The Senate has green-lighted Gov. Kristi Noem's proposal to streamline the county permitting process for projects including CAFOs, wind energy projects and large industrial developments.
Senators sparred for nearly an hour over whether Senate Bill 157 takes away local control from the counties before passing it in a 24-11 vote on Friday, as Noem watched from the Senate gallery above. The bill will now go to the House for consideration.
Noem testified on Wednesday that the bill is needed to ensure a fair, standardized process that isn't "hijacked by a vocal few" and to provide more certainty for businesses in the process. On Friday, Senate Majority Leader Kris Langer, R-Dell Rapids, said passing the bill will mean that South Dakota is "truly open for business" by growing the state's economy and that a majority instead of a "fringe few" will decide on conditional use permits for projects.
The bill will lower the vote threshold to a simple majority of members present to approve a conditional use permit and overhaul the permit appeal process. It also requires projects with a special permitted use to be approved without a public hearing if all criteria are met.
More: Noem proposal to ease hurdles for CAFOs, industrial projects sees early win in Senate
Sen. Craig Kennedy, D-Yankton, urged his fellow senators to look past the "marketing" of the bill and look at the bill's text, which makes a "significant change" to how future county planning and zoning is done in South Dakota by requiring a simple majority vote instead of allowing the county to decide whether it wants a supermajority approving project permits.
The bill creates predictability and speed in a permit decision by shrinking who can appeal a county's permit decision to "almost nothing," he said.
"It basically eliminates any meaningful way of the public to object, of the public to participate, of the public to challenge," he said.
Sen. Lee Schoenbeck, R-Watertown, argued that the bill's only county zoning change is to the vote threshold. Counties can still craft ordinances banning certain types of projects from developing in the county.
"This bill doesn't tell them one dang thing they can or can't do. That is all local control," he said.
It also narrows who can file an appeal to address situations where property owners are being harassed by project opponents who file appeals against the permits even though they aren't near the projects, he said.
Sen. Susan Wismer had a failed attempt to amend the bill to require a majority vote of members elect instead of members present. Wismer, D-Britton, argued that requiring only members present could mean a permit vote could be scheduled at a time when elected officials opposing a project can't attend the meeting. It "allows manipulation of the process," she said.
Kennedy explained that the bill's vote requirement of members present means that a permit could be approved by a minority of the commission. If two members are absent and two of the three remaining members approve the permit, it has been approved by a minority, he said. Schoenbeck replied that he never in his four years as a county official saw two officials absent from a vote.
"County officials are a lot more responsible than that," Schoenbeck said.
Cuomo announces efforts to speed up green energy projects
The governor's office on Friday announced new efforts to ramp up the production of renewable energy projects.
Gov. Andrew M. Cuomo announced he is advancing a budget amendment to ramp up the permitting and construction of green projects, as part of the state's commitment to obtain 70 percent of energy from renewable sources by the end of the decade.
The Accelerated Renewable Energy Growth and Community Benefit Act, if adopted, will streamline the permitting process of large-scale green projects by creating an Office of Renewable Energy Permitting.
"Climate change is the existential challenge of our time, and New York State has risen to the occasion by enacting the strongest laws in the nation to protect and preserve our environment," Cuomo said in a statement. "This legislation will help achieve a more sustainable future, invigorating the green economy and reaffirming New York's position as a market leader with a revamped process for building and delivering renewable energy projects faster."
The governor's office said the state's existing process for energy-generating sites was designed for plants that used fossil fuels and created before new clean-energy standards were put in place.
The Office of Renewable Energy Permitting will use standards that align with the environmental impacts common with renewable projects "and include upfront mitigation measures to address those impacts," Cuomo's office said. It will also ensure that applications are acted upon within a year in most cases.
The Act will also prod the state to accelerate the delivery of renewable energy and direct the The New York State Energy Research and Development Authority to conduct a joint study to identify cost-effective distribution methods in conjunction with the New York Power Authority, the Long Island Power Authority, and the state's grid operators and utilities.
A third of the apartment units in the pipeline through Proposition HHH will each cost more than $546,000, the median sale price of a condominium in Los Angeles, according to a data analysis released by the city controller.
