Commentary: The City Could Do More to Make Redevelopment and Infill Viable

By David M. Greenwald

Davis, CA – My columns this week have taken a rather dim view on the Housing Element and the future prospect for infill development in Davis, given that the difficulty of developing peripheral housing under Measure J is a problem.

UC Davis Law Professor Chris Elmendorf in response to my column earlier this week pointed out that “there’s nothing wrong with city relying on infill redevelopment rather than greenfield expansion, provided that city shows that redevelopment is economically feasible.”

As I pointed out, while true, the problem is the questionable fiscal feasibility of the infill at this point.

His response: “Price, rent in Davis is higher than Sac, yes? Sac’s doing infill. So if it’s not feasible in Davis, fault lies with city exactions and discretionary review.”

Yeah but…

Actually, yeah, but… he’s right.  Right now the city is going to have a great deal of difficulty with additional infill—especially in the downtown where it seems to be counting on infill to provide the housing it needs.

Remember the Bay Area Economics group back in June 2018 (seems like a million years ago now) reported on the financial feasibility “to evaluate the feasibility of retail, office, and residential (for-sale and for-rent) projects, including mixed-use projects.” BAE’s full DRAFT Economic Background Analysis – Downtown Davis Plan can be accessed HERE.

On pages 38 – 44 of the Draft Analysis BAE looked at a number of scenarios to determine the feasibility or infeasibility of ten (10) different redevelopment scenarios.  Table 14 on pages 43 showed that 9 of the 10 scenarios were fiscally infeasible.

Also on page 43 of the analysis report, BAE concluded: “These results indicate that under current conditions, it will be very difficult for developers to undertake projects similar to the prototype projects, with a few exceptions. As mentioned previously, it appears that a medium-sized mixed-use project incorporating high density for-sale residential units could be feasible.”

BAE concluded that “development feasibility in Downtown Davis is challenging under current conditions.”

On page 44 of the analysis report BAE went on to note that:

There are important ways that the City of Davis can positively influence development feasibility, including:

  • Reduce project risk and project timelines by establishing clear planning guidelines for the desired development types and reducing or eliminating discretionary review processes;
  • Allow increased densities, so that developers can achieve greater efficiencies of scale on the limited number of available sites, including better spreading the high cost of site acquisition;
  • Limit requirements imposed on downtown development projects which would translate to increased costs that do not bring corresponding revenue increases; and
  • Consider entering into public-private partnerships with developers to help put together feasible development projects that attract new businesses to downtown. This could include utilization of City-owned land on terms that help to bridge feasibility gaps where there is an expected return on the City’s involvement.

A huge consideration would be to reduce time and risk for developers.

BAE suggests providing “clear planning guidelines,” limiting discretionary decision-making, provide environmental clearance such as Specific Plan EIRs, provide fast-track path to entitlements, and “follow through with streamlines and efficient building permit and inspection procedures.”

As I pointed out earlier this week, the city continues to put most of its development eggs into the infill basket.  I know there are mixed opinions on the wisdom of that.  But if they are going to continue in that direction, the city council needs to level that playing field and allow projects of that sort to become viable.

Of course, the small contingent of folks who oppose Measure J (remember, that was less than one-fifth of all voters in 2020) see the only viable solution as leveling Measure J.  Personally I think there are at least two work-arounds that are perfectly legal under the current scenario.  One suggestion would be to simply designate a certain amount of land to be Measure J-exempt under the next General Plan.  You would have to build in density and other requirements to prevent abuse, but it’s a viable solution.

That’s probably the better approach, although it would require the city to do regular and timely updates to the General Plan and would require the voters to pre-approve land.

The other and more radical solution would be to make the opposition play perpetual defense—place a Measure J matter on the ballot every single election and force the opposition to have to organize against a project every six months.  That was actually one of the fears of the progressives, that developers would simply be able to outlast the opposition.  That’s never come to pass and there are a lot of reasons for it.

Bottom line, the city in my view is coming toward the end of infill as a workable long-term strategy for housing needs, and will have to start re-thinking its approach.  As I mentioned earlier this week, that time might not be the 2021-28 Housing Element, but it is coming.

