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City struggles with “impossible task” of meeting housing requirements after state rejects Banning Ranch as an RHNA option

By SARA HALL

During a study session this week, City Council agreed to keep Banning Ranch in the housing inventory – despite a state agency rejecting it – as an additional option to pursue, but not include in the city’s mandated housing numbers. 

Newport Beach community development staff presented an update on Tuesday (Jan. 25) on the draft Housing Element, including input recently received in a comment letter from the California Department of Housing and Community Development. 

The effort to update the 2021-2029 Housing Element is required by HCD in response to the 6th Cycle Regional Housing Needs Assessment allocation of 4,845 new housing units assigned to the city.

In the draft Housing Element, the city indicated a potential for 591 affordable units and 1,475 total units on Banning Ranch. 

The primary takeaway from the letter is that HCD is not going to accept the proposed units at Banning Ranch, explained Deputy Community Development Director Jim Campbell.

“So, if we keep it in there and we count it toward satisfying our RHNA, we believe that we will not have a certified Housing Element,” Campbell said. 

The challenge is how the city addresses that issue, he noted. Staff presented two options: Remove Banning Ranch from the inventory entirely and redistribute those units in other housing study areas in the city; or keep Banning Ranch in the inventory as an additional backup option to pursue, but not count it towards the city’s RHNA, and still redistribute those units elsewhere.

“If we can’t count this toward our RHNA, we need to move them elsewhere,” Campbell said. 

Their first thought was to move them to the other housing study areas (Airport area, Coyote Canyon, Newport Center, Dover-Westcliff and West Newport-Mesa) and proportionately distribute them. Under this plan, increases in affordable units would range from an additional 24 in Dover-Westcliff to as many as 228 in the airport area. 

Staff believes they have substantial evidence of the sites to accommodate the small increase for each area, Campbell noted. 

“We feel that this is a prudent approach,” he said. 

Another idea (which the council ultimately supported in a straw vote) is to still redistribute the units, but keep Banning Ranch in the inventory as an option to pursue as a possible back up, just in case they can get any housing opportunity sites approved, but not count it towards RHNA.

“To the extent that we’re successful in getting housing authorized and getting zoning opportunities on Banning Ranch, that would relieve the pressure to do it elsewhere in the community,” Campbell said. “If we fail miserably on getting it in there, then obviously we have sites elsewhere in the community.”

In the old draft the city suggests adding 10,053 total units. By redistributing those units but still keeping Banning Ranch in the plan as a possible option to pursue, the new proposal results in a 11,588 total.

City struggles with Dover Westcliff

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Houses in the Dover-Westcliff neighborhood

If they leave the 1,475 units in Banning Ranch and also disperse units across the other sites, the city is essentially over-planning for affordable units, Councilmember Diane Dixon pointed out. 

“Do we get any bonus points for that?” she asked, slightly joking.

“I wish,” replied Community Development Director Seimone Jurjis, “but they just looked at Banning Ranch as a zero and they’re not going to give us any additional credit.”

When they start addressing the overlays to plan for the housing, they can include language that clarifies when they reach the affordable housing thresholds to cease the additional housing beyond that, Jurjis explained.

“We can definitely put some triggers in there, if that’s what the future committees and community would like to see,” he said. 

Including Banning Ranch isn’t violating any law or “sticking a finger in anybody’s eye,” Dixon said.

“We’re just saying, ‘We want to consider this as an additional location for affordable housing. We want to go over and above what we’re required,’” Dixon said. “It’s our city and it’s within our sphere of influence and if we want to put X number of units there or think about planning for them, we can, right? And we’re complying with their draconian orders.”

Both goals of meeting the housing needs and preserving open space are possible, she added.

In a 6-1 straw vote, council majority supported directing staff to keep Banning Ranch in the inventory, but not counting it toward the city’s RHNA. Councilmember Joy Brenner dissented. 

With council’s latest feedback, city staff will revise the Housing Element one more time before returning to council for approval at the February 8 meeting. They will then forward it to HCD “hopefully for the last time,” Jurjis said.

“There’s a high probability that they will not accept it and they’re going to come back with another round of comments,” Jurjis said. “We’re going to do this back and forth until we can get approval from HCD.”

Neither option was ideal and councilmembers expressed frustration of the difficult position the city is in based on state mandates and requirements. 

They’ve been put between a rock and a hard place with Banning Ranch essentially being taken away as a potential option for housing, said Councilmember Will O’Neill. 

“If you want open space: Great, just reduce the housing requirements,” O’Neill said. “If you want the housing requirements: Ok, but then you can’t take away our large, last remaining open space (where we would) be able to put some housing.” 

They’ve been struggling for years on how to navigate the requirements, he said, and they always anticipated they’d be able to use Banning Ranch. They didn’t expect the state to simultaneously mandate a Housing Element with this much required housing while also helping fund the acquisition of Banning Ranch as open space.

“This is a frustrating end to a difficult process,” O’Neill said. “And it might not even be the end if this doesn’t get approved.”

They tried to ask the state for relief on the requirements if the Banning Ranch land was taken away as a potential housing option, Dixon noted. 

“We’re hemmed in by the ocean, by open space, by a wildfire area, by an airport,” she said. “Give us some relief, (but) we all know that there is no relief coming…We want to comply, just help us find the space to do it in.”

