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Zoning, Liability And Even Planners Inhibit Buildout Of Plans

"Buildout" is a funny term. It is the word that most planners use to describe what their town would look like once everything that is called for in the general plan has been built. In today's world, buildout is easily quantified. Most cities and counties can point to their general plan and identify precisely how many houses and how many square feet of commercial and industrial space buildout involves. In California, where the Department of Housing and Community Development (HCD) is always bird-dogging local governments about their housing elements, buildout can mean a very precise calculation of the jurisdiction's capacity to absorb both single- and multi-family residences. But do communities actually reach buildout? What happens to this theoretical capacity to absorb development when real applicants propose real projects and those projects are reviewed by real planners and real planning commissions and real elected officials? Considering the fact that communities base so many other policies on buildout housing elements, infrastructure capacity and financing, parks and recreation needs, school needs, and so forth this is not an insignificant question. And in a state that seems to be in perpetual crisis on both housing production and infrastructure finance, it is nothing less than a major public policy issue. Oddly, there has been little research over the years on the question of whether communities actually hit buildout. But the research that has been conducted has all reached the same conclusion: No, especially regarding housing. In general, housing gets constructed at considerably less than the buildout capacity contained in the general plan. One report by our company, Solimar Research Group, estimated that in Ventura County housing gets constructed at somewhere between 55% and 80% of capacity; a similar analysis done many years ago for metropolitan Portland came up with a figure somewhere in the neighborhood of two-thirds. A follow-up study just released by Solimar and Reason Public Policy Institute, which looked at six different case studies in Ventura County, found a wide variety of reasons for this phenomenon. (The report is available at www.solimar.org) In some cases, neighbors objected to the proposed development. In other cases, it was clear that the city never really intended to permit what the general plan called for. In still other cases, developers were responding to changing market conditions. In the case of one project in the City of Fillmore, the general plan called for single- or multi-family units at 7 to 11 units per acre. But when the city signaled its desire to have a single-family project built, it turned out that the required minimum lot size was 6,000 square feet, making it impossible to hit the minimum density in the general plan. Eventually, the city allowed lots of smaller than 6,000 square feet, but other concerns such as the desire for a linear park along the Santa Clara River ate into the project's density, which dropped to fewer than 6 units per acre as a result. In the case of a project in Camarillo, it was not city regulations but legal liability that caused the density decline. The city was more than happy to process an attached condominium project at approximately 10 units per acre. But the developer eventually chose to build detached condominiums instead partly to respond to market demand for single-family-style units and partly to avoid construction defect liability issues. The resulting project was only 8 units per acre. No matter how you look at it, one thing is clear: The buildout number in the typical general plan is a ceiling, not a floor. You can see this in the way most general plans approach density. A particular parcel might be designated for "medium density," which might mean a range between 4 and 8 units per acre. So, a project approved at 4 units per acre might either be achieving 100% of buildout or only 50%, depending on how you want to look at it. In many cases, environmental review and other factors will drive down densities, as the process of minimizing impacts, creating mitigations and assuaging neighbors' worries often downsizes a project and causes the jurisdiction to devote some project land to things besides housing. This whole process causes a couple of problems in a state like California. The first one, obviously, is the fact that it may drive down housing production. California seems to have a bottomless demand for housing and prices are rising rapidly. On a statewide level, production is clearly not meeting demand which is part of the reason why HCD hammers the local governments on production as well as affordability. From that perspective, using the general plan as a ceiling rather than a floor doesn't make things any better. The second issue has to do with infrastructure finance. Because most communities now operate on a "pay as you go" basis regarding infrastructure, many fee and assessment systems are based on buildout. In simple terms, many cities calculate the cost of road, water, and sewer infrastructure required by the buildout and then divide that cost by the number of housing units (or some other measure of buildout) in determining fees and assessments. What happens when buildout goes down? Well, some demand for infrastructure goes down -- but other costs might stay the same, such as the cost of building arterial roads to the new subdivisions. In other words, if buildout doesn't materialize as expected, there might be a revenue shortfall for infrastructure. In other parts of the country including Oregon and Maryland the public policy solution to this problem has been to create minimum densities. In other words, create a "floor" for development as well as a "ceiling." This is a tempting solution, but it is probably not realistic in California, where land cost and other pressures have already created fairly high single-family densities in most places. The Maryland minimum densities are laughable by California standards -- two to four units per acre, on average. Even after being shrunk by the approval process, most California subdivisions come in at higher densities than that. Another possible solution one that the new Solimar report advocates is better and more expanded use of specific plans. General plans are by nature vague and broad. And it is difficult to achieve true community buy-in for a 20-year plan. A specific plan, on the other hand, is usually used to plan out the precise development of a definable geographical area over a short period of time say, a neighborhood or district over a five-year period. The Solimar/Reason reports have found that this is a double-edged sword. On the one hand, a specific plan process may reduce densities from what the general plan calls for. On the other hand, projects in specific plan areas are usually approved at 100% of their specific plan densities, so the infrastructure finance plan is likely to line up with actual infrastructure needs. While buildout is not always what it appears, there are tools available, such as specific plans, that make hitting a reasonable buildout level more likely. These tools could protect communities and accommodate a more predictable level of growth.
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