—David M. Greenwald reporting


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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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26 Comments

  1. Don Shor

     One suggestion would be to simply designate a certain amount of land to be Measure J-exempt under the next General Plan.

    Since that itself would abrogate Measure J, it would almost certainly require a vote of the public. And if it wasn’t deemed to require such a vote, I’d expect Measure J supporters to immediately seek a referendum on it anyway.

    make the opposition play perpetual defense—place a Measure J matter on the ballot every single election and force the opposition to have to organize against a project every six months. 

    Who, what, and how would you see bringing this to pass? Measure J requires a vote on a specific project. Are you proposing that developers get together and start shoving projects forward and paying for elections at their own expense, just as a strategy to wear down the growth opponents? Or that the city council should be doing this?

    I don’t think either of your solutions is a viable option. The city is shackled by the intent of the voters. Infill isn’t going to happen without redevelopment dollars, especially if there are stringent affordable housing requirements on any project. At this point I see the only likely increase in housing within the city limits coming from state action against the city with regard to the housing element, or someone taking direct aim at Measure J via a lawsuit due to housing inequities.

    Peripheral development is actually a far likelier scenario than infill. The net profit is higher and it’s easier to meet affordability requirements.

  2. Alan Miller

    Office over retail may work in unique circumstances involving high quality tenants.

    Possible Translation:  High Quality Tenants = mostly white people (and possibly ‘model minorities’ such as Asians and Jews)  😐

    Incorporating . . . affordable housing challenges economics further

    Possible Translation:  Allowing more people of color into Davis will cost developers too much money  😐

    As I said, these are possible translations.

    ==============================================

    There are important ways that the City of Davis can positively influence development feasibility,

    You say that like it’s a good thing 😐

    Reduce project risk and project timelines by establishing clear planning guidelines for the desired development types and reducing or eliminating discretionary review processes;

    Define “desired”.  Desired by whom?   ”

    and reducing or eliminating discretionary review processes;

    Translation:  Allow to shove down existing residents throats without process.

    Allow increased densities, so that developers can achieve greater efficiencies of scale on the limited number of available sites,

    Bigger buildings in your backyard Friday Friday NIMBY!  (Note:  I’m today using Friday Friday for the F world because of recent, un-annouced puritanical policy changes on language)

    including better spreading the high cost of site acquisition;

    Define “better spreading”.

    Limit requirements imposed on downtown development projects which would translate to increased costs that do not bring corresponding revenue increases

    Let’s see:  no considerations of development.  Such as:  affordable housing, solar, improved transportation options, etc etc plus a dozen Friday Friday Davis requirements that cost money.

    Consider entering into public-private partnerships with developers to help put together feasible development projects that attract new businesses to downtown.

    Translation = subsidize developers

    This could include utilization of City-owned land  terms that help to bridge feasibility gaps where there is an expected return on the City’s involvement.

    Translation = subsidize developers

    BAE suggests providing “clear planning guidelines,” limiting discretionary decision-making, provide environmental clearance such as Specific Plan EIRs, provide fast-track path to entitlements, and “follow through with streamlines and efficient building permit and inspection procedures.”

    Translation = shove down the throats of existing citizens without process.

    As I pointed out earlier this week, the city continues to put most of its development eggs into the infill basket.

    “Self Inflicted” was the term you used, almost as if you agreed with Glick, West & Miller that Measure JeRkeD s¨cks.  (Can I say s¨cks?  Or is that banned too?)

    I know there are mixed opinions on the wisdom of that.  But if they are going to continue in that direction, the city council needs to level that playing field and allow projects of that sort to become viable.

    Of what sort?

    Of course, the small contingent of folks who oppose Measure J (remember, that was less than one-fifth of all voters in 2020) see the only viable solution as leveling Measure J.

    I resemble that remark.

    Personally I think there are at least two work-arounds that are perfectly legal under the current scenario.

    Do tell.

    One suggestion would be to simply designate a certain amount of land to be Measure J-exempt under the next General Plan.

    Say WHAT?

    You would have to build in density and other requirements to prevent abuse, but it’s a viable solution.

