By Eric Gelber
This installment of California Capitol Watch is a bit of a departure from its usual format. It is commentary rather than an objective presentation of a bill. Moreover, instead of focusing primarily on a pending piece of legislation itself, the focus is on the analyses of the bill prepared by staff of the Senate Committee on Housing and staff counsel of the Senate Judiciary Committee.
Although the subject of the bill is not quite the same (SB 649 (Cortese) applies to local tenant preferences for affordable housing residency), the analyses of SB 649 are to a large extent relevant to the validity of the Bretton Woods [nee West Davis Active Adult Community, or WDAAC] Davis-Connected Buyers Program (DCBP), which requires that 90% of initial home sales be to buyers who reside in or have a connection to Davis.
SB 649 would authorize local governments to adopt affordable housing residency preferences for certain locals at risk of displacement or who have been displaced.
The Judiciary Committee analysis points out that: “Residency-based housing preferences, once the tool of segregationists, have been re-purposed to mitigate the effects of gentrification and other causes of displacement. However, even well-intentioned residency preferences may be subject to challenges on a variety of bases, most commonly as violations of the FHA [federal Fair Housing Act], which prohibits discriminatory practices that make housing unavailable to persons because of race or color, religion, sex, disability, familial status, or national origin. Liability may be established under the FHA based on intentional housing discrimination, in which a plaintiff must establish that the defendant had a discriminatory intent or motive, or ‘based on a specific policy’s or practice’s discriminatory effect on members of a protected class under the Fair Housing Act even if the specific practice was not motivated by a discriminatory 
intent.’”
While the DCBP is being developed and implemented by the Bretton Woods developer, without City review, the City Council did approve the Development Agreement and Resolution authorizing the project, including a local buyers’ preference, to be presented to the voters for final approval. Thus, the City must share ownership of the adopted program and would likely have liability if the DCBP were found to violate federal or state law. The City was cognizant of this possibility when it included an indemnification provision in the Development Agreement related to the local buyers’ program.
The Housing Committee analysis notes the significance of the declaration included in SB 649 that the state supports a local tenant preference for lower-income households to restrict occupancy by creating a local tenant preference policy. No such declaration was made by the City Council in approving the development of a local buyers’ preference for seniors for Bretton Woods.
The Housing Committee analysis further points out that regardless of a city’s intentions, “a preference policy could risk three types of legal challenges: (1) Intentional discrimination claims under the Equal Protection Clause of the Fourteenth Amendment; (2) Right to travel claims under the constitutional right to interstate travel and migration; and (3) Disparate impact claims under the Fair Housing Act.”
The Judiciary Committee analysis notes that “the validity of a local residency preference is a case-by-case determination that will depend on such factors as the composition of the community and surrounding communities whose exclusion might have the consequence of perpetuating historical inequities. (See e.g. Langlois v. Abington Hous. Auth. (D. Mass. 2002) 234 F.Supp.2d 33, 62 [stating that when a “community has a smaller proportion of minority residents than does the larger geographical area from which it draws applicants,” a residency preference policy “cannot but work a disparate impact on minorities” (emphasis in original)]. … ‘The reality is that in communities that already present identifiable patterns of residential segregation and/or little racial or ethnic diversity, local housing preference policies can very easily have disparate impacts, segregative effects or both, in violation of the FHA.’ [citation]).”
The City of Davis is a community with a smaller proportion of minority residents than does the larger geographical area from which it would draw its applicants. The same would hold for seniors with connections to Davis—e.g non-resident seniors who have relatives in Davis or who may have gone to school or lived in Davis at some point in their lives. As such, a Davis residency (or Davis-connected) policy “cannot but work a disparate impact on minorities.”
The Judiciary Committee analysis notes that it is significant that SB 649 requires that a local government that elects to adopt a local resident preference ordinance demonstrate the need for and validity of a preference, and to ensure its proper implementation. A local resident preference ordinance would have to include, among other things: A clearly defined population eligible for the tenant preference; detailed findings that support a valid, nondiscriminatory government interest for the local preference; and a declaration that the ordinance has undergone fair housing review and comports with existing fair housing law. Neither the City Council-approved Development Agreement/Resolution nor the DCBP itself meets these criteria.
The population eligible for a buyer’s preference under the DCBP is anything but clearly defined. For example, in its most recent public iteration, it would exempt anyone who is a member of a class protected by the FHA—i.e., anyone who is included in a race, gender, national origin, etc. That is, it would exempt everyone and makes no sense.
Apart from the likely FHA issues, the DCBP would serve no apparent nondiscriminatory interest for the local preference. The purported interest is to provide housing for local Davis seniors (as opposed to outsiders from the Bay Area and elsewhere) and make available housing from which these seniors would supposedly downsize to local families. Even if legitimate goals, the DCBP, as described by the developer, would not accomplish these goals. As defined, Davis-connected would include seniors who never set foot in Davis (e.g., relatives of Davis residents) and seniors who may have briefly lived or attended school in Davis decades ago (e.g., in grade school or to attend UCD) but have had no connection since then. It is hard to see how these preferences would meet the needs of local seniors.
