LifestyleYou can build a skyscraper anywhere in Davis, California

You can build a skyscraper anywhere in Davis, California

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Right now it’s legal to build a skyscraper anywhere in Davis,
California
(a college town outside of Sacramento). Unlimited height,
anywhere in city limits, as long as you promise to dedicate 20% of the
apartments to people with lower incomes. Well, it’s legal in theory, no one
has ever tested it. But you could be the one to test it! And hopefully make a
boatload of money along the way, and help prevent more sprawl into wildfire
zones.

Every eight years, every city in California gets an “allocation” from the state
government
for very low, low, moderate, and above income housing. Each
city then needs to show it has a good plan – typically, a zoning map with some
spare capacity – to meet the goals in the allocation. Generally this involves
identifying sites in the city – places like empty lots, parking lots, abandoned
buildings – and rezoning them for additional density.

Davis, California

There’s lots of “cheating” – cities pretending that a site will turn into
housing when there’s no chance it will turn into housing
.
However, the state has in recent years A) cracked down on cheating by adding
stricter requirements and B) set much larger allocations for each city,
especially wealthier cities. So a lot of cities that have historically not
welcomed housing are struggling this time around.

Davis (population 65,000, plus about 10,000 college students at UC Davis) is one
of those cities – it is the wealthiest city in the area, and has for decades
had a 1% cap on growth. This was not enough to meet its aggressive new goal of
2075 new homes. Davis submitted a plan to the state’s Department of Housing and
Community Development (HCD) for how it would meet the goal, but HCD said the
plan was inadequate
– it didn’t do enough to advance “fair housing”
(ie. it dumped all of the new housing in the lowest income parts of town), and
HCD disagreed that the plan included enough sites to meet the allocation goal.

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Because of this, Davis has what’s called a “noncompliant housing element.” This
subjects them to a different state law that says, while your housing element is
noncompliant, you can’t legally reject an application for housing that offers
20% of the apartments for low incomes
. That’s any application, anywhere in
the city. This isn’t some loophole, this was the explicit intent of the (30
year old) law at the time it was written
, and both supporters
and opponents understood it.

So it’s legal right now to buy any lot in Davis and submit a proposal to build
a skyscraper on it.1 You would need to meet
Davis’s other rules – for example, if Davis has rules about parking or fire
egress or whatever, you would have to abide by those. But any rules Davis had
about density on a site would not apply. Crucially, Davis can’t change the rules
after your application. As long as you submit it now, while their housing
element is noncompliant, they have to be bound by the rules on the books now.

The problem is that big buildings are expensive and the law has never been
tested. If you built it you’d be looking at a legal fight for about 4-5 years.
I think you would have a good chance of winning – the California courts have
in recent years swatted down local NIMBYism at Vallco Mall, in San
Mateo
and in Los Altos. But you would still have to go
through the process.

Why hasn’t someone tested it? Because most developers are playing a repeated
game
with cities, housing applications have historically relied on a lot of
goodwill to get through the planning process, and they haven’t wanted to upset
the apple cart for one big and uncertain return. So there is room for a brash
outsider who doesn’t care what people or planning staff in Davis think about
them.

Here are some notes from Chris Elmendorf, a law professor at UC Davis, about
the legal hurdles you’d likely face.

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I know a lot of venture capitalists who hate California NIMBYism, care about
climate change, and don’t care much what opponents of progress think about
them. This is a huge opportunity to do something really big, really valuable
for the community and make a lot of money along the way. Also I would guess the
return from this project is uncorrelated with the rest of your portfolio so
would probably be a good source of alpha. I can put you in touch with talented
technical people.

If you are interested in helping but don’t have a lifechanging amount of money,
a number of groups are auditing the Bay Area’s “housing elements” this year (the
deadlines are staggered, so the Bay Area cities come later) so cities aren’t
cheating their numbers.2 If you’d like to help, or to get involved, please
donate to, or sign up with, East Bay for Everyone
.

1 It’s also legal in Redondo Beach
in Southern California, and possibly additional cities in the Bay Area, soon.

2 Given how important this process is to getting
cities to rezone for additional housing, you would hope that there were
lots of professional organizations dedicating lots of staff time to
analyzing Housing Elements and ensure compliance with the law. In reality
there are a lot of volunteers who are spending their spare time writing letters and hoping for the best.
One of the key Housing Element volunteers in Los Angeles County is a radiologist.

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2 Comments

  1. I can just imagine developers lining up for a decade long legal fight with bonus character assassination in the press for the chance to build impractically expensive housing (that still has to abide by a whole bunch of other restrictions) and then give 20% away below cost.

  2. > "Because most developers are playing a repeated game with cities, housing applications have historically relied on a lot of goodwill to get through the planning process, and they haven't wanted to upset the apple cart for one big and uncertain return. So there is room for a brash outsider who doesn't care what people or planning staff in Davis think about them."

    Thankfully, some developers are starting to become more aggressive. At some point you have to decide that appeasement is more trouble than it's worth, and there is untapped potential for developers who will target pro-housing exceptions rather than try to work with the normal planning bureaucracy. https://www.sfchronicle.com/sf/article/How-one-S-F-housing-p…

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