    Viable without a vote?  How do you figure that?

    That’s probably the better approach, although it would require the city to do regular and timely updates to the General Plan and would require the voters to pre-approve land.

    That’s not a workaround, that’s just a Measure JeRkeD vote without a project.  Good luck with that.

    The other and more radical solution would be to make the opposition play perpetual defense—place a Measure J matter on the ballot every single election and force the opposition to have to organize against a project every six months.

    What are you even talking about?  Who is doing placing these votes?  There’s a difference between “radical” and “makes no logical sense”.

    That was actually one of the fears of the progressives,

    What “fears” of what “progressives” ?  Define your terms.

    that developers would simply be able to outlast the opposition.

    Like how the Taliban outlasted Russia and now the US in Afghanistan?

    That’s never come to pass and there are a lot of reasons for it.

    Something that never was and never will be is never going to come to pass.  True.

    Bottom line, the city in my view is coming toward the end of infill as a workable long-term strategy for housing needs, and will have to start re-thinking its approach.

    As I have a suggested, how about getting rid of Measure JeRkeD, on the grounds that it is discriminatory and keeps people out of Davis?

    As I mentioned earlier this week, that time might not be the 2021-28 Housing Element, but it is coming.

    Also coming:  our Sun going supernova.

    1. Moderator

      (Note: I’m today using Friday Friday for the F world because of recent, un-annouced puritanical policy changes on language)

      We don’t control the language filter. A simple solution would be for you to stop swearing.

      1. Bill Marshall

        Not dismissing your point, Moderator… but “swearing” is in the eyes of the beholder…

        Those ‘eyes’ may be “Puritanical”, “political correctness”, “offensive to me”, “racist”, etc., etc.

        All are related… speech another individual, group(s), majority of folk, entities, find ‘offensive’… the filter was “programmed” by someone who has biases, good or bad…

        No “absolutes”…

        Am sure I’ve cracked a lot of eggshells, stomped on a lot of snowflakes, in posting this!

        One person’s “swear word” is another one’s “vigorous adjective”…

         

    2. Craig Ross

      “As I have a suggested, how about getting rid of Measure JeRkeD, on the grounds that it is discriminatory and keeps people out of Davis?”

      I’ll bite – how do you plan to do that?

      1. Keith Y Echols

        We live in a world (country) where we now have to protect everyone from everything….even if it started with good intentions……….we now get into trouble trying to protect one thing and inadvertently discriminately against another.

        In this case the argument can be made that in an effort to protect the environment (farm land, urban sprawl…etc…) through Measure J…which in turn limits housing and drives up prices (in simplistic theory) which keep out lower socio-economic groups and by extension some minorities.   The word of the day is: Disparate Impact (which I think is part of the 1964 Civil Rights Act and a housing act in 67..or 68?).

        1. Craig Ross

          Doesn’t answer my question (aimed someone else).  But oh well.  Measure R is NIMBYism disguised as environmentalism.  If not here, somewhere else.  If not bike in Davis, drive from Elk Grove or Natomas.

        2. Alan Miller

          (aimed someone else)

          CR, buddy!   Where you been?  DG finally let you out of the basement?

          how do you plan to do that?

          I don’t.  I plan to let someone else figure that out.

           

  3. Rick Entrikin

    As Governor Newsom is searching for ways to spend a $75 billion “windfall,” this seems an ideal time for The Vanguard to exert its considerable nfluence in Sacramento, for new redevelopment funds for the City of Davis.

     

  4. Richard_McCann

    First, there’s a big difference between “fiscal” and “financial” feasibility/viability and it is important in these articles to keep them separate. Fiscal feasibility is from the government, and even community, perspective, and considers whether the fiscal government net revenues are positive or negative, and can consider whether the broader community benefits are positive as well. Financial feasibility is from the perspective of the private developer and property user. The BAE analysis only looked at the financial feasibility and said nothing about fiscal feasibility. Analysis such as those presented by Urban3 consider the fiscal feasibility and generally show net positive benefits for infill projects like those in the Downtown Plan. So if we’re going to impose additional requirements on private projects downtown, we might consider compensating developers for the associated additional costs if we have evidence of broader net benefits. Sharing the wealth can make all of us better off.

