Housing, Land Use, and Transportation Budget Updates
July 15, 2021
Housing and Land Use
The Legislature passed the housing trailer bill, AB 140, which invests in various programs to help address the affordable housing crisis across the state. The bill funds key county priorities through additional rounds of regional housing implementation and planning grants and infill infrastructure grants. Specifically, AB 140 would establish the Regional Early Action Planning Grants Program of 2021 to provide regions with $600 million in funding for transformative planning and implementation activities. The bill also authorizes HCD to expend $250 million for the Infill Infrastructure Grant Program of 2019.
AB 140 exempts housing projects receiving federal American Rescue Plan Act funding from certain requirements under Article XXXIV of the California Constitution, authorizes loans to be made through the Housing Rehabilitation Loan Fund, establishes the Excess Sites Local Government Matching Grants Program, and establishes the Foreclosure Intervention Housing Preservation Program.
Regional Early Action Planning Grants Program of 2021
AB 140 establishes the Regional Early Action Planning Grants Program of 2021 to be developed and administered by the California Department of Housing and Community Development (HCD), in collaboration with the Office of Planning and Research, the Strategic Growth Council, and the State Air Resources Board. The Budget Act of 2021 allocates $600 million to the program for regional agencies to make grants to cities and counties for transformative planning and housing implementation activities.
$510 million will be allocated to Metropolitan Planning Organizations (MPO) with maximum amounts based on each region’s share of the state’s population. Two additional pots of $30 million each are set aside for a statewide competitive program and a separate competitive program for regions located outside of an MPO. Five percent of the total funding will be available for administration and technical assistance.
Regional agencies will be responsible for determining the use of funds and suballocations within their boundaries in a manner that appropriately addresses their unique housing, land use, transportation, climate change, equity, and other planning priorities in compliance with eligible uses of these funds, which include:
- Providing local agencies with technical assistance, planning, temporary staffing, or consultant needs associated with updating local planning and zoning documents and other actions that accelerate infill housing production.
- Accelerating infill development, through rezoning, updating plans and ordinances, and revamping permitting process to ease housing development.
- Completing environmental clearance to eliminate the need for project-specific review for infill development.
- Establishing and funding an affordable housing catalyst fund, trust fund, or revolving loan fund for location efficient projects.
- Performing infrastructure planning and investing in upgrading infrastructure, including for sewers, water systems, transit, roads, or other public facilities necessary to enable reduction in per capita vehicle miles traveled, including accelerating housing production.
- Encouraging multimodal transportation, including adopting vision-zero policies, developing and implementing bicycle and pedestrian infrastructure plans.
- Shifting travel behavior through reduced driving, including studying and implementing road pricing and establishing local vehicle miles traveled impact fees or mitigation banks.
- Accelerating infill housing production near jobs, transit, and resources.
- Increasing transit ridership through seamless transit systems, multimodal access plans, and planning for additional housing near transit.
Until December 31, 2022, the bill authorizes eligible entities to request an allocation of funds by submitting applications that explain how the proposed uses would meet the definition of transformative planning and implementation activities and how the proposed uses would implement and achieve the housing goals leading to a reduction of vehicle miles traveled. AB 140 authorizes HCD to make any remaining unallocated funds, after December 31, 2022, available on a competitive basis.
Entities that receive funding would be required to submit an annual report to HCD and make it publicly available online. By June 30, 2025, recipients of an allocation of funding would be required to submit a final report on the use of those funds to HCD, which would post the information online. It would also require recipients of funds to:
- Post, make available and update, land use maps and vehicle miles traveled generation maps produced in the development of their adopted sustainable communities strategy.
- Collaborate, and share progress, templates, and best practices with HCD and fellow recipients in implementation of funds.
- Expend implementation funds no later than June 30, 2024.
Infill Infrastructure Grant Program of 2019
AB 140 authorizes HCD to expend $250 million for the Infill Infrastructure Grant Program of 2019. It allocates $160 million of those funds for selected capital improvement projects for large jurisdictions under the program. Consistent with requests from CSAC, RCRC and the California Coalition for Rural Housing, the bill makes $90 million available for over-the-counter grants for capital improvement projects for counties under 250,000 population and the cities located within those counties. This portion of the bill also includes a flexible definition of infill to facilitate projects in small and rural jurisdictions.
