Taking the W

Happy Tuesday, and welcome to another edition of Rent Free. 

In keeping with the hot, sunny weather afflicting the D.C. region this week, this week’s newsletter focuses on a few sunny cases of housing reform making their way onto the books. That includes: 

• Developers’ rush to make use of California’s new law allowing apartments near transit stops
• North Carolina’s sweeping abolition of minimum parking requirements across most of the state
• The final enactment of the federal housing bill

It’s been two weeks since the California law allowing apartments near transit stops across most of the state went into effect, and the applications are flooding in, at least in Palo Alto. 

Six projects making use of Senate Bill (S.B.) 79’s more generous density limits have been submitted to the Silicon Valley city, reports Palo Alto Online. 

The latest S.B. 79 application is for a 75-foot-tall, 17-unit apartment building that will replace a nonprofit school, located just a few blocks from a Caltrain station.

The project’s close proximity to a commuter rail station entitles it to claim the maximum density allowances under S.B. 79. The law allows smaller buildings to be constructed farther from major rail stops and next to light rail and bus stops. 

The proposed development’s sponsors are also making use of the state’s density bonus law to reduce the amount of parking they’re required to build. 

S.B. 79, which passed last year, represents the culmination of the state YIMBY (“yes in my backyard”) movement’s decade-long effort to adopt a state law allowing new apartment buildings near transit stops. 

By some estimates, the law will allow for the construction of one million apartments across urbanized areas of the state. 

The question now is whether S.B. 79 will actually build anywhere close to its potential. 

The case of Palo Alto gives cause for both optimism and pessimism. 

On the optimistic side of the ledger, Palo Alto developers’ rush to submit projects using the law’s zoning standards suggests that those standards provide significant relief from the local zoning standards the law overrides. Projects can actually “pencil” under the state’s new rules. 

On the more pessimistic side, the flood of applications is also driven by developers’ desire to lock projects under S.B. 79’s zoning standards before new local rules limiting the size of S.B. 79 projects go into effect. 

S.B. 79 gives localities a lot of flexibility in implementing the law. Localities have the option of adopting implementing ordinances that temporarily exclude certain sites from the new density allowances and cut the allowable densities in half. 

It also allows localities to adopt permanent “alternative” plans that shuffle around the zoned capacity S.B. 79 calls for. Under these alternative plans, localities can reduce the size of apartments that are permitted near transit stops in exchange for allowing larger buildings elsewhere.  

As a brief by law firm Holland & Knight notes, most major cities in the state are doing both. They are passing temporary implementing ordinances that shrink densities while they work up more permanent alternative plans. 

Palo Alto is no exception. Last month, it passed an implementing ordinance that cut S.B. 79’s density allowances in half. 

As Palo Alto Online reports, the city’s implementing ordinance goes into effect this Thursday. Developers have thus been rushing to submit applications for S.B. 79 projects within the two weeks when the more generous state zoning standards are in effect. 

That rush suggests that cities can effectively limit the homes built under S.B. 79 through the use of implementing ordinances. 

“Will there need to be clean up? Almost certainly,” says Nolan Gray, senior director of legislation and research for California YIMBY, which sponsored S.B. 79. “Even if the law is really well written, and I think this is much better written than past housing laws, you still have to fight for it to be faithfully implemented.” 

Gray notes that many jurisdictions, including Sacramento, are letting S.B. 79 go into full effect without local amendments. Localities’ ability to pass temporary implementing ordinances will also expire in 2032, when S.B. 79 goes into full effect. 

Elsewhere, localities’ efforts to blunt the impact of S.B. 79 have been shot down. San Diego planners briefly produced zoning maps that did not apply the law’s upzonings around many of the city’s bus stops. 

That effort provoked opposition from local activists and was eventually withdrawn. 

State-level zoning preemption is always a cat-and-mouse game. A premise of these laws is that localities will not upzone on their own. Unsurprisingly, some localities deploy whatever tools they have to negate the state law telling them they must allow more housing. 

With S.B. 79, time will tell whether the state or localities will win that cat-and-mouse game.  

Last week, North Carolina Gov. Josh Stein, a Democrat, signed into law a bill that eliminates parking minimums across most of the state. 

House Bill (H.B.) 162 prohibits local zoning and development regulations from requiring “an off-street parking lot to meet a minimum number of parking spaces per development or structure, regardless of occupancy or use.” 

