October 5, 2020 - From the October, 2020 issue

Related’s Bill Witte: Regional–Rather than State–Housing Markets Ought to Be Policymakers’ Focus

With work half-way complete on the Grand, Related Companies' long-anticipated mixed-use complex in Downtown Los Angeles designed by architect, Frank Gehry, TPR reached out to Bill Witte, CEO and Chairman of Related California, who shares how state and local governments ought to be responding to housing affordability challenges. Pointing to the regional metropolitan nature of housing markets, Witte weighs the strategic merits of statewide efforts to compel housing density and reminds readers of CEQA's role in slowing production and inflating housing costs.


Bill Witte

“People have asked me what we could do to win over LA, and I’ve said maybe you shouldn't be trying. Since housing markets are metropolitan/regional, maybe that's where the focus should be."

“(U)nder SB 50, twenty percent of any housing built had to be affordable. The presumption was that everybody would just run with it, but as a developer, that's simply not true and not easy to do economically.”

“I don’t know, frankly, how to resolve the regional planning conundrum because Metro LA doesn't have a regional planning commission, and it's not going to happen realistically." —Bill Witte

Let's begin with the close of the California Legislative session and the many housing bills on the agenda for consideration this term, most of which failed on the last day. As one of the largest for-profit developers in the state and in the country, what’s your perspective on the efforts in Sacramento to address the need for housing?

The good news is that there's been more discussion and more legislation proposed at the state level to try to address the housing issues than at any time that I've been in California since the 1980s. The less good news is that very little has actually passed. California is such a large and diverse state, it’s very difficult to pass legislation, particularly since most land-use decision-making happens in micro-local planning commissions and city councils.

The second challenge has been the building trades and labor cause of requiring public benefits in the form of labor standards for projects seeking entitlements, which have very significant cost impacts. To debate whether they're good or bad is not the point I'm making, but it renders a lot of legislation for affordable housing and other community benefits not that desirable in most housing development areas.

Taking those two things together, you can see how difficult this is.  There are so many competing interests, so many local interests, suburban and urban issues, and legitimate questions about infrastructure funding to support the housing production. I'm not saying they're irreconcilable, but those are the challenges. And we saw them time after time in this most recent legislative session.

As Related Companies' CEO for the West Coast, is it wise, as the California Senate and Assembly do, to repeatedly advance a one-size-fits-all housing local mandate for zoning housing? What’s the lesson from the latter’s repeated failures? 

Let's look at some of the legislation that San Francisco State Senator Scott Wiener has proposed, including SB 50 and its brethren, which incited enormous—and almost irrational—opposition, particularly in LA and in the suburbs around the state.

People have asked me what we could do to win over LA, and I’ve said maybe you shouldn't be trying. Since housing markets are metropolitan/regional, maybe that's where the focus should be. There are some efforts in the Bay Area to expand some regional housing policies since that's how the transit systems operate and how the housing markets operate.

The way the City of LA has always operated because the council districts are so geographically large, the council offices have such a large role in land-use decisions within their district. Why would they ever outsource that to some state policy?

If you agree to everything everybody wants, you can get statewide standards, but that's not realistic, especially when you're trying to move the needle at the level that the governor's goals for new housing aspire to. So, I'm more a fan of regional solutions. 

Would a one-size-fits-all state up-zoning bill be positive if it were enacted?

Let me give an example of a one-size-fits-all policy, driven mostly by people in the Bay Area, that did pass: the accessory dwelling unit legislation, which essentially allows a secondary unit under certain circumstances. It's not going to fix the state housing shortage, but no single policy is. That was a small but useful, rational, and realistic thing that could be beneficial almost anywhere in the state.

The sweeping moves are much more challenging. Assuming you could do it, would it be desirable?  The answer is that most of these efforts, most recently Senator Wiener’s effort to allow property owned by churches to be developed for housing in an expeditious manner, I can't understand how that couldn't be a good thing.

A lot of the proposals, even SB 50, included conditions that I personally felt, if satisfied, made them a good thing. People were never clear on what was really plausible under SB 50 and what was not. And there were a lot of worst-case scenarios. For something this sweeping, there wasn't sufficient education.

For example, under SB 50, 20 percent of any housing built had to be affordable. The presumption was that everybody would just run with it, but as a developer, that's simply not true and not easy to do economically. We're the biggest mixed-income developer in the States, and we can't do it in most cases. Hypothetically, a lot of these efforts would be desirable on a statewide basis, but realistically, I just don't see them happening. 

The clear motive of YIMBY/WIMBY advocates today is crystallized around the idea of eliminating R1 zoning. Is that a good idea? 

