7. Up-Zoning: Pits Market-Rate Against Affordable Housing
Other housing bills in this legislative session that fall into the up-zoning category are
Allows 10 units of market-rate housing to be developed on almost any parcel (areas remain undefined) with the support of the local city council.
Enables city councils to roll back voter-approved land-use initiatives.
- ISSUE: Antithetical to democratic principles. The bill grants city councils the right to override general plans that are the culmination of community outreach, public hearings, and debate. Granting the ability to override voter-approved initiatives to a city council raises the specter of future legal challenges for the state. The bill will likely have the effect of further politicizing local elections as city council seats become a path to upzoning. The bill accomplishes nothing for low-income housing, focusing as it does, solely on market-rate housing.
SUGGESTED FIX: Since the state’s Regional Housing Needs Assessment has set targets of 40% market-rate, 20% moderate, and 40% low-income, upzoning should be favored only if developments reflect those percentages. This bill favors market rate over affordable housing, undermining the ability of any city that might adopt this law, to reach their state-required RHNA affordable housing quotas. Cities, as seen in Figure 1, are not struggling with their market-rate RHNA quotas.
SB-1120 (Atkins, Caballero, Wiener)
Allows lot-splits and duplex development “by right” in single-family neighborhoods with 1 parking space per unit — or none, if transit is within ½ mi. Requires that any rental unit created pursuant to this bill has a rental restriction of 30 days or longer.
ISSUE: Per Figure 1, above, the state is on track to exceed its market-rate housing quotas for the 5th housing element cycle. There is no need to incentivize market-rate housing with a reduced parking requirement or a streamlined approval process. Reduced parking requirements should be exclusive to low-income housing developments. Parking for market-rate housing should follow local zoning rules. Currently, the state has an average of over two registered cars per household, a number that has only increased over the last several years, despite previous forecasts of peak car. It remains to be seen how the current decline in public transit ridership and the recession will affect vehicle ownership, but in the majority of the state, it is unlikely to fall below two cars per household anytime soon. As such the removal of parking minimums should once again be kept for low-income developments. In addition, urban lot splits should still be open to local discretionary review and local subdivision ordinances. There are many considerations that factor into a subdivision and it should follow the standard local approval processes.
SUGGESTED FIX: Upzoning in of itself is an enormous incentive for market-rate housing. California is on track with its market-rate housing. No additional incentives are required. Remove language that reduces parking requirements and remove the designation of these projects as “ministerially approved”. Require these market-rate projects to follow the standard local approval processes. Also to clarify the intention of the bill and avoid the misinterpretation that the bill enables duplexes on both lots, it should say that the lot split is only for the purpose of supporting the development of a 2 unit housing project.
On a positive note, the 30-day minimum rental restriction discourages the creation of units for short-term Airbnb stays, although, in reality, the rule may be difficult to enforce.
SB-1385 (Caballero, Rubio)
Allows residential development as an authorized use on sites zoned for commercial and office if 50% of the square footage has been without a tenant for three years or more.
Creates an incentive to convert idle big-box retail to moderate-income work-force housing by providing grants to cities that are tied to the average sale use tax generated by the idle property over the past 7 years.
ISSUE: NONE. This is the only bill that addresses funding challenges for cities. It creates an innovative economic incentive for cities to convert big-box to housing. The carrot versus the stick approach.
SUGGESTED FIX: None. Unfortunately, this bill will likely struggle in the legislature because it requires state funding and the state has proved remarkably reluctant to meaningfully support affordable housing, which state leaders cite as a top priority
8. Notes and Sources
*The Dept of Housing and Community Development (HCD) is responsible for determining regional housing needs (segmented by income levels). The regional housing need is determined using demographics projections from California’s Dept of Finance and a formula that takes into account household formation rates, demographics, income, and jobs etc. Local planning bodies separately calculate their housing needs and then conferring with HCD their regional housing need is finalized. The local planning body then allocates that housing need by jurisdiction. These final allocations are referred to as the Regional Housing Need Allocation (RHNA) plan. These plans are then reflected in the housing element of a local government’s general plan. In some cases, access to state and federal funding for affordable housing requires a compliant housing element. As such, there is an incentive for local jurisdictions to comply with these state processes.
The cycle to update the housing element happens on a 5 or 8-year cycle, the cycle length chosen by the local planning body. Typically, larger urban areas are on an 8-year cycle. California is currently in its 5th housing element cycle. The smaller regions on a 5-year plan completed their cycle at the end of 2019, the larger urban regions are due to complete in the 2021 to 2023 timeframe.
Note: Statewide, approx 40% of the housing need in the 5th housing element cycle has been determined to be very low and low income, 20 % moderate-income, and 40% market-rate.
