The Double-Edged Sword of Preemption

By Brian Barth

The YIMBYs and the NIMBYs were already at each others' throats in Cupertino, California, when the state legislature got involved. Here, just a few blocks from Apple's new space station-esque headquarters, is a derelict shopping center that has become a proxy for the state's affordable housing war.

The Vallco mall, a 1970s retail dinosaur situated on a sprawling 58-acre site, was all but dead by 2014 when it was purchased by the Sand Hill Property Company — which soon announced a $3 billion redevelopment plan, including two million square feet of office space and 800 residential units on top of the site's existing retail footprint. The problem is that the proposed two million square feet of office space would translate to a lot more than 800 jobs — one estimate put the number at 10,000 — provoking stiff opposition from housing activists in this notoriously expensive city where the median home price recently climbed above $2 million. Where were those workers going to live?

The folks at YIMBY Action wanted to see significantly more residential units in the proposal, ideally with a large percentage offered at below-market rates. Members of the opposition NIMBY group Better Cupertino felt the proposal was too big and too dense for their suburban community of 60,000 and would have been content with modest retail redevelopment on par with the existing mall. It seemed no one was happy.

Common types of preemption legislation involve short-term rentals. Image from Stocknroll/iStock/Getty Images Plus.

Enter State Bill 35, legislation sponsored by California Senator Scott Weiner that streamlines planning approvals for development projects that incorporate affordable housing. In jurisdictions that have failed to meet the quotas for new residential units established by the state's Regional Housing Needs Assessment — which includes 97 percent of all cities and counties in California as of 2018 — SB 35 supersedes local regulations to green-light projects that meet preestablished development standards, effectively circumventing the costly and time-intensive public review processes that often derail controversial projects. Part of a 15-bill affordable housing package signed by former Governor Jerry Brown in 2017, SB 35 is emblematic of a push in the California capitol to force municipalities to build more housing faster, which includes similar streamlining measures aimed at accessory dwelling units and transit-oriented developments.

The situation in California is part of a broader nationwide trend of state, and even federal, legislators attempting to usurp local control of local affairs. Commonly referred to as preemption, the approach tends to make planners nervous, even when it's used as a means to ostensibly noble ends, such as affordable housing.

SB 35, says Eric Phillips, the vice president for policy and legislation of the California Chapter of APA, "is a little bit blunt of a tool for accomplishing its aims." But he appreciates the sentiment behind it.

"There definitely is a role for the state to be involved in housing in California. Because the local incentives in many jurisdictions are to not do their share, and the inertia to not change is so strong, having the state involved in breaking through that deadlock is appropriate. But then figuring out how much state intervention is needed and what's effective is a real challenge," he says.

SB 35 came at an opportune moment for the Sand Hill Property Company. They quickly reconfigured their development proposal to meet SB 35 requirements — Cupertino, a suburb of San Jose, falls into a set of jurisdictions where projects with 50 percent affordable housing get the green light — and began construction. Then all hell broke loose.

Better Cupertino, the antigrowth group, became more emboldened after the new SB 35-compliant plan — which included a total of 2,400 residential units — was unveiled, and filed a lawsuit to stop construction in June 2018. In October, Cupertino's former city attorney also sued the municipality, claiming he had been let go for voicing concerns about the project. Several city council members were already aligned with Better Cupertino, but in the November elections two more supporters who have vocally opposed the project won seats, giving the group a majority voting bloc.

Common types of preemption legislation involve housing policy. Image from Jens Kalaene/Alamy Live News.

As the first project to use the new statute, the Vallco mall controversy attracted statewide attention. After news broke in June that council members were exploring further measures to scale back development at the site, Wiener, SB 35's author, tweeted his disapproval: "In an effort to kill Vallco development ... Cupertino City Council is proposing to violate state law by down-zoning the site." Shortly thereafter, Ray Wang, the chair of Cupertino's planning commission, who is openly aligned with the NIMBY faction, sparked a firestorm when he attacked a pro-housing group on the site Nextdoor.com, writing that it was time to "save the suburbs from an onslaught of anarchists and YIMBY neoliberal fascists."

State preemption has a way of throwing gasoline on already fraught local affairs. At times it can seem as though it's the only way to solve intractable problems playing out on a local level, but it's a catch-22, says Phillips, noting that the bill has allowed a project with a roughly 4-to-1 ratio of jobs (10,000) to residential units (2,400) to move forward. "A bill that's meant to jump-start housing has allowed for office creation that will create more jobs than the housing will offset, let alone start to undo the preexisting imbalance."

Part of the challenge, Phillips adds, is that the political will to solve the problem seems to be stronger at the state level than locally; voters may not want to see residential high rises springing up in their backyard, but in California they've given a clear mandate to their elected officials to do something. "It's an issue people feel every day when they're paying their rent or walking to the train station past a tent camp. State legislators feel like they need to take action, and that will certainly continue as long as it continues to be a visible and acute problem that constituents are feeling," he says.

