The builder’s remedy window may now be closed, but with 16 new housing projects gaining state-issued permission to be built larger and denser than Santa Monica zoning rules would have allowed, the finger-pointing has just begun.
These projects all came in during a window of opportunity that opened because Santa Monica was unable to update its housing plans to meet state regulations amid the current housing crisis. The punishment for failing in the process was a loss of local control over zoning rules like height and density restrictions for residential projects that meet criteria for moderate or affordable housing.
In the past, there was no real penalty for cities that failed to meet requirements, and plans were “a bit of a toothless tiger,” in the words of Councilmember Gleam Davis. This year that tiger bit, and bit hard.
Developers, Neil Shekhter’s NMS Properties in particular, took full advantage of the opening, applying for 16 projects containing 4,562 housing units in buildings up to 15 stories tall.
So, who is to blame?
A dive back into the early days of the process shows issues from the very beginning. It seemed council members and commissioners did not understand either the point of the Housing Element or its ramifications. City staff were tasked with threading an impossible needle: confused or willfully ignorant officials asking them to draw up a document they were warned was likely to be struck down at the state level.
In the early days of the process in November 2020, when staff presented a 56-page slideshow describing the Housing Element to the Planning Commission, the basis for what would become two major points of misunderstanding emerged: commissioners seemed to believe that 1. They could unilaterally decide what the city’s housing needs were and 2. They could simply sit the process out with no real consequences.
Part of the Housing Element process involves what’s known as RHNA, or regional housing needs assessment. That’s the number of units each community is responsible for planning for — essentially, Santa Monica needs to show its zoning codes and processes allow for, and to a certain degree encourage, enough new units to be built to hit that RHNA goal. In 2021, the goal turned out to be shocking, a five-fold increase over previous cycles’, at 8,895 units, of which 69% must be affordable. Planning commissioners balked.
“I think we would be better served if we designed a Housing Element that fits our local needs, and then, having done that, see if it fits their [the state’s] needs, because I think there’s going to be such a mismatch that it’s going to be virtually unbridgeable,” Planning Commissioner Mario Fonda-Bonardi said at the time.
Fonda-Bonardi went on to say he did not know where the City would find money to construct enough homes to meet state-mandated housing minimums, asking how the City could afford the $3 billion it would need to build affordable housing.
“It just seems that everything that has been set up for us is a fake process,” Fonda-Bonardi said. “It has no basis in reality”
But contrary to Fonda-Bonardi’s statements, RHNA is a formula that is wholly outside any one city’s ability to dictate. Moreover, the Housing Element does not mandate that a City must construct units to meet RHNA, only that its code and local rules must allow for, and to a certain degree encourage, their construction.
Multiple times during the staff presentation at that November 2020 Planning Commission meeting, planners made clear that the Housing Element represents an opening, not a commitment, for the City to construct new buildings.
“The city must plan for this many units,” City Planner Rachel Kwok said at the time. “We don’t necessarily have to build this many units, but we may need to make sure that we have the policies and plans in place so that that many units can be built in the next eight years.”
Kwok and her colleagues also tried to describe the penalties for failing to produce a compliant Housing Element, but the combination of byzantine state regulations, jargon-heavy language and rambling explanations (“there’s also implications for regulatory — so, that sort of — erosion of control, as I was talking about, in terms of SB 35, so that would start to take away the city’s ability to have — establish — a process that is more in line with, with our local values,”) may have prolonged confusion among commissioners and council members that persisted over the next 11 months, until the draft Housing Element finally wound up on City Council’s lap in October 2021.
In the months leading up to the initial approval of the doomed draft one year ago, advocacy groups and individual members of the public spoke out to warn both staff and council members that they believed the Housing Element would fail California Department of Housing and Community Development (HCD) review. They also presented some of the starkest warnings about what lay ahead for Santa Monica.
Pro-housing advocates Abundant Housing wrote to both HCD and the City of Santa Monica to express doubt that the draft Housing Element satisfied state law. Both letters were among hundreds of pages of correspondence included in the council packet for the October meeting.
“We have now reviewed the City of Santa Monica’s official draft housing element update, and continue to doubt the City of Santa Monica’s willingness and ability to meet its state-mandated RHNA targets. The draft housing element update is inconsistent with HCD’s instructions and the requirement that housing element updates affirmatively further fair housing under Assembly Bill 686,” the letter from Abundant Housing stated. Later in the 14-page letter, the advocacy group wrote, “State law imposes penalties on jurisdictions that fail to adopt a compliant 6th Cycle housing element update by October 15, 2021. On that date, noncompliant jurisdictions will forfeit the right to deny residential projects on the basis of local zoning, so long as projects include at least a 20% set-aside for below market-rate units or are 100% moderate-rate projects.”
