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Public Domain
Why I oppose the $20 billion housing bond and the amendment to Proposition 13
UPDATE: the Bay Area Housing Finance Authority has withdrawn this bond. It will NOT appear on the November 2024 ballot.
I have posted a new blog explaining why I oppose the proposed amendment to Prop 13, which will appear on the November ballot as Prop 5
https://marinpost.org/blog/2024/8/17/why-i-oppose-the-proposed-amendment-to-prop-13-called-prop-5
Introduction
I explain below why I oppose two measures that will be on the ballot in November 2024.
The first measure I oppose is the $20 billion regional housing bond, which on the ballot will be called Regional Measure 4 (RM 4). This is a regional revenue measure that will be funded by an increase in property taxes. Its stated purpose is to fund affordable housing in the nine county Bay Area. It is being placed on the ballot by the Bay Area Housing Finance Agency, a new governmental agency created in 2019 by the Legislature.
https://mtc.ca.gov/sites/default/files/documents/2024-07/BAHFA_Bond_Report.pdf
The second measure I oppose is an amendment to Proposition 13, which will be on the ballot as Proposition 5, and which was enacted by the Legislature as ACA 10.
https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240ACA10
This amendment would make several major changes to Proposition 13. It would lower the percentage of votes needed to approve not just the affordable housing bond, but also future bonds that are funded by ad valorem taxes (ad valorem taxes are taxes based on the value of real property). The reduction in the percentage of votes needed for a bond to pass will be from 66.67% (2/3) to 55%. The amendment to Prop 13 would also create a new exception to Proposition 13’s limit on property taxes to 1% of value and would broaden the uses to which property taxes could be put.
I oppose both measures for the reasons set forth below.
FIRST the housing bond (RM4) will be very expensive.Although promoted as a “$20 billion” bond, in fact repayment of principal plus interest is projected to cost $48 billion.
The estimated tax rate for 2023-24 is $34.20 per $100,000 of assessed valuation, or $342.00 per $1 million assessed value. More info about the cost can be found at this website
SECOND the housing bond will only make a small dent in the need for affordable housing, relative to its cost.
Only 52% of the bond proceeds will go towards “production” of affordable housing for lower income households, per AB 598, pending in the legislature.
https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB598
Fifteen percent (15%) will be for “preservation of housing that is restricted by recorded document to be affordable to low- or moderate-income households.”
https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB598
No funding will be provided for “production” of moderate income housing.
These figures fall far short of the state housing mandates imposed on all cities and counties.The same government agent promoting the bond (Association of Bay Area Governments [ABAG]) advised its cities and counties that there is a need in the nine county Bay Area for 180,334 lower income housing units (this need is called RHNA).
https://abag.ca.gov/our-work/housing/rhna-regional-housing-needs-allocation
But this expensive bond, to be paid for by a substantial increase in real estate taxes, will only fund the construction of 36,000 new lower income homes, or about 20% of our RHNA for lower income homes.
The bond proceeds will not fund any moderate income housing.ABAG told cities we need 72,712 new moderate income housing units.
https://abag.ca.gov/our-work/housing/rhna-regional-housing-needs-allocation
The bond will provide none.
The bond would provide funding for “preservation” of moderate income homes, not for the production of new moderate income homes. Preservation doesn’t count towards cities’ RHNA.
Thus, the production of new affordable housing for lower and moderate income households will only be 14% of the Bay Area RHNA.
This is grossly insufficient. We can and must do better.
THIRD a little known but very important detail regarding the proposed $20 billion housing bond (RM4), and of the proposed Amendment to Proposition 13 (Proposition 5), is that besides lowering the percentage of votes needed to pass, they are an attack on, and a weakening of, Proposition 13 (1978) cap on ad valorem taxes.
That proposition generally limited ad valorem property taxes to 1% of the “full cash value” of real property, plus 2% annual increases. Initially, it only had one exception:
"An exception to the 1% limit is provided for ad valorem taxes or special assessments to pay interest and redemption charges on indebtedness approved by the voters before July 1, 1978.”
Proposition 46 (1986) added a second exception to the 1% limit; the limit would be inapplicable to bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast by the voters voting on the proposition.
Proposition 39 (2000) created a third exception for school district funding for facilities.
The $20 billion housing bond (RM 4) is generally contingent on passage of Proposition 5 (ACA 10), which will amend to Prop 13 by creating a fourth exception to Prop 13’s 1% cap:
“Bonded indebtedness incurred by a city, county, city and county, or special district for 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…” (Emphasis added.)
https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240ACA10
Two things about this amendment containing a fourth exception to Prop 13’s 1% cap are remarkable.
The first remarkable thing to note is the exception for “affordable housing,” which is defined to cover fairly high income.
