Last week I got an email last week from a New York VC asking for advice about building a house in the California Coastal Zone. For six and a half years I served as a public official on the California Coastal Commission.
The call reminded me that it’s been a year since I resigned, and it’s time to tell a few stories of what I learned as a Coastal Commissioner. Each and every month I learned that not everything was how it seemed.
Here’s Lesson 1: Farming for Developers.
Background
The California coast is a panorama of open farm fields and hundreds of miles of undeveloped land. Highway 1 (the Pacific Coast Highway) follows the coast for almost the entire length of the state. The kind of road you see in car ads and movies, it looks like it was built to be driven in a sports car with the top down. The almost 400 mile coast drive from Los Angeles to San Francisco is one of the road trips you need to do before you die.
With 39 million people in the state, there’s no rational reason there aren’t condos, hotels, houses, shopping centers and freeways, wall-to-wall for most of the length of our state’s coast (instead of just in Southern California).
The Coastal Act saved California from looking like the coast of New Jersey.
Almost 40 years ago the people of California passed Proposition 20 – the Coastal Initiative – and in 1976, the state legislature followed with the Coastal Act, which created the California Coastal Commission. Essentially the Coastal Commission acts as California’s planning commission of last resort for all 1,100 miles of the California coast.
Thanks to the Coastal Act and the Coastal Commission, generations of Californians and our visitors enjoy the most pristine and undeveloped coast in the country, with recreation and access for all. It’s an amazing accomplishment.
The downside is that the coastal zone has the strictest zoning and planning requirements in the country.
As a new commissioner I learned quickly what developers would do to bypass those requirements.
A Different Type of Developer
After 30 years in Silicon Valley I thought I knew what a developer was: a software programmer building a web site, app, game, firmware, etc. But as a Coastal Commissioner, I was dealing with a different type of developer – a real estate developer – someone who acquires land and builds housing and commercial buildings.
The business model for real estate developers isn’t hard to understand: buy farms and/or ranches then build commercial buildings or houses and sell them off. Real estate developers make their money off the difference between the raw land and the net profit on the houses or the commercial buildings.
But a lot must happen before they can make money. If they’re building homes, they need to get approvals to rezone and subdivide the property, bring in utilities (water, sewer, electricity, phone, internet); build infrastructure (roads, sidewalks, street lights, etc.), get approvals to build the units, etc. A lot of capital is at play. Naturally if you’re a developer you want to maximize your return on invested capital. The easiest way to do that is to ensure that you can build as many units (apartments, condos, houses, etc.) as you can on the parcel you own.
Absent any zoning or regional planning, each developer will naturally maximize the development density of a parcel while leaving the impacts on traffic, views, water, wildlife, ecosystem, community character for others to worry about. The result is what’s called the tragedy of the commons (individuals acting independently end up depleting shared resources.) An example of this are the wall-to-wall housing developments on the Southern California coast and resulting gridlock on the freeways.
The Coastal Act has tried to protect the remaining parts of the California Coast. The opening section of the Act starts by stating, “…the permanent protection of the state’s natural and scenic resources is a paramount concern to present and future residents of the state and nation.” It follows with, “…it is necessary to protect the ecological balance of the coastal zone and prevent its deterioration and destruction.” One of the ways it protects the coast is that you can’t build on land that has been designated an Environmentally Sensitive Habitat Area (ESHA) or on lands that are Wetlands.
Part of my education as a commissioner was seeing how housing developers attempted to avoid these rules.
Farming for Developers
My first lesson was learning that developers love farmers.
In fact, developers think farms and farmers are the best thing to ever happen to the coast of California. Developers love buying farms. They buy-out family farms for prices that far exceed what the farmers could ever get from selling their crops. And often developers let the farmer stay on the farm, leasing them back the land so they can continue to farm it. Developers even help farmers optimize their output by making sure that they plant multiple crops each year and insisting that each time they plant they till each and every inch of their fields. And the farmers are told to make sure the fields are perfectly level so no water can collect or pond on the fields, regardless of how small.
When I first ran into this I thought, “Wow what a great deal. The developers are helping farmers maximize their yields by making all these improvements to California farming. “
Boy was I dumb.
The developers knew that if the farm fields were to remain fallow, many of them would return to the native wetlands or sensitive habitats that are protected by the Coastal Act and when that happened, developers couldn’t build on them. If enough of the farm would be found to have ESHA or Wetland, it would limit the number of houses that could be built (reducing the value of the project) or might even make the entire project economically unfeasible.
The reality was that the real estate developers could care less about farming or the crops. Tilling every inch of the farm and pouring pesticides on it meant nothing but a single crop could grow. Making it perfectly level meant that no water could pool and start a wetland. Developers were using the farmers to ensure the continued eradication of any Environmentally Sensitive Habitat Area (ESHA) or Wetland.
So the developers keep the farmers plowing the fields as the developers work on changing the zoning and getting approvals, and when they do, the bulldozers show up to start building the condos or houses that have buried Southern California. And the farmers retire.
That’s why developers on the California coast love farming.
Lessons Learned
- The Coastal Act prohibits development in Environmentally Sensitive Habitat Areas (ESHA) or Wetlands
- Existing farms have previously eradicated ESHA or Wetland
- Keeping the farming going while developers get approvals minimizes environmental objections
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Filed under: California Coastal Commission |
Wow what a great article! I’ve been reading your blog for over a year and I never noticed you tackling any environmental issues in your prior posts (did I miss them?). Have you ever covered socially responsible start-ups?
