BILL ANALYSIS Ó
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: AB 1103
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: huffman
VERSION: 5/4/11
Analysis by: Mark Stivers FISCAL: no
Hearing date: July 5, 2011
SUBJECT:
Housing elements
DESCRIPTION:
This bill allows a city or county to accommodate a portion of
its housing element needs for lower-income households through
the provision of financial assistance to convert foreclosed
homes and second units to affordable units.
ANALYSIS:
Current law states that early attainment of decent housing and a
suitable living environment for every Californian is a priority
of the highest order and that local and state governments have a
responsibility to make adequate provision for the housing needs
of all economic segments of the community and to facilitate the
improvement and development of housing. These statements are
known as the state housing goal.
The Planning and Zoning Law requires cities and counties to
prepare and adopt a general plan, including a housing element,
to guide the future growth of a community. Cities and counties
located within the territory of a metropolitan planning
organization (MPO) must revise their housing elements every
eight years following the adoption of every other regional
transportation plan. Cities and counties in rural non-MPO
regions must revise their housing elements every five years.
Before each revision, each community is assigned its fair share
of housing for each income category through the regional housing
needs assessment (RHNA) process.
A housing element must identify and analyze existing and
projected housing needs, identify adequate sites with
appropriate zoning to meet its share of the RHNA, and ensure
that regulatory systems provide opportunities for, and do not
unduly constrain, housing development. The Department of
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Housing and Community Development (HCD) reviews both draft and
adopted housing elements to determine whether or not they are in
substantial compliance with the law.
In general, in order for a city or county to show that it can
accommodate its RHNA allocation, it must identify sites on which
new housing may be built. In order to establish the
appropriateness of sites to accommodate very low- and low-income
housing, housing element law relies on densities as a proxy for
affordability. While high-density developments are not
necessarily affordable, it is generally impossible to develop
affordable housing at lower densities without an exorbitant
amount of subsidy. Current law allows cities and counties to
demonstrate the appropriateness of their zoning densities for
very low- and low-income housing in two ways:
1.By providing an analysis demonstrating how the adopted
densities accommodate lower-income housing, based on market
demand, financial feasibility, or recent development
experience; or
2.By meeting or exceeding the following default densities
established in statute, in which case no further analysis is
required:
30 units per acre for counties and cities in
metropolitan areas of more than 2 million persons.
20 units per acre for counties and cities in
metropolitan areas of less than 2 million persons.
15 units per acre for incorporated cities within
non-metropolitan counties.
10 units per acre for unincorporated areas in all
non-metropolitan counties.
In addition to zoning sites for the construction of new housing,
current law also allows a city or county to meet up to 25% of
its RHNA allocation through the conversion (converting
non-affordable units to affordable units through purchase of
affordability covenants or the units themselves), preservation
(extending the term of affordability on existing affordable
housing units), or substantial rehabilitation of affordable
housing units under specified conditions, including among
others:
The city or county must have met (i.e., housing units were
built) at least some portion of its RHNA allocation for very
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low- and low-income housing in the previous planning period.
The city or county must identify the specific, existing
sources of available funding in the housing element and commit
assistance to individual developments (i.e., enter into a
legally binding agreement to provide the necessary financial
assistance) within the first two years of the housing element
planning period.
The converted, preserved, or rehabilitated units must be made
available for occupancy within two years of the execution of
the agreement committing assistance.
For purposes of counting units against the city's or county's
RHNA allocation, the converted, preserved, or rehabilitated
units must be counted in the appropriate income category.
The city or county must include in its annual housing element
progress report it submits to HCD for the third year of the
planning period an update on its progress in providing the
units counted.
With respect to units converted from non-affordable to
affordable in particular, the following conditions also apply:
The units must be located in multifamily housing complexes of
three or more units.
The units must not be acquired by eminent domain.
The units must be unoccupied by low-income households or, if
occupied, the city or county must provide relocation
assistance to occupants displaced by the conversion.
The units must constitute a net increase in the city's or
county's stock of assisted affordable housing units.
The units must be subject to an affordability covenant and
remain affordable to very low- and low-income households for a
period of at least 55 years.
For units located in multifamily ownership housing complexes
with three or more units, the city or county must have
constructed at least an equal number of new-construction
multifamily rental units affordable to lower income households
within the same planning period as the number of ownership
units to be converted.
This bill :
For purposes of utilizing the authority to meet up to 25% of
its RHNA allocation by means other than zoning for new
construction:
Allows a city or county to commit assistance for the
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conversion of existing units located on foreclosed
properties to affordable housing, subject to the
requirements for conversions listed above.
Allows a city or county to commit assistance for the
conversion of second units from non-affordable to
affordable to very low- or low-income households, provided
that affordability covenants require the unit to be
affordable to very low- or low-income households for a
period of not less than 40 years.
States the intent of the Legislature to examine whether the
housing element default densities could be adjusted for some
jurisdictions without impeding the attainment of the state
housing goal.
COMMENTS:
1.Purpose of the bill . According to the author, the intent of
this bill is not to undermine the goals of the housing element
law but rather to provide the flexibility necessary to allow
local governments to meet the housing needs of their residents
and workforce. The one-size-fits-all approach does not
necessarily fit all. In regions, such as Marin, with limited
space available for new development, the conversion of
existing units is one way that cities and counties can provide
housing. This bill provides flexibility for local governments
to meet the housing needs of their residents and workforce in
creative and innovative ways.
2.Inconsistent with SB 375 . This bill arises out of a political
controversy in the City of Novato in which residents opposed
the city's efforts to comply with housing element law by
identifying sites to rezone for higher-density multifamily
housing. The city's lack of sites is a political problem,
because from a planning and development perspective, there are
viable sites within the city that can support such housing.
