When We Make It Hard to Build, We Give Developers More Power Over Our Communities

A few months ago, I wrote about San Bruno, California's rejection of a 425-unit apartment complex, even after the developer jumped through an insane series of hoops. To get the project approved, Mike Ghielmetti's Signature Development followed San Bruno's own voter-approved downtown vision to the letter. The project was near mass transit. It would have had 64 affordable homes, a grocery store, community space, and Ghielmetti would also have paid $10 million into the city's general fund—a concession that feels like a bribe in all but name.

The rejection, by a single vote and two abstentions on San Bruno's city council, was easy to treat as a symbol of California's utter dysfunction when it comes to housing: in a county with a universally recognized housing crisis, which added 19 jobs for every one new home from 2010 to 2015, someone wanting to build housing could do everything the city asked for and still be capriciously turned down (in part due to a bizarre procedure in San Bruno in which abstaining council members' votes were counted as "no" votes).

Well, now there's an update on the story: predictably, the developer is taking advantage of a state law to move ahead anyway with a *larger* project with *fewer* concessions! The San Mateo Daily Journal reports: 

Leaning on streamlined development regulations loosened under Senate Bill 35, the Oakland builder is citing its newfound authority to construct 600 units spread across four buildings at the corner of San Bruno Avenue and El Camino Real.... 

The new version offers taller buildings, fewer parking spaces and no grocery store, as the developer’s letter leans on state construction standards facilitating dense housing near transportation hubs.

Ghielmetti is still offering to return to the rejected, 425-unit plan if the city will come back to the table.

Senate Bill 35 has been state law in California for about two years now. It requires cities to streamline the approval process for qualifying housing projects that otherwise meet the city's zoning and other requirements. SB35, in essence, says to cities, "You have to follow your own rules. And you can't stonewall projects that comply with your own rules, or delay them for years, as a way to deter developers from building."

But a lot of cities are resistant to the law because it supersedes public processes that cities like San Bruno use to extract extra value for the community from what might otherwise be a developer's windfall profits. This is the view of San Bruno officials who believe the original 425-unit proposal is preferable to the SB35-enabled alternative that Ghielmetti is now threatening:

For her part, Councilwoman Laura Davis said the developer’s new vision for the site is the confirmation of her worst fears when councilmembers voted 2-1 in favor of the original project, falling short of the three votes needed for approval. 

“I’m frustrated because it was a good project that we should have approved and now we are dealing with the aftermath of that,” said Davis.

A Development Culture That Favors the Big and Powerful

There's a much deeper source of dysfunction here, and that is that it's so onerous to develop in San Bruno (or virtually anywhere in coastal California), and there are so many costly regulatory hurdles and delays involved that it's virtually only viable to do so at an enormous scale like 425 or 600 apartments. Imagine jumping all those same hurdles just to build 20 or 30 apartments on a much smaller piece of land. Who would be crazy enough to try?

This is a system designed to turn each individual development proposal into a high-stakes battle. And when that's the case, the only developers in the arena will be the ones big enough to throw their weight around.

San Bruno acted rationally in trying to extract as many freebies from Ghielmetti as possible. You only ever get so many hundred-million-dollar projects, after all—and the city has a lot of unmet needs. Why not leverage the process to both meet a few of those needs and mollify citizen opponents at the same time? 

To many citizens, it seems only right and proper that a developer like Ghielmetti be asked to offer major concessions. Developers are profiting off the community, the logic goes, and so they should have to give something back. Instead of merely building apartments, it's standard operating practice in countless cities that an apartment builder might be asked to donate a park or other public space; cater to specific community priorities for commercial retail, such as a grocery store; or chip money in for city priorities above and beyond the taxes that the finished project will pay.

“This is a system designed to turn each individual development proposal into a high-stakes battle. And when that’s the case, the only developers in the arena will be the ones big enough to throw their weight around.”

And Ghielmetti is behaving rationally in invoking state law as a trump card. But even in states where there's no equivalent to SB35, large developers do have leverage—it's just less explicit. Their clout comes from the fact that cities, as a rule, do need new construction—whether to house workers (San Bruno is home to the world headquarters of YouTube and centrally located to thousands of other tech jobs), or shore up their tax base to pay for city services.

The result of Ghielmetti's application—rejection by a single vote due to a procedural fluke—was unusual. The more common outcome of this process (and the likely eventual outcome in this case as well) is that the giant developer and the city government successfully reach an arrangement in which the developer offers the city a bunch of concessions in exchange for whatever zoning or other code changes they require to move forward. A perfunctory public hearing is held, and the project is approved—the concessions provide the necessary political cover for any conflicted elected official to vote "Yes" and still be able to answer to angry constituents later. It's not an explicit quid pro quo, but in practice it might as well be. 

In all of this, it's the public that gets the short end of the stick. That culture of dealmaking and convoluted permitting processes makes housing scarcer and more expensive. It can result in land sitting idle for years waiting for a project of sufficient size and complexity to be worth the "return on brain damage" of getting permission to build. And sometimes, at the end of the day, the city ends up getting a building that actively harms the public realm, because of the leverage held by a developer dangling the promise of many millions of dollars in new tax base. 

Legalize Small

The biggest problem with "Make developers give something back to the public" is that a city's efforts to do so end up ramping up the cost and complexity of development until the game is even more stacked in favor of the biggest projects and the deepest pockets. And that, in turn, even more dramatically raises the incentive to shout "Make them give something back!" 

In an ideal world, we'd have hundreds of small infill projects going on at once. San Bruno could still get that 475 new apartments (or far more than that) but spread over dozens of sites instead of all in one gargantuan building. The culture of negotiation and dealmaking would be less dominant, because it's not practical to operate that way with small projects. For example, the logistical complexity of trying to impose inclusionary zoning on small projects is such that almost all such ordinances exempt individual homes or projects below a certain number of units (20, perhaps, or even 50).

What should replace it is a culture of consistent rules applied consistently. With a steady stream of small projects going up all over the place, you'd have a steadier stream of revenue flowing into the city's coffers, and a stream less dependent on the approval or denial of any one specific proposal. The small-scale developer can't throw their weight around—but nor does the city need to throw its weight around.

Of course, it's often the case that nearby residents oppose a triplex or corner coffee shop as vociferously as they do 425 apartments. This is why it's important that the next increment of development in neighborhoods—buildings that represent a modest growth or evolution in the area's character and intensity without radically transforming the landscape—be allowed as of right. No concessions, no open-ended negotiations, no fraught public hearings.

Let the community be heard in the abstract about what its zoning and development vision ought to be—let them hash it out in the zoning code and the comprehensive plan. But let's not let each individual project become an existential battle. When we do, Goliath tends to stomp all over David.

Cover photo by Priss Enri.

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