BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  April 20, 2016


               ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT


                                  David Chiu, Chair


          AB 1968  
          (Steinorth) - As Amended March 17, 2016


          SUBJECT:  Greenhouse gases:  Affordable Housing and Sustainable  
          Communities Program


          SUMMARY:  Sets aside 10% of funds within the Affordable Housing  
          Sustainable Communities (AHSC) program for medium-density  
          developments.  Specifically, this bill:  


          1)Makes legislative findings. 


          2)Defines "medium-density residential development" to mean a  
            development of attached housing that includes a duet, duplex,  
            triplex, fourplex, or a townhouse or condominium of between  
            three and five stories with an allowable density range of  
            between eight and fifteen units per gross developable acre. 


          3)Requires 10% of moneys appropriated to the AHSC program each  
            year to be allocated each fiscal year to local governments  
            that adopt an ordinance promoting medium-density residential  
            developments to support projects that meet all of the  
            following requirements: 










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             a)   Demonstrates that it will achieve a reduction in  
               greenhouse gas emissions;


             b)   Support implementation of an adopted or draft  
               sustainable communities strategy (SCS) or, if a SCS is not  
               required for a region by law a regional plan that includes  
               policies and programs to reduce greenhouse gas emissions;  
               and


             c)   Demonstrate consistency with the state planning  
               priorities established to achieve the state's environmental  
               goals. 


          1)Requires at least 20% of the total amount allocated to local  
            governments must be used for housing projects that are  
            affordable to lower income households. 


          EXISTING LAW:  


          1)Establishes the SGC made up of the California Business  
            Consumer Services and Housing Agency (BCSH), California Health  
            and Human Services (CHHS), California Environmental Protection  
            Agency (CalEPA), California State Transportation Agency  
            (CalSTA), the California Department of Food and Agriculture  
            (CDFA) and the California Natural Resources Agency (CNRA); the  
            director of the Governor's Office of Planning and Research  
            (OPR).


          2)Directs the SGC to develop guidelines and selection criteria  
            for the implementation of AHCS to reduce greenhouse gas  
            emissions through projects that implement land use, housing,  
            transportation, and agricultural land preservation practices  
            to support infill and compact development and that support  








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            related and coordinated public policy objectives including the  
            following:


             a)   Reducing air pollution;


             b)   Improving conditions in disadvantaged communities;


             c)   Supporting or improving public health or other  
               co-benefits;


             d)   Improving connectivity and accessibility to jobs,  
               housing, and services;


             e)   Increasing options for mobility, including the Active  
               Transportation Program;


             f)   Increase transit ridership;


             g)   Preserve and develop affordable housing for lower income  
               people; and


             h)   Protect agricultural lands to support infill  
               development. 


          1)Requires a project to demonstrate the following to be eligible  
            for funding from the AHSC program:


             a)   Demonstrate that it will achieve a reduction in  
               greenhouse gas emissions;








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             b)   Support implementation of an adopted or draft SCS, or if  
               a SCS is not required for the region a regional plan that  
               includes policies and programs that reduce greenhouse gas  
               emissions. 


             c)   Demonstrate consistency with the state planning  
               priorities established to achieve the state's environmental  
               goals. 


          1)Requires that at least 50% of the funding for AHSC benefit  
            projects in disadvantaged communities. 


          2)Requires SGC when revising its guidelines to develop the  
            guidelines and selection criteria, conduct at least two public  
            workshops (one in northern California and one in southern  
            California) to receive and consider public comments, and  
            publish the draft guidelines on its Internet Web site at least  
            30 days prior to the public meetings. 


          3)Requires SGC to consider comments from local governments,  
            regional agencies, and other stakeholders in adopting  
            guidelines and selection criteria. 


          4)Requires the SGC to conduct outreach to disadvantaged  
            communities to encourage comments on the draft guidelines from  
            those communities. 


          5)Defines "disadvantaged communities" to mean communities  
            identified by the CalEPA based on geographic, socioeconomic,  
            public health, and environmental hazard criteria, and may  
            include, but are not limited to, either of the following:








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             a)   Areas disproportionately affected by environmental  
               pollution and other hazards that can lead to negative  
               public health effects, exposure, or environmental  
               degradation; and 



             b)   Areas with concentrations of people that are of low  
               income, high unemployment, low levels of homeownership,  
               high rent burden, sensitive populations, or low levels of  
               educational attainment.

          


          FISCAL EFFECT:  Unknown. 