Figure 1. Sharp Decline in State Funding for Affordable Housing
Note: Affordable Funding totals do not include mortgage revenue bond financing for affordable housing.
Dept of Housing and Community Development (HCD): Annual Reports (2005 to 2019)
Redevelopment Housing Activities Financial Reports (2005 to 2011), HCD public request under the FOIA
California Tax Credit Allocation Committee (CTAC) Annual Reports (2008 to 2019)
California Business Community and Housing Agency, HEAP annual report (2018-2019)
California Dept of Social Services CDSS: CalWORKS Annual Reports (2008 to 2019) and CDSS public request under the FOIA
California Office of Emergency Services (CalOES): Joint Legislative Budget Committee Report (2005 to 2019) (CalOES public request under the FOIA)
Dept. Health Care Services (DHCS): Mental Health Care Act Expenditure Reports (2005 to 2019)
California Housing Finance Agency (CalHFA): Comprehensive Annual Reports (2008 to 2019),
Figure 2. State Income Tax Revenue Doubles While Its Spending on Affordable Housing Stagnates
Note: Affordable Funding totals do not include mortgage revenue bond financing for affordable housing.
Sources as in Figure 1 and in addition
California State Controller’s Office: State of California Comprehensive Annual Financial Reports (2005 to 2019)
Figure 3. Return on Income Tax Dollars for Affordable Housing - Federal vs State
Sources as in Figures 1& 2 and in addition
U.S. Dept. of Housing and Urban Development (HUD):
Source: HUD Exchange: State Grants from 2005 to 2019
Community Development Block Grant (CDBG) including Economic Development and Disaster Recovery Initiative (CDBG-ED, CDBG-DRI); Federal Emergency Shelter Grant Program/ Emergency Solutions Grant Program (ESG); Home Investment Partnerships Program (HOME) including Drought Tenant based Rental Assistance (HOME-DRI); Housing Assistance Program (HAP); Housing Trust Program (HTP); Neighborhood Stabilization Program (NSP)
Source: HUD portal datasets on rental assistance covering the following programs
Public Housing, Housing Choice Vouchers, Project-Based Section 8, Mod Rehab, S236/BMIR, 202/PRAC, 811/PRAC, MF/Other
U.S. Dept. of Health and Human Services (HHS)
Source: SAMHSA State Summaries 2014 to 2019, Public Request under FOIA SAMHSA 2000 to 2014 data (pending), FYSB State Allocation Tables – Basic Center and TLP; SMHS Supplement to the Medi-Cal Estimate November Reports 2000 to 2019, SAMHSA – Projects for Assistance in Transition from Homelessness (PATH); Family and Youth Services Bureau – Basic Center Program and Transitional Living Programs; Medi-Cal Specialty Mental Health Services Program
U.S. Dept of Agriculture (USDA)
Source: USDA Rural Housing Program Funding Activity Year-End Report (2008 to 2019)
521 Rental Assistance; 523 Self Help TA Grants; 504 Repair and Rehab Grants; MFH Tenant Vouchers; 533 Housing Preservations Grants; 516 Farm Labor Housing grants
Dept Of Housing and Community Development (HCD) – Federal grants to HCD
Source: HCD Annual Reports (2004 to 2019) cross-referenced with HUD Exchange reporting
Community Development Block Grant (CDBG), Emergency Solution Grants (ESG), Home Intervention Partnerships (HOME), Homelessness Prevention Re-Housing Program (HPRP), Housing Assistance Programs (HAP) until 2012, National Housing Trust Fund (HTF), Neighborhood Stabilization Program (NSP)
California Tax Credit Allocation Committee (CTAC)
Source: CTAC Annual Reports (2000 to 2019); 4% and 9% Federal Low Income Housing Tax Credits for Affordable Housing
State Controller’s Office
Source: State of California Comprehensive Annual Financial Reports; State of Revenues, Expenditures and Changes in Fund Balances 20015 to 2019
Internal Revenue Service
Source: IRS Tax Statistics: Historical Table State Tax - California 2005 to 2017
Figure 4. New Construction of Affordable Housing Has Been Sluggish For Over a Decade
California Tax Credit Committee:(CTAC) Annual Report data on project awards by type of construction type - includes 4% and 9% tax credit projects
Figure 5. Affordable Housing Languishes While Market-Rate Presses Full steam Ahead
Source: Regional Housing Need Assessments as determined and reported by the Dept of Housing and Community Development (HCD). The cycles last between 5 and 8 years so targets have been prorated based on the percent of the cycle completed at the time of the most recent HCD progress reports (2019). Permit Progress data is from HCD’s 5th cycle Annual Progress Report Summary.
1.Data from Rent Cafe
2.City of Pasadena: Affordable Housing: In-lieu Fee Study, Pasadena (2018)
3.Terner Center:The Cost of Affordable Housing Production ,March 2020