Common types of preemption legislation involve climate change and transportation network companies. Images from iStock/Getty Images Plus and Carterdayne, iStock Unreleased.

On the rise

The value of any particular preemptive law is a matter of debate. It is clear, however, that preemption is on the rise, and that there are distinct trends in how it is being applied nationally. A recent National League of Cities report analyzed seven areas of preemption law, ranging from transportation network and short-term rental companies to minimum wage and municipal broadband, and found that every state except Connecticut and Vermont had preemptive laws on the books in at least one of the policy areas. Four states — North Carolina, Florida, Wisconsin, and Arkansas — had laws in six of the seven policy areas (more on preemptive housing laws, which NLC analyzed separately, in a moment).

The first big wave of state preemption came in the 1980s when the tobacco industry pushed back at local regulations limiting where tobacco could be sold, consumed, and advertised. Josef Kubes/Alamy stock photo.

An oft-stated benefit of preemption is the establishment of a uniform policy environment, as opposed to patchwork regulation. The idea is to create a smoother and more predictable business environment for companies operating regionally or nationally, thus driving economic growth. Preemption can also be used to set a level playing field in areas of social justice by rectifying the legacies of archaic local laws, preventing moneyed special interests from wielding too much power, and serving as a checks-and-balances system in cases where local politicians are not acting in the best interests of their constituents (or in cases where their actions have negative impacts outside city limits). Indeed, much of state and federal law falls into these categories — labor, lending, and pollution regulations.

A black-and-white, good-bad view of preemption is further clouded by the legal precedents underlying the division of state and local power, which vary from state to state.

In so-called "Dillon's Rule" states, where state legislatures have historically assumed broad authority over municipal governments, preemption is essentially the default approach to governing local jurisdictions. In home-rule states, where state legislatures have historically granted broad authority to local jurisdictions, preemption is less of a norm.

In practice, however, Dillon's Rule states often provide legislative carve-outs that allow larger cities fuller authority over their own affairs (even smaller local governments are often granted a significant degree of self-determination), and legislatures in home-rule states are by no means precluded from enacting preemptive laws when they see fit.

But the bottom line, says Alex Jones, the manager of the NLC's Local Democracy Initiative, is that in instances where preemptive laws contradict local needs, conflict inevitably arises.

"Preemption is a legal tool that is neither good nor bad," Jones says. "Our assertion is that it should be used to solve a clear problem. But in too many cases recently we're seeing it used to strip cities of what we believe should be within their power and restrict the ability of city leaders to deliver solutions their constituents are asking for."

One notable finding of NLC's research is that preemption is most common where the state government controls both legislative chambers and the governor's office, which as of 2017 was the situation in 34 states (eight of them controlled by Democrats and the balance by Republicans).

"It's not a red or blue issue," says Jones. But it does seem to be a product of partisanship — the "spatial sorting of political preferences between urban and rural areas," as the NLC report put it. "Recent preemption has pitted rural- and suburban-dominated state legislatures against cities with large populations of low wage earners and ethnic minorities," the report continued. "As preemption efforts often concern a politically divisive issue, they rely on single party dominance to pass through state legislatures."

Ben Winig, the vice president of law and policy at ChangeLab Solutions, agrees that it's not the use of preemption that's the problem, so much as the way it's being abused. A lawyer who has spent his career working at the intersection of the built environment and public health, Winig says the first big wave of state preemption came in the 1980s at the behest of the tobacco industry as it pushed back on local regulations that sought to limit where tobacco could be sold, consumed, and advertised.

"Preemption is certainly not a new topic in the public health world," he says. "What is new is how other industries have jumped on the preemption train. Now we're witnessing the abuse of state preemption across a whole range of issues."

Corporate lobbying has played a central role in the current wave of preemption, which Winig says began in 2011 when the partisan divide in state legislatures intensified. Fights over soda taxes are a prime example. In the land-use realm, companies operating in the sharing economy have also exerted their influence to sway state regulations in their favor. According to the NLC analysis, the proliferation of services offering short-term rentals has sparked preemptive laws in five states, including Arizona, where a 2017 law prevents cities from banning platforms like Airbnb. Ride-hailing services have had even more luck in state capitols, with 41 states passing legislation that preempts local authority to regulate their use. In Virginia, where taxis have traditionally been regulated at the local level, a 2015 law said that ride-hailing services would be regulated by the state, leaving taxi drivers to fear they would be subject to stiffer rules that would reduce their ability to compete with Uber and Lyft drivers.

"Ideally you want cities and states partnering to advance equitable land-use and housing policies, but that's not really what we're seeing right now," says Winig. "What we're seeing around the country is special interests using the state to curtail equitable planning at the local level. Cities are facing these really urgent, complex problems that require creative solutions and the evidence shows that it is local governments that are best suited to determine which policies most reflect the unique values and needs of their citizens."

