BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1867
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          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.








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          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:








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             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  








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                 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  








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            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  








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            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  








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            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