A 2021 law that allows jurisdictions to select parcels for multi-family housing excited housing activists throughout the state. Many cities and towns included programs to use SB 10 in their housing elements to provide more housing choices over the course of the 8-year planning period. Fewer of these jurisdictions, however, have had the capacity to give thought to where these “SB 10 parcels” might best result in actual homes getting built, and what effects these new homes might have on equity and opportunity.
What is SB 10?
SB 10 allows cities to bypass the CEQA process when rezoning certain areas to allow for up to 10 units per parcel. It is a powerful tool to get multi-family housing in areas without necessitating a specific plan or other sort of area-wide rezoning, particularly in cities and towns with a lot of urban infill opportunities. The law creates a new section of the Government Code, Sec. 65913.5.
This is especially attractive for cities looking to rezone to allow more multi-family housing to meet the Department of Housing and Community Development’s requirement for a variety of housing options. If a jurisdiction is predominantly zoned for single family, or has some older commercial properties that are not great fits for AB 2011 and SB 6, SB 10 can streamline housing development.
Going up to 10 units is, for housing developers, a sweet spot where construction starts to make sense. According to a 2022 Terner Center report, “the ideal building typology is between eight and twelve units, where more projects start to become financially viable.” SB 10 is a path towards true viability, more so than other initiatives to get duplexes built or to replace struggling commercial properties with residential ones.
The law was only passed in 2021, however, so there are hardly any “best practices” yet for jurisdictions to determine which sites might be best for SB 10. Many local planners rely on gut instinct or its more up-to-date counterpart, vibes, to assemble a list of parcels. Another alternative is to use Urban Footprint’s parcel reference data to identify sites that have tremendous potential for multi-family housing, and then map these parcels onto census tract-level equity data.
What Makes a Site “Good” for SB 10
As planners know, just because a parcel is zoned for 10 units does not mean that a developer is going to come by and build 10 units of housing. Even setting aside development standards and lot sizes that can make it impossible to fit 10 units, there are other reasons why housing might not get built
First, the parcel must legally be an urban infill site (a site zoned for residential use that is - in or adjacent to a city or other urbanized area) or within a transit rich area. The site does not need to fill both of these criteria.
Looking beyond the legal requirements, there is also the question of what “good” even means. Good for whom? How can new housing promote equity? And what does equity even mean? These are not theoretical questions for graduate students or angry people on the Internet, but rather key concepts that go towards mitigating California’s housing crisis at a local level.
Defining Likelihood of Development
Through UrbanFootprint’s Parcel Reference Data feature, a planner can identify not just the existing land use of a parcel, but also how many dwelling units it contains, how many employees by sector work there, and key assessor information such as date of construction, improvement and land values, and related data. This gives a planner the building blocks for an in-depth analysis, done quickly.
For this article, we chose San Mateo County as our research area because M-Group is working on housing element updates for four different jurisdictions in the county. In these housing element updates, we did in-depth existing development conditions analysis. For this article, however, performing such analysis on San Mateo County and its 220,747 parcels (including unincorporated County area) would be onerous and rely on too much blunt instrumentation.
This article uses “improvement value to land value ratio” or “building to land value ratio” as a rough indicator of the likelihood of redevelopment, one of the indicators most commonly referenced by HCD in their guidance on redevelopment of non-vacant sites. By measuring the assessed value of the improvement (i.e., the building on the land) as a proportion of the assessed value of the land itself, planners can get a sense of if the building is indeed the “highest and best use” or if the value is locked up in the land instead. An improvement value-to-land value ratio of less than 1.0 means that the land is more valuable than the building, and a developer interested in maximizing revenues could likely earn more by developing anew. This is just one of many ways to determine the likelihood of redevelopment, but it can help planners working at a smaller scale get started in determining where redevelopment may actually occur.
By using building to land value ratio as an indicator, two different typical development scenarios where SB 10 might make the most sense can be explored: underutilized residential and underutilized commercial parcels.
What Makes Residential “Underperforming”?
It is not quite as straightforward as it may seem to define certain residential parcels as underperforming. After all, 85 percent of residential land use in the Bay Area is exclusively single-family, and people tend not to think of their home as underperforming real estate. More to the point, the decision of a single-family homeowner to sell to a multi-family developer or to transform their land into multi-family housing is often more idiosyncratic than a simple investment decision. Transitioning from single-family to multi-family housing is tied to increasing the housing supply, improving the environment, increasing economic growth and related tax revenues, and lowering housing construction costs. It is, however, a more complicated policy discussion - one that SB 10 is no doubt a part of, but a problem for which SB 10 is no silver bullet.
