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Monday, April 22, 2019

SB-50 Suggested Amendments

SB-50 Suggested Amendments

On April 22, 2019 I sent the following letter to all members of the California Senate Governance and Finance Committee.  They will consider SB-50 on April 24th - 26th, 2019.  A full list of the Committee Senators and their emails is at the bottom of this post:
A more readable formatted version of SB-50 is available for download here: 
https://drive.google.com/open?id=1yPfqWvSvnVhbYhFnQVUJVXcpdgiG1vgu
----------------------- begin letter ---------------------

Dear Senator,

Thank you for your service to the people of California.  

While I oppose SB-50 as a “one-size-fits all blunt instrument” here are some suggestions a number of us feel would make SB-50 much more likely to accomplish its stated goals.

1.       Avoid Displacement:  There is high likelihood that builders could use SB-50 to “gentrify” lower income neighborhoods increasing displacement and homelessness. 

a.     Not Apply to Low Income Areas:  To avoid gentrification, the provisions should not apply to jurisdictions where the average income is below the state median.

b.     Require BMR in All Buildings:  The current SB-50 exemption of 10 units or less from any BMR requirement is less stringent than that of Sunnyvale and other communities.  It should be strengthened to at least 15% in all units constructed under SB-50 incentives.

c.       Database of Renters: SB-50 excludes places that have been rented in the previous 7 years.  Without a database of renters cities have no way of enforcing this.  An Assembly bill currently being considered would create a state-wide database of renters.  SB-50 should explicitly state it will not take effect unless and until such a renter’s database is created for any jurisdiction subject to SB-50.

2.       Define “Jobs-Rich” and “Good Schools”:  SB-50 does not clearly define “jobs-rich” and “good schools” even though those are key criteria for imposition of SB-50 mandates.

a.        “Jobs Rich” Definition: A well-defined objective quantitative rule should be written into the law - such as jobs with average pay 50% above the county median – or some similar clear and identifiable criteria.

b.      “Good Schools” Definition: A well-defined objective quantitative rule to define good schools might be schools scoring in the top 50% of the state.

3.       Define “Housing Crisis”:  If SB-50 is meant to “solve” a “housing crisis” in California it should define what it is in clear objective quantifiable means so we know where and when it applies.  It is impossible to solve a problem if you can’t tell when you are done.

a.       Objective Standard Needed: An objective standard needs to be defined which will enable a jurisdiction to know when it is subject to SB-50 so it will know what it needs to do to satisfy that condition.

b.      Not apply to areas not in a “housing crisis” - Of California’s 58 counties only 17 have a population over 500,000 – 23 counties have fewer than 100,000 residents.  In the vast majority of those counties housing costs are at or below the national average.  Thirteen counties are actually losing population. There is no need to give density bonuses in those counties as it will not lower already low housing costs.

4.       Environment: There are eight mentions of the environment in SB-50 but nothing explicitly improving sustainability.  To further strengthen California’s environmental record:

a.       Protect Solar Panels: SB-50 should explicitly state that no building under SB-50 may block the sun from existing solar panels or roofs where solar panels could reasonably be positioned.   Without this, property owners will be afraid to install solar panels for fear they could be shadowed by a nearby building. 

b.      Require Solar Panels: The California Energy Commission and Senator Wiener’s San Francisco have made a huge impact by requiring solar panels on certain types of new buildings under certain conditions.  SB-50 should further those goals by requiring that all new construction under SB-50 be required to have solar panels covering the equivalent of at least 70% of all roof surface area.

c.       Net-zero Buildings: California has made great strides in reducing GHG emissions in power generation, but there is almost nothing being done to reduce GHG emissions from buildings.  SB-50 eligible construction should be “net-zero” GHG emitters.

d.      Eliminate Natural Gas:  Natural gas is the dominant contributor to GHG emissions from both residential and commercial buildings (for space heating and hot water heating).  Forbidding SB-50 eligible construction from having natural gas connections – using heat pumps instead (already popular in Europe) – would set an example for the entire US.  We in Sunnyvale are moving in that direction as are other communities around the world.

Thank you again for your service to the people of California.

Sincerely,
Michael S. Goldman
Sunnyvale City Council Member, Seat 7
I write solely on my own behalf.
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Saturday, April 20, 2019

City Power Over Wireless Towers

Recent ruling by California Supreme Court says any city has "inherent local police power” under the California Constitution to determine the appropriate uses of land within its jurisdiction.  That includes cell phone towers so a city (like Sunnyvale) can tell a phone co. to adhere to city zoning standards for aesthetics.

