Here’s an interesting state statistic on home ownership for you: California’s current population of 39.5 million people live in 13 million households scattered across 58 counties and 482 cities. Now that you know this thought-provoking tidbit, here’s the rest: California’s population is expected to swell to 50 million by 2050 and nearly 40% of those new residents will live in Southern California. The 4.2 million SoCal newcomers will need a place to live, requiring more than 68,000 new homes each year.
As we locals know, housing has become a massive problem in California. Even though developers are adding homes at a far higher pace than in recent years, it’s still far below what’s needed. To stem the crisis, Governor Jerry Brown has compiled robust response to California’s shelter and affordability problems. In the autumn of 2017, he signed 15 bills designed to ease the state’s housing crisis. Here’s a rundown of how the “15 good bills” address the state’s housing problems:
The majority of funds raised by Senate Bill 2 – a $75 real estate transaction fee – and Senate Bill 3 – a $4-billion housing bond – are earmarked for the development of new homes for low-income residents earning 60% or less of the median income in a given community. In Los Angeles, that translates to a family of four having a combined income of less than $54,060 a year. This bond will be on the 2018 ballot. Funds from these two measures will also contribute to new construction benefitting 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 up to $135,000 in annual income for a family of four in Los Angeles. In addition, SB 2 – anticipated to raise $250 million annually – earmarks half of the funds accumulated in the first year for cities and counties to update neighborhood development blueprints and other planning documents. Additionally, $1 billion of the housing bond will go toward home loans for veterans.
There are three measures aimed to ease regulations, including the drawn-out application process of local governments. Senate Bill 35 requires cities to approve projects that comply with existing zoning to keep pace with residential construction goals. These projects must also build a percentage of homes for low-income residents, 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 specific community for higher density housing and is rewarded with additional dollars once homebuilding permits have been issued. These new communities must allocate at least 20% of the housing for low- or middle-income residents, and permits will be granted without delay if they meet zoning standards. SB 540 allows for a state grant or loan so a local government can do planning and environmental reviews for a particular neighborhood in exchange for building homes for low- and middle-income residents. The city is expected to approve these developments without delay. Money to implement both Laws is expected to come from the new real estate transaction fee and the bond.
Assembly Bill 1521 requires owners to accept a qualified offer to purchase the apartment complex from someone who promises to continue the building’s low-income designation. Typically, when developers agree to build low-income apartments it is for a set amount of time, say 30 to 50 years, then rents surge to market rate. As many as 14,000 low-income units in Los Angeles County are at risk of losing their income restrictions in the next five years.
Assembly Bill 571 expands the current tax credit program to help finance housing for farmworkers. This bill should make it easier for developers to bundle the tax credits other sources to build farmworker housing.
There are a trio of new laws so cities may plan new housing. Assembly Bill 1397 requires local governments to zone land for housing where it could actually go, nullifying the game of nominating sites they don’t intend to approve in their housing plan. Huh? Take L.A. Cañada Flintridge for example. They rezoned a big box commercial property for apartments or condominiums, then city officials announced that 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 local standards to augment the housing units that weren’t built. Assembly Bill 879 instructs cities to review the time it takes developers to build projects once they’ve been approved, and then take steps to expedite new housing projects.
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. Three measures, Senate Bill 167, Assembly Bill 678 and Assembly Bill 1515, strengthen the existing law by simplifying the procedure for developers to prove a city acted in bad faith when denying a project. Cities will be penalized $10,000 for each unit they reject. Assembly Bill 72 authorizes the state housing department to investigate cities that don’t follow through with their housing plans and to pass such cases along to California’s attorney general for potential legal action.
California’s economy is the 6th largest in the world. Yet, the McKinsey Global Institute estimates that California’s housing shortage is costing the state $143 billion to $233 billion in lost economic output, primarily from consumption that’s crowded out by high housing costs and lost construction activity. Just imagine the power our state would have if housing prices were on par with the rest of the country.