“‘Affordable housing’ shall include housing developments, or portions of housing developments, that are affordable to individuals, families, seniors, people with disabilities, veterans, or first-time homebuyers, who are lower income households or middle-income households earning up to 150 percent of countywide median income….” (Emphasis added.)
I provide examples below of what that means in dollars.
The second remarkable thing to note is that the definition of “public infrastructure” is very broad:
(iv) ‘Public infrastructure’ shall include any of the following:
(I) Facilities or infrastructure for the delivery of public services, including education, police, fire protection, parks, recreation, open space, emergency medical, public health, libraries, flood protection, streets or highways, public transit, railroad, airports, and seaports.
(II) Utility, common carrier or other similar projects, including energy-related, communication-related, water-related, and wastewater-related facilities or infrastructure.
(III) Projects identified by the State or local government for recovery from natural disasters.
(IV) Equipment related to fire suppression, emergency response equipment, or interoperable communications equipment for direct and exclusive use by fire, emergency response, police, or sheriff personnel.
(V) Projects that provide protection of property from sea level rise.
(VI) Projects that provide public broadband internet access service expansion in underserved areas.
(VII) Private uses incidental to, or necessary for, the public infrastructure.
(VIII) Grants to homeowners for the purposes of structure hardening of homes and structures, as defined in state law.
Note that “public infrastructure” is not limited to, or connected with, affordable housing. Thus, future property taxes could be used for a new airport, for protection from sea level rise, and even “private uses incidental to …the public infrastructure” without being subject to Proposition 13’s 1% limit.
There would be a new exception to Prop 13’s 1% cap for bonds funded by ad valorem taxes for any public infrastructure, unrelated to affordable housing. Ad valorem bonds for public infrastructure would only need 55% of the vote to be approved.
This authorizes future ad valorem taxes for bonds for many purposes beyond original Prop 13, and without being subject to its 1% cap.
A bill pending in the Legislature, AB 598, to implement the housing bond, would seem to limit “public infrastructure” expenditures from the housing bond to a maximum of 10% of the bond revenue, and would limit grants for “infrastructure” to
“needs associated with increased housing production, including, but not limited to, transportation, schools, and parks.” (Emphasis added.)
Note, however, that the infrastructure for “housing production” is not limited to infrastructure for affordable housing production.
https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB598
Importantly, however, the broader definition of “public infrastructure” in ACA 10 (Prop. 5) would make a permanent inroad in Prop 13’s 1% cap for all future bonded indebtedness for infrastructure, independent of affordable housing.
FOURTH an insufficient amount of tax revenue (80%) is returned to the county of origin. Thus, taxes paid by residents of one county could be used to fund infrastructure such as parks (or airports) in another Bay Area county.
Worse, 20% of the bond proceeds -- $4 BILLION — will go to and be controlled by BAHFA, which is controlled by the Metropolitan Transportation Commission (with some input from ABAG), an unelected, unaccountable public agency.
I strongly oppose giving it $4 billion to spend in its unfettered discretion.
FIFTH, as explained above, the benefits of the bond are not limited to lower income people, despite the insufficiency of the bond to adequately help those who need it most. The definition of “moderate” income covers some high incomes:150% of the county median income. In Marin and San Francisco counties, for a four person household, 150% of the median income of $186,600 is an income of up to $279,900.
https://www.hcd.ca.gov/sites/default/files/docs/grants-and-funding/income-limits-2024.pdf
In Contra Costa County, where the median income is $155,700, the maximum household income for a four person household would be $233,550. I believe we should better prioritize lower income households.
SIXTHracial preferences will be used in the distribution of the 20% of bond proceeds controlled by ABAG.See the BAHFA Business Plan, chapter 2 and appendix 2, here.
https://mtc.legistar.com/View.ashx?M=AADA&ID=1201661&GUID=EDA57ED6-A61C-42A4-B4D8-73CD9CC83177
This is unconstitutional, as the Supreme Court ruled in the Harvard Admissions case, and wrong as a policy. The preferences must be eliminated, and the funds open to all.
SEVENTH, the actual language on the ballot for the bond, although three pages long, is vague and includes footnotes with cross-references to various provisions of the constitution and certain laws that need to be looked up.
https://mtc.ca.gov/sites/default/files/documents/2024-07/2024_Housing_Bond_Language_6-18-2024.pdf
FINALLY, I oppose Proposition 5 because we are already living in a high tax state, and we should not make it easier to increase taxes even further.
Footnote: I have separately explained why I believe the housing bond itself is unconstitutional.
https://marinpost.org/blog/2024/7/23/the-20b-bond-proposed-by-bahfa-is-unconstitutional
Nick is a retired lawyer whose practice consisted of trials and litigation, primarily in real estate and doing pro bono work in his community. During the 11 years since retiring, he has been active in civic affairs and studied state housing laws in great detail.