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California Legislature Responds to the State’s Housing Crisis With Increased Funding, Streamlining, and Enforcement

9/27/2017 Articles

On the final day of the legislative session, California’s legislature approved 15 separate housing bills, taking a big step toward addressing California’s ongoing housing crisis. The collection of bills comes after months of negotiations, education, and outreach between the Governor’s office, the Legislature, industry groups, and other interested parties. Given the heavy involvement of the Governor’s office in crafting and negotiating the bills, it is expected that Governor Jerry Brown will sign them by the October 15 deadline. Indeed, the Governor tweeted his support of two bills discussed herein – SB 2 and SB 35 – shortly before the final vote.

The package of bills generally addresses three different aspects of the housing crisis, with some areas of overlap: increasing the funding available for creating affordable housing; streamlining the process for entitling development projects; and putting more teeth into existing housing regulations by focusing on enforcement and accountability.

Funding

The two main funding bills on the Governor’s desk – SB 2 (The Building Homes and Jobs Act) and SB 3 (The Veterans and Affordable Housing Bond Act of 2018) – seek to develop new sources of funding for affordable housing projects.

SB 2, arguably the more controversial of the two, would impose a $75 fee on recordable real estate transaction documents, up to a maximum fee of $225 per recording transaction and exempting recordings made in connection with home and commercial real estate sales. In 2018, the funding derived from SB 2 will be allocated to local governments to assist with streamlining housing production, and to the Department of Housing and Community Development (HCD) to assist those experiencing or at risk of homelessness. In 2019, the funding shifts to the creation of affordable housing.

SB 3 authorizes a $4 billion bond measure on the November 2018 ballot, of which approximately $3 billion is allocated to existing housing programs and $1 billion will go toward extending CalVet home loans to veterans. Among the existing programs that can expect funding are the Affordable Housing Innovation Fund, the Multifamily Housing Program, and the Joe Serna, Jr. Farmworker Housing Grant Fund.

Streamlining

Several bills, and in particular SB 35, aim to improve the overall housing approval process and remove what many believe are unwarranted local impediments that effectively act as deterrents to the development of new housing.

SB 35, sponsored by San Francisco’s own Sen. Scott Wiener, is designed to streamline the approval process for multifamily infill housing that meets certain requirements, including being located within a city that is not currently meeting its Regional Housing Needs Allocation (RHNA) goals. Supported by the Governor’s office and opposed by local governments, SB 35 permits certain projects to undergo a ministerial approval process that limits review to planning criteria and project design. To qualify, a project must (among other things) meet zoning standards, be located in an infill site, dedicate between 10-50% of the units to households earning up to 80% of area median income (AMI), and, if more than 10 units, meet prevailing wage requirements. Notably, these streamlining provisions would only be in effect until the end of 2025, giving developers less than 10 years to take advantage of its benefits.

Less controversial, but still targeting the housing approval process, are AB 73 and SB 540, which incentivize cities to establish districts or zones within which streamlined approval is permitted. Specifically, AB 73 authorizes the creation of “Housing Sustainability Districts” and SB 540 “Workforce Housing Opportunity Zones,” wherein planning and environmental review are conducted at the outset in exchange for incentive payments, grants, and/or loans. To be eligible for either program, the development must include a certain percentage of affordable housing, in addition to meeting other requirements.

Enforcement

The new slate of housing bills also includes a focus on holding local governments accountable for land use decisions that defy state housing policy.

SB 167 and AB 678 seek to strengthen the existing Housing Accountability Act by authorizing courts to impose fines of $10,000 per unit against cities that act in bad faith by denying or reducing the density of housing projects that conform to objective general plan policies and zoning. Funds collected via these fines can be deposited into a local fund, but must be spent on affordable housing within five years; otherwise, they revert to California’s Housing Rehabilitation Loan Fund.

SB 166 (which, like SB 167, is sponsored by Sen. Nancy Skinner of Berkeley) ensures that cities meet the housing needs identified in their general plan housing elements by prohibiting local governments from causing their inventory of housing sites to be insufficient to meet their required housing needs. The bill also requires cities to find replacement sites for affordable housing in the event lower-density residential projects are approved in sites otherwise suitable for affordable housing.

Also targeting local governments’ housing elements is AB 1397, which would require that the inventory of land identified in the housing element be suitable for development – i.e., that the parcels have sufficient utilities (including water) to support housing development – and AB 72, which allows the HCD to refer local government violations of their housing element to the Attorney General’s Office for enforcement proceedings.

Going Forward

California’s lawmakers and Governor Brown have shown a commitment to reform the State’s housing programs and processes through a combination of funding, streamlining, and enforcement. The efficacy of these reforms, which unfortunately failed to address or reform CEQA (the California Environmental Quality Act) – and how quickly Californians struggling under the weight of the housing crisis will feel relief – will be seen over the course of the next several years.

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