BILL ANALYSIS AB 1867 Page 1 Date of Hearing: April 21, 2010 ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT Cameron Smyth, Chair AB 1867 (Harkey) - As Introduced: February 12, 2010 SUBJECT : Land use: local planning: housing element program. SUMMARY : Changes, for local governments, the eligibility requirements for the substantial rehabilitation of units for purposes of meeting housing element and regional housing needs assessment (RHNA) requirements. Specifically, this bill : 1)Requires the local government or a court, in terms of the substantial rehabilitation of a unit, to find that the unit is a substandard building due to the existence of at least six violations of the conditions listed in the "Rules and Regulations" section of the Health and Safety Code that regulates buildings used for human habitation. 2)Reduces the number of units located in a multifamily rental housing complex that have newly been made affordable with affordability covenants, from four units to three units, in order to qualify with respect to counting the rehabbed units toward a local government's RHNA obligation. EXISTING LAW : 1)Requires each city, county, or city and county to prepare and adopt a general plan for its jurisdiction that contains certain mandatory elements, including a housing element. 2)Provides that the housing element shall consist of an identification and analysis of existing and projected housing needs and a statement of goals, policies, quantified objectives, financial resources, and scheduled programs for the preservation, improvement, and development of housing. 3)Specifies that the Department of Housing and Community Development (HCD) may allow a city or county to substitute the provision of units for up to 25% of the community's obligation to identify adequate sites for any income category in its housing element, for units that meet specified substantial rehabilitation, conversion or preservation requirements. AB 1867 Page 2 4)Requires, for purposes of counting substantially rehabilitated units toward meeting housing element requirements, that a unit is not eligible to be "substantially rehabilitated" unless all of the following requirements are met: a) At the time the unit is identified for substantial rehabilitation: i) The local government has determined that the unit is at imminent risk of loss to the housing stock; ii) The local government has committed to provide relocation assistance to any occupants temporarily or permanently displaced by the rehabilitation or code enforcement activity, or the relocation is otherwise provided prior to displacement either as a condition of receivership, or provided by the property owner or the local government, provided the assistance includes not less than the equivalent of four months' rent and moving expenses and comparable replacement housing; iii) The local government requires that any displaced occupants will have the right to reoccupy the rehabilitated units; and, iv) The unit has been found by the local government or a court to be "unfit for human habitation" due to the existence of at least four violations of the conditions listed in the Violations section of the Health and Safety Code that provides for regulation of buildings used for human habitation. 5)Provides that units that are located in a multifamily rental housing complex of four or more units that are converted with committed assistance from the city or county from nonaffordable to affordable by acquisition of the unit or the purchase of affordability covenants and restrictions for the unit, will constitute a net increase in the community's stock of housing affordable to low- and very-low income households. 6)States in the Violations section of the Health and Safety Code, which provides for regulation of buildings used for human habitation, that the following conditions are considered violations: AB 1867 Page 3 a) Termination, extended interruption or serious defects of gas, water or electric utility systems provided such interruptions or termination is not caused by the tenant's failure to pay such gas, water or electric bills; b) Serious defects or lack of adequate space and water heating; c) Serious rodent, vermin or insect infestation; d) Severe deterioration, rendering significant portions of the structure unsafe or unsanitary; e) Inadequate numbers of garbage receptacles or service; f) Unsanitary conditions affecting a significant portion of the structure as a result of faulty plumbing or sewage disposal; or, g) Inoperable hallway lighting. 7)Provides that the rehabilitated unit will have long-term affordability covenants and restrictions. 8)Provides that prior to initial occupancy after rehabilitation, the local code enforcement agency shall issue a certificate of occupancy indicating compliance with all applicable state and local building code and health and safety code requirements. 9)Provides that a unit is not converted by acquisition of the purchase of affordability covenants unless all of the following occur: a) The unit is made available at a cost affordable to low- or very-low income households; and, b) At the time the unit is identified for acquisition, the unit is not available at an affordable housing cost to either of the following: i) Low-income households, if the unit will be made affordable to low-income households; or, ii) Very-low income households, if the unit will be made AB 1867 Page 4 affordable to very-low income households. FISCAL EFFECT : Unknown COMMENTS : 1)Under current law, when a city updates its housing element, it must generally show sufficient vacant land to accommodate the projected housing need for the time period covered by the element. This requirement ensures an adequate supply of land for the construction of new housing. Current law also allows a very limited exception to this requirement that allows a local government to substitute a portion of these real, available sites for a promise to rehabilitate existing units in the future. This exception was put into place by AB 438 (Torlakson), Chapter 796, Statutes of 1998, and allows local jurisdictions to fulfill up to 25% of their region's affordable housing needs by providing substantially rehabilitated units whose long-term affordability is assured through covenants and restrictions, through the provision of "committed assistance" as provided by the city or county. One of the requirements for counting units within this 25% cap is that the units have received "committed assistance" from the local jurisdiction, meaning that the city or county must enter into a legally enforceable agreement that obligates sufficient available funds to provide the assistance necessary to make the identified units affordable. 