Amid a housing crisis in California, legislators last week approved a historic package of bills that will shape the future of housing policy in the state.
The bills raise revenues for affordable housing production, hold local governments accountable for approval of housing projects, and make housing plans meaningful and inclusive. They balance the power over land-use planning between the state and cities, and they politically move the state in the direction of exploring progressive solutions to solving the housing crisis permanently.
California’s affordable housing problem is multifaceted, and as I have written previously, has grown larger and larger over decades of public and private sector failures. It has manifested itself in almost half of the state’s 6 million renters paying more than 30 percent of their income on rent, and 1.5 million paying over half their income on rent. The state also has the lowest homeownership rates since the 1940s, with only one in three households able to afford a median priced home. Meanwhile, California’s homeless crisis is expanding to the countryside and cities deal with widespread health emergencies due to large populations of unsheltered people. (San Diego is facing a deadly Hepatitis A outbreak among its homeless citizens.)
Despite a panoply of local housing measures last year, the approval of last week’s legislative package is a paradigm shift in California’s approach to housing. This is because it elevates the discourse on affordable housing to the center of policy decisions at the state and local level, and sets up the framework for political agreement between the Democratic-controlled Assembly, the Senate, and the governor. It took years of failed proposals to reach a viable deal; nonetheless, the three fundamental pillars of this political agreement are:
- Public revenue is necessary to produce below-market rate housing.
Two major bills that needed the support of two-thirds of the legislature to pass both generate public revenue for housing in different ways, and were a necessary condition for any housing package. One of the bills, SB 2, tacked on a fee of $75–$225 for real estate transactions like refinancing (with the exception of purchase) to generate $250 million a year for local planning, homeless services, and affordable housing. The other, SB 3, will place a $4 billion veterans and affordable housing bond on the November 2018 ballot to create a statewide affordable housing trust fund and produce 52,000 new or rehabilitated homes.
These two revenue sources could be leveraged with other state and federal sources to raise $3.9 billion and produce 14,000 homes annually, according to the California Housing Partnership Corporation. Even though this is a drop in the bucket of the total need, this creates a permanent dedicated funding source for housing that can be augmented in the future. On a broader level, it reinforces the tools that affordable housing developers have been using, and that have faced uncertainty through state and federal cuts. It is a political recognition of the positive impacts of affordable housing on the overall economy. And it may spur the public support of many more voter initiatives to raise tax revenues that would supplement the state resources on affordable housing.
State control of local planning may be invoked to remove social barriers.
Land-use planning has traditionally been under local control, within the “home rule” provision in California. As a consequence, revenue-constrained local infrastructure and laissez-faire suburban sprawl directed growth since the 1980s. When suburbs ran out of developable land and developed cities found their infrastructure insufficient to accommodate more residential development, housing production was not able to meet jobs and population growth.
After considerable debate and consensus among a variety of stakeholders, state legislation (SB 35) will streamline the approval process for multifamily residential projects that meet certain conditions such as including affordable housing units, paying prevailing wages on construction projects, using a skilled and trained workforce, and protecting against resident displacement.
The bill explicitly makes ensuring access to affordable housing a matter of statewide concern, and is applicable to all cities and counties, including those that have their own charter. It also treats affordable housing and good jobs as two sides of the same coin, as affordability is a function of both prices and income, or rents and wages.
There is a carrot and stick approach to local planning. Cities are empowered and funded to plan for housing production, within the parameters of twin bills (SB 540 and AB 73). These bills allow a city to create areas within which the city can conduct environmental reviews, mitigate impacts and incentivize housing projects. On the other hand, state legislation will increase the burden on cities that deny housing projects (SB 167 and AB 678), and require courts to give less deference to local planning objections to housing projects (AB 1515). These changes will require cities to report on all projects approved or denied (AB 879), and allow developers to sue cities for plans and planning decisions that impede housing projects.
Housing plans CAN be meaningful and inclusive.
California cities are required by state law to have general plans that address housing. The housing chapters, known as “housing elements,” of the plans are supposed to accommodate their share of regional population growth in various income categories. However, they have been ignored by some cities, since they were largely paper exercises and there were few consequences for non-compliance in accommodating lower-income housing.
New state legislation will make housing elements sufficient (SB 166) to meet the city’s unmet housing needs, realistic (AB 1397), and enforceable by the state (AB 72).
Finally, to top off the housing bills, AB 1505 will allow cities to require housing projects to include affordable housing. Inclusionary housing creates balanced communities with enhanced economic opportunity for lower-income families, but these rules were challenged by developers and held up in courts. Now, with this state bill, expect cities across the state to adopt local inclusionary policies, or perhaps in the future, the state itself may mandate a minimum statewide inclusionary housing standard (we can dream!).
This is indeed a paradigm shift for housing in California—to mandate harnessing local-state power in the funding and regulation of housing projects.
To show his support for this package of housing bills, Governor Jerry Brown tweeted: “There’s no place like home. #SB2 #SB35”