October 26, 2017

Governor Brown concluded legislative business by the October 15 deadline, ultimately signing 859 bills into law. CSAC will be publishing a series of updates on new laws from each policy area. This week, the report from the Housing, Land Use and Transportation policy unit provides information on housing bills signed by Governor Brown. Stay tuned for more updates from other policy areas over the next several weeks.

The Governor recently signed a package of bills aimed at increasing production of affordable homes. The bills provide direct subsidies for constructing affordable homes, attempt to streamline the housing development process, and provide opportunity to access funding for updating or developing land use plans that encourage affordable housing development. Several bills in the package, however, will require new planning and analysis and increase exposure to litigation. Bills with direct implications to counties are discussed below. The new laws listed below become effective January 1, 2018 unless otherwise noted.

Affordable Housing Funding

SB 2 (Atkins), the Building Homes and Jobs Act, establishes a new $75 recording fee on real estate transactions (excluding new home purchases) to create a permanent source of state funding for affordable housing (up to $225 per transaction). The bill is expected to generate approximately $225 – $260 million per year in new revenue.

In the first year, half of the funding will go to address the state’s homelessness epidemic on a competitive basis with geographic equity and the other half will be available for local governments for updating planning documents, including general plans and community plans. After the first year, seventy percent of funds will be allocated to local governments, ten percent to farmworker housing, and fifteen percent to the California Housing Finance Agency for mixed-income workforce housing. Additional detail on funding allocations is available on the CSAC website.

SB 3 (Beall), the Affordable Housing Bond Act of 2018, places a measure on the November 2018 statewide ballot asking the voters to approve the issuance of $4 billion in general obligation bonds. $3 billion will be allocated to funding affordable housing development through existing state programs, all of which include counties as eligible applicants. The additional $1 billion would be used to recapitalize an affordable homeownership program for veterans that would otherwise run out of capacity in 2018. This portion of the bond funds would be repaid back through veterans’ mortgage payments. Additional detail on bond funding allocations is available on the CSAC website.

Changes to Housing Permitting Processes and Legal Review

AB 72 (Santiago) requires the Department of Housing and Community Development (HCD) to review local jurisdictions’ General Plans and housing actions to ensure that they comply with state law, with the possibility of reporting violations to the Attorney General and decertifying a local government’s housing element. Counties should be aware of this additional legal remedy.

AB 1515 (Daly) specifies that a housing development project or emergency shelter is “deemed consistent, compliant, and in conformity” with an applicable plan, ordinance, or other similar provision if there is substantial evidence that would allow a reasonable person to conclude that the project is consistent, compliant, or in conformity. CSAC opposed the “deemed consistent” automatic approval, which goes too far and upends the accountability for local land use decision-making. Counties should be aware of this new standard when determining whether a development proposal is consistent with local land use rules.

SB 35 (Wiener) would require local governments in jurisdictions where housing production for a particular income category has lagged behind the planned amount set forth in a local housing element to offer qualifying housing development projects a state-mandated process that bypasses discretionary review. Qualifying projects would have to be located in an urbanized area or urban cluster, meet specified thresholds for affordability, and be constructed by a skilled and trained workforce paid prevailing wages, among other requirements. Proposed projects are eligible for streamlined review if they are multi-family developments, include a certain percentage of affordable units, and are not located in a variety of potentially-sensitive environmental contexts.

Counties should review the bill closely to determine which geographic areas zoned for multifamily housing within the county’s jurisdiction could be available for the streamlined process required by SB 35 at the developer’s request and pending local housing production levels. Counties should also ensure timely submittal of annual housing element reports, which include information on housing production, to HCD, as these reports will be used to determine whether a local agency must offer the streamlined development process. Failure to submit a report will result in a requirement to offer the streamlined process for all eligible multifamily housing projects in any income category. CSAC expects HCD to issue implementing guidelines for SB 35. We will keep counties apprised of any such guidance and provide input on behalf of counties.

SB 166 (Skinner) and AB 678 (Bocanegra) are identical bills that make major changes to the Housing Accountability Act (HAA), including changing the standard of review, in the event of a legal challenge, from “substantial evidence” to “preponderance of the evidence”. Counties should be aware of this change, which CSAC expects will be difficult to apply to land use law, when a housing development is denied or conditions are imposed that have the effect of lowering the density of the project.

