Housing Crisis at Top of Legislative Agenda

California’s housing crisis is a big focus of attention at the State Capitol as studies highlight two elements of the crisis that are inextricably linked—supply and affordability.

The Department of Housing and Community Development estimates that California must build at least 180,000 units a year to keep pace with demand, not accounting for the backlog of approximately 2 million units that has accrued over the last several decades.

The supply shortage has sent home prices and rents soaring, resulting in many individuals and families being priced out of the market and leading to overcrowding, homelessness, substandard housing conditions, and an exodus of Californians to other states.

For every $1,000 increase in a California home, 15,000 buyers are priced out of the market, according to a recent study by the National Association of Home Builders.

Based on pending legislation, lawmakers are concentrating on things like local land use, funding affordable housing, or expedited permit processing.

Louinda V. Lacey presents a recap of housing bills at the CalChamber Capitol Summit.

Local Land Use Decisions

The Legislature will grapple to define the scope of the state’s role in local land use decisions. One of the driving issues in the crisis is the reluctance of local governments to approve new housing projects due to “not in my backyard” (NIMBY) resistance.

Several bills have been introduced to hold local governments accountable for meeting their affordable housing elements. Such bills include SB 167 (Skinner; D-Berkeley) and AB 678 (Bocanegra; D-Pacoima), both supported by the California Chamber of Commerce.

These bills require a local agency to make relevant findings if it denies a housing development, clarify provisions of the Housing Accountability Act (HAA), and impose added penalties on agencies that violate the HAA by failing to make appropriate findings.

Another CalChamber-supported bill, AB 943 (Santiago; D-Los Angeles), seeks to increase the vote required to pass an ordinance that would reduce density or stop development or construction of parcels located less than one mile from a major transit stop, in an effort to limit the NIMBY effect.

AB 1397 (Low; D-Campbell) further attempts to ensure that sites contained in a local government’s housing element can realistically be developed to meet the locality’s housing needs by requiring that such sites have sufficient infrastructure available to support housing development.

Funding Affordable Housing

Another focus is funding for state subsidies to develop affordable housing. The two bills getting the most attention are:

SB 2 (Atkins; D-San Diego), which sets up a permanent source of funding for affordable housing by creating a $75 recording fee on real estate transactions, with a $225 ceiling; and

SB 3 (Beall; D-San Jose), a $3 billion housing bond that would go on the 2018 ballot.

The CalChamber has not taken a position on either of these bills and it is unclear whether the administration has an appetite for a bond that would affect the general fund.

Other proposed funding methods include taxes:

ACA 4 (Aguiar-Curry; D-Winters) gives local governments the authority to enact special taxes, including parcel taxes, to fund the construction, reconstruction, rehabilitation, or replacement of public infrastructure or affordable housing, or the acquisition or lease of real property for public infrastructure or affordable housing, and lowering the vote threshold to impose such new taxes from two-thirds to 55%; and

ACA 11 (Caballero; D-Salinas) exposes the retail industry to increased taxes by imposing a quarter-cent sales tax increase in addition to a quarter-cent excise tax to fund affordable housing and homeless shelters, without creating greatly needed market rate housing.

Both these tax bills have been identified as job killers and have not moved through the legislative process at this juncture.

While the state places significant focus on funding, according to the Legislative Analyst’s Office report, it would have to raise upwards of $250 billion to subsidize itself out of the housing crisis—a feat that cannot be accomplished.

Permit Processing

Several bills aim to streamline permit processing, which is much needed to stimulate development; however, the bills’ limitations or prevailing wage requirements make them unlikely to have much impact on the ground. Other bills attempt to relax rules for granny flats (accessory dwelling units) and home additions.

Fortunately, three “wrong way” bills have been taken out of the equation.

• Two prevailing wage bills were amended to remove opposition. Before amendments, former job killer AB 199 (Chu; D-San Jose) would have imposed prevailing wage on all development projects (private and public), and SB 418 (Hernandez; D-West Covina) would have increased housing costs and discouraged development by imposing prevailing wage on more projects through defining a public subsidy as de minimis only if it is both less than $275,000 and less than 2% of the total project cost.

• The third bill, job killer SB 224 (Jackson; D-Santa Barbara), was held on suspense in the Senate Appropriations Committee. SB 224 would create significant uncertainty for developers by requiring the Office of Planning and Research (OPR) to amend the California Environmental Quality Act (CEQA) Guidelines to redefine the baseline that may be used in the CEQA analysis and directing OPR, in drafting the Guidelines, to limit consideration of modifications to the environment at the project site caused by illegal, unpermitted, or emergency activities within the baseline conditions. If prior illegal, unpermitted, or emergency activities are excluded in a project’s baseline, it may require projects to mitigate not only the impacts of the project itself, but also the impacts of other historical activities for which the applicant has no legal liability and over which it had no control.

Other Possibilities

Three potential key factors in addressing the housing crisis that do not appear to be getting much attention are the potential for Proposition 13 property tax and CEQA reform, and revival of some version of California’s redevelopment agencies.

Although there is no silver bullet to tackle the housing crisis, the Legislature will need to consider all available and possible avenues to increase supply to address the state’s housing crisis—the stimulation of actual construction being of the utmost importance.

Staff Contact: Louinda V. Lacey