As pointed out by city staff, Newport Beach is not the only agency struggling with the HCD’s requirements. 

The city received HCD’s comment letter on January 14, Jurjis said. It’s the city’s second round of comments and is about nine pages long, which is average for most jurisdictions in the Southern California Association of Governments region. 

In the SCAG region there are 197 agencies and only two have been certified so far, Campbell pointed out, and none in Orange County.

“I guess we’re in good company,” he said. “Everyone is struggling to make this work.”

They met with HCD staff, who summarized the points in the comment letters, Campbell said. While HCD does essentially just have a checklist they run through, there is some thought put into it, he added. 

“But they clearly have state law behind them that makes us do what we have to do,” Campbell said. 

“HCD is not a well-oiled machine,” Jurjis added, sometimes what’s said during the meeting is different than the letter officially issued to the city. “So we’re dealing with an agency that is trying to understand their laws and trying to implement their laws, and they’re struggling to do that too.”

Noting that only two plans for agencies in the SCAG area have been approved, Dixon asked what staff has heard from other jurisdictions about possible legal action, challenges, or resistance.

“I think right now everybody feels (they’re all) in the same boat, that this has gotten out of control, this is the impossible task, this is a futile effort,” Jurjis answered. “Those cities that have been through the housing process before (say) it was easier in the past to get certified, everybody is saying is that this is ridiculous.”

City struggles with rooftops

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Houses in Newport Beach

Another side to consider is that the state has formed a housing compliance group or task force as the enforcement arm, Jurjis said. In a recent statewide Zoom meeting, they actually talked specifically about Orange County cities, he noted. 

“So Orange County has a target on its back,” Jurjis said. 

Assembly Bill 1398 that states if the city cannot get certified, HCD requires they implement their adopted Housing Element, Jurjis said, “which is impossible for us because we have Greenlight, we can’t do it.” 

It’s unknown what that would mean in regards to the compliance enforcement arm of HCD and potential consequences.

“This is all unchartered territory for us,” Jurjis said. 

The task force will likely start out with a letter campaign of notices of violation and request a plan for compliance, Jurjis predicted. Ultimately, there are fines under state law up to $600,000, he added, but that is not likely to be the first step in the process. The attorney general could also get involved with litigation.

O’Neill struggled with the idea of removing Banning Ranch because, if faced with an enforcement action, he doesn’t want the state to claim they took it out of the inventory “voluntarily.” Even if the council opted to remove it now, it wouldn’t be voluntary, O’Neill pointed out.

“The threat of what we’re looking at, in terms of the enforcement mechanisms, are draconian and aggressive,” he said. “They did it on purpose, which I understand, but at the same time…we can’t realistically take it out and then put ourselves in a binding position down the road.”

They also can’t keep it in and solely rely on it, he added. 

Other councilmembers mentioned that keeping most of Banning Ranch as open space is still possible even with some plans for housing.

Banning Ranch is about 400 acres and this number of housing units would need roughly about 30 to 40 acres, Campbell said. Approximately 10% of the land is all they would need to make this happen, he added. 

That leaves a lot of great park land and, if done correctly and sensitively, a development like that is not going to be detrimental to the public’s enjoyment of that open space, said Councilmember Brad Avery. Housing is not going to completely cover the land, he added. 

“To be held up like this, after all the effort with no compromise whatsoever, is disappointing,” Avery said. 

The housing units taken away from Banning Ranch are going to negatively impact all the other parts of the city with more development and more affordable housing, added Councilmember Joy Brenner. 

She’s not sure everyone advocating for open space fully understood the counter-consequences of removing the potential for housing from the Banning Ranch area.

“We all love the idea of open space,” Brenner said. “But now that we’ve got this mandate (from the state), it’s going to negatively impact our quality of life in the rest of the city.”

Although resident and president of Still Protecting Our Newport, Charles Klobe, noted that the owner of Banning Ranch has no interest in remediating the property for residential development.

“You all have to know that there aren’t going to be homes built on Banning Ranch for the simple reason that the owner is not interested in developing them,” Klobe said. “So placing those there continuing this idea, seems to me to be giving a gesture to the HCD which begs them to come back to us in a harsh way.”

Klobe agreed with staff’s idea of distributing the units to the other focus areas. He also suggested adding a 20% inclusionary policy, so there won’t be a “run on the bank” while it gets figured out.

“That kicks the can down the road and gives us the potential for HCD to approve it, so that we don’t get fined and we don’t get made an example of,” Klobe said. 

Other key highlights from HCD’s comment letter include: Request for additional information about Affirmatively Furthering Fair Housing, related to trends, patterns and developing an action plan; general comments about the site analysis and whether the city has enough substantial evidence to support all the housing opportunities sites, specifically with concerns regarding Banning Ranch; and clarification, milestones and timing about the city’s Housing Element programs, which will be implemented over the next three years once adopted. 

“There’s a lot of clean-up work to do,” Campbell said. 

They’re fairly subjective, so it’s challenging to understand exactly what HCD is looking for, he said, although it’s very clear to city staff they are not going to accept Banning Ranch. 

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Sara Hall covers City Hall and is a regular contributor to Stu News Newport.