Category Archive: Affordable Housing

  1. Affordable Housing, Homelessness Central to 2019-2020 Legislative Agenda

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    Governor-Elect Gavin Newsom

    Over the past two years, California’s Legislature and Governor Jerry Brown have demonstrated their determination to pass legislation to address the State’s growing housing affordability crisis. Many of these efforts respond to growing public recognition that the future of California’s economy depends on a housing market in which cities plan for and develop adequate housing for individuals and families at all socioeconomic levels. The trend is expected to continue in January 2019 when Governor-Elect Gavin Newsom, who ran on a platform to provide additional financial incentives to promote smart growth while holding cities accountable for their fair share of housing production, takes office.

    Key Bills Signify Ambitious Housing Agenda

    The new Legislature, which convened Monday, December 3, has already taken steps toward establishing a more equitable housing market with the introduction of several housing and homelessness bills, including:

    AB 10 (Chiu) – With more than 20 co-authors from both the Assembly and Senate, the bill would increase the state low-income housing tax credit (LIHTC) to $500 million annually, including $25 million annually dedicated to farmworker housing, with increases to the total tied to the Consumer Price Index.

    AB 11 (Chiu) – This bill would reinstate California redevelopment agencies, which were dissolved in February 2012. Redevelopment agencies historically utilized tax-increment financing and were key in providing financing for affordable housing developments, but were eliminated in the wake of the Great Recession. AB 11 also includes protections against the misuse of funds, a common criticism of the former redevelopment agencies.

    SB 18 (Skinner) – The Keep Californians Housed Act aims to decrease evictions and resulting homelessness. The bill would require the rights and obligations of landlords to be easily accessible online and provide a sustainable source of funding for the California Emergency Solutions and Housing Program, which would administer rental assistance and legal aid funding to tenants experiencing eviction.

    SB 48 (Wiener) – If passed, this bill would create a right to shelter for all homeless and unhoused individuals in the State and include the navigation center model, a best practice supported by many homeless advocates.

    SB 50 (Wiener) – This bill is a more polished version of SB 827, which failed last legislative session. The bill aims to increase residential density near public transit centers by lifting local height and density restrictions within 1/4 to 1/2-mile to transit. The bill addresses previous concerns, including a 5-year deferment period for communities concerned with displacement and gentrification.

    Bay Area’s CASA Process

    Several of the newly introduced legislative measures, namely SB 18 and 50, have ties and have been influenced by the Bay Area’s CASA Process. CASA has been a regionwide process that convened diverse stakeholders to address housing affordability and it has been facilitated by LDC President and CEO Jennifer LeSar. On December 3, CASA’s Technical Committee approved a 10-element Compact, which proposes a housing legislative package encompassing tenant protections, preservation of affordable units, and the production of new units. The Compact will be presented to the CASA Steering Committee on December 12.   If you would like to bring a CASA-like planning process to your community, please email Jennifer LeSar.

    Building on a Strong Foundation

    These legislative developments build on the momentum created by the 2017 Housing Package, which included the Building Homes and Jobs Act (SB 2) and the Veterans and Affordable Housing Bond Act of 2018 (SB 3), which became the Prop 1 ballot initiative that passed with overwhelming support in November.

    Earlier this year, the Legislature passed SB 828, which reforms the methodology used to set Regional Housing Needs Assessment (RHNA) goals. This change aims to create a more transparent and equitable process, and better hold jurisdictions accountable for producing units toward their goal.

    In an effort to protect housing for low-income households, including those who are homeless, the Legislature also passed AB 3194, which prohibits jurisdictions from rejecting a development of very low-income, low-income, or moderate-income housing or an emergency shelter without evidence to demonstrate that it would have a “specific, adverse impact upon the public health or safety.”

    Other key bills passed during the legislative session include:

    AB 2923, which gives BART more autonomy over its land surrounding existing transit stops. BART has expressed interest in using the land to develop housing, including affordable units.

    SB 918, the Homeless Youth Act of 2018, established further requirements for the Homeless Coordination and Financing Council. These requirements focus on the needs of homeless youth, including identifying best practices and providing program developments and technical assistance for youth-focused homelessness programs.

    AB 686, which requires public agencies to uphold Obama Administration Fair Housing guidelines, which strengthen the Affirmatively Furthering Fair Housing (AFFH) provisions of the 1968 Fair Housing Act. HUD has tried to dismantle the AFFH clause, which is meant to protect against the legacy of redlining.

    Jennifer LeSarWith more than 30 years of experience in the real estate development and investment banking industries, Jennifer LeSar, President and CEO, brings a diverse background to her work in community development and urban revitalization. Her technical expertise spans from policy and program development to comprehensive strategic planning for top executives and executive teams to the origination and underwriting of complex investments in equity funds, multi-family portfolios, historic, and low-income tax credit properties utilizing federal and state financing programs. Ms. LeSar’s educational achievements include two advanced degrees from UCLA – a Master of Business Administration in Real Estate, Finance and Nonprofit Management and a Master of Arts in Urban Planning. She received her Bachelor of Arts from Bryn Mawr College in Political Science and Economics. She can be reached at jennifer@lesardevelopment.com.