Another way to look at residential development is to look at how to bolster existing missing middle housing. These buildings are already used for multi-family housing. They are typically of older construction (93 percent of the 5,602 parcels identified as “plex” housing were built before 1993) and are interspersed throughout San Mateo County.
The purple-coded parcels on this map are multi-family housing of less than 6 units. Dark blue are jurisdiction boundaries, light blue is San Mateo County. Parcel data may be out of date and is for reference only.
Using assessor data available through UrbanFootprint, there are 1,136 “plex” buildings of 2-to-4 units with a building to land value ratio of less than 1. These parcels are in light purple, here:
The light purple-coded parcels on this map are multi-family housing of less than 6 units with a land-value ratio of less than 1. The darker purple-coded parcels on this map are other multi-family housing of less than 6 units. Dark blue are jurisdiction boundaries, light blue is San Mateo County. Parcel data may be out of date and is for reference only.
These buildings are potentially good candidates for SB 10 rezoning in San Mateo County because they are already in use as multi-family. The vast majority of these have existed for decades - if not generations - and SB 10 would allow them to bring in additional residents without drastically changing the urban fabric. The existing units in these buildings would presumably be subject to replacement housing requirements, and construction would not lead to long-term displacement. Successful SB 10 redevelopment in these parcels could potentially lead to additional infill housing in jurisdictions that may be home to residents skeptical of multi-family housing in their communities.
Commercial Conversions: A New Opportunity
Recent state laws (AB 2011 and SB 6) were passed to promote residential development in areas otherwise zoned for commercial or retail use. While these laws do streamline and incentivize the construction of homes, they do not do much in-and-of themselves to determine which commercial areas are most likely to be converted to residential, and under what circumstances.
Openscope Studio, an architecture studio with offices in San Francisco and Los Angeles, researched office space conversion and determined that Class C buildings are the best bet.
“Class C buildings are the sweet spot: smaller floorplates that allow for more natural light, high ceilings and operable windows all make for much simpler residential conversions, and create the type of apartments that people want to live in,” the firm noted in a recent blog post. “These conversions are more similar to the loft building conversions that were common in the 1990s and before than they are to converting commercial high rises.”
Class C offices are perhaps best defined as older commercial buildings with functional space and below-average rents. This is a working definition and not a legal standard, so there is difficulty in translating it into data-driven planning analysis.
Once again, the improvement to land value ratio serves as a useful indicator. It points to an older building, which likely does not have up-to-date finishes or contemporary conveniences. Below-average rents are likely. Of San Mateo County’s 4,839 parcels with office, commercial, or retail use, 2,367 (49 percent) have an improvement to land ratio of less than 1.
The light blue-coded parcels on this map are commercial and retail uses in San Mateo County with an building to land value ratio of less than 1. The darker green-coded parcels on this map are other commercial and retail uses. Dark blue are jurisdiction boundaries, light blue is San Mateo County. Parcel data may be out of date and is for reference only.
Equity
Feasibility - that is, actually getting homes built - is necessary. Also crucial, particularly considering the State’s new law (AB 686 - 2018) requiring that local housing decisions affirmatively further fair housing, is where these homes get built.
SB 10 is a way for jurisdictions that may not have a lot of multi-family housing to meet their requirements to zone for a variety of housing types. It is worth taking a moment to explain why this is a requirement. Multi-family housing is often more affordable on a per-unit basis than single-family housing in the same neighborhood.
Greater affordability means more access for people who do not have as much income or wealth as other residents in exclusive or gentrifying neighborhoods. Typically containing fewer bedrooms than single family homes, multi-family housing offers more opportunities for empty-nesters or senior citizens to downsize while remaining in the neighborhood, or for young families moving in. For jurisdiction staff, there is probably a subjective sense of which neighborhoods are most suitable for SB 10 projects. A more objective analysis would help frame any potential community outreach and support more precise siting.
There are two broad ways to think of SB 10 implementation: mobility based; a way to bring new neighbors to an exclusive area, and place based; a way to retain residents in a changing area. SB 10 relies on high land values to get the multi-family housing built, because it allows the land to be redeveloped to make more rent (with more units) that offset the land value. It is not likely to be as effective in areas that have low land values that are seeing depletion and dispersal, because a developer looking at an area will have a difficult time obtaining traditional bank financing.
Exclusive areas can be understood as Racially Concentrated Areas of Affluence, or census tracts that are much whiter and wealthier than the region as a whole.