Like you I’ve been in high tech for several decades. But I tried something new last year when my daughter wanted to become entrepreneur. We launched a socially responsible start up to make clothing for surfers/paddlers/yogis in California (because 98% of clothing sold in the US is made overseas). Currently our clothing is made from organic cotton in India, but last year we looked to see if we could replace it with organic cotton from California.
Interestingly there are 750 farmers that grow cotton in California, but only one grows organic cotton. We partnered with this farmer over a year ago and in a few weeks we’ll be completing the project to grow clothing from seed to shirt, all in California. We’re the only company in the world making clothing in California from organic cotton grown in California (and we also sell clothing made from organic cotton grown in India, at least until we have a stable source in California).
Clearly you’re a capitalist and entrepreneur… and this article about development says you’re also concerned about our environment, maybe even an environmentalist…. Do you think business (start-ups) have a roll in solving some of our environmental issues? Would you have any specific posts or books that would be help educate my daughter and I grow our socially responsible business more quickly?
Steve, Thanks for clearing the debris. While its understandable that farmers would sell out for a high price, what about those farmers that want to sustain a lifestyle and family business, but need help in doing it as an environmentally sustainable business. Is there a population of such farmers that the coastal commission could aid to counteract the developer effect by aiding farmers to engage in organic and evnironmentally sustainable farming? Could WholeFoods help?
Ask a multigeneratoinal farming family what “environmental sensitive” land use is all about. In order to be a sustaining farmer over several scores of years he or she knows what its all about. Not the non participating observer including rule making agency members.
Pau//Patricia
Saving multi-generational farms is a real issue, not just on the California coast but in the rest of the U.S.
Coastal Commission staff have seen farmers who are “land-banking” for developers (knowing they’re going to work the farm until they retire and then selling it off for intensive housing/commercial development.)
Because 1) the consequence of getting it wrong means the permanent loss of farm land and 2) the staff has no way of knowing who really wants to save their farm for a next generation of farmers (multi-generational farming) and those land-banking, they have come up with “one-size fits all” regulations.
Being able to distinguish between farmers who truly want to do multi-generation farming and those who are scraping ESHA to prep it for sale, is hard.
But the result are that the regulations that condition farming up and down the coast satisfy no one. They are rigid and assume that all farmers want to do is sell their land to developers. Therefore the conditions are a series of proscriptive “you shall not.” While that might be true for the majority it punishes those who truly want to protect their land by keeping in farming when they are gone.
I had suggested to staff that they think about writing specific multi-generational guidance into cities/counties Local Coastal Program (LCP.)
They might create a special LCP category called “multi-generation farms.” These farms would put an irrevocable conservation easement (no subdivision, no use other than farming) on their property. In exchange, the LCP would allow maximum farming flexibility in varying crops, grading, farm labor housing, barns, etc. without any additional Coastal Development Permits (CDPs). On lots greater than 10 acres it would also allow for a second house not to exceed 3500 sq ft, (assuming it has a density credit) to be built and occupied by the next generation farm family (or someone engaged in working on the farm.)
The conservation easement could be donated for tax credit, sold to a local land trust, or bought by the county. It allows farmers to take the cash out of their farms now.
This proposal would:
– work with the farmers who really want to pass the farm on not sell it. You tweak the proposal based on their feedback
– call the bluff of the farmers who really are running a land-bank for future development
– set up a model for preserving agriculture on the entire coast of California
– remove draconian paperwork requirements for those who just want to farm
– allow farmers to get cash now and preserve their farms.
I welcome your additional thoughts.
I have random reactions to your comments, Steve. Most of them swirl around the following two comments I lifted from your reply to “Paul/Patricia”. A side comment: My sister’s name is Patricia. Most my thoughts are largely tied to the agony felt by Colorado, Washington and other states in which property owner rights were trampled by rigid bureaucrats (at times with an evil grin).
“They are rigid and assume that all farmers want to do is sell their land to developers. Therefore the conditions are a series of proscriptive “you shall not.””
” irrevocable conservation easement (no subdivision, no use other than farming) on their property”
Many times during my eighty plus years I’ve been accused of being delusional and this by many current standards may be an additional time. But I am darned tired of continual application of restrictions on my rights to do what my 18th century for-fathers suggested what my rights are and no continued governmental overriding thereof.
The California Coastal Commission has become an evil agency that deprives private property owners of their property rights without advancing the goals of the Coastal Act. That is especially true now that environmental absolutists dominate the commission and its staff. They now demand “take avoidance” rather than “least harm,” which has unjustly and unnecessarily stifled development along the Northern California coast. And it’s all done without improving coastal access or improving coastal health!
The Coastal Act requires the Commission to consider the needs of the people of the State of California in its decisions. They no longer do so — they listen to the radical environmentalists only.
Right on! The CA Coastal Comm probably began with the typical do-gooder intent…but, as its assumed powers piled on layer on layer, it became the “evil agency”.
Thank you for the explanation of how developers are making saps of local elected officials!
I was going to say, With no Coastal Commission, the water’s edge from Pendleton to Oregon would be developed like Northern San Diego County – say, Encinitas – and i was going to ask, Is that how we want California to look? But then I thought that most people would be perfectly happy with no open Coast at all except for a few State Beaches where they could grill hamburgers.