Santa Monica Planning Manager Jing Yeo also told Council at the time: “If the City fails to adopt its Housing Element, a project with at least 20% affordable in it could still proceed even if it exceeds the city’s adopted zoning and LUCE [land use and circulation elements of the general plan].”
Still, when Yeo presented the Housing Element plan to Council on Oct. 12, 2021, she told council members that she believed it would comply with HCD requirements. Yeo explained her Department did its best to follow city council direction while also making edits HCD requested in correspondence with the City prior to the vote.
“Council on June the 15th  gave broad direction for to staff to produce a compliant Housing Element that addresses historic discrimination and satisfies Affirmatively Furthering Fair Housing requirements,” Yeo said at the October 2021 meeting. “You gave direction with respect to housing production, particularly affordable housing production, equitable housing access, and also in the area of housing stability. We believe that at this point, we’ve done everything that Council directed us to do. And the final draft before you tonight meets the state’s requirements for a compliant housing element.”
Last week, a City of Santa Monica spokesperson reiterated that the Community Development Department “believed the Housing Element adopted on October 12, 2021 met the requirements of state law and demonstrated capacity for the required 8,895 units.”
However, the document did not pass HCD review.
In the October 2021 meeting, Council voted, 5-2, to approve the Housing Element, rejecting outside concerns that it might not meet state requirements. Davis and Mayor Pro Tem Kristin McCowan voted against the Element, while Mayor Sue Himmelrich and Councilmembers Phil Brock, Oscar de la Torre, Lana Negrete and Christine Parra voted in favor.
At the meeting, councilmembers again took issue with the idea of Santa Monica being forced to build 9,000 new housing units with no financial help from the state, what became known as an “unfunded mandate.” But there was no mandate to build, a fact most did not seem to grasp.
Davis was outspoken in her opposition to the Housing Element at the time.
“I’m going to be voting ‘No,’ and I want to set forth my reasons on the record,” Davis said at the meeting. “I want to make it clear: this is not a reflection on staff’s efforts. They’ve obviously made Herculean efforts to try and address the issues raised in HCD’s letter. Unfortunately, in all honesty, I’m not sure we made it. This may, in fact, be a technically compliant Housing Element, but I’m not sure it’s really going to meaningfully generate the kind of housing that HCD expects us to generate, or that we are morally obligated to generate.”
At the time, Himmelrich said she did not share Davis’ concerns, instead zeroing in on a need for affordable housing.
“Where I believe you and I disagree is, I believe that our commitment should be to build more affordable housing. I think what we have in Santa Monica is an affordable housing, not a housing, crisis,” Himmelrich said at the October 2021 hearing. “And as a result, and I’ll bet you a steak dinner right now that we will meet our market allocation, as we have every other cycle, from HCD — I have no doubt that we will meet our allocation and exceed it as we have every other time — our challenge is affordable. But we have met the challenge.”
On Feb. 8 of this year, HCD formally rejected Santa Monica’s draft 6th Cycle Housing Element (and, as of last week, the Mayor still owes Davis that steak dinner).
In his rejection letter, Senior Program Manager Paul McDougall repeatedly referenced the warnings HCD issued to city staff that draft versions of the original Housing Element would fail to meet state standards.
The phrase “Please see HCD’s prior review” appears 10 times in McDougall’s Feb. 8, 2022, letter, indicating city staff were informed by HCD prior to denial that elements would need to be changed that were not.
Speaking to the Daily Press last week after the dust settled, Davis said she believed city staff did the best they could while being stonewalled by the Planning Commission and City Council. Davis said she felt the initial draft Housing Element designed by city staff was good and would be accepted, but each time it passed through Planning Commission and City Council hearings it was watered down.
“When I saw the original staff report — the very first one, with all these innovative things — that went to the Planning Commission, I thought, ‘This is great and this is exactly the kind of thing that HCD is looking for from us,’” Davis recalled. “And it didn’t happen because the political winds, for lack of a better term, moved the other way.
“Staff did, I think, make a valiant attempt to really come up with a strong, compliant document, but I think it was made clear to them by the Planning Commission and by the Council, that some of the proposals that they included in those documents were not welcome. And so they reacted to that,” Davis said.
Davis clarified that she did not feel blame could be placed on any one person, but rather that “the process did it in.”
*Editor’s note: This story was updated to clarify that HCD is the California Department of Housing and Community Development.