Two approaches

Preemption may be neither good nor bad, but the question of how best to wield the tool remains. In seeking a model, it is instructive to look at policy areas in which the lines between federal, state, and local control enjoy broad consensus. Consider environmental regulations. Because air and water pollution inevitably have impacts far from their sources, it's reasonable to expect local jurisdictions to cede the authority to regulate them. The pattern here is that the federal government sets minimum standards (parts per million of a certain pollutant that will be allowed, for example), leaving states free to impose stricter standards should their citizens mandate it (as has long been the case in California). Local jurisdictions can then take further steps to reduce pollution, but they will be penalized if they fail to meet state or federal minimums.

The federal minimum wage (currently $7.25 per hour) is considered a preemptive "floor." Local jurisdictions can set their own minimums as long as they don't go below it. The U.S. Department of Labor has interactive maps comparing state rates. Images from Getty and Patchnation, Etsy.

Policy makers refer to this as a "floor" approach to preemption, as opposed to a "ceiling" approach, which is when preemptive laws put a cap on how far a jurisdiction can go in creating policies to address a particular issue. The federal minimum wage is another example of a preemptive floor in that it allows local jurisdictions to set a higher minimum but prevents them from going lower. In 2016, however, the Alabama legislature effectively made the federal minimum a ceiling by preempting jurisdictions that wanted to set their own minimum wage based on local living costs.

Regulatory ceilings have also come into play with housing law, such as in Ontario, where the province recently granted enabling legislation to allow cities to adopt inclusionary zoning policies but capped the percentage of affordable units that could be required of a specific project at 10 percent. In the U.S., according to a recent NLC analysis of state-level affordable housing policies, 22 states have placed limits on municipalities' freedom to design inclusionary zoning policies and eight states have banned it outright. Rent control has suffered a similar fate: It is restricted in four states and fully preempted in 36 states, though one state (Oregon) has used preemption to mandate rent control.

Winig points out that allowing cities the flexibility to chart their own course has traditionally been a way to test new policy ideas on a limited scale. "Many of the things that cities have experimented with have ultimately bubbled up to the state and federal level — we want cities to experiment and innovate." And if a city passes a truly disastrous law? "Then we're going to need to rely on the state or the federal government to counteract that. What we don't want is powerful interest groups telling state legislatures that cities shouldn't do x, y, and z because it hurts their profits."

Where Does Preemption Limit Local Control?

The National League of Cities' wheel of preemption laws starts at the top with Connecticut and Vermont (both with none) and cycles around to Florida, Wisconsin, Arkansas, and North Carolina, which have the most. Legal precedents underlying the division of state and local power in each state make preemption controversies anything but clear.

Source: National League of Cities, "City Rights in an Era of Preemption: A State-By-State Analysis 2018 Update"

On housing

The division of federal, state, and local authority is such a fact of life that we rarely refer to it as a preemption — except, it seems, when a significant conflict arises. The likelihood of conflict rises steeply when one level of government treads into a domain traditionally relegated to another. For instance, state and federal lawmakers naturally assume responsibility for new industries such as ride hailing and autonomous vehicles, laying the rules of the road, so to speak.

But where cities are preempted from regulating how these industries impact land use — say, the innovative approaches to curb management that have come about in response to changes in transportation — a line has clearly been crossed.

Housing is traditionally the domain of local jurisdictions (other than in certain tangential aspects, such as discrimination, financing, and building codes), yet the society-wide implications of housing affordability and availability have risen to such crisis levels in some regions that lawmakers understandably feel they have no choice but to intervene. Meddling too deep in local land-use affairs sets a dangerous precedent, however, and one-size-fits-all solutions tend to fall short.

California is neck deep in exactly this dilemma. As its legislators continue to sponsor bills aimed at forcing cities to take a more aggressive approach to soaring housing costs, Eric Phillips of APA California sees a mixed bag in terms of policies that align with effective planning and those that don't.

"For every helpful bit of state legislation there's some new obligation that seems unlikely to result in more housing, or has other unintended consequences," he says.

SB 35 is a case in point. It uses the "floor" approach by tying each city's housing obligations to the state's Regional Housing Needs Assessment. But its penalty for noncompliance usurps local authority over planning decisions.

Alternatives exist, however. This year, legislators in Utah passed an affordable housing bill that was lauded by the Utah League of Cities and Towns. Using a floor-based approach and a menu of 22 options for compliance, the bill offers planning flexibility for cities to fulfill state housing requirements, with the stipulation that state transportation funding will be withheld from those that fail to act — a penalty that does not infringe on the planning process.

If state lawmakers are displeased with the progress local governments are making on an issue of collective importance, it makes sense to set minimums, raise them if necessary, and levy penalties that are heavy enough to provoke compliance — but designed to respect the self-determination of local communities.

"Preemption is not inherently partisan. It doesn't have to be political," says Winig. "Let's look at what we want to achieve and then determine whether preemption helps us or hinders us. The devil's in the details."

Brian Barth is a frequent contributor to Planning.