2)AB 1867 makes several changes to the section of law that allows a city or county to substitute the provision of units for up to 25% of the community's obligation to identify adequate sites. First, the bill allows units that are located in a multifamily rental housing complex of three or more units that have newly been made affordable with affordability covenants to qualify, with respect to counting the rehabbed units toward a local government's RHNA obligation. Current law specifies that this only applies to a complex of four or more units [AB 2348 (Mullin), Chapter 725, Statutes of 2004]. Prior to 2004, this requirement was for a multifamily rental housing complex of sixteen or more units. Second, the bill revises requirements for what is necessary AB 1867 Page 5 for a local government to substantially rehabilitate a unit. Pursuant to existing law, one of the requirements is for the unit to be found by the local government or the court to be "unfit for human habitation" due to the existence of at least four violations of certain building conditions specified in the Health and Safety Code (See Section 17995.3). A majority of the seven violations listed in that code are serious in nature - including serious rodent, vermin or insect infestations, serious defects or lack of adequate space and water heating, severe deterioration which renders portions of the structure to be unsafe or unsanitary, and unsanitary conditions affecting a significant portion of the structure as a result of faulty plumbing or sewage disposal. Instead, this bill provides that the local government or court has to find that the unit is a "substandard building" due to the existence of at least six violations in a different Health and Safety Code Section (see Section 17920.3). These fifteen conditions are less serious in nature than what is provided in existing law, and include violations like lack of adequate exit facilities, nuisances, faulty weather protection, and lack of fire-resistive construction, for example. The result of this bill's provisions that change from "unfit for human habitation" to a "substandard building" and the subsequent code switch to less serious violations could mean that more units would potentially be eligible to be rehabilitated, but the rehabilitation of those units would be less likely to increase the actual number of affordable units for the purposes of the local government's share of RHNA, given that the units deemed "unfit for human habitation" would most likely fall out of the housing stock if not rehabilitated, where the units that are "substandard" would most likely remain in the housing stock even if they were not rehabbed. 3)According to the author and the sponsor, the City of San Juan Capistrano, current law leaves some cities with few opportunities to utilize the alternative methods of meeting RHNA requirements. San Juan Capistrano believes that this section of law needs to be changed for three reasons: first, San Juan Capistrano is approximately 90% built out, making developable land sparse; second, land that is available to build tends to include land with historic and cultural sensitivity, or have topography and geography concerns; and AB 1867 Page 6 third, the majority of remaining building sites in San Juan Capistrano are in areas distant from schools, public transportation, and amenities necessary for lower-income households. According to the author, given San Juan Capistrano's built-out condition and location of vacant and buildable parcels, the city is struggling to find sites to accommodate newly constructed units and is seeking to make current law more usable and flexible for the substantial rehabilitation of existing sites. 4)AB 720 (Caballero), Chapter 467, Statutes of 2009, updated this same section of law to increase flexibility for local governments in meeting housing requirements by expanding the amount of time a city or county could provide committed assistance for the rehabilitation of affordable housing units. Other provisions in AB 720 allow a city or county to include weatherization and energy efficiency improvements as part of its efforts to substantially rehabilitate a unit. Additionally, AB 720 allows a jurisdiction to claim credit in their annual report for any units rehabbed, preserved, or acquired that meet the statutory requirements, regardless of whether their housing element included a program to address the alternative adequate sites requirement. In light of the recent changes to allow for greater flexibility in this section of housing element law, the Committee may wish to ask whether it is necessary to amend this statute for more flexibility before any local government has had much of a chance to use the expanded provisions of AB 720 that took effect on January 1, 2010. 5)Support Arguments : The cities of San Juan Capistrano, Buena Park, Mission Viejo, Laguna Hills and San Clemente, in support, note that AB 1867 seeks to make minor changes to current law in order to give local governments additional autonomy, to provide increased opportunities to create additional affordable units, and to implement methods of addressing the needs of low-income individuals who are currently housed in sub-standard dwelling units. Opposition Arguments : Housing California, in opposition, writes that "when a home is unfit for human habitation and AB 1867 Page 7 rehabilitated, it is the equivalent of bringing a new home into the housing market, because it is uninhabited prior to rehabilitation." And, "most homes that are considered to be substandard are already occupied, so allowing these homes to be rehabilitated and counted towards a jurisdictional obligation to increase housing supply does not actually bring any new homes into the market." 6)AB 1867 is double-referred to the Committees on Local Government and Housing and Community Development. REGISTERED SUPPORT / OPPOSITION : Support City of San Juan Capistrano [SPONSOR] Cities of Buena Park, Dana Point, Laguna Hills, Mission Viejo, Laguna Hills, and San Clemente League of CA Cities Opposition CRLA Foundation (unless amended) Housing CA Western Center on Law & Poverty (unless amended) Analysis Prepared by : Debbie Michel / L. GOV. / (916) 319-3958