The city is also planning a commuter train station downtown,
and higher density housing could support the railline as well
as bring additional customers to downtown business
establishments. Rezoning such sites could result in more
housing choice, more compact development, and lower emissions,
consistent with the goals of SB 375 (Steinberg), Chapter 728,
Statutes of 2008.
This bill, however, seeks to address the political controversy
by allowing the city greater flexibility to comply with
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housing element law without rezoning. The author argues that
cities need flexibility because housing element law imposes a
one-size-fits-all density requirement on cities and counties,
implying that housing at the default density of 30 units per
acre is too dense for Novato. Most communities, even suburban
communities, have found it possible and reasonable to zone for
densities of 30 units per acre. In addition, as described
above, the law allows a city or county to demonstrate to HCD
that lower densities can effectively accommodate affordable
housing. In such cases, HCD looks at a city's prior
experience developing affordable housing at lower densities,
how land costs relate to total development costs, and what
densities affordable housing developers say are necessary to
obtain financing and make a project financially viable. HCD
states that it has allowed at least 14 jurisdictions to
designate sites at densities lower than the default densities
after conducting such an analysis.
It should also be noted that, according to an article in the
Marin Independent Journal, a draft report commissioned by the
County's Community Development Agency after a federal review
citing the county's failure to meet its fair housing
obligations found that the county must ease zoning
restrictions, allow low-income apartments in suburban
neighborhoods, boost public transit to accommodate multifamily
development, and make related moves to eliminate housing
discrimination. The committee may wish to consider whether
granting local governments additional avenues to avoid
rezoning land at higher densities is consistent with the
state's larger goals for more compact development, public
transit, and social equity, including SB 375.
3.Opportunity costs . In order to get housing element credit for
converting foreclosed homes and second units to affordable
housing under this bill, a city or county must commit
financial assistance to the units. Every city and county has
a finite amount of housing funds that is insufficient to meet
all of the community's needs. To the extent that a city
commits its funding to the conversion of foreclosed homes and
second units, there will be less or no money available to
develop the higher-density, transit-oriented type of projects
that would be consistent with state planning goals. Moreover,
placing affordability covenants on foreclosed and second units
does not increase the housing stock overall. As population
continues to increase in California, housing demand increases.
Without additional supply, so does the price of all housing,
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requiring even greater subsidies to achieve affordability.
The section of the bill stating legislative intent to examine
the default densities also has the potential to increase
subsidy needs. To the extent that the author wishes to see
the default densities lowered, that would simply result in
fewer units over which to spread the cost of land, making each
unit more expensive and the gap to be filled by public sources
even greater. Local governments would effectively be buying
their way out of density with a corresponding decrease in the
number of affordable units they can fund. The committee may
wish to consider whether the bill ensures the most effective
use of funds.
4.Viable strategies ? It is not clear that the bill's provisions
for converting foreclosed homes and second units to affordable
housing are truly viable. First, as is the case with
affordable housing generally, the bill requires the converted
units to be affordable to very low- or low-income households
for a period of not less than 55 years for foreclosures and 40
years for second units. In addition to the upfront financial
contribution that cities and counties would have to make to
acquire the units, this would require cities and counties to
make a long-term commitment of scarce resources to monitor the
occupancy of these units and ensure re-rental or resale to
income-eligible persons. Due to the scattered site nature of
the units allowed under this bill, this is likely to be quite
resource intensive. Few, if any, cities and counties may be
willing to make this long-term commitment.
Second, maintaining long-term affordability of rental units,
while resource intensive, is technically uncomplicated. Some
proponents of the bill, however, envision that the foreclosed
units will be sold to low-income families. Long-term
affordability restrictions on ownership units raise fairness
questions for the homebuyers. Current law determines
affordability as a percentage of the area median income.
Because under this bill resale prices are tied to incomes and
incomes historically have risen much more slowly than home
prices in California, the low-income homeowners realize very
little equity gain. Restrictions on who can buy the home upon
resale can make it very difficult to locate a buyer,
especially given that the lack of equity gain potential makes
the home an unattractive investment. Altering the
affordability requirements, however, means that this form of
housing would not truly provide the long-term affordability
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that that bill promises.
Third, the bill's provisions for second units raise even more
questions. How many homeowners will be willing to agree to a
covenant requiring that he or she and all subsequent owners
for 40 years rent the second unit to a low-income individual
or household? The homeowner would no longer be able to use
the unit for family members (unless they met the income
qualifications and paid rent), guests, or home office
purposes. More importantly, perhaps, the homeowner would only
be able to sell the parcel to a buyer who accepted these same
conditions, which could significantly reduce the marketability
of the main home. The committee may wish to consider whether
the new authorities provided by the bill are viable manners in
which to meet affordable housing needs.
Assembly Votes:
Floor: 77-0
Local Gov: 9-0
H&CD: 7-0
POSITIONS: (Communicated to the Committee before noon on
Wednesday, June 29,
2011)
SUPPORT: California Chapter of the American Fence
Association
California Fence Contractors Association
City of Novato
City of San Rafael
County of Marin
Engineering Contractors' Association
Fireman's Fund Insurance Companies
Flasher/Barricade Association
Habitat for Humanity of Greater San Francisco
Marin Builders Association
Marin County Council of Mayors and Councilmembers
Novato Chamber of Commerce
Novato Housing Coalition
San Marin Compatible Housing Coalition
Town of Corte Madera
OPPOSED: None received.
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