Orange census tracts are identified as racially concentrated areas of affluence. Dark blue are jurisdiction boundaries, light blue is San Mateo County. Parcel data may be out of date and is for reference only.
An alternative lens would be looking at areas experiencing displacement. Note that this map also includes identification of census tracts that are “Stable/Advanced Exclusive”, which could corroborate with Racially Concentrated Areas of Affluence. The difference in this metric is that it looks at change over time, rather than a single “snapshot” captured in Racially Concentrated Areas of Affluence.
This map shows gentrification and exclusivity on a red-to-green spectrum. Generally speaking, red tracts are experiencing gentrification and dark green areas are exclusive, with shades of yellow and green in the middle. A more detailed map can be found at the Urban Displacement Project, here. Dark blue are jurisdiction boundaries, light blue is San Mateo County. Parcel data may be out of date and is for reference only.
Combining Results
Looking at the parcels where SB 10 might be most feasible, one clear trend comes into focus: the potential for increased development along the El Camino Real Corridor (also known as Highway 82 through most of San Mateo County).
The light blue-coded parcels on this map are commercial and retail uses in San Mateo County with an improvement-land value ratio of less than 1. The light purple-coded parcels on this map are multi-family housing of less than 6 units with a land-value ratio of less than 1. Dark blue are jurisdiction boundaries, light blue is San Mateo County. Parcel data may be out of date and is for reference only.
The historic highway between San Francisco and San Jose is studded with underutilized commercial areas and surrounded by older duplex development. This demonstrates how land use patterns have in many ways chased transportation investments over time: buildings constructed along El Camino Real have declined in value after the construction and further improvement of San Mateo County’s two highways, US-101 and I-280. Outside of major Caltrain stations, however, there has not been a substantial rent gap that can justify redevelopment.
For some of these properties, SB 10 may provide enough of a rent increase (or be combined with other state or local affordable housing incentives) to jump that gap and provide new residential units. If a jurisdiction decides to go forward with SB 10 to get housing units, the question then becomes: what impact will these units have on the existing community?
The use of the term “rent gap” in this context is intentional. The concept was initially developed in 1979 to describe the disparity between current rental income of a property and its potential rental income if redeveloped. Rent gap theory is linked to gentrification: if a landlord can justify redevelopment costs with eventual rent increases, they will go for it even if it involves changing the area.
There is no reason, however, for redevelopment to necessitate gentrification. In areas that are already exclusive and gentrified, more residential units are a way to give new people access to exclusive amenities (such as high-performing school districts or pristine parks) without dramatically affecting the existing community. For these areas - many of which are losing population despite their high desirability because it is just so expensive to live there - more residents can support the services and amenities with their tax dollars.
In areas that are at active risk of gentrification, SB 10 can alleviate development pressure by creating more units for incoming residents while supporting the retention of existing community members. This allows for more housing choice within a community, so that an empty-nester can stay close to their friends and family as they move out of a larger house, or a wealthy newcomer can live next to a less-well-off neighbor without causing their eviction.
Conclusion
SB 10 is unique in how it allows a jurisdiction to efficiently create new opportunities for multi-family housing, a sorely needed land use throughout California. Its defining properties, namely CEQA clearance and a 10-unit limit, make it a great fit for infill housing. This goes especially for low-rise or suburban areas, where SB 10 projects can provide that “ideal building typology” that is often financially unfeasible.
The law leaves siting of SB 10 parcels up to jurisdiction discretion. As many jurisdictions are leaning on SB 10 as a Housing Element strategy, there is limited guidance on how the law can exacerbate or mitigate fair housing issues.
A true SB 10 strategy would naturally take a more narrow lens than county-wide analysis of census tracts. It would also necessitate a community outreach strategy to truly identify what community goals can be furthered by SB 10 developments, and what should be avoided. This broader look at San Mateo County serves to help jurisdiction staff start asking questions about what multi-family housing might look like in their communities and their neighborhoods, as well as what beneficial impacts these homes might have on the future of the jurisdiction itself.
This map displays underutilized residential (purple) and commercial (blue) over racially concentrated areas of affluence data. Dark blue are jurisdiction boundaries, light blue is San Mateo County. Parcel data may be out of date and is for reference only.
This map displays underutilized residential (purple) and commercial (blue) over the gentrification and displacement data. Dark blue are jurisdiction boundaries, light blue is San Mateo County. Parcel data may be out of date and is for reference only.
By Asher Kohn, AICP
Asher Kohn, AICP, is a planner focused on the relationship between land use and demographic change. His work is based in the Peninsula and South Bay.