The initial funds from the $1.2 billion bond measure to reduce homelessness are now all committed and it is uncertain if the program will reach its goal of 10,000 new permanent housing units.
Prop. HHH’s jaw-dropping costs could dissuade taxpayers from supporting similar housing bonds in the future, particularly as residents deal with increases to their own household expenses, according to Gary Painter, director of the Sol Price Center for Social Innovation at USC.
“We can all look ourselves in the mirror and say if the price of these units keeps going up, whether its $400,000 or $550,000, we’re going to run out of money for these kinds of things from a purely public sector, philanthropic stance,” Painter said.
Attempts to lower the price tag of publicly subsidized housing are underway, but these experiments — while potentially game changing — are slow moving and unproven, according to developers and researchers.
When Los Angeles voters approved Prop. HHH in 2016, city officials predicted units would cost $350,000 to $414,000. In reality, prices have jumped to as much as $701,000 per unit, with 60 percent of the living spaces expected to exceed half a million dollars each.
Last year, the Los Angeles Homeless Services Authority estimated nearly 59,000 people were experiencing homelessness. At Prop. HHH’s median price of $531,000 per unit, it would cost $31 billion to house that population.
More than 7,400 units in pipeline
Currently, 7,465 new affordable housing units are available in the process through Prop. HHH, of which 5,764 will have additional supportive services for the formerly homeless, according to a Jan. 27 summary on The Los Angeles Housing and Community Investment Department’s website. Another 975 units are expected through an innovation challenge. The city plans to put funds from repaid loans back into additional projects as the money becomes available over the next seven years.
A spokesperson for HCIDLA did not respond to requests for comment. In a response to the City Controller’s Office in October, HCIDLA stressed that the city “does not control the cost to develop supportive housing projects” and only contributes $150,000 per unit on average toward the overall costs.
The rebuttal notes that the city tripled its production pipeline in two years following the passage of Prop. HHH.
Tommy Newman, director of public affairs at United Way of Greater Los Angeles and a proponent of the proposition, acknowledges there is room for improvement on costs, but he still sees HHH as a success story. The city is more than 70 percent to its goal with a path to get “pretty darn close,” he said.
At $531,000 per unit, the costs pencils out to about $26 per night over 55 years, the length of time a property must stay affordable under Prop. HHH, Newman said. By comparison, a motel voucher costs the city about $60 per night.
“They have thousands of people sleeping in hotel rooms every night, which is way more expensive than creating affordable and supportive housing that is restricted for the long term,” he said.
Why costs soared
There’s no simple answer to why costs have increased so much, experts say. A booming economy created a highly competitive labor market. Trade wars increased the price of materials. Complicated, and painfully slow, financing structures stalled construction for years.
At the same time, public policies require these projects to meet higher environmental standards, pay higher wages and build to a quality that allows affordability for the next five and a half decades. Much of the housing under Prop. HHH is “supportive,” meaning additional square footage — and cost — is needed for non-living spaces, such as community rooms and offices to meet with service providers.
In some cases, parking is required, even when the type of resident targeted is unlikely to drive, developers said.
Many of the policies that now slow down the production of the much-needed housing were enacted in the 1980s when California was trying to limit its population growth, Painter said.
Costs go up for every day a property sits idle as developers go through lengthy environmental, titling and permitting processes, he said.
“The reality is that there are stories all the time where there are delays on the front end through the entitlement process, and then delays on the back end, that cause some of these projects to take five to seven years when they should, if everything was moving smoothly, take 12 to 18 months,” Painter said.
NIMBYism can add to costs through repeated public meetings and design revisions.
In three years since the bond passed, only one project has opened its doors.
Prop. HHH only pays for a portion of each project’s total cost. The bond measure’s $1.2 billion was leveraged to obtain $2.8 billion in additional loans, usually from a half-dozen other local, state and federal sources. One developer compared it to juggling six to 12 mortgages.
Just assembling that money can take years, according to Alan Greenlee, executive director of the Southern California Association of Non-Profit Housing. The complexities often require developers to hire outside assistance, he said.