Come January, when the law goes into effect, apartments, subdivisions, and strip malls can all be built without government-mandated parking spaces. Developers will decide how much parking the market demands. 

“Driving by big shopping centers with huge amounts of parking spaces that are never utilized until the last two weeks before Christmas, I got to thinking, why do we have to have so much parking that’s unused?” says Rep. Donnie Loftis (R–Gaston), one of the bill’s sponsors, to Reason.

The bill initially passed unanimously in the North Carolina House and received one dissenting vote in the Senate. 

Localities within the 20 counties covered by the state’s Coastal Area Management Act can still impose parking minimums on new development, unless the development is located within their historic districts. 

This provision emerged as a compromise measure with localities, says Loftis. It’s intended to ensure there’s enough parking in coastal areas whose populations swell during the summer months as vacationers flock to the beach. 

Even with that exclusion, North Carolina’s law is the most far-reaching parking reform to pass, says Tony Jordan of the Parking Reform Network, which advocates for the repeal of parking mandates. 

According to a tracker published by the Parking Reform Network, an increasing number of localities are moving to eliminate parking minimums across the board. 

At the state level, however, parking reform is usually proposed as part of a large housing reform package, says Jordan. The result is that the parking reforms that do pass typically only eliminate parking requirements for residential construction. 

North Carolina is “particularly notable and exciting,” he says, because the state passed standalone parking reforms that eliminate parking requirements for commercial uses as well. 

“The commercial mandates are probably more damaging for cities,” he says. 

The 21st Century ROAD to Housing Act finally became law this past week without President Donald Trump’s signature. The president had 10 days to sign or veto the bill following its transmission from the House. 

He took no action, meaning it becomes law automatically. 

Rent Free has spilled a lot of ink on the federal housing legislation, which began life in the Senate Banking Committee last summer as the ROAD to Housing Act. 

While the details of the bill have changed a lot, its final form remains a long list of mostly modest tweaks and changes to federal housing policy, many of which are aimed at increasing the nation’s rate of home construction. 

A handful of these changes attempt to make federal grant spending more pro-growth. 

The new law will redistribute existing money in the $3.3 billion Community Development Block Grant program from high-cost, low-building jurisdictions to jurisdictions that are building more housing. 

It also creates a $200 million per year Innovation Fund to subsidize the planning work of jurisdictions that have already adopted liberalizing reforms to their zoning code. 

The bill directs the Department of Housing and Urban Development (HUD) to publish model zoning reforms and streamlines environmental reviews for federally subsidized housing projects. 

The most direct form of deregulation in the bill is in the area of manufactured housing. The legislation eliminates a provision in the federal building code for manufactured homes that required these housing units to sit on a permanent steel chassis. 

Reformers have long argued that this provision needlessly drives up the costs of naturally affordable manufactured homes. 

The bill also imposes some new regulations on the housing sector. The final version of the housing bill generally prohibits large housing investors (defined as those owning over 350 single-family homes) from acquiring additional single-family homes. 

This is hardly a positive provision of the bill. It comes out of a baseless bipartisan panic over the notion that corporate buyers are outcompeting families for single-family housing and thus reducing homeownership opportunities. 

The silver lining is that the investor restrictions that were initially included in the bill were much more severe and would have amounted to a ban on build-to-rent housing–a growing source of new construction. 

The axing of those restrictions is a dodged bullet. It’s notable, too, that Congress managed to pass a housing bill without many billions in new spending or the addition of onerous “tenant protections,” as many congressional Democrats have proposed. 

Time will tell how effective the 21st Century ROAD to Housing Act will be. Many of the bill’s supply provisions involve using federal financial carrots and sticks to motivate local deregulation. Similiar, past programs have had mixed success. 

The deregulation of manufactured housing is a more direct reform and will hopefully have a more direct impact on increasing production. 

• California voters will consider not one but two bond issues for housing subsidies on the November ballot. One would provide money for affordable home construction. The other would subsidize loans for middle-income homebuyers. 
• Good news! The latest homeless encampment in San Francisco is part of a movie set. 
• The Washington Post editorial board opposes property tax freezes for seniors. 
• Following a high-profile alleged Airbnb squatting case, D.C. Mayor Muriel Bowser is proposing housing reforms that will make it easier to kick people out of short-term rentals after their stay is up. 
• Idaho leads the nation in homebuilding. 
• A new lawsuit challenges Santa Rosa, California’s emergency restrictions on mobile home rent increases.