 More here:

 http://www.cacities.org/Top/News/News-Articles/2019/April/California-Supreme-Court-Upholds-Local-Ordinance-R

 The opinion is here:

 https://www.courts.ca.gov/opinions/documents/S238001.PDF


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Saturday, April 6, 2019

Forum on SB-50

California Housing
Challenging the Narrative

Summary:  The current narrative is that everyone wants to walk to work (especially millennials) and we should abandon Single Family Homes (SFHs) and build only high rise apartments.  Here we look at data relating to housing prices and commuting.  We see that about half the population prefers to own a single family house and commute and the other half prefers a denser environment (townhouse and condos) and walk, bus, or bike (not drive) to work.

Link to this post (for sharing):
https://meetingthetwain.blogspot.com/2019/04/forum-on-sb-50.html

Discussion and Slides:

These are the PowerPoint slides and text (with a few additions) Sunnyvale Council member Michael Goldman (me) used at a Forum on California Senate Bill 50 and related "housing" bills.  The forum was held on April 6th, 2019, in Cupertino.  Also presenting were city council members Lydia Kou of Palo Alto, Julie Testa of Pleasanton, and Mayor Steven Scharf of Cupertino along with Susan Kirsch of "Livable California".  A video of the event will be available soon, as will the slides used by all participants.

Slide 1 (click image to enlarge):

SB-50 applies to transit stops and "job-rich" areas with schools with "positive outcomes".  "Job-Rich" is defined as more jobs than surrounding area.  Does Merced have more jobs than surrounding farms and fields?  Sure.  Are there any schools that do not have "positive outcomes"?  No.  So SB-50 applies everywhere.

There is no time limit or other criterion for when we will no longer be in a "housing crisis".  Without any definition of the "housing crisis" we can't tell where or for how long it exists.  If you can't define the problem then you can't know when you've solved it.  So, SB-50 will apply everywhere and forever.  In other words the "housing crisis" will never end.  If it never ends, then SB-50 isn't going to solve the "housing crisis".  Maybe it isn't intended to.

The key thing to know about SB-50 is that it is not directly intended to increase housing “affordability”.  The idea is simply to increase the construction of apartment buildings by allowing them to be constructed in residential neighborhoods.

Under SB-50, any single family home can be torn down and replaced with an apartment up to 4 or 5 stories - with a “density bonus” that’s 5-6 stories.  Near transit stops it is 5-6 stories with density bonus going to 7-9 stories.  Only 1 parking space for every 2 apartments can be required by a city or county.  That means two 2-bedroom apartments (four bedrooms total) cannot be required by the city or county to have more than one off-street parking space to share among them.  The builder may decide to build more off-street parking for higher end apartments which might not rent without more parking.  However, no jurisdiction can require it.

Slide 2 (click image to enlarge):
https://embarcaderoinstitute.com/portfolio-items/sb-50/
Text of SB-50 here: 

https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200SB50

This applies even to areas where housing costs are low and lots of housing is being built.  Areas like Riverside and Sacramento are already “affordable” to most people and there is lots of construction. Nonetheless, SB-50 applies there as well as San Francisco or Sunnyvale.

Slide 3 (click image to enlarge):
Minneapolis grew more than Silicon Valley?  Must be the weather!
From: https://meetingthetwain.blogspot.com/2018/10/on-move-1.html
and: https://meetingthetwain.blogspot.com/2019/03/lao-on-housing.html
The story is that there is a shortage of housing units because builders are unable to keep up with tremendous growth in the SF Bay Area.  This is false.  They can keep up with much higher growth in metro areas like Charlotte and Riverside where there is plenty of buildable land.

In fact, almost 90% of the top 300 US metro areas are affordable to any family with the median income.  It is only about 10% of those metro areas that are hard for median income buyers to afford.

Slide 4 (click image to enlarge):
https://shelterforce.org/2019/02/19/whose-affordable-housing-crisis
So why are housing prices high in the SF Bay area?  Simple - there's not much land to build on and some people can afford the high prices!  Revenue per employee is $1.3M at Google, $1.6M at Facebook, $1.9M at Apple.  Their employees don't get paid that much but they get paid enough more than the average worker that they are better able to outbid others for a single family home close to work.

