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Legislative Session Recap – Special Focus on Housing

Publication date: 
Monday, October 9, 2017

The combination of higher demand for housing and insufficient supply in California has driven a rapid rise in housing costs.  According to a recent report by The McKinsey Global Institute, more than 50 percent of the state’s households are unable to afford the cost of housing in their local markets. Low-income Californians are disproportionately impacted with a state shortfall of 1.5 million affordable units for extremely low and very-low income renter households. Subsequently, nearly 70 percent of low-income and very-low income households spend more than half of their incomes on housing costs.

To address this issue, the state Legislature took action to:

  • Increase state funding for the development and preservation of affordable homes
  • Streamline the local approval process for housing development, and;
  • Combat “Not-In-My-Backyard” (NIMBY) opposition.

 

The Legislature directed public policy related to housing affordability by focusing on streamlining the local approval response for policy and practical reasons. At a policy level, the Legislative Analyst’s Office (LAO), California’s nonpartisan fiscal and policy advisor to the Legislature, issued a report last year that stated “considerable evidence suggests that construction of market–rate housing reduces housing costs for low–income households and, consequently, helps to mitigate displacement in many cases.”

At a more practical level, the state lacks the sufficient funds to support the construction of affordable housing. According to the LAO, building affordable housing for California’s 1.7 million rent burdened low–income households would cost in excess of $250 billion (approximately twice the size of the recently adopted state budget of $125 billion in the 2017-8 state fiscal year). For these reasons, many of the bills enacted focused on strengthening local governments’ ability to reduce obstacles posed by NIMBYism in various communities.

Increasing State Funding

Senate Bill 2 (Atkins): This bill would impose a new $75 to $225 fee on real estate transactions in the state. The fee will generate $250 to $300 million annually to fund affordable housing development, programs to assist homeless people and long-range development planning in cities and counties. Analysis indicates that approximately 77,000 new housing units over five years could be built with this fund when combined with nonprofit groups, private investors, and tax incentives for low-income projects.

Senate Bill 3 (Beall): This bill places a $4 billion housing bond before voters in November 2018. If approved, $1 billion would go to the CalVet home loan program, established in 1921 to help military veterans purchase homes. The remaining $3 billion would help fund low-income housing projects and development near jobs and public transportation.

Assembly Bill 571 (Garcia, E.) allows state tax credits to be awarded to farmworker housing projects without regard to designated development area (DDA) or qualified census tract (QCT) status with the main purpose of making the state credits more valuable and providing enough state tax credits to match the value of a 9 percent federal tax credit. Under existing law, state tax credits cannot be awarded to a DDA or QCT. AB 571 would permit the use of these credits in these areas allowing state credits to be used for farmworker projects in DDAs and QCTs, increasing the equity projects could generate from tax credits because the projects can already qualify for more federal tax credits than projects outside of a DDA or a QCT.

Streamlining the Housing Development Approval Process

Senate Bill 35 (Wiener) creates a streamlined approval process for constructing affordable housing when cities fail to meet required housing development goals. It establishes a streamlined, administrative (“by-right”) approval process for qualified infill developments with two or more residential units or for Accessory Dwelling Units (ADUs) in localities that do not meet their RHNA housing production goals.

When unmet income-based categories are addressed, the approval of zoning-compliant projects will be streamlined, if they meet objective zoning, affordability, and environmental criteria, and if the projects pay prevailing wage. In addition, this bill also requires all charter cities (e.g. Los Angeles, Long Beach, Irvine, Huntington Beach) to report their annual housing production to HCD, and will require HCD to ensure housing production data is detailed, up-to-date, and publicly accessible on the internet.

Senate Bill 166 (Skinner) requires local government to have development sites identified, at all times, for all unmet housing needs, from very low-income to market-rate. It also seeks to strengthen state housing law that in most cases prevents cities and counties from reducing zoning densities to ensure there is “no net loss” of building capacity.

Assembly Bill 73 (Chiu) creates a streamlined zoning and environmental review process by allowing local governments to create a “housing sustainability district” (HSD). The bill defines “developable land” as the area within an HSD that can be feasibly developed into residential or mixed-use development. At least 20 percent of the housing in the district must be zoned at affordable levels.

