SB 35 Explained: What Does the State’s Affordable Housing Law Require, and Is It Working?

The Santa Cruz City Council on Dec. 14 voted rather reluctantly to allow the controversial 831 Water Street housing project to move ahead, Santa Cruz Local reported. The 4-3 vote seemed reluctant because just a month earlier, the council voted against the project by a 6-1 count. Why the about-face?

As Santa Cruz Local writer Steven Baxter explains, the project’s developers filed their application under Senate Bill 35, a 2018 law that takes the approval process for housing developments, at least under certain circumstances, out of the hands of local governments.

The 831 Water Street development, the first SB 35 project in Santa Cruz, is drawn up as two buildings of four and five stories, with 140 housing units. Of those, between 55 and 82 will be designated as “affordable,” and rented to people who earn less than 80 percent of the region’s median income. In Santa Cruz County, the median annual  income for a single person is $73,850, and $111,900 for a family of four. The remainder of the units will go for market rates.

831 Water Street is one of a few dozen housing construction projects statewide that are taking advantage of SB 35’s restrictions on local controls over development.

A ‘Mess’ of a Housing Approval System

The affordable apartments are what allowed the developers to file their application under the provisions of SB 35. The law, authored by state Sen. Scott Wiener of San Francisco, is designed to encourage the creation of new affordable housing units by removing the pressure of local politics from the approval process.

“When local communities refuse to create enough housing—instead punting housing creation to other communities—then the State needs to ensure that all communities are equitably contributing to regional housing needs,” Wiener wrote, in a summary of his bill. “Local control must be about how a community meets its housing goals, not whether it meets those goals.”

In a September 2021 interview with the New York Times, Wiener called the existing system of approval for housing development “a mess,” recounting one project in the Bay Area which “had to go through 50 community meetings, even though it was entirely within zoning.” 

Why?

“We’ve created a structure where the priority isn’t to get housing built as quickly as possible. The priority, instead, is trying to make everyone happy,” Wiener told the Times. “It’s veered into this extreme situation where every project is discretionary, even if it complies with all of the local zoning rules.”

In other words, whether or not affordable housing units get built depends not so much on the need for housing, which remains at crisis level in California, but on a cumbersome local process designed to give a wide range of people representing a wide range of interests their say. The result: Housing projects that could make a dent in the state’s desperate affordable housing shortage get blocked.

SB 35 Takes the Views of Local Elected Officials Out of the Process

SB 35 was one of 15 housing bills signed by Gov. Jerry Brown in September of 2017. Others included a real-estate transaction fee of $75 per sale that would go toward homes for low-income residents, and a $4 billion bond issue to raise funds for the same purpose. But SB 35 was the marquee item in the package of housing legislation, revolutionizing the process to force local governments to approve affordable housing developments under what’s called a “ministerial” process.

What does “ministerial” refer to? A ministerial process is one in which a development is automatically approved if it conforms to local zoning regulations and state laws. Those determinations are to be made by professional staff members, taking the personal views and political considerations of elected officials out of the picture.

The law also fast-tracks affordable housing projects. After a developer submits an application invoking SB 35’s provisions, local agencies can take no more than 60 to 90 days (depending on the size of the project) to decide whether the proposal meets the objective standards. If the city misses that deadline, the project is automatically deemed to meet the standards.

Under SB 35, as long as a project meets the legal requirements, it does not even require a review under the California Environmental Quality Act, the state law that requires local agencies to evaluate the environmental impact of housing developments, as well as any project that might have environmental impact.. 

The law does not apply everywhere, however. Only when a county or city has failed to meet its Regional Housing Needs Assessment—a determination by the California Department of Housing and Community Development of how much housing a community needs to provide—can developers use the SB 35 provisions.

That’s not every jurisdiction in the state, but as of June 2019 it was 95 percent of them.

California’s Housing Crisis Remains Acute

Since taking effect on Jan. 1, 2018, SB 35 has not seen widespread use. Despite the provisions streamlining the process for developers, and requiring an approval within 180 days, the law has not spurred a boom in affordable developments. By the end of 2019, shortly before the COVID-19 pandemic, only about 40 SB 35 projects were in the pipeline, with about 6,000 housing units among them.

That’s barely a drop in the proverbial bucket. A study by the National Low Income Housing Coalition released in March of 2021 found that California has the worst shortage of affordable homes in the country, coming up 960,000 short. On a per capita basis, California ranks in the bottom five, with only 24 affordable housing units for every 100 people who need one, according to the study.

The SB 35 projects in the works as of late 2021 are concentrated in the Bay Area as well as in and around Los Angeles. That makes sense. Those areas are among the most heavily populated in the state and are also also the tightest and most expensive rental markets. But the affordable housing crisis is a statewide one. In the San Joaquin Valley, the state’s agricultural breadbasket, 89 percent of low-income families spend more than 30 percent of their income on housing, and 52 percent pour at least half of all the money they earn into housing costs. In Kings County those figures are 90 percent and 47 percent, numbers that are similar in many rural counties.

SB 35 Projects Still Face Serious Obstacles

Wiener’s bill was always contentious, with opponents claiming that it would result in more gentrification while shoveling profits into developers’ bank accounts. And perhaps worst of all, they said, the law would strip away cherished local control of housing development. That’s something that local governments have not given up easily.

The most prominent SB 35 project in the state so far has been a proposed development of 2,402 residential units alongside 1.8 million square feet of office space and 400,000 square feet of retail that would replace the decrepit Vallco Mall in Cupertino.

The project has met resistance at every turn, actually going before voters as a ballot measure in 2016 only to get batted down, and developers have turned to SB 35 as a kind of  leverage over the city. Two years after the failed ballot initiative, they proposed an alternative plan with enough affordable units to qualify under the law that had only taken effect at the start of 2018. 

Wiener praised the new proposal, saying, “This type of project is exactly why we passed SB 35.” But to avoid fast-tracking the SB 35 proposal, the city of Cupertino agreed to go ahead with an even more massive plan, under which the developers agreed to build a new Cupertino City Hall and add other benefits to the city such as $11 million worth of bike paths and new performing arts center.

But residents gathered signatures for a new referendum on the revised plan. Wanting to avoid another defeat at the ballot box, the developers reverted to their SB 35 proposal, which the city eventually had no choice but to approve. And even after that approval the project remains in limbo. In September, the city claimed that the SB 35 approval would soon expire and the whole project would be back to square one. State officials emphatically disagreed—and the fight continued.

The Vallco example shows that even with a law designed to force local governments to greenlight new affordable housing, the ongoing battle to solve California’s housing shortage will take more than legislation. SB 35 will not be around forever. The law is scheduled to automatically “sunset,” that is, expire, on Jan. 1, 2026.