          COMMENTS:  


          In 2014, Legislature created the AHSC program funded through  
          cap-and-trade proceeds. SB 862 (Senate Budget and Fiscal Review  
          Committee) Chaptered 862, Statutes of 2014 continuously  
          appropriated 35% of the cap-and-trade funds for investments in  
          transit, affordable housing, and sustainable communities.  Of  
          this, 10% is for transit and inter-city rail capital programs  
          administered by the Department of Transportation (Caltrans) and  
          the California Transportation Commission (CTC); 5% is for low  
          carbon transit operations through the State Transit Assistance  
          formula; and 20% is for affordable housing and sustainable  
          communities, with half of this funding going to affordable  
          housing projects that demonstrate a reduction in greenhouse  
          gases.

          The AHSC program has approximately $300 million available in  
          funding and is administered by the SGC and HCD. HCD is  
          responsible for implementing the transportation, housing, and  








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          infrastructure components of the AHSC program. According to the  
          AHSC guidelines, "The AHSC program is designed to implement the  
          GHG emissions reductions through fewer shorter vehicle trips.  
          The AHSC program will fund integrated land use and  
          transportation projects supporting low-carbon transportation  
          options. Promoting mode shift to low-carbon transportation will  
          require strategies that link residential areas, major employment  
          centers and other key destinations to accessible reliable,  
          affordable safe, comfortable transit, and active transportation  
          options." 

           Purpose of this bill  :  According to the author, "In some parts  
          of California, it is not as economically feasible (or perhaps  
          even permissible) to build high-density, high rise developments  
          envisioned by the AHSC. For those areas, "medium-density"  
          development may be a more realistic option, especially where  
          there is a strong need for increased housing supply. Such  
          development is unfortunately not as easy to build, due to  
          tougher building code standards and engineering challenges. As a  
          result, suburban and less-affluent parts of the state are at a  
          disadvantage when trying to qualify for the AHSC. This in turn  
          hinders compact development efforts in these regions and creates  
          a disparity with the areas that can afford higher density  
          projects. A 2014 federal report on infill development determined  
          that one of the biggest challenges to creating infill  
          development were construction costs in buildings that utilized  
          steel or reinforced concrete, typically those that are four or  
          more stories. The report also references a 2007 Brookings  
          Institution paper which also found that the cost to construct  
          wood-framed buildings over two stories ballooned and that  
          mid-rise reinforced concrete buildings were even more expensive.  
          Other studies show a similar concept: increased building heights  
          (and density) often lead to increase per-unit construction costs  
          and rental prices. AB 1968 would help developers, who may be  
          financially prohibited from such development, defray some of  
          their costs and be able to provide more infill development to  
          communities that may not be as suited for larger-scale projects.  
          In particular, in areas that may not have a strong enough demand  
          or capital resources to sustain a high-rise building, this bill  








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          would help support developments for a more affordable, mid-range  
          market." 


           Staff comments:


           


          This bill would award 10% of AHSC funding to local governments  
          that adopt an ordinance that promotes medium-density residential  
          developments which would include developments that are between  
          three and five stories with a density range of between eight and  
          fifteen units per developable acre.  Local governments would  
          only be required to use 20% of the funds awarded to it for  
          affordable housing.  The intent of programs funded by  
          cap-and-trade proceeds is to reduce greenhouse gas emissions to  
          achieve goals set in AB 32 (Nunez), Chapter 488, Statues of  
          2006.   In order to meet this standard affordable housing  
          project must combine both density and accessibility to public  
          transportation in order to result in vehicle miles travelled  
          which will reduce our overall GHG production. The effect of this  
          bill is to reduce the density required for projects and  
          potentially undermine the goal of the program.  In addition,  
          AHSC is limited to funding housing that is affordable to lower  
          income households. This bill proposes to allow local governments  
          to use 80% of the funds awarded to it for housing at any income  
          and is not limited to affordable housing.      


          Climate change is a dynamic and evolving situation that the  
          state needs to be able to respond to through policy and funding  
          mechanisms in an efficient and thoughtful manner. Locking  
          program guidelines into statute may undermine that process and  
          the fundamental purpose of the AHSC program, to reduce our GHG  
          emissions and slow climate change. The committee may wish to  
          consider if making changes to the guidelines through this bill  
          will invite other stakeholders who are dissatisfied with the  








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          guidelines process to pursue changes through the legislative  
          process.





          REGISTERED SUPPORT / OPPOSITION:




          Support


          County of San Bernardino




          Opposition


          None on File




          Analysis Prepared by:Lisa Engel / H. & C.D. / (916) 319-2085,   
          Lisa Engel / H. & C.D. / (961) 319-2085

















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