If you look at places that have done it like Seattle, Minneapolis, and a few others, if it’s targeted, then I think it's a good idea.

But not only is that politically challenging to apply in a blanket manner across the entire state of California, but it also may not be as much of a solution in some places. So, once again, it is a good idea, but much as the way I feel about certain proposals to increase density, not everybody who lives in a single-family neighborhood and opposes more density around them is a pure NIMBY. These are complicated discussions.

It's not so simple to just say automatically that every R1 zone should allow for duplexes or fourplexes. First of all, I'd like to see that tried out in various urban situations to show people that if implemented in a thoughtful way then yes, it can make a difference. But no, it's not going to completely change the character of neighborhoods. I've seen examples in Seattle where it's been done very successfully. It requires thoughtfulness in urban design; it's not just a blunt instrument.

In terms of intruding into local government authority over planning and land use, are you suggesting that it would be wise for the State to be the decision-maker regarding how best to synthesize density into our urban fabric?

Let's start with the fact that historically there hasn't been, and there isn’t today, a significant housing leadership staff at the state level. Housing is balkanized somewhat among different agencies, which are more execution-oriented, not policy-oriented. Governor Newsom came in with all sorts of very strong proposals on housing, but in fairness, he has a pandemic, fires, PG&E, and about ten other things going on. I don't care how committed you are, there's only so much room to take on all sorts of initiatives. It comes down to trying it out on an urban scale. Let planning commissions in San Francisco, Oakland, LA, and Long Beach look at this and see where it could make a lot of sense.

SB 50 is everybody's favorite whipping boy, but a lot of other legislation didn't make it through that had nothing to do with stuff like that. I can't let the interview go without taking a shot at the CEQA process.

CEQA is established law from the early 70s, and it isn't going anywhere, and I'm not saying it should. SB 35 was a small oar in the water here. There need to be rules for development—and we can debate how they're formulated and implemented— but once there are rules, if you play by the rules, it shouldn't take four years to get an approval. Much, if not all, of that, is because of CEQA.

First, full environmental impact reports are often prescribed or required when they needn’t be. They're done because if you don't, you open yourself up to more laws and legal challenges.

The second issue is affordability and cost. If something takes three or four years to get approved, you can’t control or manage the costs. What do you think is going to happen? My favorite example, San Francisco, has actually approved 10s of thousands of housing units over the last 10 years. But under the best circumstances, it takes three years to get something approved.  So, it was creating something like one housing unit for every 10 jobs created in the city.

Seattle, which has a very similar micro-economy to San Francisco with no CEQA and a much simpler process, was creating one housing unit for every three new jobs. Therein is a huge problem. Wherever you are—forget San Francisco, any place—as long as it takes that long, it doesn't matter how many housing units your newly aggressive Planning Commission approves, the annual delivery of units will always be behind the curve. That's great for owners of property and some developers—there's never too much competition. But it's not necessarily great for housing affordability

The political leadership for most all of California’s 'bold' statewide housing legislative proposals comes from San Francisco and the Bay Area. How is it that that political leadership at the state level is centered in the San Francisco, but in most people's opinions, it is the Bay Area that has failed miserably at the city, county and regional level to build affordable housing? 

Well, when you say failed miserably, here's a city that for decades has been 80 percent built out. No other city in the state even remotely approaches that. What it did, starting in the 80s, frankly, was rezone the entirety of the South of Market area in the eastern part of the city and created the Mission Bay neighborhood.

Over time, a lot of housing, more than had ever been developed, has taken root. But the problem of affordability goes back a long way. I should send you a copy of the San Francisco Chronicle article from April of 1981, three months after I came to the city to work for Mayor Feinstein. If you read my quote about how the city is high cost and difficult for families, you’d think it was from today. That was 1981.

So, when you say San Francisco's failed miserably, San Francisco's also only 48 square miles; that's the size of a council district in LA. Yes, you can blame San Francisco for a lot of things, but the problem to me is that you have to look at these things regionally.

Take LA for example: Willowbrook is unincorporated LA County, Watts is City of LA, San Pedro is City of LA, but Culver City isn’t. Are you supposed to just stop at the city line and see how well they've done in housing policy? That's not the way housing markets work. The simple thing about the Bay Area is that the housing affordability issue has been very acute. Whether they've done a good or a bad job, it has certainly generated consistent interest in trying to address it. 

If SB 50 or Sen. Wiener’s successive trailing housing bills had passed, how would it affect affordability in San Francisco and the Bay Area?  