In exchange for creating a HSD, localities receive incentive payments to encourage their establishment of these districts, at two stages. Firstly, local governments receive an incentive payment when they create a HSD. This payment would be issued by the state upon preliminary approval of the district ordinance and issuance of an environmental impact report. . Secondly, once a city permits housing units within a district and demonstrates it has received a certificate of compliance from the state, it would receive a second incentive payment. The Department of Housing and Community Development would issue the incentives.

Assembly Bill 879 (Grayson) requires local governments to expand their analysis of nongovernmental constraints. According to the author, this bill would lead to a more comprehensive understanding of the factors affecting housing development by requiring housing elements to include an analysis of potential and actual nongovernmental constraints upon development, maintenance, and improvement of housing for all income levels. Additionally, this bill requires that local governments identify how they will remove nongovernmental constraints indicated in their report.

Assembly Bill 1397 (Low) would require that cities and counties zone land that can realistically support housing development instead of choosing sites that are unfeasible for development to meet state housing requirements. Every local government is required to prepare a housing element as part of its general plan. In preparing its housing element, a local government must show how it plans to accommodate its share of housing demand. The housing element must include an inventory of sites already zoned for housing. If a community does not have enough sites within its existing inventory of residentially zoned land to accommodate its entire RHNA, then the community must adopt a program to rezone land within the first three years of the planning period. It requires the residential parcels to have access to sufficient infrastructure for water, sewer and other public utilities.

Assembly Bill 1505 (Bloom) seeks to restore the option for local governments to apply inclusionary polices to rental housing which as affected by a 2009 court ruling in Palmer v. City of Los Angeles. Additionally, it provides the Department of Housing and Community Development with the authority to review an ordinance that requires as a condition of the development of residential rental units that more than 15 percent of the total number of units rented in a development be affordable to, and occupied by, households at 80 percent of the area median income.

Assembly Bill 1521 (Bloom): This bill strengthens the law regarding the preservation of assisted housing developments by requiring an owner of an assisted housing development to accept a bona fide offer to purchase from a qualified purchaser, if specified requirements are met, and by giving the Department of Housing and Community Development (HCD) additional enforcement authority. These changes can increase the chances that thousands of affordable homes at risk of conversion will be preserved, reduce the displacement of existing low-income residents, and prevent the state’s already large shortage of affordable rental homes from growing.

Addressing NIMBY-ism

Senate Bill 167 (Skinner) and Assembly Bill 678  (Bocanegra) are identical bills that make changes to the state’s Housing Accountability Act (HAA) by increasing the burden on local jurisdictions  “substantial evidence” to “a preponderance of the evidence” when making findings that reject a housing development project or a shelter for persons experiencing homelessness. It also makes other changes related to when a local agency can reject a development, and also provides attorney’s fees for successful litigants that a plaintiff brings a cause of action related to the HAA.

Senate Bill 540 (Roth) authorizes a local government to establish a Workforce Housing Opportunity Zone (WHOZ). Before adopting a development plan, the local agency would prepare an environmental impact report (EIR) to identify and mitigate impacts from establishing a WHOZ, streamlining the planning approval process. After the adoption of such a plan for the area, any proposed housing development meeting specific requirements would have expedited review and would be exempt from development-specific environmental review. Additionally, portions of new developments would be dedicated to affordable housing. Thirty-percent will be rented or sold to moderate income households, fifteen percent to low income households and five percent to very low income households.

A local government must approve a housing development within the WHOZ that meets specified criteria, and no project-level EIR or a negative environmental declaration would be required on a development within a WHOZ that meets specified criteria.

Assembly Bill 1515 (Daly) seeks to address “not-in-my-backyard” protests when it comes to a housing development project or emergency shelter by strengthening existing law known as the Housing Accountability Act (HAA). Zoning and planning consistency is a threshold requirement for the HAA, and this bill would potentially expand the number of housing developments that are afforded the protections of the HAA. The bill inverts the normal burden of proof for determining whether a project is consistent with local zoning. It does so by stating that a proposed housing development is deemed consistent with local plans and ordinances if there is substantial evidence such that a reasonable person could conclude that the project is consistent.

Assembly Bill 72 (Santiago and Chu) expands enforcement abilities of the Department of the Housing and Community Development to report violations to the Attorney General if local governments fail to comply with its own housing plan. The Attorney General could then pursue judicial action against a local government for failure to comply with state law.

Contact

If you have questions or comments, please feel free to contact Seyron Foo, Director of Public Policy and Government Relations, at [email protected] or (213) 680-8866 ext. 221.

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