    Second, I don’t think having a Measure J/R/D vote for approving an overall bubble of land will work. First, property owners would have to agree to include their parcels in the vote–the City Council can’t designate these by fiat–that’s probably unconstitutional as a potential taking. Second, the vote likely would turn on inclusion of individual parcels and without a clear champion as happens with current projects, this actually increases the likelihood of failing. And third, this doesn’t address the real root of the opposition from the voters who actually decide these projects–whether the project complies with specific Davis goals such as sustainability or social equity. These aren’t decided on whether to expand City limits–that core opposition won’t be swayed by this approach.

    Similarly, developers aren’t going to wear down Davis voters because those who have been interested don’t have the financial resources to fight that battle. All of the projects proposed under Measure J/R/D have come from developers with direct ties to Davis. Ramos is the most distant and it owns substantial land here. Outside developers, such as those at the Cannery, only come here when there’s no electoral approval required. That’s why we get so few Measure J/R/D proposals–its the hidden cost of that law.

    I’ve suggested a viable alternative of approving a set of development baseline conditions that are non negotiable, and if a developer meets or exceeds those, then the development can be approved by the Council. We also could set a limit on acreage that can be developed on an annual or cumulative basis over a period of time. That could be approved by voters. This would require a replacement of Measure J/R/D and would provide certainty to developers. It also likely would be highly defensible in court and also meet CEQA requirements.

    1. Bill Marshall

      Interesting thoughts… some resonance for me… not opining one way or the other, at this point… but thanks for getting some interesting thoughts into the discussion…

    2. Keith Y Echols

      Yes, thank you for pointing out the difference between fiscal and financial analysis.  It often seems like this type of analysis is done with little thought to the market involved.  In this case it seems like the assumption is a Field of Dreams: “if we zone and entitle it; builders and their tenants will come”.  That works in the Bay Area because there’s nowhere else to zone, entitle and build.  If Santa Clara up zones a bunch of land…it’s going to get built because there’s not much else available in Sunnyvale or San Jose…..Mountain View, Milpitas…Palo Alto?  But if you just call out the magical planning words: “high/medium density” “mixed use” and “infill” in Davis?  Eh, a builder/tenant is just as likely or more so to locate in Sacramento or buy a single family home in Dixon or Woodland.   I mean sure, encourage infill development but it’s not some magical solution for the city that will dictate to the market.

      1. Alan Miller

        Yes, thank you for pointing out the difference between fiscal and financial analysis.

        You may also wish to thank me for pointing out there is a difference between “fiscal” and “physical” analysis.

        You’re welcome  😐

  5. Keith Y Echols

     One suggestion would be to simply designate a certain amount of land to be Measure J-exempt under the next General Plan.

    In a properly run city that area is designated in the General Plan as the “Sphere of Influence” and usually has some agreements ahead of time between the city and LAFCO.  The city every 10 or so years during the General Plan update or an amendment figures out what it wants to do with future growth under certain conditions.   Those conditions are set by the city (and by extension it’s voting populace)….everyone is relatively happy if the conditions are met to make the city and county happy the land is annexed and development is underway without the need for some idiotic voter micro scrutiny for every project.  Davis probably has a sphere of influence…but what’s the point with John Q Public involved each time a property is to be annexed for development?

  6. Wesley Sagewalker

    As someone who is working on several infill housing projects in Sacramento currently and was contemplating an infill housing project in Davis, if anyone is interested, I will share my perspective on why infill is happening in Sacramento but less so in Davis.

    There are several reasons why infill is working in Sacramento and is considerably more challenging in Davis.

    First, Sacramento does not require Affordable Housing whereas projects in Davis generally do. On an infill project where your land basis is generally quite high, you generally need to build high density product whose build costs are much higher than one or two story housing. These added costs make Affordable Housing quite difficult unless you are essentially building affordable by design style microunits whose market rate rent is basically the same as the capped Affordable rents. For greenfield development, you are better positioned to absorb this hit via land dedication, etc. for projects of sufficient scale. For infill development, everything is already tight, so these options generally are not available. The more Affordable Housing that is required, the higher rents/sales price you have to charge to make up the difference which disadvantages new construction against the existing housing stock.

