State quickly closes ‘builder’s remedy’ loophole with OK of Santa Monica’s housing plan

Housing agency signoff means coastal city regains control of projects

Mayor Himmelrich, Neil Shekhter and Gustavo Velasquez (Twitter via SaMoMayor, Wikipedia, Kevin Scanlon, Getty)
Mayor Himmelrich, Neil Shekhter and Gustavo Velasquez (Twitter via SaMoMayor, Wikipedia, Kevin Scanlon, Getty)

Just like that, a golden loophole for developers in Santa Monica has closed.

On Friday — just days after City Council members had revealed that the city’s earlier failure to come up with an approved housing plan had led to a brief development bonanza — the California Department of Housing and Community Development (HCD) did in fact certify the city’s updated housing strategy, thereby closing an opening for developers that had occurred when the same agency refused to certify an earlier version of Santa Monica’s framework.

The agency’s approval was not unexpected — Santa Monica had been working with the state to ensure its new plan would be certified — but the greenlight from Sacramento nevertheless marked an important technical milestone, because it ensures that the City of Santa Monica will once again have authority over local development approvals.

The public, and even many members of Santa Monica government, had learned that the city had temporarily lost that authority at a council meeting only last week, when staff explained that the city’s failure last fall to secure state approval meant that at least a dozen development projects were being automatically approved.

“This is not theoretical,” Santa Monica planning manager Jing Yeo said at last week’s meeting. “This is very real and it’s happening.”

One council member, Phil Brock, referred to the state’s revocation of local control, a measure known as “builder’s remedy,” as a “hammer.” “Correct,” Yeo responded.

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Santa Monica’s short-lived approval boom was the consequence of a 1990 state law known as the Housing Accountability Act. Under the law, cities that are deemed noncompliant with their housing plans lose the ability to approve or deny projects with affordable housing components, and those projects instead are automatically approved, a function known as “builder’s remedy.”
Projects qualify if at least 20 percent of their units are affordable, or if the entire project is dedicated to moderate income tenants.
At the Santa Monica City Council meeting, which took place on Oct. 11, a vote adopted a new Housing Element update, which then paved the way for the state approval on Friday. As part of its update, Santa Monica agreed to zone for nearly 9,000 new units, including more than 6,100 affordable units, according to a city press release.

The release also notes that the adoption came after “major changes in state law that both impacted the housing capacity studied and reduced local control for qualifying housing projects.” Representatives for Santa Monica and HCD did not immediately respond to requests for comment on the state approval.

While the state’s approval means that Santa Monica once again has control over which projects it approves, that control does not apply retroactively, so certain projects that were submitted during the window while the city was out of compliance, and automatically greenlighted, will still have their approvals intact.

Over the period that Santa Monica was out of compliance, which lasted months, developers submitted more than a dozen project applications that sought to add nearly 4,000 total units, or more than 7 percent of the city’s existing housing stock. WSC Communities, a firm founded by Scott Walter and Neil Shekhter, the prominent apartment developer and landlord, filed a majority of those applications.

“We felt this was the best way to try and get housing built as fast as possible,” Walter, the firm’s CEO, said last week.

Without the builder’s remedy fast track, the same approvals could have taken years to secure, if they came at all.

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