Will Legislative Deal Be a Boon for California CMs?
Originally published by: The Sacramento Bee — August 29, 2017
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Legislative leaders and Gov. Jerry Brown have reached a deal on a trio housing bills expected to spur new construction across the state and begin digging California out of an unprecedented housing shortage that has led to soaring rents, mass evictions and a homeownership rate at its lowest point since World War II.
The bills – controversial measures that have been the subject of intense negotiations for weeks – serve as the backbone of a broader housing package aimed at speeding up the development process, easing land-use regulations and generating billions of dollars for affordable housing and homelessness assistance.
Two of the bills – from Democratic Sens. Toni Atkins of San Diego and Jim Beall of San Jose – would generate billions of dollars for affordable housing construction and over the next five years, lead to development of an estimated 70,000 housing units. The authors pushed through amendments Tuesday that are expected to get moderate Democrats, and perhaps Republicans, on board, according to a legislative source briefed on the changes. Both require two-thirds approval in the Legislature to make it Brown’s desk.
But some Democrats are skeptical about the approach to housing, endorsed by Brown and leaders of the state Senate and Assembly.
“They want all these fees and taxes,” said Assemblyman Jim Cooper, a moderate Democrat from Elk Grove, referring to a real estate fee sought by Atkins following a gas tax increaseearlier this year to pay for road repairs, and the July extension of the state’s cap-and-trade program – also expected to raise the price of gas.
“I’m hearing from my constituents, and they’re tired of being over-taxed. People are pissed off,” Cooper said. “They’re paying more for gas already and it’s going to go up again...We have to address housing, but at the end of the day, people still got to put gas in their cars and put food on the table.”
Senate Bill 2, from Atkins, would impose a $75 to $225 fee on real estate transactions. The fee would generate $229 million to $258 million per year, according to a Senate appropriations committee analysis. Atkins says an ongoing funding source for housing is crucial following the demise of redevelopment agencies, which generated about $1 billion per year for cities and counties to invest in residential development.
Major changes to the bill, finalized Tuesday morning, alter how and where the money would be spent. Initially, the annual funding was to be split between state and local governments.
Under the amendments, half of the funding would be spent on initiatives to combat homelessness and half would go to local government during the first year. Cities and counties will receive 70 percent of the annual revenue beginning in 2019.
The remaining 30 percent would be distributed by the state, with proceeds going to housing for farmworkers and low and moderate-income people, as well as other housing programs, from new construction and property acquisition, to rehabilitation projects, to renter assistance and homelessness housing. The state’s department of Housing and Community Development would oversee the funding.
Atkins on Monday she said she didn’t yet have the votes for the fee bill, but said it’s her “hope to get it done this week.”
Brown also has signed off on the other funding bill, Senate Bill 3 from Beall, that puts a $4 billion bond before voters on the November 2018 ballot. The bond is modeled after measures in 2002 and 2006 that raised $5 billion to build 165,000 housing units.
The current bond, initially $3 billion, was increased with the additional $1 billion going to the Cal-Vet home loan program, established in 1921 to help military veterans purchase homes. The program allows veterans to borrow with low or no down payment at below market interest rates. Beall’s bill would also allow funding to be spent on parks and cleaning up environmental contamination to make land suitable for development. Some Democrats wanted a higher bond, but Brown has been reluctant to agree on large general purpose bonds that further burden the General Fund with debt service.
Although they are part of the same borrowing package, the affordable housing and veterans housing components differ significantly in how the bonds would be paid off.
Taxpayers would cover the principal and interest on the $3 billion for housing projects, with annual debt service costing roughly $195 million over 30 years. Debt service for the $1 billion in borrowing for veterans housing programs, though, would come from participating veterans’ loan payments.
Besides adding the veterans money, Tuesday’s amendments to the Beall bill also gave it a new ballot title which could help its chances with voters: the “Veterans and Affordable Housing Bond Act of 2018.”
Together, Senate Bill 2 and Senate Bill 3 would generate $5.1 billion over the next five years, according to lawmakers’ estimates. That money would allow local developers to leverage an additional $15.6 billion in federal and local funding for low-income construction and generate 70,000 new housing units, Beall said.
Both funding bills, as well as the larger package, can be voted on as soon as Friday.
Democratic lawmakers label the state’s housing shortage a “catastrophe.” California is home to a disproportionate share of the nation’s homeless, homeownership is at its lowest rate since the 1940s and rents continue to soar, leading low- and middle-income people to spend as much as half their monthly income on housing. State officials say more than 1.5 million low-income Californians cannot find housing, and the state needs roughly 200,000 new units per year to meet rising demand.
Atkins said the larger deal under negotiation between between Gov. Jerry Brown, Assembly Speaker Anthony Rendon and state Senate President Pro Tem Kevin de León would not entirely solve the housing crisis.
Brown on Tuesday announced his support for Senate Bill 35 from Sen. Scott Wiener, D-San Francisco. It seeks to streamline the approval process for new housing of all types by eliminating environmental and planning reviews for some projects. Under state law, California cities are required to set aside land under local zoning regulations for housing of all income levels, from homeless housing to luxury high-rises. Wiener says too often, local elected officials cave to neighborhood pressure to kill or water down housing proposals, and as a result, cities have not built enough housing to keep pace with population increases.
Under his bill, developers of projects in cities that aren’t on track to meet their housing requirements would be allowed to bypass local government review. In cities that are on track to meet their goals, set by the state under a process called the Regional Housing Needs Assessment, local elected officials will retain local decision-making control.
The bill would also mandate higher construction worker pay, known as prevailing wage, for housing projects 10 units or larger.
Local government representatives cheered the funding measures, saying an infusion of money is needed following the 2011 demise of redevelopment, but voiced concern over Wiener’s bill.
“Cities like Folsom and Roseville, which have been producing homes at very high rates, cannot possibly meet their lower-income requirements because those levels need subsidies in order for a community to convince a developer to construct those units,” said Jason Rhine, a legislative representative for the League of California Cities, which opposes the bill. “They shouldn’t be held responsible for actions beyond their control.”
The League argues the bill erodes environmental protections, local land use authority and the ability of residents to have a say in local development decisions.
Several other bills are potentially part of a housing package, but no agreement has yet been reached:
▪ Assembly Bill 73 from Assemblyman David Chiu, D-San Francisco, would allow local government to create special housing districts close to transit and job centers, and ease permitting and other regulatory requirements for development proposals in the new zones. They’d be zoned with higher housing densities, with a minimum of 20 percent set aside as affordable to low- and very low income families.
It also includes prevailing wage mandates for construction workers.
▪ Senate Bill 540 from Sen. Richard Roth, D-Riverside, would allow developers to approve local housing projects under one master plan and environmental review document. Fifty percent of projects would be affordable for low-income households, with an additional 10 percent of low-income housing required in market-rate housing projects.
▪ Senate Bill 167 from Sen. Nancy Skinner, D-Berkeley, would prohibit local officials from voting down housing projects that fit within zoning and other land-use designations. It’s aimed at addressing the “Not-In-My-Back-Yard” phenomenon that Skinner and other lawmakers say has worsened the state’s housing shortage.
▪ Assembly Bill 1505 from Assemblyman Richard Bloom, D-Santa Monica, would restore the authority of cities and counties to mandate that a portion of multi-family rental housing be set aside for low-income people.