Advertisement

I don't think it would affect us that much at all. If you're looking at SB 50 in San Francisco, it's fine to say that you can have more density at various transit stops. But if most of them already have buildings on them, realistically, unless you gave people unlimited height—which from an urban design point of view, let alone a political point of view, is a bad idea in my opinion—how many places can really absorb that?

Let me give you another example: Geary Boulevard in San Francisco runs from Union Square downtown essentially all the way west to the Pacific. It is a classic transportation corridor. In this case, just bus lines, but it's a wide thoroughfare. It's sort of a prototype where some planner might envision increasing density, not in the core neighborhoods, but along the so-called transit corridors. But virtually the entirety of it has four-story buildings already. Are you going to demolish four stories to get six? That makes no sense at all. Yes, there are selective sites along the way where it can happen, but, again, small steps that are not going to move the needle significantly.

I have no reason to be particularly defensive about San Francisco, I just know it well, but find it stunning that the suburbs get on their high horse on this issue. They always say, ‘put it in San Francisco, why don't they do more?’ And yet, can you cite me some suburbs that have taken any initiatives? I literally just have to chuckle sometimes when I read some of this stuff.

You have spent much of your professional life residing outside the central city. It doesn't sound like your personal choices comport with the advocacy you're making in this interview.

True. But the issue isn't that you should force people to live in cities. For example, I just said something that is consistent with what you just described is my personal choice, which is, if, in fact, it's not just about shelter, if it’s also about schools, if that's relevant (which of course it is) and you can't afford private school and accept that public schools in urban areas have a ways to go, well then, shouldn't we be encouraging more housing in some of these areas?

But the biggest pushback on some of these mandates tends to come from the suburbs. Some of which are very small in area, which gets to my point about regional planning or the lack thereof with individualized Planning Commissions. LA County has 88 cities. How many separate planning commissions? How is that a good idea?

Are your neighbors willing to do away with their planning commission and cede land-use planning authority to the state legislature and Scott Wiener?

I agree with you, but even I can poke at all of the legislation. For example, on SB 50, its precursors and successors, I've said it to Senator Wiener that he went out too far, too fast and generated all this negative reaction. It could have been handled differently, but the outcome might not have been different.

California has had, until recently at least, as much growth as any place in the country. It's been a hub of job growth and all sorts of other things. Cities have welcomed, for tax reasons particularly, non-residential development, which creates jobs and housing demand. What would all of you good folks suggest we do to mitigate the housing supply and or housing affordability problem? In other words, we hear what people don't want—what I just said is factually correct. What do people suggest? What are some alternatives?

 We have a millennial generation that, size-wise relative to other age cohorts in the country, is like the baby boomers. Even if an increasing percentage them decide to move out of the city at some point, where do they get housed until then? 

Culver City, one of the 88 cities in LA County—and much smaller than the county of San Francisco—has enticed Amazon and Apple and other new tech companies to their city; and, as a result are adding 10,000 new well-paid employees to their existing built-out neighborhoods and strained infrastructure. How should Culver City address, either locally or by statewide legislation, the challenge of balancing housing affordability and the quality of life of their current residents with the needs of the new 10,000 well paid tech employees now about to work in Culver City? 

So, you just gave a perfect example of a smaller version of the San Francisco phenomenon. If you don't look at this regionally, you're going down a rabbit hole. In other words, I don't begrudge them from attracting Apple or Amazon, but it's a small area. They can't, and in my opinion, should not be expected to be singularly responsible for housing all of those employees. I don’t know, frankly, how to resolve the regional planning conundrum because you don't have one regional planning commission, and it's not going to happen realistically.

I do think under the current governor, the state has made some headway in trying to enforce, or at least begin to take seriously the RHNA numbers. For example, I've heard council members in Newport Beach talk at least privately, if not publicly, that they’re going to have to do something because they’re so far behind. I’ve never heard that before. It’s an imperfect vehicle that doesn't completely have teeth, but I do sense a recognition in many places including the suburbs that they have to do more. The problem comes, as we said earlier when you say there's one instrument for doing that And it's got to work everywhere in the state the built environment

How would state legislation like SB 50, or its offspring, work to the advantage of Culver City current residents and future residents.

First of all, let's stop talking about SB 50, which is dead anyway. You keep asking me to tell you how a statewide initiative would benefit them, and I keep saying I don't think statewide initiatives are necessarily practical or even functional because the conditions on the ground are so vastly different.

Culver City is a very good example. Culver City is proposing or has proposed in recent years or decades, not just commercial development but encouraging within reason, some higher density housing near its core. But you say it's largely built-out. The solution isn't going to be just in Culver City. What do you do, tell them no more jobs?

