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The $20B Affordable Housing Bond is Unconstitutional

THE $20 BILLION HOUSING BOND IS UNCONSTITUTIONAL

Summary:

The Bay Area Housing Finance Authority (“BAHFA”) has decided that in November 2024, a $20 billion regional bond measure to build more affordable homes and help keep existing homes affordable will appear on the ballot. As is explained below, this bond cannot legally be placed on the ballot.

Only 52% of this money will be spent to build new affordable housing: 72,000 housing units.https://es.mtc.ca.gov/sites/default/files/documents/2024-06/BAHFA_Bond_Explainer_06-27-2024.pdf
By contrast, essentially the same body, the Association of Bay Area Governments (“ABAG”), determined that the Bay Area needs 253,046 affordable housing units (very low, low and moderate income housing units). See page 11 here: https://abag.ca.gov/sites/default/files/documents/2022-12/Final%20RHNA%20Methodology%20Report%202023-2031_update_11-22.pdf

The $20B bond proposed by BAHFA violates Article IV, Section 16 of the California Constitution because the law creating BAHFA, AB 1487 (Chiu 2019), is a regional statute which is not permitted when a statewide statute could be passed. A statewide bill could be passed because the affordable housing crisis is not unique to the San Francisco Bay Area. The bill’s assertion to the contrary, in its attempt to justify its lack of statewide remedy, is simply false.

The bond also violates Article XI, section 11, subdivision (a), of the California Constitution, which provides that the Legislature may not delegate the power to levy taxes to a private person or body.The delegation to BAHFA, whose board is the commissioners of the Metropolitan Transportation Commission (“MTC”), violates this provision of our Constitution because the board contains unelected members.

Discussion

The bond violates Article IV, section 16, of the California Constitution

Article IV, Section 16, of the California Constitution provides:

(a) All laws of a general nature have uniform operation.

(b) A local or special statute is invalid in any case if a general statute can be made applicable.

AB487 is invalid under section “(b)” because a general, statewide housing finance authority could be created.

Example of laws held unconstitutional under this provision include a law limiting the number of notaries public in San Francisco County (the applicable section of Article IV was then numbered Section 25).(Hollman v. Warren (1948) 88 Cal. App. 4th 298.) Similarly, a section of the Elections Code declaring that "The county committee in any city and county [which can only be San Francisco, it being the only city and county in the state] may increase its membership by a majority vote of the committee," was held to be invalid as local and special legislation, there being no rational basis for the provision that in such county an unspecified additional number, above the number fixed as in other counties by assembly districts, may be appointed by the committee. (Stout v. Democratic County Central Com. (1952) 40 Cal. 2d 91.)

The authors of AB 1487 recognized that the bill needed to justify its lack of statewide application. Thus, its Section 2 states, “The Legislature finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the uniquely severe shortage of available funding and resources for the development and preservation of affordable housing and the particularly acute nature of the housing crisis within the nine counties of the San Francisco Bay area region.”

Legislative findings are not binding on the courts, and will not be upheld if they are unreasonable and arbitrary.(California Housing Finance Agency v. Elliott (1976) 17 Cal.3d 575.)

There is overwhelming evidence that a general, statewide housing finance authority can be created. In fact, one already exists: the statewide housing finance agency. https://www.calhfa.ca.gov/

The attempt by the authors of AB 1487 describe affordable housing issues in the Bay Area as “uniquely severe” is unreasonable, arbitrary, and demonstrably false, as is shown by other bills. A similar bill, SB 679 (Kamlager 2021) uses the same words to describe the same issue in the LA area as also “uniquely severe.” Its Section 2 provides: “The Legislature finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the uniquely severe shortage of available funding and resources for the development and preservation of affordable housing and the particularly acute nature of the housing crisis within Los Angeles County.” This bill passed both houses and was signed by the Governor in 2022.

The only difference between SB 679 and AB 1487 is that the former substitutes “within Los Angeles County” for “within the nine counties of the San Francisco Bay area region.”

The same issue, occurring in two different areas of the state, is not “uniquely severe” in one area. “Unique” means “the only one."