Counties should be aware of new fine provisions as well as the ability for a judge to increase fines in jurisdictions where housing development has not kept pace with Regional Housing Needs Allocation goals. CSAC and our local government partners ensured that these bills retained the ability of cities and counties to cure a HAA violation before the new fines authorized for non-compliance are imposed.

New Local Planning and Analysis Requirements

AB 879 (Grayson) significantly expands requirements for local jurisdictions to analyze constraints on housing development, including requests to develop housing at lower densities than zoned and length of time to complete permitting, among other requirements. CSAC and other local government groups opposed this bill, which requires future housing element updates to analyze any ordinances that directly impact the cost and supply of residential development. Many ordinances could be determined to impact the cost of housing, including critical ordinances like utility infrastructure such as sewer and water connection fees not under the control of local governments; drought requirements; building and fire code requirements like fire sprinklers; lighting; fencing; and, road and other infrastructure improvements. Counties should be prepared to complete required analyses during upcoming housing element updates.

AB 1397 (Low) imposes additional restrictions on the ability of cities and counties to designate non-vacant sites as suitable for housing development and would require all designated sites to have water, sewer, and utilities available and accessible to support housing development. While the latter is an existing requirement, AB 1397 adds new requirements related to analyzing the availability of this infrastructure. Counties should prepare to incorporate this additional analysis when identifying adequate sites to accommodate affordable housing during the next housing element update.

SB 166 (Skinner) mandates that cities and counties implement a rolling adequate sites and rezoning requirement by income level, rather than total units. Although CSAC and local governments agreed that no jurisdiction should be left with only a few or no sites that can accommodate affordable housing by the end of the housing element planning period, the remedy of continuous rezonings is an extremely onerous requirement. Counties should be prepared to monitor development of non-affordable housing on housing element sites carefully and complete rezonings as needed.

New Tools for Local Government

AB 73 (Chiu) gives cities and counties a new option to encourage housing development by creating a housing sustainability district (HSD). Within an HSD, cities and counties would complete upfront zoning and environmental review, substantially speeding up development approvals, in order to receive incentive payments for development projects that are consistent with the HSD’s ordinance. Counties interested in creating a HSD should be aware of several limitations, including requirements for housing to be built by a skilled and trained workforce paid prevailing wages, and a requirement for local governments to repay any state “zoning incentive payment” received by the county if private development does not meet projected goals.

AB 1505 (Bloom) clarifies the Legislature’s intent to supersede the holding in the Palmer/Sixth Street Properties L.P. v. City of Los Angeles decision, to the extent that the decision conflicts with a local jurisdiction’s authority to impose inclusionary housing ordinances on rental projects. As inclusionary requirements are one of the few options cities and counties have to increase affordable rental housing, this is an important clarification. The bill includes new requirements for certain cities or counties that elect to impose an inclusionary requirement exceeding fifteen percent of residential units to complete an economic feasibility analysis of the ordinance, which is subject to review by HCD. New ordinances are also required to include an alternative means of complying, including, but not limited to, in-lieu fees, land dedication, off-site construction, or acquisition and rehabilitation of existing units.

AB 1568 (Bloom) establishes the Neighborhood Infill and Transit Improvements (NIFTI) Act in Enhanced Infrastructure Financing Districts (EIFD) law. It allows EIFDs to receive sales and use and transaction and use taxes to finance affordable housing, and the infrastructure to serve that housing, in infill areas, as agreeable to parties involved. While there are geographic limitations on the availability of this new tool, counties with relatively dense, urbanized areas should examine AB 1568 to determine whether this additional fiscal tool could help support the development of affordable housing units and necessary supporting infrastructure.

SB 540 (Roth) streamlines the housing approval process by authorizing a city or county to establish a Workforce Housing Opportunity Zone (WHOZ) by preparing an EIR and by adopting a specific plan. Once a WHOZ is established, and for five years thereafter, the bill will substantially streamline development and provide certainty for developers by requiring approval of eligible housing developments within a WHOZ within 60 days without requiring the preparation of an EIR or negative declaration under CEQA. Requires at least thirty percent of total housing units within a WHOZ to be affordable to persons or families at or below moderate income. Counties interested in creating a WHOZ are eligible to apply for funding or a loan from the Department of Housing and Community Development to defray planning costs. Counties should be aware of prevailing wage requirements for development constructed pursuant to the tiered environmental review available within the WHOZ.