  2. Opportunity Zones: An Investment in Smart Gentrification?

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    In October 2018, the Internal Revenue Service released regulations for investment in Opportunity Zones, a concept established in the Federal Tax Codes and Jobs Act of 2017. The zones are designed to spur private investment in economic and community developments in economically distressed communities. The State of California now has 890 designated Opportunity Zones out of 8,000 nationwide. The zones would function as a form of impact investing, where private investors are interested in two bottom lines: the capital impact and the social impact.

    Map of the San Diego Promise Zone, which includes the same Census tracts as the new Opportunity Zone

    Within California, Opportunity Zones have the potential to replace public redevelopment dollars lost by the dissolution of redevelopment agencies. Opportunity Zones also allow private investors to contribute to their local communities. The regulations released by the IRS in October were particularly investor-friendly and include a provision clarifying that all capital gains on investments made in Opportunity Zones before 2048 would be excluded from the capital gains tax. Investors may invest capital gains from an asset in a Qualified Opportunity Fund (QOFs) within 180 days of the transaction. The taxes on those gains are then deferred through the end of 2026.

    Given the incentives, investors’ interest in Opportunity Zone funds has grown rapidly. Community advocates, especially those concerned with equitable development, have expressed growing concerns about gentrification and displacement within the Opportunity Zones. Given that the tax subsidy grows as property values increase, investors in quickly gentrifying neighborhoods will receive the highest return on investment. The Brookings Institute suggests that with some guardrails, such as tenant protection policies, Opportunity Zones could lead to “smart gentrification,” or gentrification that does not displace existing residents. The long-term impact of Opportunity Zones is yet unknown, but housing advocates hope it could mean the return of redevelopment.

    Liz TraceyLiz Tracey, Senior Principal, is an expert on affordable housing and community development finance using tools such as the Low-Income Housing Tax Credit and New Markets Tax Credits. For information about community development financing resources, contact Liz Tracey at liz@lesardevelopment.com.

     

  3. Promising Innovations: Shared Permanent Supportive Housing

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    Across California, the heightened urgency associated with addressing the housing crisis has prompted a range of innovations. In Los Angeles, Flyaway Homes has become one of those innovators. They are using shipping containers – the corrugated steel metal boxes you see hauled around on semi-trucks and freight trains – to develop a model of shared-unit Permanent Supportive Housing (PSH) to reduce homelessness.

    While shipping containers have been used for everything from boutique homes to commercial development, they have not factored significantly into efforts to reduce the slow pace and high cost of PSH development. Last month, LDC had an opportunity to attend an open house at Flyaway’s first shared-unit PSH development, located at 820 West Colden Avenue in Los Angeles. We got a feel for the place (it’s nice) and talked a little shop about how the model improves upon traditional PSH development.

    Colden Avenue DevelopmentThe shipping containers, which are used for modular construction, are the most obvious innovation. This approach allows PSH units to be permitted prior to construction and assembled quickly, eliminating a portion of the soft costs associated with most new construction. For example, the Colden project took approximately 10 months to plan and develop, as compared to traditional approaches, which can take years.

    The nine-unit development also uses a shared housing model, providing a home for 32 tenants (and an onsite property manager) who each have their own room and share a kitchen and bathroom with three other neighbors.

    Shared housing is an important resource in the effort to reduce homelessness, but it’s rare to see a developer integrate the model into the budget and design of a newly-constructed property. Doing this has allowed the developer to finish the project at a similar price point to other PSH developments, but at a much lower cost per tenant – $109,000, including the cost of the land.

    Flyaway COO Kevin HiraiFlyaway COO Kevin Hirai explained that to make the project financially sustainable the company secured a 20-year master lease with local homeless services provider the People Concern, which guarantees supportive services for the tenants and rental income for the property for the duration of the lease. The services will be paid for by the Los Angeles Department of Health Services’ Flexible Housing Subsidy Pool program, which offers versatile rental subsidies for individuals experiencing homelessness.

    Flyaway’s model relies solely on private equity to fund development, another way it differs significantly from the majority of PSH development. For the Colden Avenue project, investors contributed to the $3.6 million budget with a guaranteed return of 4.5-5 percent, paid for with the rental income generated by the property. Hirai explained that this approach to financing allowed the company to raise the initial capital very quickly and avoid some of the red tape often associated with securing government funds.

    With the low cost, rapid production time, and flexibility of the project, the most exciting aspect of Flyaway’s model is its potential scalability. Flyaway anticipates that using shared modular housing to produce PSH will become an important resource within the continuum of housing solutions for a significant portion of the population experiencing homelessness. If the model proves successful, Flyaway and other similar companies could build thousands of units relatively quickly. This is one project LDC will be watching closely.

    —————–
    Flyaway Home’s Colden Avenue development combines several innovative approaches to housing people experiencing homelessness under one roof:

    1. Modular construction
    2. Private equity financing
    3. Shared housing
    4. Master leasing
    5. A flexible subsidy pool

     

    Brian GrutersBrian Gruters, Associate, focuses on designing systems that respond to homelessness quickly and efficiently, emphasizing harm reduction and trauma‐informed care. Before joining LDC, Mr. Gruters led development of the City of San Diego’s coordinated entry system (CES) for the San Diego Regional Task Force on the Homeless. He has also worked for Breaking Ground (formerly Common Ground) and the Urban Homesteading Assistance Board in New York City, where his work centered on permanent supportive housing management. Mr. Gruters holds a master’s degree in Environmental Studies from the University of Waterloo, in Ontario, Canada, where he studied ecology and rural anti‐poverty movements. He can be reached at brian@lesardevelopment.com.