“If we could figure out a way to align all the public sector resources and get it all at the same time, that would save a lot,” Greenlee said.
How the money is being spent
Nearly $1 billion of Prop. HHH’s total spending will go to “soft costs,” a type of expense that covers non-construction activities such as development fees, financing, consultants and public outreach. That figure is likely to increase as 39 projects had not reported those costs when the city controller audited Prop. HHH in October.
In his report, City Controller Ron Galperin said an “unusually high” 35 to 40 percent of the spending was on “soft costs” versus 11 percent on land purchases.
“Providing housing and shelter is a proven way to solve homelessness, but three years after voters approved a $1.2 billion bond for that very purpose, not even a fraction of the housing required exists,” Galperin said in a statement at the time. “A course correction is needed so that the City can maximize HHH dollars and create more units quickly and cost-effectively.”
Take 88th and Vermont, the first building completed under Prop. HHH. The 62-unit complex opened in January and cost $549,500 per unit, slightly higher than the median per unit cost of all of the projects.
Shay Gibson and her four children head to their home at the 88th and Vermont Apartments, the first supportive housing complex under Prop. HHH to begin housing homeless people, in Los Angeles on Thursday, February 13, 2020. (Photo by Sarah Reingewirtz, Pasadena Star-News/SCNG)
Of that cost, $274,977 per unit went to construction; $202,006 per unit went to soft costs; and $72,517 per unit went to the purchase of the land. The project includes a community center and other amenities for youths, veterans and low-income families.
A review of the project’s budget shows the developer shaved $7 million off its construction and land costs between the time its budget was submitted to Los Angeles in 2017 and the end of 2019. However, soft costs in that same time frame jumped from $7.6 million to $12.5 million, according to public records. The developer, Women Organizing Resources, Knowledge and Services, declined to answer questions about development.
The loans from Prop. HHH covered about 30 percent of the total costs for the 88th and Vermont project. A 2017 staff report indicated the project expected to have seven sources of funding.
For some projects, soft costs actually exceeded the cost of construction by several millions of dollars.
One project in development in downtown Los Angeles called for an estimated $29 million on soft costs, nearly double the expected spending on labor and materials, according to a database of costs released by Galperin’s office.
What is changing and why
Recognizing the need for more nimble development, Los Angeles set aside $120 million of Prop. HHH’s funds to challenge developers to find ways to build faster and cheaper. That includes projects using shipping containers, converting non-residential buildings, building with prefabricated parts and setting up simpler financing structures.
Newman, from United Way of Greater Los Angeles, said he believes the city made the right choice by starting with more traditional projects that could be built more quickly. The housing industry largely puts up an apartment building the same way today as it did six decades ago and many alternative forms of construction are still unproven.
“The city of L.A. was producing about 300 units a year of affordable housing. There wasn’t a lot of space for new ideas.” Newman said. “For the first time, we are actually testing better and more effective delivery methods, and that’s exactly what we should be doing.”
Prop. HHH’s innovation challenge may serve as the proving ground for new technologies and construction methods that could become common if the experiment shows significant cost reductions. Modular construction, where the pieces of the building are assembled offsite and shipped in to be assembled like Legos, could cut construction costs by 30 to 50 percent, but it remains to be seen whether the reductions will scale.
Newman and others say Prop. HHH is only the beginning of the massive effort needed to house the homeless. Other changes in the works at the local and state level also might help speed up construction and cut down on delays.
The city appointed a “concierge” last year to help HHH projects navigate more quickly through red tape. In September, Gov. Gavin Newsom approved AB 1197, a bill by Assemblyman Miguel Santiago, that exempts supportive housing in Los Angeles from the requirements of the California Environmental Quality Act, a typically lengthy process that can stall projects for years if challenged.
At his “State of the State” address this year, Newsom focused his entire speech on homelessness, pledged billions toward the cause and made 286 state properties available for homelessness solutions. The speech specifically called out the need for more housing, more innovation and fewer delays.
“We will provide stable funding to get sustainable results,” Newsom said. “We will tackle the underproduction of affordable housing in California. And we will do all of this with real accountability and consequences.”
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