New Housing Bill Has People Freaking Out

Housing apartmentMemes of a mild-mannered California legislator photoshopped as a Star Trek villain. A San Francisco supervisor suggesting the city should sue the state, to “thunderous applause.” Wealthy Marin County homeowners and South Los Angeles tenants’ rights groups working as political bedfellows.

All inspired by a wonky state housing bill that has yet to receive a single vote — and faces tough odds of passing the Legislature.

Senate Bill 827, sponsored by state Sen. Scott Wiener, a Democrat from San Francisco, tries to force cities to build more dense housing around public transit hubs. The bill has received a remarkable level of media attention both within California and nationally, providing fodder for think pieces from Slate, Vox, The Boston Globe, Bloomberg and The New York Times — which called it a “bold, divisive plan to wean Californians from cars.”

That attention has only amplified a loud and acrimonious debate over how the bill would transform California cities. Proponents see the bill as a radical and necessary step for the state to solve its endemic housing shortage and meet its ambitious climate change goals. Opponents see it as a blunt overreach of state power that would destroy the character of local communities while displacing long-established residents so developers could build more luxury condo towers for rich people.

Here are four things you should know about California’s most controversial housing bill in decades:

1) This isn’t hype. If it becomes law, the bill could really revolutionize California cities.

As currently written, SB 827 would essentially exempt all new housing built within half a mile of a train stop or quarter mile of a frequent bus stop from most local zoning rules. So, if a city had zoned an area for single-family homes, developers could invoke the bill to build multifamily apartment buildings between four and eight stories high. It would also free those projects from parking requirements and other zoning rules frequently abused by cities to impede new development.

How much area in major California cities would fall under the bill? That’s what makes this so radical. Preliminary analysis by the San Francisco Planning Department shows that basically all — yes, all — of San Francisco and huge swaths of Los Angeles would lose their local zoning regulations. Ninety percent of San Francisco’s residential parcels would have a higher height limit for new development under the bill.

A more rigorous analysis of just how much developers would take advantage of the bill, and how it would apply to smaller California cities, has not yet been conducted. But the potential is huge.

For decades, urbanists across the state have have longed for the type of density SB 827 would bring. Despite major pushback from some quarters of his home city that San Francisco would become unrecognizable should the bill become law, Wiener has stressed that such density is good for cities like San Francisco, and the most effective way to combat the region’s astronomical housing prices.

2) Many environmentalists love this bill

Proponents of SB 827 say it has two primary goals: 1) to increase the supply of housing and thereby lower housing prices, and 2) to reduce greenhouse gas emissions that cause climate change.

Urban planning academics and climate change activists argue the state can only meet its climate change goals—a 40 percent reduction in greenhouse gas emissions from 1990 levels by the year 2030—if it succeeds in getting people out of their cars and onto public transportation closer to where they work. Alternative energy sources and cleaner-burning power plants can only go so far: The leading cause of emissions nationally is the tailpipe. Building tons of housing in major job centers close to good transit seems like a sensible and necessary solution, they argue.

But at least one prominent environmental group with a tradition of opposing new development has balked at the measure. Angering many climate change activists, California’s Sierra Club has argued the bill would only create more local hostility to future transportation projects and would displace low-income residents.

Anti-gentrification groups argue that communities whose residents have lower incomes are much more likely to ride a bus or take a subway to work than commuters who earn more money. If lower-income residents are exiled to the suburbs as a consequence of the bill, its success at cutting carbon emissions will be muted at best.

Anti-gentrification and tenants’ rights groups not so much

Advocates for lower-income renters and urban communities of color have greeted SB 827 with a mixture of skepticism and hostility. A group of prominent Los Angeles anti-gentrification and civil rights groups signed onto a letter opposing the bill last month on the grounds that it lacked sufficient protections for renters whose apartments could be demolished to make way for newer, bigger, market-rate projects. They also expressed the broader fear that “opening the floodgates” around transit corridors would mean rents around shiny new developments would rise out of reach of current residents.

Wiener has addressed some of those concerns by amending the bill to include fairly strict renter protections. Developers who wish to demolish a renter-occupied unit would have to pay for the moving and living expenses of tenants for more than three years, and renters would have the right to move back into the new development at their old rent.

But the changes have yet to attract broad support from major housing equity groups, who fear the larger gentrification pressures possibly unleashed from the bill. It also didn’t help that backers of SB 827 waited until after the bill’s announcement to try to court those groups’ endorsement.

The bill faces a very tough road in the Legislature — a road that goes through Marin County

Bills that override local zoning control are rarely popular in the California Legislature. Homeowners in many regions of the state are, by and large, not thrilled with the idea of new apartment complexes going up next door over their objections. Homeowners are also more likely to vote than renters—a fact state legislators are acutely aware of.

Cities and counties are stealth power players in Sacramento, and are also not fans of having their zoning power stripped away. Up and down the state, mayors, city council members and county supervisors have come out against the bill, including Los Angeles Mayor Eric Garcetti.