To people who say you're ruining our neighborhoods, why do you think that is? Where do you think all these people who are coming to work in and around your communities are going to live? It's complicated, it's not simple, and there is no one solution. But I do think somehow, someway, we need to think regionally more than we do now.

TPR recently republished a report critiquing the numbers used by the governor to determine housing need. How comfortable are you with the YIMBY assessments of the demand for housing in coastal California? 

Look, the reality is, this is not an exact science. I'm not close enough or familiar enough with how they arrived at some of these numbers. I recall not too long ago there was a big dispute about the numbers assigned to San Bernardino County versus Orange County, where it seemed like they were lifting the burden in Orange County at the expense of the Inland Empire. So, I'm always a little skeptical of numbers like that other than to provide some context. State Housing Elements, which of course have never been very enforced, require a city that has land that can be zoned to accommodate housing, it should at least make some attempt to do that. If you are literally favoring shopping centers over housing—a decision, by the way, I'm sure people are regretting very much today—maybe you need to revisit that.

If it is accepted as a matter of public policy that we have a housing shortage, and it's a good policy objective to try to build housing close to centers of employment or near transit to access of centers of employment, if you accept those premises, is it really so unreasonable to ask cities to dig a little deeper to try to accomplish those objectives? 

What are the impacts of COVID-19 on the marketplace today for urban housing? And, do cities have the economic capacity – given cratering budgets – to play a lead role in partnering to generate more units?

First of all, people don't really know. The question most often posed now is whether some form of remote work in going to supplant the current centralization of office use? I have my doubts about that. Are people going to be more focused on space rather than density because they're concerned about being in close quarters? Will people ever come back to downtown San Francisco or downtown LA?

I think, to me, the answer is yes. I'm just giving you my considered opinion. We make investment decisions and are thinking about them as we speak based on those very questions right now.

I don't think that most office workers are going to feel better about not mixing with their colleagues. And we're already seeing signs, even in the tech community where there's been the most publicity about working remotely, that they don't really believe that. The answer is that no one knows exactly how this is going to play out. We can all speculate, but I don't think New York City and San Francisco are going to become wasteland, quite the contrary. I do think that we in real estate, all of us, are rethinking how we go about planning for new development. I don't think there's a mass migration to outer suburbs, at least among younger workers. There's no evidence of that.

But COVID has presented problems in real estate that are very different from prior recessions where there were more supply, demand, and economic issues dominating. Here, there's more uncertainty. There's also much more political uncertainty.

We haven't talked yet about the state and local ballot measures that will affect real estate, whichever side of the argument you're on. How will cities respond to budget deficits? Those types of questions will all have an impact on how we think about real estate, at least in California going forward. In fact, probably potentially more of an impact than some of the legislation that we've been talking about.

I wish I could give you a specific answer, but that's a tough one. I think there is still a bright future for cities, particularly those that have tried to develop true mixed-use environments with amenities. I can't tell you how many suburbs have asked us at various points about trying to convert a 50s/60s/70s shopping center into a mixed-use community.

We're involved right now in a 42-acre site in Santa Ana, adjacent to South Coast Plaza on the Costa Mesa border. It's an old, single-story shopping center owned by three separate families for years. We are under a long-term lease with these families to master redevelop it into upwards of 2,500-3,000 residential units, some retail, potentially senior assisted living, and some other uses but a real focus on placemaking. Irrespective of COVID, that type of mindset is going to be successful. The biggest question to me about COVID is how long does this uncertainty stay with us?

Lastly, TPR recently interviewed a noted Dutch architect and planner, Daan Zandbelt, who advises the Dutch government and local governments on placemaking and spatial questions. He, like you, believes that COVID-19 has reinforced the notion of creating mixed-use places where people from home have amenities within walking distance and that post-WWII zoning and separation of spaces makes no sense anymore. Are you confirming his view of our city’s future?

 Yes, and I like to think that some of us were already there. I suspect some of your new urbanist friends, would say they’ve been saying that for years. But I would argue that it's a good thing irrespective of COVID and that the market supports and justifies that. But yes, certainly it's focused, more attention on it. But we started in Santa Ana or our big Santa Clara project, which is 9 million square feet of mixed-use development on a 248-acre public golf course a long time before COVID. We didn't just wake up one day and discover that placemaking is a good thing.  I do think it has maybe awakened some market sensibilities at the consumer level for why it's a good thing.

<

Advertisement

© 2020 The Planning Report | David Abel, Publisher, ABL, Inc.