  4. Proposition 10 Creates Local Rent Control Controversy

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    Proposition 10: Rent Control aims to repeal a law that currently prevents city and county governments from enacting rent control. Known as the Costa-Hawkins Act, the law prohibits rent control on single family homes, new housing built after February 1, 1995, or when tenants first move into a unit. If passed, Proposition 10 would restore authority to city and county governments to determine whether they should enact rent control policies and limit how much landlords could raise the rent each year.

    Supporters contend that California renters currently pay 50 percent more than counterparts in other states, straining households’ ability to cover the costs of other necessities such as food, childcare, education, transportation, and healthcare. A policy brief from the Urban Displacement project concludes that the proposition would be beneficial to Bay Area renters, particularly in terms of preventing displacement. It found that including single family homes in rent control ordinances, a policy not permissible under Costa-Hawkins, could have significant impact because they make up an increasing percentage of the area’s rental stock.

    However, the brief also highlights the potential unintended consequences of repealing Costa-Hawkins. In particular, the brief addresses the possibility of units being removed from the rental market. A Terner Center brief highlights other possible consequences, including the possibility of slowing already lagging production. Housing construction in California has not met growing demands, and the report notes that further shortfall would only exacerbate the housing crisis.

    The Terner Center brief also highlights a more nuanced perspective: Proposition 10 aims to increase tenant protections, a necessary action given the housing crisis, but those protections do not have to be implemented in a way that affects production. Instead, they suggest modifications to Costa-Hawkins, including an “anti-gouging” rent cap and further incentives for developers to include affordable units in their market-rate developments.

    Estimating the true effects of Proposition 10 is difficult due to a lack of data surrounding rental units, landlords, and tenants. Additionally, Proposition 10 allows local governments to adopt rent control, but does not require these provisions. As such it is difficult to predict the specifics of the policy across the state. However, the repeal of Costa-Hawkins and implementation of rent control has some potential to negatively impact affordable housing. If Proposition 10 passes, careful consideration will need to be given to the development of specific local policies to truly protect California’s vulnerable communities.

    Jennifer LeSarJennifer LeSar, President and CEO, has more than 30 years of experience in the real estate development and investment banking industries, and brings a diverse background to her work in community development and urban revitalization. Her technical expertise spans from policy and program development to comprehensive strategic planning for top executives and executive teams to the origination and underwriting of complex investments in equity funds, multi-family portfolios, historic, and low-income tax credit properties utilizing federal and state financing programs. She can be reached at jennifer@lesardevelopment.com.

  5. Yes on Props 1, 2: Ballot Measures Critical to Developing Housing

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    San Diego Square Senior ApartmentsThis November, the decisions voters make about two ballot measures—the Housing Assistance Bond and No Place Like Home—the Proposition 1 Housing Assistance Bond and Proposition 2 No Place Like Home—have significant implications for California communities as they address housing affordability.

    Proposition 1: Housing Assistance Bond, would allow the state to issue $4 billion in general obligation bonds to investors to fund existing affordable housing programs. Specifically, the bond would provide:

    • $1.8 million to build or renovate affordable multifamily housing;
    • $450 million for transit-oriented infrastructure development;
    • $450 million for down payment assistance or other funding to assist low- and moderate-income homebuyers;
    • $300 million for rental and owner-occupied housing for farmworkers; and
    • $1 billion for home loan assistance for veterans.

    The measure, which qualified for the ballot based on a two-thirds vote from the Legislature and approval by Governor Jerry Brown as part of the 2017 Housing Package, would support an estimated 30,000 multifamily units, 7,500 farmworker households, 15,000 homebuyers, and 3,000 veterans. If passed, the measure would enable the state to provide grants or low-cost loans to local governments, nonprofits, and developers through a competitive process to fund a portion of construction costs. Interest on the bond would be repaid using the state’s General Fund at approximately $170 million annually for 35 years. While opponents chafe at the cost burden to taxpayers, supporters such as United Way, the League of Women Voters, the League of California Cities, and the California State Sheriffs’ and Firefighters’ Associations view Proposition 1 as a much-needed measure to address the affordable housing crisis and argue that a portion of the funds will be recouped as payments on home loans.

    Proposition 2: No Place Like Home, if passed, would allow the state to redirect $140 million per year in Mental Health Services Act funding to repay up to $2 billion in bonds to fund permanent supportive housing for people experiencing or at-risk of homelessness who need mental health services. Counties would be able to use these funds to acquire, design, construct, rehabilitate, or preserve permanent supportive housing. Only those supportive housing developments that use low-barrier tenant selection practices and provide voluntary, individualized supportive services would be eligible for funding. Counties would also need to commit to providing mental health services and coordinating other supportive services as a condition of funding.

    Currently, the state needs court or voter approval to use Mental Health Services Act funds for permanent supportive housing through No Place Like Home (NPLH). Counties will be able to apply to the California Department of Housing and Community Development for NPLH funds, which are categorized as loans repayable to the state, on either a non-competitive or competitive basis contingent on voter approval.

