Measures Aim to Boost Developer Incentives, Drastically Reduce Homeless Ranks
California lawmakers are considering bills intended to increase housing supply and cut homelessness by 90% by 2028. (State of California)
By Lou Hirsh CoStar News
Three California bills that would increase developer incentives and city-level accountability as a way to make a dent in the state’s worsening housing crisis have made it through a key committee in the legislature.
The Senate Housing Committee approved the three bills, authored separately by state Assemblymembers Lorena Gonzalez and David Chiu, both Democrats. Together the measures would increase density bonuses, allowing developers to build more than permitted by local standards, and other incentives for constructing affordable units. They would also hold cities accountable for reducing homelessness by 90% by the end of 2028.
While it’s tough to predict potential effects, the bills could provide some help in addressing a longtime imbalance between supply and demand, said CoStar Managing Analyst Stephen Basham, who tracks multifamily trends in the Los Angeles area.
“California has been under-building homes and apartments for decades, and a big part of that is local opposition to increased density,” Basham said. “Since land is scarce and expensive, especially in the big coastal metros, anything that incentivizes density is a step in the right direction.”
Amid rising prices and severe under-building relative to population growth over the past 20 years, San Diego and other major California cities remain far behind the number of affordable units needed by working families. State agencies have estimated that California is at least 3.5 million units short of the number needed to meet current housing needs. Developers contend that the long costly approval process and other bureaucratic red tape, coupled with resistance by local residents, have contributed to making development very difficult in the state.
The lack of housing and skyrocketing costs of existing units helped create the nation’s largest contingent of homeless people in California, and three of its cities – Los Angeles, San Jose and San Diego – rank among the nation’s top five for the size of their homeless populations, according to the U.S. Department of Housing and Urban Development.
The latest legislative deliberations on housing come as California faces a potential mass wave of evictions as coronavirus pandemic related eviction moratoriums expire, potentially impacting thousands who have been unable to pay rent along with landlords needing to offset lost income.
“Our housing and homelessness crises have only become more intense in the wake of COVID-19,” Chiu of San Francisco, author of two of the bills, said in a statement. “We need to double down on our efforts to increase production of housing and take meaningful steps toward reducing homelessness.”
Legislative Efforts
In Sacramento, the Senate Housing Committee approved a bill, put forward by Gonzalez of San Diego, aimed at boosting construction of affordable units by increasing the density bonus by as much as 15 percentage points and increasing related allowances granted to housing developers who incorporate a high number of units deemed affordable into their apartment and single-family projects.
Current statewide standards allow most developers to build at no more than 35% above existing allowable unit density when they go above and beyond minimum local standards for what is known as inclusionary housing.
Gonzalez said that level of added-density incentive has failed to draw sufficient interest from California developers over the past 40 years. Instead, her bill, known as state Assembly Bill 2345, calls for the maximum bonus to be raised to 50%, similar to an enhancement already adopted by the city of San Diego.
“We must find ways to increase the number of affordable units being built in California,” Gonzalez said in a statement. “AB 2345 will do that.”
Gonzalez’s bill, passed in June by the full Assembly, would also raise from four to five the number of local incentive programs that a developer could make use of when putting affordable housing into a project. Developers whose projects are deemed 100% affordable based on regional median household income standards could take advantage of up to six incentive programs.
Another bill, known as state Assembly Bill 3269 and passed Aug. 6 by the Senate Housing Committee, calls for state and local governments to develop an actionable plan to reduce homelessness by 90% by Dec. 31, 2028. The bill, from Chiu, would also establish a new state government post of Homeless Inspector General, with the right to bring regulatory action against local governments that fail to submit or follow a plan of action.
The Senate Housing Committee also passed another bill by Chiu intended to increase housing production by giving local governments additional credits under the state’s Regional Housing Needs Allocation program if they up-zone single-family parcels to allow for four housing units. The RHNA program is part of a 50-year old set of California requirements calling for regional housing needs to be fulfilled based on factors including population growth and other supply and demand factors. Known as state Assembly Bill 3040, Chiu’s bill was passed by the Assembly earlier this year.
According to Circulate San Diego, a regional organization that advocates for transit-friendly development, the city has seen a 490% annual increase in project applications to use the density bonus program for affordable housing since San Diego raised the maximum bonus in 2016.
All three of the housing-related bills are expected to next be reviewed by the Senate Appropriations Committee before going to the Senate floor for consideration. If passed by the Senate, they would then go to Gov. Gavin Newsom, who could sign them into law. Newsom hasn’t made public statements about the three bills but has been quick to sign bills related to boosting housing production in the state since taking office. He signed 18 housing production related bills late last year.