) that cities and counties derive their authority to regulate behavior to preserve the health, safety, and welfare of the public—including land use authority. The California Constitution also allows cities that adopt charters to control their own “municipal affairs.” In all other matters, charter cities must follow the general, statewide laws. Because the Constitution doesn't define “municipal affairs,” the courts determine whether a topic is a municipal affair or whether it's an issue of statewide concern.

Planning and Zoning Law. State law provides additional powers and duties for cities and counties regarding land use. The Planning and Zoning Law requires every county and city to adopt a general plan that sets out planned uses for all of the area covered by the plan. A general plan must include specified mandatory “elements,” including a housing element that establishes the locations and densities of housing, and a land use element that describes the general categories of uses (such as multifamily residential, single family residential, retail commercial, and open space) that are allowed in specific portions of a jurisdiction.

Cities’ and counties’ major land use decisions—including zoning ordinances and other aspects of development permitting—must be consistent with their general plans. However, prior to 2019, state law didn’t require zoning ordinances for charter cities to be consistent with their general plans. SB 1333 (Wieckowski, 2018) extended the consistency requirement, as well as several other provisions of planning and zoning law, to charter cities.

State law imposes numerous requirements on the housing element of a general plan. A local government’s housing element must allow for enough housing to be produced to meet the jurisdiction’s regional housing need allocation (RHNA), which is updated on a statutory schedule (generally every eight years). The Department of Housing and Community Development (HCD) reviews and certifies housing elements as compliant with state law, and also reviews their zoning ordinances for consistency with the approved housing element. If a local government’s zoning ordinances do not include enough sites where housing is permitted at the density needed to meet its RHNA obligations, the local government must rezone sufficient additional sites within three years of certification of their housing element.

SB 330 (Skinner, 2019). The Legislature has enacted a variety of statutes to facilitate and encourage the provision of housing, including the Housing Accountability Act, the Permit Streamlining Act, and, most recently, the Housing Crisis Act of 2019 (SB 330, Skinner). Among other provisions, SB 330 prohibits, until January 1, 2025, most local governments from changing local planning rules to reduce residential capacity within the jurisdiction or otherwise change land uses to a less intensive use that would reduce residential capacity. However, SB 330 allows cities and counties to reduce residential development intensity (“downzone”) in one part of their jurisdiction as long as they increase residential intensity (“upzone”) commensurately in another part of the jurisdiction at the same time, so that there is no net loss in residential capacity.

City of San Jose zoning ordinances. The City of San Jose is a charter city. The city’s current general plan, Envision 2040, proposes 29 types of land uses within the city’s boundaries, including designations for urban villages that are intended to accommodate higher density housing and significant job growth, mixed use neighborhood, urban residential, transit residential that is intended to put mixed-use development near transit stations at moderately high density, urban residential that allows for medium density development and some commercial uses, and mixed use neighborhood that is intended for individual neighborhoods of denser single family homes or townhomes. The city has not yet adopted all the conforming zoning ordinances for these designations. The city must also adopt a housing element for the sixth cycle of housing element revisions no later than January 2023; accordingly the rezonings required under housing element law to ensure that there are adequate sites to meet the city’s RHNA obligations must take place no later than January 2026.

Many parcels outside San Jose’s urban growth boundary (but within its territory) are designated for open space or agricultural uses in the city’s general plan, but have zoning designations that allow residential uses that are inconsistent with those general plan designations, such as single family housing. Additionally, some industrial or commercial general plan designations are zoned to allow inconsistent residential uses. The image on the following page identifies these parcels.

San Jose is a charter city that for many years has relied on maintaining inconsistency between their general plan and zoning to ensure that development was concentrated in its urban core, rather than in its undeveloped outlying areas. Since the general plan designation overrides the zoning designation, the amount of housing that can be legally built on these parcels is negligible. However, in order to meet SB 1333’s requirements that its zoning be consistent with its general plan, the city must downzone these parcels to less intensive uses. SB 330 prohibits downzoning unless a city simultaneously upzones to avoid any loss in residential capacity.

Because San Jose is embarking on a more comprehensive effort to bring zoning for many parcels into consistency with its general plan, it argues that it is infeasible to downzone and upzone all the parcels that it needs to modify for consistency simultaneously, as SB 330 requires. The city wants the Legislature to grant it flexibility on when upzonings and downzonings can occur under SB 330.