    Research has shown that housing paired with treatment, commonly referred to as permanent supportive housing, helps people with severe mental illness live healthy, stable lives and reduces public health costs. Supporters of the measure include the California affiliate of the National Alliance on Mental Illness. Opponents argue that the measure, if passed, would shift funding away from treatment for people with severe mental illness to pay for housing and does not address restrictive zoning laws that make it difficult to build housing.

    Together, Propositions 1 and 2 provide significant revenue streams to address California’s growing housing affordability and homelessness crisis and aim to produce housing types California’s private market has failed to adequately produce in California. The propositions have received widespread support from organizations and elected leaders statewide, including Assm. David Chiu (D-San Francisco) and Senate President pro tempore Toni Atkins (D-San Diego).

    Diana Elrod, Principal, brings more than 30 years of consulting and public sector experience to her work co-leading LDC’s housing policy and real estate finance team. Before joining LDC, she provided strategic counsel and conducted research on Housing and Community Development for the Cities of Lafayette, Belmont, Palo Alto, San Jose, San Mateo, and the County of Santa Clara. She also has completed Housing Elements and Consolidated Plans for jurisdictions throughout California. She can be reached at diana@lesardevelopment.com.

  6. What Should Every Homelessness Plan Include? Housing

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    Image of Colorado Court _Affordable HousingEnding homelessness is simple: Provide people with a home.  While it is a straightforward solution, developing new housing takes time, is costly, and often faces community opposition. Within the existing rental market vacancy rates are low and housing is unaffordable to most, especially those at the lower end of the economic spectrum.

    Recent data make a strong case that homelessness at its core is a housing issue, regardless of other complexities within the population. The June 2018 UCLA Anderson Forecast found strong correlations between high rent and home prices and the number of people experiencing homelessness. In addition, a 2017 Zillow report indicated that a 5% increase in rent in Los Angeles County would result in 2,000 additional people losing housing.

    Recently, LeSar Development Consultants (LDC) worked with the San Gabriel Valley Council of Governments (SGVCOG) to assist 17 cities in creating city-specific plans to address homelessness.  The San Gabriel Valley, although just one Service Planning Area (SPA) in Los Angeles County, has nearly 4,300 people experiencing homelessness on any given night.[1] While small in comparison to the City of Los Angeles, the San Gabriel Valley’s homeless population is larger than those of 31 states nationwide.

    In January 2018, LDC set out on a path to engage each community and their stakeholders to draft a plan for adoption by their city councils at the end of June.  The cities varied in size and demographic composition, as well as in their understanding of homelessness.  Some cities have been working proactively on the issue for years and already had solid strategies on which to build, while other cities were taking their first steps to tackle the issue. As with any project that involves people from diverse backgrounds, our team heard differing opinions on challenges, solutions, and best practices.

    Throughout the process, LDC stayed focused on the vision that housing is the best remedy for homelessness and that cities play a crucial role in encouraging development across the socioeconomic spectrum.  Specifically, cities have a lot of control when it comes to land use, zoning, and siting affordable housing, supportive housing, and shelter. Our work in the San Gabriel Valley underscored the need for all three, both locally and countywide. In fact, in February 2018 the Los Angeles Homeless Services Authority (LAHSA) released a report that identified a gap of more than 21,000 supportive housing units, 10,446 Rapid Re-Housing spots, and just over 3,000 emergency shelter beds to meet the needs of single adults across Los Angeles County. While creating more affordable and supportive housing are no-brainers, I sometimes hesitate to encourage the creation of new shelter beds. Los Angeles County, however, is an anomaly compared to the rest of the country given the sheer number of people living outdoors. Currently, the San Gabriel Valley has only 1,200 temporary housing beds. Three-quarters of the homeless population lives unsheltered on the streets and in riverbeds and canyons.

    It was exciting for our team to celebrate the adoption of the plans by each city council during the SGVCOG City Homeless Plan Summit on August 1st in San Dimas. At the summit, the SGVCOG highlighted the many cities that included strategies to address housing:

    • 16 cities included strategies for affordable housing.
    • 11 cities included strategies for supportive housing.
    • 13 included Rapid Re-Housing.
    • 8 plans included interim housing.

    Obviously, plans are only effective if they are implemented, and cities will need assistance identifying and tapping into available resources to achieve the goals outlined in their plans. However, the planning process generated regional momentum to prevent and address homelessness, and I am optimistic that SPA 3 will see declines in homelessness across the area over the next several years. Remember, ending homelessness is quite simple in concept but hard to achieve.  And it’s a reminder to always ask yourself, “Without housing, where do people ultimately go?”

    Headshot of LDC Principal Kris KuntzKris Kuntz, Principal, is passionate about creating innovative solutions to address homelessness. Prior to joining LDC, he performed agency-wide evaluation activities for San Diego’s largest homeless services agency, that included a drop day center, emergency shelter, transitional housing, rapid re-housing, permanent supportive housing, and a federally qualified health center.  He was an integral part of Project 25, San Diego’s successful homeless high utilizer project and worked with Managed Care Organizations to sustain the project after the United Way’s initial investment. To learn more about LDC’s work with homeless assistance systems, contact him at kris@lesardevelopment.com.

    [1] 2018 Point-In-Time Count data includes the Pasadena Continuum of Care.

