South San Francisco, CA March 18, 2022 Submitted by Leslie Guevarra, Senator Becker’s Office
Reform bill provides new regional housing credits for innovation solutions and eliminates counterproductive penalties
Sacramento — Senator Josh Becker announced a bill today to help unlock funding for affordable housing creation by eliminating onerous misdirected penalties against affordable housing developers in cities and counties that have not complied with state law requiring local governments to have adequate plans to meet housing needs.
“We should not punish affordable housing developers who did nothing wrong,” said Senator Becker, D-Peninsula. “There are many penalties on the books right now for cities and counties with noncompliant housing elements. One penalty goes too far by preventing affordable housing developers from accessing certain state funding when pursuing projects to address the affordable housing shortage in those noncompliant places.
“The penalty is counterproductive and makes absolutely no sense when we are short millions of affordable homes in California. Cities and counties should be on the hook for compliance, but affordable homes should not be used as a bargaining chip. We need to provide more incentives for local governments to create affordable housing, not penalize developers who are trying to build it. My bill corrects this problem.”
Senate Bill 1094 makes clear that affordable housing developers cannot be blocked from state funding in such situations. Among other important changes, the bill also provides incentives in the form of regional housing credits, known as RHNA, to local governments that:
- Create interim housing for people experiencing homelessness,
- Partner with community home sharing programs to create affordable units from existing housing stock, or
- Create affordable housing from units acquired or converted from market rate housing, if the jurisdiction previously produced moderate-income housing.
“With increased requirements for cities to add housing – and specifically affordable housing, we need increased resources to do so, not penalties that roadblock our efforts,” said Mountain View City Councilmember Margaret Abe-Koga, one of several local government leaders to hail SB 1094. “Senator Becker’s legislation will remove counterproductive barriers and unlock much-needed state funding to enable more affordable housing developers to build affordable units in partnership with cities.”
Pacifica Councilmember Sue Vaterlaus said, “This bill carefully balances the challenges cities are facing with smart reforms to compliance penalties. Allowing cities with some moderate-income production to benefit from the affordable housing conversion allowances under RHNA will help incentivize more acquisition of affordable housing.”
The Consequences of Failing to Comply with Housing Element Laws
Since 1969, state law has required cities and counties to have a general plan that serves as a blueprint for growth and development. The plan must cover seven elements: land use, transportation, conservation, noise, open space, safety and housing. The law also requires local governments to update their housing element every five to eight years. Local governments must submit their housing elements for review to the state Housing and Community Development Department (HCD), which may approve the housing elements if the plans meet the requirements of law or reject the plans and require revisions until the plan meets approval. To be deemed in full compliance, local governments must adopt HCD-approved housing elements within a specific amount of time.
Several penalties result when a jurisdiction’s housing element is rejected, or a jurisdiction is significantly late in submitting a housing element. One of the most significant penalties blocks access to affordable housing funding sources in jurisdictions that miss their compliance deadline by 120 days – or fail to rezone sufficient land within a year.
The majority of the blocked funding sources, such as the Community Development Block Grant, are available solely to jurisdictions. But two significant funding pots are also available to affordable housing developers. That financing is available through the Infill Infrastructure Grant (IIG) Program and the Affordable Housing and Sustainable Communities (AHSC) Program. Perversely, if a jurisdiction falls out of compliance with housing element law, affordable housing developers who are trying to pursue projects in the jurisdiction also lose access to these key funding sources. The project developers have nothing to do with preparing a jurisdiction’s housing element, nor do they have the ability to rectify the jurisdiction’s noncompliance.
Many regions are completing or have recently completed their 6th Cycle Housing Element. A substantial number of jurisdictions, however, are out of compliance with housing element law for various reasons. For example, as of February 9, only 1% of the localities in the Southern California Association of Governments had housing elements in compliance. The city of Los Angeles’s housing element was rejected by HCD just last month. The Bay Area is on track to submit housing elements to HCD in January 2023 and may face similar challenges coming into compliance.
“We cannot afford to deny affordable projects in cities and counties access to infill grants and sprawl-reducing affordable housing incentives, if we are going to tackle the housing crisis and the climate crisis,” said Senator Henry Stern, D-Calabasas, an SB 1094 coauthor. “Sprawl will not solve either of these crises and we need to remove every barrier we can to saying yes when it comes to affordable, sustainable, infill development especially in high opportunity zones.”
Senator Ben Allen, D-Santa Monica, also is a coauthor.
How SB 1094 Will Help
Correcting an unintended consequence
In addition to removing the penalty that now falls on affordable housing developers, SB 1094 remedies an unintended consequence of the state’s new “pro-housing” designation laws, which provide incentives to local governments to implement policies that facilitate more housing production – an important goal. The incentives include giving extra points to pro-housing jurisdictions during the selection process for much sought-after affordable housing grants in a variety of programs. The highly competitive programs include the two that award Infill Infrastructure and the Affordable Housing and Sustainable Communities grants. Both programs make some or all of their grants directly available to affordable housing developers.
As recommended by the California Housing Partnership, SB 1094 will adjust the “pro-housing” designation law to make clear that its incentives apply only to programs in which local governments are the sole eligible applicants. This change ensures affordable housing developers are not unfairly disadvantaged when competing with local governments for grants to fund infill and sustainable community developments.
Incentives for creative affordable and interim housing solutions
SB 1094 also allows Regional Housing Needs Allocation (RHNA) credit to be given to jurisdictions with interim housing for people experiencing homelessness and those that partner with local home sharing programs in their communities to create affordable units from existing housing stock. Both models are proven cost-effective methods of creating affordable housing rapidly.
“Home sharing offers a creative, practical way to provide housing options to people in need of an affordable place to live,” said HIP Housing Executive Director Kate Comfort Harr. “Incentivizing cities to promote these programs could quickly and efficiently create thousands of housing opportunities throughout the state.”
“Much more permanent housing is urgently needed, yet it’s clear the streets cannot continue to be the waiting room,” said Joanne Price, a vice president at LifeMoves. “Rapid, cost-efficient, and flexible interim solutions to bring people indoors sooner are important tools on the spectrum of housing. It’s not an either-or, it’s both, and MORE of both. Isn’t it time that these types of solutions be considered towards some kind of housing allocation?”
SB 1094 also permits local governments to receive RHNA credit for affordable housing that has been acquired or converted from market rate housing, if during the prior planning cycle, the local governments met some of their goals for creating moderate-income housing. Currently, eligibility for the credit is limited to local governments addressing their low- and very low-income housing goals. The change provides further incentive for affordable housing acquisition and removes another counterproductive restriction.
What other local government leaders are saying about SB 1094
“Cities need a partner in the state to help knock down obstacles jurisdictions face when trying to build common-sense affordable housing,” said Menlo Park Councilmember Ray Mueller. “SB 1094 proposes smart methods to help us get there and gets rid of a punitive self-defeating barrier to affordable housing financing.”
“The modest RHNA changes proposed in SB 1094 will help accelerate lower cost housing interventions and remove a counterproductive penalty against cities and affordable housing developers,” said San Mateo Councilmember Eric Rodriguez.
SB 1094 was amended in entirety this week to introduce these housing law reforms. The legislation is expected to be heard in a Senate policy committee in the coming weeks.