Proposed Law

Senate Bill 940 allows the City of San Jose, for the purposes of complying with the no net loss requirement in SB 330, to first increase the residential capacity in one area of the city and count that upzoning towards a later downzoning of an eligible parcel. SB 940 applies only to parcels zoned for residential uses that are inconsistent with the general plan of the city in effect on January 1, 2020. The downzoning authorized by SB 940 must occur within one year of the

increase in zoned capacity takes place, and SB 940 provides that any downzonings only take effect once the City of San Jose establishes zoning districts that implement mixed use neighborhood, urban residential, transit residential, and urban village general plan land use designations.

SB 940 requires the City of San Jose to report each downzoning in the annual progress report that the city must file with HCD and to submit the annual report to the relevant policy committees of the Legislature in every year that the City of San Jose amends a zoning ordinance pursuant to the bill.

SB 940 provides that its provisions become inoperative once HCD certifies the City’s housing element for the sixth cycle and includes findings and declarations to support its purposes.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. According to the author, “Senate Bill 940 empowers the City of San Jose to protect green and open space while maintaining a commitment to increase capacity for housing developments. This bill is urgently needed because the City of San Jose is currently in the process of rezoning over 11,000 acres of open space that is currently incorrectly zoned for single-family homes. Without SB 940, the city will have to navigate a burdensome rezoning process that will make it difficult to meet the deadlines required in recently passed legislation. This bill will authorize the City of San Jose to up-zone infill housing sites proactively in the urban core and around transit, while also having the flexibility to strategically down-zone sites to prevent sprawl. In other words, San Jose will aggressively up-zone in the urban core, then use their down-zone capacity to appropriate re-zone and protect our open spaces. I want to make it clear that this bill will not decrease the City’s housing capacity.”

2. Careful…. Local governments are a creative bunch, and some find ways to skirt laws that they disagree with. Ordinarily, a request for flexibility on the upzonings and downzonings mandated by SB 330 could be seen as a mechanism for local agencies to avoid the bill’s requirements. However, SB 940 contains several provisions that ensure that it will be used in a manner that truly preserves residential capacity within the jurisdiction, as follows:

The sixth housing element cycle is expected to require significant increases in residential capacity to account for much higher RHNA obligations. As a result, most jurisdictions, including San Jose, will have to upzone additional sites to comply with state housing law, even in the absence of SB 330’s no net loss requirement. SB 940 allows the city to proactively upzone for the purposes of later reducing residential capacity, but sunsets this authority once HCD certifies the city’s housing element. This sunset helps to ensure that the city does not get to count upzonings that it would have been legally required to do anyway towards the downzonings that it wants to pursue.
Similarly, SB 940 provides that the city’s downzonings do not take effect until the city adopts zoning ordinances for many of its land use designations that allow dense residential development. This requirement ensures that residential capacity will be increased, consistent with SB 330’s purpose.
Finally, the bill requires the city to report annually on the use of this authority, providing the opportunity for the Legislature and HCD to hold the city accountable.

3. Who’s next? SB 1333 required all charter cities to bring their zoning ordinances into conformity with their general plans. While some charter cities required consistency between their general plans and zoning ordinances prior to SB 1333, others did not. Accordingly, it seems likely that other cities are likely to come forward with reasons of their own for relaxing provisions of SB 330, whether because of SB 1333’s consistency requirement or other implementation issues that arise. SB 940 sets a precedent for easing compliance with SB 330, which could be used by those cities who are less well-intentioned. Other city-by-city measures to loosen requirements set by SB 330 should ensure that, similar to SB 940, they are consistent with the spirit of the law.

4. Special legislation. The California Constitution prohibits special legislation when a general law can apply (Article IV, §16). SB 940 contains findings and declarations explaining the need for legislation that applies only to the City of San Jose.

Support and Opposition

(5/7/20)

Support: City of San Jose (co-sponsor); Santa Clara Valley Open Space Authority (co-sponsor); Building Industry Association of the Bay Area.

Opposition: Unknown.

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SB 940: Housing Crisis Act of 2019: City of San Jose.

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