Another way a statewide bill for housing finance could be passed is shown by proposed SB 440 (Skinner 2023) (pending), which would allow two or more local governments to establish a regional housing finance authority anywhere in the state.

The fact that the affordable housing crisis is statewide, and not unique to the San Francisco Bay Area, is confirmed by SB 423 (Wiener 2023), among many others housing laws. It provides, “SEC. 3. The Legislature finds and declares that ensuring access to affordable housing is a matter of statewide concern and is not a municipal affair as that term is used in Section 5 of Article XI of the California Constitution.”

In short, there is nothing “uniquely severe” about the Bay Area’s affordable housing crisis. It plagues most, if not all, of California, and is certainly as acute in Los Angeles as it is in San Francisco, as the Legislature’s findings in AB 1487 and SB 679 confirm. It is a statewide concern as stated in SB 423.

For these reasons, AB 1487 violates Article IV, section 16, of the California Constitution. It follows that BAHFA was created by an unconstitutional statute and cannot place a bond on the ballot.

AB 1487 violates Article XI, section 11, of the California Constitution

The $20 billion bond issue proposed by BAHFA is invalid because the statute creating BAHFA is unconstitutional for another reason: AB 1487 also violates Article XI, section 11, subdivision (a), of the California Constitution, which provides, “The Legislature may not delegate to a private person or body power to make, control, appropriate, supervise, or interfere with county or municipal corporation improvements, money, or property, or to levy taxes or assessments, or perform municipal functions.”

In Howard Jarvis Taxpayers’ Assn v. Fresno Metropolitan Projects Authority (1995) 40 Cal. App. 4th 1359, a statute passed by the Legislature, Gov. Code, § 68059.7, allowed the Fresno Metropolitan Projects Authority to impose a tax, and provided that the Authority shall be authorized to levy and collect the tax. The Authority was held to be a “private person or body” because some of the members of the Authority were not publicly-elected officials, or appointees of publicly-elected officials. There were not accountable to the public. The court ruled that the statute was unconstitutional, because the power to tax cannot be delegated to a “private person or body.” The same constitutional flaw is fatal to AB 1487.Notably, the court in this case also concluded that it made no difference that the tax had been approved by the voters. It was “taxation without representation.”

Similarly, in County of Sonoma v. Superior Court (2009) 173 Cal. App. 4th 322, the court rules that a state law requiring Sonoma County to submit disputes over employee compensation to arbitration, in which arbitrator would determine compensation, violated state constitutional provision giving county authority to establish such compensation. The constitutional power vested in the county could not be required to be delegated to a “private person or body” – an arbitrator.

The BAHFA Board is comprised of the same members as the MTC Commission.https://mtc.ca.gov/about-mtc/authorities/bay-area-housing-finance-authority/bahfa-governance-meetings The MTC Commissioners include contains unelected officials.https://mtc.ca.gov/about-mtc/commissioners/full-commissioner-roster

Specifically, no one is elected to the position of MTC Commissioner. Some of the commissioners are elected officials. Some are appointees of elected officials. Some are not even appointees of elected officials: Dina El-Tawansy (Representing California State Transportation Agency (CalSTA); Director, Caltrans District 4); Dorene M. Giacopini (Representing U.S. Department of Transportation); and Libby Schaaf (Representing U.S. Department of Housing and Urban Development). Although those who are not even appointees of elected officials are "non-voting" MTC Commissioners, they participate in discussions. Notably, Commissioner Schaaf spoke in support of the bond measure at the BAHFA board meeting on June 26, 2024, at which the decision was made to place the bond on the ballot.

Her participation results in a violation of Article XI, section 11, subdivision (a). By analogy, when a public official must recuse himself or herself from a decision, the recusal must include not only not voting, but also not participating in the discussion; also, the official must physically leave the room. Gov't Code section 87105(a)(2) and (3).

https://california.public.law/codes/ca_gov't_code_section_87105

Conclusion

For the foregoing reasons, the BAHFA was created by an unconstitutional statute, the BAHFA board is a "private person or body" to whom the power to tax could not be delegated, and BAHFA therefore cannot place a bond measure on the ballot. We can and should do better. Any affordable housing bond needs to devote more than 52% of its proceeds to building housing.

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