  7. Legislature Extends Legacy of 2017 Housing Package

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    California lawmakers continued to build on the achievements of the 2017 housing package by passing a number of bills to address the ongoing housing crisis during the final days of the 2018 legislative session, which ended on Aug. 31. While issues related to land use planning, affordable housing development, fair housing efforts, and homelessness continued to figure prominently in the debate, the Legislature also passed a number of bills to mitigate risks associated with a second crisis: wildfire disasters.  Governor Brown has until Sept. 30, 2018, to sign or veto the bills.

    Land Use Planning

    Both AB 1771 and SB 828, which are awaiting Governor Brown’s signature, would address ongoing concerns that the current Regional Housing Needs Allocation (RHNA) distribution process is more often influenced by politics rather than data on housing needs.

    AB 1771, authored by Assm. Richard Bloom (D-Santa Monica), would substantively change the allocation process by requiring Councils of Government (COGs) to develop their RHNA allocation methodology in consultation with the state Department of Housing and Community Development (HCD) rather than waiting to consult with HCD until they are in the process of developing their allocation plans. The plans would need to integrate statutory objectives related to promoting infill development, advancing socioeconomic equity, achieving greenhouse gas targets, increasing the availability of affordable housing units relative to the number of low-wage jobs, and affirmatively furthering fair housing.

    AB 1771 also calls for COGs to employ a more transparent approach to developing and implementing the allocation process. For example, COGs would also need to electronically publish the results of its survey of members on the proposed methodology and information on how the proposed methodology achieves statutory objectives. The methodology would need to address factors such as housing need, housing burden, overcrowding, and the availability of housing to align with employment and wages. HCD would have 60 days following the public comment period to determine whether the methodology meets RHNA allocation statutory objectives. Another change contained within the bill would prohibit local governments from proposing the redistribution of housing allocations among themselves as part of an appeal process.

    SB 828, authored by Sen. Scott Wiener (D-San Francisco), seeks to establish a more transparent, equitable process for determining each jurisdiction’s Regional Housing Needs Assessment (RHNA). While each jurisdiction is required to plan for its fair share of the regional housing need, the current process does not adequately account for unmet needs due to historically low housing production. Further, the process has been criticized for favoring cities that can apply political pressure to reduce their allocations. SB 828 would allow HCD to include existing households in the number of total projected households when determining RHNA methodology. It would also prohibit COGs from using factors, such as the prior underproduction of housing or stable population numbers from the previous RHNA, in determining the jurisdiction’s future share of housing needs.

    SB 828 would further require the final regional housing need allocation plan to demonstrate government efforts to reverse racial and wealth disparities throughout a region. Specifically, COGs would be required to compare local overcrowding and vacancy rates, as well as the percentage of cost-burdened households, with those of a healthy housing market. Before passing the bill, the Assembly cut language that would have required a city or county to identify an inventory of available land equal to 125 percent of its RHNA requirements for each income category or identify zoning and other strategies to address needs.

    The Legislature also passed AB 829, which was authored by Assm. David Chiu (D-San Francisco) and designed to discourage local legislative bodies from requiring developers to obtain a letter of acknowledgement or other documentation prior to seeking state funding for a project in their district. Senate amendments refocused the bill’s language to prohibit the use of state funding in any project that requires documentation from a local legislative body or one of its members. The bill was introduced following a Los Angeles Times article on Los Angeles city councilmembers power to block housing developments in their district by requiring, but not providing, such documentation.

    In addition, AB 2923, authored by Assms. David Chiu (D-San Francisco) and Timothy Grayson (D-Concord), would streamline the approval process for transit-oriented development (TOD) on infill sites owned by Bay Area Rapid Transit (BART) and located within a half-mile of a BART station. The bill would also require the BART Board of Directors to establish TOD zoning standards by July 1, 2020. Cities and counties within the BART service area would have two years or until July 1, 2022, to adopt an ordinance conforming to the BART TOD zoning standards. If signed into law, the bill would enable BART to fulfill its goal of building 20,000 new units of housing, including 7,000 units of affordable housing, on the 250 acres of developable land it owns by 2040.

    Governor Brown has already signed, AB 3194, which updates the Housing Accountability Act to prohibit jurisdictions from rejecting a development of very low-income, low-income, or moderate-income housing or an emergency shelter without evidence to demonstrate that it would have a “specific, adverse impact upon the public health or safety.”  Authored by Assemb. Tom Daly (D-Santa Ana), the law prohibits jurisdictions from requiring rezoning for projects that meet objective general plan standards when local zoning is inconsistent with the general plan.

    The governor also signed AB 1406, which was authored by Assm. Todd Gloria (D-San Diego). The new law amends the Education Code to extend the allowable term of specific types of lease agreements entered into by a school district to 99 years and aligns the law with Civil Code. The Education Code had previously prevented school districts from entering a lease-leaseback agreement or lease-to-own agreement of more than 40 years with the entity that constructed the school facility. The maximum term under which school districts can co-locate with another entity through a joint-occupancy agreement has also been extended from 66 to 99 years.

    Affordable Housing Development

    Introduced by Sen. Ben Allen (D-Santa Monica) and co-authored by Assms. Jesse Gabriel (D-Van Nuys) and Lorena Gonzalez Fletcher (D-San Diego), SB 961 would streamline the process for developing affordable housing near transit in enhanced infrastructure financing districts (EIFDs) in certain situations. EIFDs are government entities established by cities or counties for the specific purpose of financing public and private infrastructure and facilities, including low- and moderate-income housing. This bill would enable EIFDs to enact and form a Second Neighborhood Infill Finance and Transit Improvement Act (NIFTI-2), which allows for the issuance of bond financing to support affordable housing near transit without voter approval.