You cannot bring in trillions of dollars from around the world and thousands of highly paid workers (with stock options) and expect costs to not increase.  What are people thinking?

Slide 5 (click image to enlarge):
From: https://howmuch.net/articles/tech-companies-revenue-per-employee
Shortages increase costs.  But high costs don’t mean there's a shortage.  A Lexus 500 costs 5 times a Corolla but there is no shortage.  Go buy 10 of them if you have the money.

Slide 6  (click image to enlarge):
The Great "Lexus Crisis" of 2019
So why are people commuting long distances instead of living near work?  Well, half the population wants to live in a small town.

Slide 7 (click image to enlarge):
https://uli.org/wp-content/uploads/ULI-Documents/America-in-2013-Final-Report.pdf
About the above graph - I want to point out this was from a survey done for both the "Urban Land Institute" (ULI) and "National Association of Realtors" (NAR).  The ULI desperately wants to stop suburban sprawl and get everyone to live in high rises.  They keep asking the same questions year after year hoping they will get answers they want to hear.  Instead they keep getting results (like slide 8 below) that say 50% prefer a Single Family Home, driving to work and stores, instead of condo/apt. and walk to work and stores.

Slide 8 (click image to enlarge):
Random variations in sampling means you never get the same proportions year to year.
https://www.nar.realtor/sites/default/files/documents/2017%20Analysis%20and%20slides.pdf
From: https://www.nar.realtor/reports/nar-2017-community-preference-survey
This applies to all generations - including "millennials".  Of millennials, 47% prefer "large yards & drive" vs. 53% who prefer "small yard and walk".  That is - with random variations in sampling - equivalent to a 50-50 split.

Slide 9 (click image to enlarge):
The "Greatest" generation are in their 70's and older and are less likely to want to drive.
From: https://www.nar.realtor/sites/default/files/documents/2017%20Analysis%20and%20slides.pdf
More at: https://www.nar.realtor/reports/nar-2017-community-preference-survey
So, lots of people commute from single family homes in distant suburbs to areas with lots of jobs but no room for more single family homes.  And VICE-VERSA!  People change jobs on average every 5 years - they aren’t going to change houses every time they change jobs!

And this shows up in actual data.  If we look at Palo Alto (slide 10) and how many commute more than 50 miles not only TO Palo Alto but FROM Palo Alto, we see that as population increases both the number and percentage of super-commuters increases – BOTH ways!  

Slide 10 (click image to enlarge):
Palo Alto increased both the number of jobs and the number of housing units from 2002 to 2015
resulting in more "super commuters" (Both Ways) than before.  (From Census data)
More here:  https://meetingthetwain.blogspot.com/2018/01/palo-alto-work-live-commute.html
This is absolutely normal.  This is how people organize themselves around metro areas in the US.

Slide 11 (click image to enlarge):
More here:
https://meetingthetwain.blogspot.com/2018/06/commute-distance-in-us-metro-areas.html
We have been building in the SF Bay area for years and are currently at the low end of affordability but it has been worse as well as better.  Slide 12 below shows that housing affordability in California has varied from a low of 14% in 2007 to a high of 55% in 2011.  It is currently at about 28% or roughly half way between the extremes.  Similarly for Santa Clara County, 27-year range of 12% to 42%, currently at 17%.

Slide 12 (click image to enlarge):

We are in the longest economic expansion in US history and it shows up in housing prices – if anything, it is a bubble not a crisis.

Slide 13 (click image to enlarge):
From John Burns Real Estate Consulting newsletter
This is projected to come back down to the trend-line by 2021 as seen in slide 14, below.

Slide 14 (click image to enlarge):
https://journal.firsttuesday.us/california-tiered-home-pricing-2/1592/
So what will happen?  "It is really hard to make predictions, especially about the future" (Yogi Berra) but two possibilities seem likely.

1.  Silicon Valley becomes like NYC with lots of tall buildings in the center and millions of commuters on mass transit (costing $Billions) - with suburbs sprawling out to Merced and Sacramento - or ...

2.  We become like LA.  We stop growing with new job centers forming in adjacent counties.  Many companies move to Texas or Washington state.  Silicon Valley population growth - already anemic at 6% below the national average - simply slows to a crawl.

Either way it gets more expensive.

Slide 15 (click image to enlarge):

For now this is....



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