Last year, lawmakers passed a handful of laws that encroached on the traditional zoning power of cities. But that housing package took a herculean effort to enact after years of failure, and importantly included new funding sources for subsidized housing, as well as tenants’ protections that attracted support from a wide coalition of housing groups. And the zoning process changes brought by those laws pale in comparison to what SB 827 could do.

Nowhere has opposition to state interference in local planning decisions been as fierce as in Marin County, an affluent northern suburb in the Bay Area. If the bill is to receive a full vote of the Legislature, it will first have to clear a committee controlled by Sen. Mike McGuire, a Democrat who represents Marin. McGuire could prevent the bill from moving past his desk and receiving a vote.

Is a California Housing Revolution on the Horizon?

HousingFrom downtown Los Angeles to Santa Monica, train commuters on the Expo Line journey from asphalt to ocean through some of the most expensive real estate in the United States. Each train pulls into stations of low-slung buildings that soon fade into vast expanses of single-family homes. The view from Los Angeles is hardly unique. Commuters from San Diego to the Bay Area and Sacramento see low-rise suburbs as the norm. And everything costs a fortune.

That might begin to change if the state legislature passes a bill addressing local land-use regulations. Introduced by Scott Wiener, a Harvard-educated attorney and state senator, Senate Bill 827 would effectively abolish zoning restrictions in Wiener’s district of San Francisco and for significant portions of the state’s most populous areas — and likely produce a boom in new housing construction. SB 827 sweeps away many local limits on height, density, and design within a half-mile of a train station—such as for BART or CalTrain—and within a quarter-mile of stops on high-frequency bus routes. So-called transit-rich zones would see local height limits lifted to anywhere from 45 feet to 85 feet—roughly from four to eight stories—depending on factors such as street width and station proximity. Cities could build taller, but they could not require that buildings be shorter. New projects built near transit hubs would also be exempted from minimum parking requirements. And as long as a particular project is up to code, no municipality could introduce design standards preventing developers from including the maximum number of units possible in a building.

Wiener hopes to fight sprawl by allowing Californians more opportunities to live closer to public transit, and to address climate concerns by reducing their need to drive. To Wiener, a liberal Democrat, housing is also about social justice. He believes progressives have “lost their way on housing,” as he told Forbes recently. Young people, the poor, and the elderly are demanding shelter only to find its supply limited by stringent regulations. “Gentrification is fueled by a lack of housing,” Wiener argues. “When there isn’t enough housing and rents skyrocket, landlords have an economic incentive to push out long-term renters by raising the rent or evicting them.”

Nearly a third of households in California’s metro areas can’t afford rent, according to the McKinsey Global Institute. A majority of these rent-squeezed households—some 3.7 million—are in Los Angeles and the Bay Area. In San Francisco and Oakland, even making $90,000 a year barely puts one above the affordability threshold. California’s affordability crisis is rooted in a housing crisis: not nearly enough homes are being built to keep up with demand. “We under-produce by about 100,000 housing units every year, and we have a housing debt that’s growing,” Wiener says. The most feasible way to pay off that housing debt, he believes, is to let developers build more units in concentrated areas.

Housing is the most pressing issue in California politics. Last year, Governor Jerry Brown signed 15 bills aimed at tackling housing affordability. Senate Bill 35, for instance, forces almost all of California’s cities to approve projects that complied with current zoning rules. Another bill placed a measure on the 2018 ballot directing nearly $1 billion a year to subsidize new low-income housing. These efforts are part of a growing trend in Sacramento to preempt local restrictions on housing. Some of these measures, such as a 2016 law easing the approval of new “accessory dwelling units” statewide, appear to be working. Los Angeles is seeing a 20-fold rise in applications for these so-called “granny flats,” built in backyards or above garages.

Transit-oriented development has assumed sacred status among Yes In My Backyard (YIMBY) progressives popping up across California. The ideal scenario for lowering the barriers to housing density near transit is to get more with less: more housing and affordability with less displacement and sprawl. The result is a traditional Main Street for the twenty-first century. After all, compact, mixed-use developments, accessible by foot, were the norm until the rise of the automobile and institution of zoning laws.

Building more housing is broadly popular in California. Sixty-four percent are in favor of more housing in their cities, according to a PPIC poll of the state. In San Francisco, some 70 percent support building more housing to alleviate cost burdens. Leaders in Los Angeles have formulated a plan to add 6,000 new homes within a half-mile of Expo Line stops between Culver City and Santa Monica.

Of course, building in someone else’s backyard is always more popular than construction in your own. Most instances of transit-oriented development, such as the kind that Arlington, Virginia, has pursued, take the shape of a corridor running through—but not impinging on—preexisting tracts of single-family homes. Los Angeles’s Expo Line housing plan up-zoned 250 acres while leaving the surrounding 2,000 acres of homes untouched.