    SB 961 also sets forth procedures public financing authorities must follow to develop and adopt an infrastructure financing plan to expend NIIFTI-2 funds. Cities or counties would be allowed to allocate tax revenues to a NIFTI-2 by adopting a resolution, under certain conditions. Specifically, the district would be required to use at least 40 percent of the total funds it receives for rental or owner-occupied housing affordable to households earning 60 percent or less of the area median income (AMI). Rental housing funded through the EIFD would need to remain affordable for 55 years, and owner-occupied housing would have affordability restrictions for 45 years. Half of the total housing funds would be used to develop permanent supportive housing for people experiencing homelessness or households earning less than 30 percent AMI.

    The bill was amended in the Assembly to require an EIFD to set aside at least 10 percent of its total funds to cover capital costs for greening efforts or active transportation capital projects. Other amendments established requirements for public hearings and guidelines to address potential landowner and resident protests of the financing plan.

    Two other bills, intended to make it easier to build accessory dwelling units, did not make it through the Legislature. AB 2890, authored by Assm. Phil Ting (D-San Francisco), would have further revised Accessory Dwelling Unit laws to prohibit local ordinances from imposing certain standards that constrain ADU development and required HCD to establish small home building standards. SB 831, introduced by Sen. Bob Wieckowski (D-Fremont) and coauthored by Sens. Toni Atkins (D-San Diego), Nancy Skinner (D-Berkeley), and Scott Wiener, would have significantly rewritten ADU statutes. The bills did not pass at least in part because local governments have only updated local ADU ordinances to comply with recent laws, which went into effect less than two years ago.

    Fair Housing

    The Legislature also took a proactive stance to ensure that all housing and community development programs combat patterns of discrimination and segregation by actively addressing disparities, promoting inclusive communities, and upholding civil rights and fair housing law regardless of whether they receive HUD funding.

    Authored by Assm. Miguel Santiago (D-Los Angeles), AB 686 would require public agencies to be consistent with the final rule to Affirmatively Further Fair Housing, promulgated by the U.S. Department of Housing and Urban Development during the Obama Administration. This would require Housing Elements due on or after January 1, 2021, to include an assessment of fair housing with an analysis of fair housing issues and trends contributing to disparate access to housing; goals, strategies, and actions to address factors that contribute to limited housing choice and access to opportunity; metrics to track progress toward goals; and the identification of land suitable for residential development.

    On August 28, Governor Brown signed AB 2219, authored by Assm. Phil Ting (D-San Francisco). This bill requires landlords to accept security deposits and rent from a third party in a form other than cash or electronic funds transfer. The third party must provide a signed acknowledgement that they are not the tenant. The new law seeks to prevent homelessness by requiring landlords to accept funds from individuals and/or organizations other than the tenant. The third-party payments do not constitute a contract between the landlord and third party, and the law does not prevent landlords from terminating a tenant rental agreement.

    Homelessness

    As part of ongoing efforts to address the public health impact and costs of homelessness, the Legislature passed bills to facilitate supportive housing development, support efforts to reduce youth homelessness, provide matching funds to support employment programs for people experiencing homelessness, and create the Orange County Housing Trust.

    Jointly authored by Assms. David Chiu and Tom Daly, AB 2162 expedites supportive housing development by making it a by-right use in multifamily and mixed use zones under certain conditions. The bill would allow ministerial approval of projects that are 100 percent affordable for low-income households earning up to 80 percent of AMI if 25 percent or 15 of the units, whichever is greater, are set aside for supportive housing. Projects would be required to have a 55-year affordability restrictions, no minimum parking requirements for supportive housing units located within a half-mile of transit, and a plan for on-site supportive services with named partners, proposed funding sources, and staffing commitments. Senate amendments would cap by-right development requirements at 50 units or less in cities or unincorporated areas of a county with a population of less than 200,000 and an annual Point-In-Time count of less than 1,500, although a city or county could approve by-right development for projects of over 50 units. If signed by Governor Brown, the bill would apply to all areas even where local governments are meeting RHNA.

    A second bill, SB 1152, authored by Sen. Ed Hernandez (D-Montebello), would require hospital discharge policies and procedures to include specific processes for discharging people experiencing homelessness to ensure that they are not discharged without having a safe place to go. The law would require hospitals to inquire about an individual’s housing status; notify patients about options for housing, shelter, and supportive services based on their best interest and preferences; and identify a post-discharge destination. Assembly amendments eliminate requirements related to coordinating referrals and providing transportation in excess of 30 minutes or 30 miles, and delay implementation until July 1, 2019. In addition, hospitals would be required to maintain a discharge log of patients experiencing homelessness rather than report to the Office of State Health Planning and Development.