    Second, Davis is largely composed of small single family lots. Unless you can assemble them into larger parcels, the number of units you can build at any site is generally not enough to spread all the fixed costs related to design, overhead, etc to make them attractive to anyone other than people who are looking to build a duplex to fourplex and are willing to accept lower returns than the risk generally warrants. Scale is key to driving down costs, and Davis currently has very few parcels that can achieve the necessary scale to spread the fixed costs down.

    Third, Sacramento’s core generally has higher intensity and more flexible zoning than Davis does. Hopefully, this will be rectified by the Downtown Plan which I think it fairly good as long as Affordable Housing is not put into it. Currently, many of the setback requirements, height limitations, and units/acre restrictions in Davis make redevelopment infeasible given the current construction costs/design costs for higher intensity development. Hopefully, the General Plan update will do a lot to alleviate this. Given the revealed preference of Davis citizens/voters regarding a low density urban form, I am somewhat skeptical that the General Plan will do as much as it should, but one can always dream.

    Fourth, although more marginal, Davis generally has higher fees per unit than Sacramento does. I am not entirely sure why this is, but at the margin, this makes it more challenging to develop infill housing given the tighter margins resulting from the factors I mentioned above.

    Fifth, there is more regulatory uncertainty in Davis than Sacramento which drives up risk, time, and cost. This is getting better and hopefully will become much better with the Downtown Plan and General Plan update. I should also note that Sacramento contains its fair share of challenges, especially regarding anything that is considered “historic”. Hopefully, Davis will not be quite as enamored with “historic” resources that really shouldn’t be, but we will see how that evolves.

    1. Keith Y Echols

      My first personal project were small residential infill homes in San Jose.  That was quite a while ago and it was fairly easy since there were no changes to the existing zoning necessary….just some weird small scraps of land that had to be assembled and vacated.

      Yes, I’m all too familiar with inclusionary housing.  One of the things with Habitat for Humanity we tried for a couple years was to take the affordable component off of the developers’ hands.  You’re right it depends on increased at market prices to subsidize the affordable ones.  So you’re borrowing from peter to pay paul…so to speak.  I think specific target inclusionary housing has a purpose (housing for teachers, police, fire fighters etc..) but I do not believe that it’s a viable long term solution for affordable housing.  Does Sacramento have an in lieu fee for developers to pay into for affordable housing?

      The lots are small which is why they’re all advocating higher density.  That means they’ll have to go up and traditionally Davis doesn’t like that.  But Davis is sort of caught in a market no-man’s land in commercial (and by extension mixed use) development.  It wants high density infill but that won’t attract the build to suit businesses necessary to drive the kind of growth they want….which initially would require greenfield business park development.

      Here’s the thing that would mitigate the Davis vs. Sacramento discussion: if Davis had a vibrant growing economy outside of UCD.  Economic growth could fuel the kind of infill development that Davis wants.  But so far Davis has decided to not encourage that kind of economic growth through it’s restrictive development and almost prohibitive anti-business reputation (which may or may not be fully deserved).

       

      1. Matt Williams

        Here’s the thing that would mitigate the Davis vs. Sacramento discussion: if Davis had a vibrant growing economy outside of UCD.  Economic growth could fuel the kind of infill development that Davis wants.  But so far Davis has decided to not encourage that kind of economic growth through it’s restrictive development and almost prohibitive anti-business reputation (which may or may not be fully deserved).