The same holds true for the purported intent of making larger homes sold by seniors who want to downsize available to local families. These larger homes could readily be purchased by monied outsiders, thereby undermining the intent of the DCBP to increase the net housing supply for local buyers.
The DCBP is either a well-intentioned but utterly inept attempt at addressing local housing needs, or a cynical (but successful) effort to reduce voter opposition to Bretton Woods by promising an unintelligible solution to a purported local housing need. In either case, the City Council should urge the developer to drop the DCBP entirely, as it makes no sense, would not address a legitimate community interest, and is likely in violation of fair housing laws.
Eric Gelber, now retired, is a 1980 graduate of UC Davis School of Law (King Hall). He has nearly four decades of experience monitoring, analyzing, and crafting legislation through positions as a disability rights attorney, Chief Consultant with the Assembly Human Services Committee, and Legislative Director of the California Department of Developmental Services.
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It appears to me that this bill addresses displacement risk of lower-income tenants within a city’s boundaries.
I see no comparison with Bretton Woods in regard to that. Instead, Bretton Woods displaces farmland, some trees (I understand), and any “no-income critters” that may depend on it.
Which is why I said the article focuses on the analyses rather than the specifics of the bill. The analyses address resident preferences more broadly.
Here’s another issue that’s impacting low-income renters in Sacramento, per an article I came across this morning:
https://www.msn.com/en-us/news/us/despite-eviction-moratorium-hundreds-of-sacramento-renters-have-been-kicked-out-during-covid/ar-BB1gH9jh?ocid=uxbndlbing
Not too likely that Sacramento is going to “build its way” to affordability there, either. Especially not for those with low incomes.
“Not too likely that Sacramento is going to “build its way” to affordability there, either. Especially not for those with low incomes.”
Good to see not much has changed since the last time I was here. Ron still argues that laws of supply and demand don’t apply to housing. Doesn’t account for how low income housing will be built without market rate.
Hey – it’s Craig!
Months after we last heard from him.
I figured that housing costs might have priced you out of the entire state, by now. 🙂
Welcome back, buddy! (In some odd way, I kind of missed you.)
I thought it had been discussed ad nauseam (I know I made quite a few posts about it) how viewing housing through a simplistic understanding of supply and demand doesn’t work. Builders will never let there be enough supply to impact home prices where it will effect housing affordability. So yes this statement is true; “Not too likely that Sacramento is going to “build its way” to affordability there”.
I have to disagree with that view Keith. That implies that builders have a collective agencies rather than an incentive to build houses on an individual level that will generate a profit for them. The collective action principles here suggest that at an individual level, as long as a profit can be turned, there will not be a sense of widespread collusion that you imply.
I worked for a home builder. I also personally developed and sold lots to home builders (even to some of the large public ones).
It’s not collusion. It’s basic business economics. I was the one that would look at which markets (in my case specifically Southern CA) to enter why. For my company I looked for and evaluated the markets developed lots for (mostly in the central valley….and at the time it was tied to market projections for financing).
Homebuilders will not enter a market where home prices look like they’re going to fall. It’s not collusion when all the home builders want to get optimum pricing and the greatest sales price by building and selling homes when they think they’ll get the most return on their investment. Every homebuilder does that. It’s not collusion.
It costs heavy capital to build homes. Home builders do not like to build on “spec”, they build when they have homes sold ahead of time. Beyond a few homes to jump start a market, you won’t see rows and rows of new homes built that add to the supply of homes which will effect home prices. Usually when you see homes being built….they’ve already been sold. You won’t see a flood of new homes effect supply to the degree that home prices will stabilize or go down….actually more often than not it’s quite the opposite. During the Great Recession, home builders did not rush out to build a bunch of homes when land became cheaper. They did not flood the market with a ton of newly built homes. There was in fact what the industry called “shadow inventory” a bunch of finished and unfinished (some barely entitled) lots that were originally intended to be developed and built out but sat quietly during the recession.
From the book “Capital City” Gentrification and the Real Estate State by Samuel Stein (pgs. 88-89)
“Citing neoclassical economics, city officials argued that upzoning would increase the housing supply in poorer areas, sopping up demand and resulting in lower overall housing costs. This argument, unfortunately, had little basis in reality. Late in her term as planning commissioner, Amanda Burden admitted as much. In a forum on urban growth she told and audience: “I had believed that if we had kept building in that manner and increasing our housing supply….that prices would go down. We had every year almost 30,000 permits for housing, and we built a tremendous amount of housing, including affordable housing, either through incentives or through government funds. And the price of housing didn’t go down at all.”
Or put simply, housing prices won’t go down until you build enough to exceed demand. Home builders aren’t going to build that many and aren’t going to build that many do to economic, financial and logistical constraints. So the homes that do get built are just going to continue to drive up prices because demand is never met.
The only way to increase the availability of family sized houses to a large number of families is to increase the supply of family sized houses. It is impossible to provide subsidized Affordable housing of sufficient amount to that market segment. And building more family sized housing is effectively the same at the DCBP paired with Bretton Woods, so its the same solution with same shortcoming. (And I can walk you through the logic that shows they are the same.)