    The Legislature also passed SB 918, known as the Homeless Youth Act of 2018 and co-authored by Sen. Scott Wiener and Assm. Blanca Rubio (D-Baldwin Park), which would establish additional requirements for the Homeless Coordinating and Financing Council focused on the specific needs of youth experiencing homelessness. As of the January 2017 Point-In-Time Count, California was home to more than 15,000 homeless youth, 38 percent of the total homeless youth population nationwide. The requirements include setting goals and outcomes measures; enhancing systems integration and coordination; guiding the coordination of policy, practice, and funding in coordination with stakeholders; identifying best practices; and, providing program development and technical assistance, as funding is available. Assembly amendments eliminated a grant program focused on youth homelessness.

    If signed into law, AB 3085, authored by Assm. Ian Calderon (D-Whittier), would establish the New Beginnings California Program within the Department of Community Services and Development. The program would provide up to $50,000 in matching funding for up to 50 cities or Continuum of Care (CoC) programs to pursue a homeless employment program of their own or expand on an existing one. Cities and CoCs would be able to contract with a qualifying local service provider to operate the program. To qualify, programs would need to connect individuals experiencing homelessness and living in supportive housing with employment through the city, a contracted service provider, or a private entity or prepare people for employment by providing relevant services and resources. Hourly wages must meet or exceed minimum wage. The city or CoC would be required to provide matching funds from charitable contributions or other grant funding.

    AB 448, authored by Assms. Tom Daly and Sharon Quirk-Silva (D-Fullerton), would allow Orange County and any city in the county to create the Orange County Housing Trust, a joint powers authority (JPA) that can receive public and private funding and authorize debt instruments to streamline shelter and permanent supportive housing development. The JPA would fund the development of housing for individuals and families experiencing homelessness or those with extremely low- to low incomes within Orange County. The legislation was propelled forward by an Orange County Grand Jury report on the benefits of supportive housing and a UC Irvine study that showed the County could save an estimated $42 million on healthcare, law enforcement, and other local and county expenditures by funding supportive housing. The County would also be able to better leverage available funding to attract increased funding from the state.

    One of the bills that stalled in the Legislature was SB 792, which would have required the Homeless Coordinating and Financing Council to develop and implement a statewide strategic plan to assist CoC lead agencies better implement HUD-recommended activities and better meet HUD requirements.  SB 1010, which would have created a pilot program to provide supportive housing to parolees with mental health conditions experiencing homelessness, also did not pass the Assembly Committee on Appropriations, in part because the California Department of Corrections and Rehabilitation has already established a similar program with one county and because it would require CDCR to pay for mental health treatment for which counties already receive funding.

    Wildfire and Disaster Mitigation

    Governor Brown has already signed AB 1797, the first of several bills to result from the state’s most disastrous wildfire season on record. Authored by Assm. Marc Levine (D-San Rafael), the law will require insurers to conduct a replacement cost estimate that conforms to the State Department of Insurance’s methodology and rules when they sell or renew a residential insurance policy. This bill originated following recent wildfires, after which numerous consumers learned that their insurance coverage was based on outdated replacement costs and therefore inadequate to fully cover the cost of repairing or rebuilding their homes.

    SB 824, authored by Sen. Ricardo Lara (D-Bell Gardens), would further protect consumers by preventing insurers from cancelling or not renewing residential insurance policies in fire-prone regions unless such actions were related to nonpayment, conviction of a crime related to increasing a property hazard, or fraud. Amendments specify that the regulations would not apply if the policy renewal threatened the insurer’s financial solvency.

    SB 894, authored by Sens. Bill Dodd (D-Napa) and Mike McGuire (D-Healdsburg) and co-authored by Assemb. Levine, would allow disaster victims with insufficient insurance coverage on their primary dwelling to combine payments under other policy limits up to the total cost of rebuilding or replacing the home. Insurers would also be required to renew policies for at least two renewals or 24 months, with a 12-month extension, following a total loss.

    Two companion bills, AB 1772 and AB 1800, each address different aspects of the Senate bill. AB 1772, authored by Assms. Jim Wood (D-Santa Rosa) and Cecilia Aguilar-Curry (D-Winters), would give wildfire victims 36 months to rebuild their homes and businesses following a catastrophic wildfire and extend the time policyholders can collect the full amount of the insurance payment. AB 1800, authored by Assemb. Marc Levine, would permit policyholders to collect the full replacement cost of their home after a total loss, even if they opted not to rebuild, decided to replace the home at another location, or purchased a home elsewhere.

    Diana ElrodDiana Elrod, Principal, brings more than 30 years of consulting and public sector experience to her work co-leading LDC’s housing policy and real estate finance team. Before joining LDC, she provided strategic counsel and conducted research on Housing and Community Development for the Cities of Lafayette, Belmont, Palo Alto, San Jose, San Mateo, and the County of Santa Clara. She also has completed seven Housing Elements and eight Consolidated Plans for jurisdictions throughout California. She can be reached at diana@lesardevelopment.com.

    Kris Kuntz, Principal, is passionate about creating innovative solutions to address homelessness. Prior to joining LDC, he performed agency-wide evaluation activities for San Diego’s largest homeless services agency, that included a drop day center, emergency shelter, transitional housing, rapid re-housing, permanent supportive housing, and a federally qualified health center.  He was an integral part of Project 25, San Diego’s successful homeless high utilizer project and worked with Managed Care Organizations to sustain the project after the United Way’s initial investment. To learn more about LDC’s work with homeless assistance systems, contact him at kris@lesardevelopment.com.