Wiener’s proposal is more aggressive: it would immediately up-zone nearly all of San Francisco, as well as South Los Angeles’s sprawling landscape of single-family homes. Transit corridors in Oakland, San Diego, San Jose, and Sacramento would be able to build for demand. Nearly 3 million housing units could be situated within a half-mile of transit hubs throughout California. With fewer permitting rules, units could be built faster and with a greater variety of housing types between a home and a high-rise.

Critics of SB 827 fear displacement. Los Angeles city councilman Paul Koretz has labeled SB 827 “devastating,” telling the Los Angeles Times that his Westside neighborhood of “little 1920s, ‘30s and ‘40s single-family homes [would] look like Dubai 10 years later,” and without any public say in the matter. Damien Goodmon, founder of the Crenshaw Subway Coalition in Los Angeles, calls the bill a “declaration of war,” seeing it as a mask for large-scale gentrification. Laying on the hyperbole, Goodmon calls Wiener “a modern-day Andrew Jackson” pushing “a legislative agenda to enact a 21st century Trail of Tears.” Housing availability does not mean housing affordability, these critics say; only subsidies and public housing can achieve that.

Wiener acknowledges that his bill is a “heavy lift and isn’t guaranteed to pass” in its current form. There will likely be revisions as it winds its way through committee, with added provisions addressing housing displacement and demolition. Observers believe that Governor Brown, in his final year in office, would likely sign such a bill if it reached his desk.  But whether it passes or not, SB 827 shifts the window of acceptable discourse dramatically in favor of market-oriented reforms of housing policy. On that basis alone, Scott Wiener has positioned himself as a visionary reformer of California’s housing crisis.

Don’t Tax Family Businesses Out of California

tax signFamily businesses are the bedrock of our communities and the economy. A recent study showed that the state’s 1.4 million family businesses employ 7 million people. Family businesses tend to pay their employees better, train them better, and provide more generous benefits than nonfamily companies. We’re also less likely to significantly downsize during tough economic times.

I know because I’m the president of Holt of California, which was established in 1931 and is now owned by three families.

For years, like all businesses, we have had to adapt to ever-higher taxes and ever-more stringent regulations. To no one’s surprise, our state has ranked dead last the past two years in the annual survey of business executives nationwide conducted by CEO Magazine. But we have survived and now provide a wide range of equipment and servicing for construction and agriculture and employ more than 700 people in Northern and Central California.

But just when you think things can’t get any worse, along comes legislation by state Sen. Scott Wiener, D-San Francisco. Senate Bill 726 would place a measure on next year’s ballot to overturn two 1982 initiatives that abolished California’ inheritance tax and impose a 40 percent death tax on California’s family businesses. That would generate an estimated $4.5 billion a year for Sacramento politicians to spend, and would put California family businesses at a huge disadvantage compared to the rest of the nation.

The bill had been scheduled to face its first hearing on April 26 before the Senate Governance and Finance Committee, but after Family Business Association lobbyists organized a coalition of nearly 50 business and farming groups to oppose it, Sen. Wiener made it a two-year bill, meaning it won’t be heard during the remainder of 2017. FBA will do everything in our power to persuade Sen. Wiener to drop the measure altogether and if he declines to do so, to stop this poorly considered measure once and for all.

Why is it important to encourage, not destroy, family businesses?

Because families are in it for the long term, we focus not just on the next fiscal quarter but the next quarter-century. And because we’re based in our communities, we care about them, donating our time and financial support for community-based organizations and projects.

But keeping businesses family-owned is a struggle. Only about 30 percent survive into the second generation, about 12 percent make it into the third generation and just 3 percent operate in the fourth generation and beyond. And one reason for that distressingly low long-term success rate is high inheritance taxes.

While proponents of the current 40 percent federal death tax argue that only “the rich” pay because the first $5.5 million in assets are excluded, many family businesses and farms are land-rich and cash-poor. With the high value of land in California, the total value of assets can easily exceed that seemingly high threshold.

Furthermore, the need for the tax to be paid in cash is particularly troubling as many survivors are left with no other option but to sell homes, family farms and businesses and lay off employees just to pay those taxes. This is money that could have otherwise been used as working capital to create jobs and allow business expansion.

Sen. Wiener says he will only pursue the measure if the federal government abolishes its death tax, as has been proposed, but the bill does not contain such a clause. The bill also refuses to address the very real issue of what would occur if the federal estate tax is reimposed by a future Congress. If reinstated at the same rate, it could result in California estates being taxed at a staggering 80 percent rate.

While family businesses in the other 49 states could be significantly strengthened if the federal government abolishes its death tax, California would punish them and undoubtedly many would leave the state, taking jobs and tax revenue with them. Currently just 18 states impose such a tax – none with rates higher than 18 percent – while four states have repealed their death taxes since 2010.

Family businesses are the foundation of our economy and our communities. Isn’t it time our politicians take steps to keep family businesses operating profitably for the next generation instead of doing everything they can to drive us out of business, or at least out of California?

Ken Monroe is President and CEO of Holt of California and serves as Vice Chair of the Family Business Association of California.

This piece was originally published by Fox and Hounds Daily