        Keith’s comment above is spot-on.  According to the US Census On The Map, the City of Davis has only 15,607 jobs the breakdown by job category is as follows:

         

        Health Care and Social Assistance
        2,831
        18.1%

        Accommodation and Food Services
        2,819
        18.1%

        Educational Services
        2,059
        13.2%

        Retail Trade
        2,032
        13.0%

        Professional, Scientific, and Technical Services
        1,596
        10.2%

        Other Services (excluding Public Administration)
        686
        4.4%

        Public Administration
        611
        3.9%

        Real Estate and Rental and Leasing
        476
        3.0%

        Manufacturing
        412
        2.6%

        Administration & Support, Waste Management and Remediation
        373
        2.4%

        Finance and Insurance
        299
        1.9%

        Wholesale Trade
        287
        1.8%

        Construction
        274
        1.8%

        Arts, Entertainment, and Recreation
        256
        1.6%

        Information
        248
        1.6%

        Management of Companies and Enterprises
        220
        1.4%

        Agriculture, Forestry, Fishing and Hunting
        77
        0.5%

        Transportation and Warehousing
        51
        0.3%

        Mining, Quarrying, and Oil and Gas Extraction
        0
        0.0%

        Utilities
        0
        0.0%

         

        Further, the Census data shows that population in the City is over 20,000 people lower during the daytime than it is at nighttime, with close to 9,000 more residents leaving the City to go to work than come to the City to work (only 4,173 of the 15,607 jobs are held by Davis residents), and well over 11,000 Davis residents commuting outside the City to go to their classes.  That creates an incredibly anemic economic base for Davis’ “daytime” businesses.  By comparison, Palo Alto’s daytime population is more than 100,000 people higher than its nighttime population.

        Further indicators of how vibrant and growing the Davis economy is is shown by the Census data.  Only 3,807 of the 15,607 jobs in the City of Davis are filled by a person who has a Bachelor’s degree or advanced degree.

        That lack of a vibrant and growing economy makes the financial viability of redevelopment even more challenging because filling the first floor street facing commercial space is very difficult and very price sensitive (for rent per square foot) and the demand for second floor office space is virtually non existent. So almost all the revenue needs to come from the residential units.

        1. Ron Oertel

           By comparison, Palo Alto’s daytime population is more than 100,000 people higher than its nighttime population.

          As I recall, even one or two of the early railroad barons got the heck out of Sacramento, including the family associated with that fine university which bears their name – in or adjacent to Palo Alto.  🙂

          But hey, they did leave a couple of their nice mansions behind.

          Turns out that no one wants to live in a hot, flat floodplain – if they have the ability ($) to avoid it.

      2. Ron Oertel

        Here’s the thing that would mitigate the Davis vs. Sacramento discussion: if Davis had a vibrant growing economy outside of UCD.

        Seems to me that Sacramento is not exactly a job center either – outside of government agencies.

        Oh, and perhaps the heavily-subsidized Aggie Square, at some point in the future.

        Seems like state capitols are sometimes given that designation as a “consolation prize”, for otherwise kind of sucking.  But truth be told, Sacramento might be in a league of its own, regarding that.  🙂

        I remember speaking with someone who was attending Sac State years ago (majoring in a technology field), with an eye toward moving to the Bay Area after graduation. A talented guy, for sure.

        I asked him how he ended up in Sacramento, and he acknowledged not knowing much about it before moving there, other than being the “state capitol of California”. I laughed.

        Sacramento, while not being the “worst place on earth”, will always be a second (or third) fiddle town. No matter how many basketball arenas they build.

        And by the way, Davis is part of the Sacramento region, to the eyes of anyone outside of Davis.

  7. Ron Oertel

    60,000 people in Sacramento can’t find an “affordable” home.

    ‘Unprecedented’: Nearly 60,000 Sacramentans can’t find an affordable home (msn.com)

    But there are indications that this latest housing run-up has peaked.

    The housing boom might be at its peak (msn.com)

    That reminds me:  How is crypto-currency doing?

    Here’s a tip for y’all, that most folks seem to adhere to:  buy high, sell low.  Either way, real estate agents always think it’s a good time to (either) buy or sell. 🙂 Not much difference, other than the the price of a cup of coffee/day for the next thousand years. At least, that’s what I’ve heard.

     

    1. Bill Marshall

      Affirming that the SOI is already very extensive [huge would be a better term] (and has been since at least 2000), and precludes nothing… last time I saw, extended up to CR 29 to the north… SOI is not a factor… Ron G, you understand… some other posters just pretend to…

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