     

     

     

     

     

  8. Santa Cruz Affordable Housing Bond Ballot

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    Farmworker Housing CoastsideThis November, Santa Cruz County residents will vote on a  $140 million affordable housing bond ballot measure that will be funded through annual property taxes at an estimated $16.77 for each $100,000 of assessed property value. If passed, 75 percent of bond proceeds ($105 million) will be used for new construction of approximately 1,041 rental and accessory dwelling units for low- and moderate-income households, such as public servants, teachers, farmworkers, or people working in the tourism industry. Fifteen percent of the funds will provide shelter and supportive housing for individuals and households experiencing homelessness, and 10 percent will fund first-time homebuyer loans. A broad coalition of business and civic organizations, including the Santa Cruz Chamber of Commerce, the Farm Bureau, and the Monterey Central Labor Council, support the measure.

     

  9. Bay Area Housing Experts Consider Regional Housing Solutions

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    This month, the Committee to House the Bay Area (CASA) reached an important milestone. The CASA Technical Committee, a group of housing policy experts from throughout the Bay Area wrapped up development of dozens of action plans designed to tackle the housing and displacement crisis. Now, a subset of those plans will go before the CASA Steering Committee for review.

    For the last six months, members of the CASA Technical Committee drafted, vetted, and voted on ‘action plans’ designed to tackle CASA’s three goals, known as the “Three Ps”:  Protecting vulnerable populations from displacement; Producing more housing; and Preserving existing affordable housing stock. On July 18, the CASA Technical Committee wrapped up this process, having voted on a total of 36 action plans over the last several months.  The conclusion of the action plans’ development marks a significant milestone in the 16-month CASA process.

    Now attention turns to the CASA Steering Committee, comprised primarily of elected officials and other thought leaders, including the Mayors of San Francisco, San Jose, and Oakland.  The CASA Steering Committee will consider the action plans drafted by the Technical Committee over the next several months.

    On Wednesday, July 25, the Steering Committee considered four action plans proposed by the CASA Technical Committee. The four action ideas include efforts to prevent extreme rent increases, no net loss of affordable units, regional inclusionary zoning, and reductions to impact fees.

    Regionwide Rent Control Policy

    The Technical Committee considered several variations of a regional rent control policy to prevent burdensome rent increases. One version of the plan is modeled after existing rent control ordinances in cities like Oakland and San Francisco, which cap annual rent increases according to changes in the Consumer Price Index (CPI).  Under this plan, which would require enabling legislation, all municipalities in the Bay Area would be required to adopt a CPI-based rent control policy that meets minimum standards.

    Alternatively, the Technical Committee also considered an anti-gauging measure, which would prevent Bay Area landlords from increasing rent by more than 10 percent per year.  More lenient than CPI-based rent control, this policy is similar to the Emergency Anti-Gouging policy already in place in California, where landlords cannot gouge renters during times of emergency, such as the 2017 fires in Sonoma County.

    No Net Loss/First Right of Refusal

    The “No Net Loss” action plan pursues state legislation that mandates a 1:1 replacement of any rent-restricted or market-rate affordable unit that is demolished. The proposal would require that tenants who are displaced from their homes due to the demolition of affordable units would be granted the right of first refusal to the new units, which would be offered at their previous rental rate.

    Regional Inclusionary Zoning

    Though many Bay Area cities already have inclusionary zoning ordinances, this action plan creates a consistent, regional inclusionary zoning framework. Inclusionary zoning policies require developers to include a certain percentage of affordable units (typically 10-15 percent) in their developments. This policy is one method of creating mixed-income communities and increasing production of affordable units.

    Reduce Impact Fees

    This action plan requires state legislation to change the structure of impact fee imposition with the goal of reducing high costs and confusion in the development process. This legislation would include locking rules and fees at development application completion, changing the imposition calculation from a “per unit” basis to a “per square foot” basis, and reducing or eliminating impact fees on small middle-income developments or deed restricted units. This policy could significantly lower costs for developers while increasing feasible production at lower income levels.

    Next Steps for CASA

    Estolano LeSar Advisors will continue to facilitate the process through December, when CASA aims to compete a Regional Compact that incorporates the top policy recommendations emerging from the process. Visit the CASA website for more information.

    Jennifer LeSarJennifer LeSar, President and CEO, has more than 30 years of experience in the real estate development and investment banking industries, and brings a diverse background to her work in community development and urban revitalization. Her technical expertise spans from policy and program development to comprehensive strategic planning for top executives and executive teams to the origination and underwriting of complex investments in equity funds, multi-family portfolios, historic, and low-income tax credit properties utilizing federal and state financing programs. She can be reached at jennifer@lesardevelopment.com.

  10. Berkeley to Vote on Affordable Housing Bond Measure

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    On July 10, Berkeley City Council members approved an affordable housing bond measure to be placed on the November 2018 ballot. If passed, the measure will authorize up to $135 million of general obligation bonds for the development of affordable housing, to be financed by taxes on all taxable properties. The tax burden for the city’s mean home valuation of $425,000 would be about $97, according to the City Council’s staff report. The funds will support housing development or preservation and will target a diverse group of incomes ranging from extremely low-income households to workforce housing, which extends up to 120 percent of the area median income. A March 2018 City of Berkeley Community Survey found that the two most important issues among likely voters is building affordable housing and addressing homelessness, with 58 percent of survey respondents indicating one of the two as their top issue facing the community.