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HCD Prematurely Releases Determinations Implementing SB 35’s Streamlined, Ministerial Approval Process for Certain Housing Projects

On January 31, 2018, the California Department of Housing and Community Development (“HCD”) made several determinations pursuant to Government Code section 65913.4, commonly referred to as SB 35. SB 35 requires certain local agencies to ministerially approve multifamily housing projects that meet a long list of standards. (Please click here for our SB 35 Eligibility Checklist.) Some of HCD’s determinations were, as we explain below, made prematurely and cannot be made until cities and counties submit reports to HCD that are due April 1, 2018.

SB 35 tasks HCD with making only one determination. It determines whether cities and counties are subject to SB 35. If HCD determines that a city or county has issued more building permits than their “share of the regional housing needs, by income category, for that reporting period” (subd. (a)(4)(A)), the city or county is not subject to SB 35. Reporting period is defined to mean either the “first” or “last half of the regional housing needs assessment cycle.” (Id., § 65913.4, subd. (h)(7).) SB 35 also states that localities “remain eligible” until HCD’s “determination for the next reporting period.”

In its January 31, 2018 publication, HCD, nonetheless, determines what level of affordability is required for streamlining proposals in each jurisdiction that is subject to SB 35. SB 35 provides that in jurisdictions where the latest “production report” submitted by the jurisdiction to HCD reflects that it approved fewer above moderate-income units “than were required by the regional housing needs assessment cycle for that reporting period,” 10% of the units in projects in excess of 10 units must be affordable to households making below 80% of area median income. (subd. (a)(4)(B)(i).) By contrast, the affordability requirement is 50%, where the jurisdiction’s latest “production report” reflects that the agency issued building permits for fewer below moderate-income units “than were required by the regional housing needs assessment cycle for that reporting period.” (subd. (a)(4)(B)(ii).) These particular sections do not direct HCD to make determinations.

Even if HCD was tasked with making SB 35’s affordability requirement determinations, HCD made its determinations prematurely. SB 35 defines “production report,” on which those determinations are to be based, to mean “the information reported pursuant to subparagraph (D) of paragraph (2) of subdivision (a) of [Government Code] Section 65400.” Government Code section 65400 has long required the submittal of information to HCD concerning the status of the implementation of the jurisdiction’s Housing Element. The cross-reference is to a newly added subsection of 65400 that was added in 2017. (We believe that the cross reference was intended to be to subdivision (a)(2)(H), another newly added subsection.) The first version of the annual report that will contain a “production report” is not due until April 1, 2018. It is also notable that HCD based its determinations solely on building permits issued, but the 10% affordability requirement must be based on “units . . . approved,” information that HCD does not yet have.

Agencies that receive SB 35 applications prior to their filing of their 2017 annual report or April 1, 2018 may wish to consider rejecting or suspending them until after the submittal of the report or the passage of the April 1, 2018 deadline. Advice of legal counsel is strongly recommended.