Leasing State-Owned Property for Housing
AB 140 requires that at least 20 percent of housing units developed pursuant to current law allowing the state to lease property for housing purposes, be made available for the term of the lease to, and occupied by, lower income households and very low income households. It authorizes the California Department of Housing and Community Development (HCD) to prescribe alternative minimum percentage requirements in each income category. AB 140 also authorizes the California Department of General Services to permit commercial development on property leased if HCD determines that it is necessary to provide benefits to the community. Finally, the bill authorizes HCD to permit phased development or to sell property or portions of a property leased to a lessee for the purposes of affordable homeownership.
Excluding Housing Projects Receiving ARPA Funds from Article XXXIV Requirements
AB 140 exempts new housing projects receiving funding from the Coronavirus State Fiscal Recovery Fund established by the federal American Rescue Plan of 2021 from the definition of “low-rent housing project” included in Article XXXIV of the California Constitution, which prohibits the development, construction, or acquisition of a low-rent housing project until a majority of the jurisdiction’s electorate votes on the issue.
Housing Rehabilitation Loan Fund
The Budget Act of 2021 allocates $300 million for the preservation of existing affordable housing. AB 140 authorizes HCD to make loans or grants available through the Housing Rehabilitation Loan Fund to rehabilitate, capitalize operating subsidy reserves for, and extend the long-term affordability of HCD-funded housing projects that meet any of the following criteria:
- Have affordability restriction that has expired
- Have affordability restriction with a remaining term of fewer than 5 years
- Are at risk of conversion
Excess Sites Local Government Matching Grants Program
AB 140 establishes the Excess Sites Local Government Matching Grants Program to be administered by the California Department of Housing and Community Development. The bill removes language that requires state leasing to receive the approval of the governing body of any concerned local agency. It requires HCD to allocate grants of up to $10 million to develop partners selected under Executive Order N-06-19. This Executive Order authorized the Department of General Services (DGS) to dispose of surplus state property, required the DGS to create a digitized inventory of all excess state-owned parcels, and required DGS, in consultation with the Department of Housing and Community Development, to issue requests for proposals on individual parcels and accept proposals from certain developers of affordable housing.
AB 140 requires HCD to award grant funding based on several factors, including the value of the local government contribution and the creation of new permanent housing. It also authorizes a selected developer and a local government to submit a joint application that includes information on the local government’s contribution and a commitment and strategy from the local government to support the developer. The bill limits the total amount of funding awarded under the program to $30 million and would require HCD to set aside up to five percent of appropriated amount for program administration.
Foreclosure Intervention Housing Preservation Program
AB 140 creates the Foreclosure Intervention Housing Preservation Program to be administered by HCD. The Budget Act of 2021 includes $500 million in funding for the program, which would be intended to preserve affordable housing and promote resident ownership or nonprofit organization ownership of residential property.
The bill requires HCD to provide eligible borrowers loans and grants to pay the acquisition costs and associated transaction costs of property purchased through a trustee’s sale, as specified, subject to a pre foreclosure intervention sale or subject to a foreclosure risk intervention sale.
Any funds that remain uncommitted or are returned as of December 31, 2025 would be made available for purposes of the Housing Preservation Program. AB 140 requires that loan principal and interest payments be deposited into the Housing and Rehabilitation Loan Fund to be used for loans or grants to pay for repairs, maintenance, or improvements on properties acquired pursuant to the program.
The Governor has until July 16 to sign AB 149, the transportation budget trailer bill that includes limited relief for city and county maintenance of effort requirements from SB 1 (Beall, 2017) for fiscal years 2019-20, 2020-21 and 2021-22. Specifically, the trailer bill waives the MOE requirement for 2019-20, and in 2020-21 and 2021-22, each local agency’s SB 1 MOE will be prorated downward based on reductions in taxable sales from 2018-19 to 2020-21 and 2021-22, respectively. No city or county’s MOE will be increased pursuant to these provisions.
Separately, the Legislature and Governor continue to negotiate on transportation budget investments, including allocation of Proposition 1A (2008) bond funding to the High-Speed Rail project. Several one-time General Fund allocations to transportation grant programs in the Budget Act of 2021 appear to be contingent on the resolution of this debate, as these appropriations in SB 129 include language requiring adoption of authorizing legislation by October 11, 2021. Specifically, one-time investments through the Transit and Intercity Rail Capital Program, as well as $500 million in local active transportation grants and $400 million split evenly between state and local transportation climate adaptation grants, are all contingent upon adoption of future trailer bill language.