The “15 good bills” Brown signed into law here Friday morning include a new fee on real estate transactions and a $4-billion bond on the 2018 ballot that together could raise close to $1 billion a year in the near term to help subsidize new homes for low-income residents.
"It is a big challenge. We have risen to it this year,” Brown said.
The governor signed the legislation surrounded by lawmakers and advocates at Hunters View, a $450-million project in San Francisco that is redeveloping what was once crumbling public housing into new homes for 700 low- and middle-income families. Speakers at the ceremony hailed the package of bills as a sea change in how the state handles housing issues.
“Today California begins a pivot from a housing-last policy to a housing-first policy,” said Sen. Scott Wiener (D-San Francisco), who wrote one of the key measures.
Still, the array of new laws Brown signed Friday will hardly put a dent in the state’s housing problems. Developers need to build about 100,000 new homes each year beyond what’s already planned, simply to keep pace with California’s population growth.
Money from the bond — assuming it’s approved by voters in November 2018 — and the new real estate fee are estimated to finance about 14,000 additional houses a year, still leaving the state tens of thousands of units short annually, according to the state and third parties. Moreover, all the bond money could be spent in as little as five years.
Legislators and others in attendance emphasized that this year’s package of bills was only the start of what they planned to do on housing.
“We know we have much more work to do,” said Assemblyman Richard Bloom (D-Santa Monica), who authored multiple bills in the package. “And we will keep working this issue for as long as we need to.”
Here’s a rundown of how the bills aim to address different factors that add to the state’s housing problems:
Spending more money to build housing, primarily for low-income residents
Most of the money raised by Senate Bill 2, the $75 real estate transaction fee, and Senate Bill 3, the $4-billion housing bond, would go toward helping pay for the development of new homes for low-income residents, defined as people earning 60% or less of the median income in a given community. So in Los Angeles that means a family of four having a combined income of less than $54,060 a year.
The measures also will go toward new construction to benefit the homeless and farmworkers with a small percentage of money reserved to help pay for middle-class housing construction. For those homes, residents will be able to earn up to 150% of median income in the highest cost areas — that’s $135,000 annually for a family of four in Los Angeles, for example.
Both measures include dollars for other efforts besides helping subsidize homebuilding. Half of the money raised in the first year under SB 2 will go to cities and counties to update neighborhood development blueprints and other planning documents. And $1 billion of the housing bond will go toward home loans for veterans.
SB 2 is expected to raise $250 million a year by charging people a $75 starting fee to refinance a mortgage or make other real estate transactions, except for home or commercial property sales. The most anyone can be charged is $225 per transaction. SB 3 will authorize a bond that will be paid back with interest by tax dollars earmarked in the state budget, though the veterans will repay their loans themselves.
Making it easier for developers to build
Housing advocates and academics cite burdensome regulations, including some local governments’ lengthy approval processes, as a problem limiting the state’s housing growth.
A trio of measures aims to whittle down some of those rules. Senate Bill 35 forces cities to approve projects that comply with existing zoning if not enough housing has been built to keep pace with their state home-building targets. Such projects must also reserve a certain percentage of homes for low-income residents and pay construction workers union-level wages and abide by union-standard hiring rules.
Assembly Bill 73 and Senate Bill 540 give cities an incentive to plan neighborhoods for new development. Under AB 73, a city receives money when it designates a particular community for more housing and then additional dollars once it starts issuing permits for new homes. In these neighborhoods, at least 20% of the housing must be reserved for low- or middle-income residents, and projects will have to be granted permits without delay if they meet zoning standards.
SB 540 authorizes a state grant or loan for a local government to do planning and environmental reviews to cover a particular neighborhood. Developers in the designated community also will have to reserve a certain percentage of homes for low- and middle-income residents and the city’s approvals there would be approved without delay.
Money to implement both laws could come from the new real estate transaction fee and the bond.
Pushing developers to build and preserve more low-income housing
Because of a 2009 court decision involving a Los Angeles developer, cities are not allowed to force builders of apartment complexes to reserve a portion of their projects for low-income residents. Those policies were called an illegal expansion of rent control.
Now, Assembly Bill 1505 changes the rules so that cities can once again implement low-income requirements. San Jose already is considering a policy that would force developers to set aside 15% of their projects.
Typically when developers agree to build low-income apartments, that agreement lasts a certain time, often between 30 and 50 years. Afterward, owners of the property can charge market-rate rents. The California Housing Partnership Corp., a nonprofit low-income housing advocate, recently estimated that 14,000 low-income units in Los Angeles County are at risk of losing their income restrictions in the next five years.
Assembly Bill 1521 requires owners to accept a qualified offer to purchase the apartment complex from someone who pledges to continue renting the homes to low-income residents.
The state now runs a tax credit program giving large banks and other investors incentives to help finance housing for farmworkers. Assembly Bill 571 expands that effort with an eye toward making it easier for developers to bundle it with other sources to build farmworker housing.
Forcing cities to plan for more housing
Every eight years, cities and counties have to plan for enough new homes to meet state projections of population growth. This process, however, has not led to sufficient housing production to meet demand.
Three new laws expand requirements for cities to plan for housing. Assembly Bill 1397 forces local governments to zone land for housing where it could actually go, instead of putting sites they don’t intend to approve in their housing plan. In one example, La Cañada Flintridge rezoned a big box commercial property for apartments or condominiums, but city officials later told residents any new homes on the site would be almost impossible to build.
Senate Bill 166 makes cities add additional sites to their housing plans if they approve projects at densities lower than what local elected officials had anticipated in their proposals. The goal is to make up for the housing units that weren’t built.
Assembly Bill 879 instructs cities to analyze how long it takes developers to actually build their projects once they’ve been approved, and then take steps to shorten that time.
Penalizing cities that say no to housing
The Housing Accountability Act passed in 1982 prohibits cities from saying no to housing projects that meet zoning requirements simply because they don’t like them. But such cases are hard to prove. Three measures, Senate Bill 167, Assembly Bill 678 and Assembly Bill 1515, will beef up the existing law by making it easier for developers to prove a city acted in bad faith when denying a project, and by upping a city’s penalty to $10,000 per unit they rejected.
Assembly Bill 72 gives the state housing department more authority to investigate cities that don’t follow through with their housing plans and refer cases to California’s attorney general for possible legal action.
FOR THE RECORD
Sept. 29, 1:42 p.m.: An earlier version of this article referred to Assembly Bill 879 as Assembly Bill 897.