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Broad Affordable Housing Bill Package Signed by Governor

This article was originally published by John Goetz and Eva Plaza of Meyers Nave and can also be found on their web site.

A package of fifteen bills designed to help communities combat California’s affordable housing crisis was signed into law by the Governor on September 29, 2017. The approved bills take several different approaches to the housing dilemma, including bills which provide more funding for affordable housing development, bills aimed at streamlining of local government approval of housing projects, bills designed to restore local government authority to impose inclusionary housing requirements on private housing developers, and bills strengthening the state’s Anti-NIMBY laws.

Here is a brief description of the approved housing bills:

SB 2: The Permanent Source. SB 2 is the long debated legislation that will provide a “permanent source” of funds for affordable housing development through the imposition of a $75 fee on most recorded documents (except for home sales). The recording fee is expected to generate approximately $200 – $300 million per year for affordable housing. Half of the funds generated in 2018 will be made available to local governments for updating planning documents and zoning ordinances in order to streamline housing production, and the other half would go to the state for homeless assistance programs.

Beginning in 2019, 70% of the funds will be directly allocated to local governments by the same formula used for the federal Community Development Block Grant program, to be used for a variety of affordable housing projects and programs, and the other 30% will be used by the state for farmworker housing, mixed income multifamily housing and other programs.

SB 3: $4 Billion Housing Bond. This bill will place a bond act on the November 2018 state ballot, with bond proceeds to be used to fund various existing housing programs. $1.5 billion of the funds would go to the state’s Multifamily Housing Program for affordable housing development loans, $1 billion of the funds would go to the state’s CalVet veteran’s home loan program, with the remainder of the funds allocated for farmworker housing, the CalHome down payment and mortgage assistance program, transit oriented development and infrastructure supporting infill housing. The last state housing bond (Proposition 1C) was approved in 2006, with those funds long since allocated.

SB 35: Streamlined Approval Process for Housing Projects. This complex bill creates a streamlined ministerial approval process for applicants for housing developments in communities that have not approved enough housing to keep up with regional fair share housing goals. Eligible projects do not need to obtain conditional use permits, and can take advantage of lower state-mandated parking standards.

There are numerous requirements and prerequisites to take advantage of the special process: the proposed development must be on an urban infill site, the existing zoning or general plan land use designation must allow residential uses, and the development must not be in the coastal zone, agricultural land, severe fire areas, hazardous waste sites, earthquake zones, flood zones, or other sensitive areas. A developer taking advantage of the streamlined process must pay prevailing wages and in some cases certify that it will use a “skilled and trained workforce” to complete the project.

AB 1505: The Return of Inclusionary Housing. This bill overturns the 2009 appellate court ruling in Palmer/Sixth Street Properties, L.P. v. City of Los Angeles which ruled that cities and counties were not permitted to require private developers to restrict rent levels under the State’s Costa Hawkins Rental Housing Act. Costa Hawkins limits local government ability to establish rent control. This bill authorizes (but does not mandate) local governments to require, as a condition of development of residential rental homes, that new rental housing developments include a specified percentage of affordable units for moderate, low, very low and extremely low income households.

Cities would need to provide for alternate means of compliance, including in lieu fees, land dedication, offsite construction, and/or acquisition and rehabilitation of existing housing units. This bill gives the State Housing and Community Development Department the authority to review inclusionary ordinances that require more than 15% affordable housing in localities that have met less than three-fourths of their regional fair share of housing, and to require an economic feasibility study to support their ordinances.

AB 678, SB 167 and AB 1515: Strengthening Anti-NIMBY Law. These bills strengthen the State’s Housing Accountability Act, often referred to as the “Anti-NIMBY Law”, which limits the ability of cities and counties to disapprove proposed housing developments unless specified findings are made.

AB 678 and SB 167 impose a higher standard of proof on local governments which make findings to support disapproval of housing projects, award attorneys’ fees to housing advocates (in addition to project applicants) who successfully challenge local disapprovals, and allow courts to vacate local disapprovals and impose fines of $10,000 or more per unit for violation of the Housing Accountability Act. AB 1515 directs courts to give less deference to local government determinations of a project’s consistency with local zoning and general plans.

SB 540 and AB 73: Workforce Housing and Housing Sustainability Districts. Under SB 540, which is sponsored by the League of California Cities, local governments can identify Workforce Housing Opportunity Zones within their boundaries and conduct necessary environmental reviews and public engagement at the “front end,” possibly eliminating time-consuming environmental reviews for specific projects later proposed within the zones.

Local governments would need to act on the proposed developments within 90 days of application, and would not be able to turn down development that satisfies the plan’s criteria. The environmental review and streamlining process within these Workforce Housing Opportunity Zones will be in effect for 5 years, and development will need to be completed within that time frame.

AB 73 authorizes local governments to establish Housing Sustainability Districts, and provides incentive funds for upfront zoning and environmental review to localities that issue permits for residential units on infill sites within the district. Under AB 73, local governments must allow residential use within each district by ministerial permit. Incentive payments must be returned if no construction begins within 3 years.

AB 1397 and SB 166. No Net Loss Zoning. These bills will modify the existing “No Net Loss Zoning” law, which ensures that local governments do not downzone sites or approve new housing at significantly lower densities than projected in their housing elements without identifying other sites that could accommodate the local need for housing sites at specified income levels. The bills will ensure that as development occurs, local governments assess their ability to accommodate new housing on the remaining sites in their inventory and make adjustments to their zoning if needed. The bills also establish more specific standards for those sites.

AB 72 and AB 879: Housing Elements. AB 72 authorizes the Department of Housing and Community Development to review actions by cities and counties for compliance with their adopted housing elements, and allows the Department to revoke housing element compliance for inconsistent actions. AB 879 makes changes to housing element requirements and directs the Housing and Community Development Department to conduct a study evaluating the reasonableness of local fees charged to housing developments.

AB 1521: Expiring Affordability Restrictions. This bill strengthens the law regarding the preservation of assisted housing developments by requiring an owner of an assisted housing development to accept a bona fide offer to purchase from a qualified purchaser, if specified requirements are met. For assisted housing developments, SB 1521 (1) requires the owner to provide notice of use restrictions that are expiring after January 1, 2011 to all prospective tenants and existing tenants within 3 years of the scheduled expiration of rental restrictions; (2) expands potential remedies for failure to provide notice to include the imposition of prior restrictions, restitution of improper rent increases, and award of attorney’s fees and costs to a prevailing plaintiff; (3) requires HCD to certify persons or entities that are eligible to purchase the development and to receive notice of the expiring restrictions based on their experience with affordable housing; (4) revises the procedure regarding the owner’s ability to accept an offer to purchase; and (5) requires HCD to monitor compliance and provide an annual report to the legislature beginning in 2019.

AB 571: Farmworker Housing. AB 571 makes several changes to the farmworker state low income housing tax credit program to make the historically underutilized program more flexible. Only 50% (rather than 100%) of the units funded under the program must be occupied by farmworker households. In addition, the bill also makes several changes to the law regarding migrant farm labor centers for advance payments up to 20 percent of annual operating costs and measures. These changes to the farmworker housing are intended to make the projects more feasible and increase the supply of farmworker housing.