Four Assembly bills announced in December address California’s affordable housing crisis. The proposed bills will fund production of housing for low-income families, incentivize local governments to complete upfront planning and environmental review and approve housing permits to increase housing supply, fund the enforcement of existing state housing law by the Attorney General, and provide rental assistance to homeless Medi-Cal recipients.
“The affordable housing crisis threatens our state’s economic prosperity and climate goals and deepens inequality,” said Assemblymember David Chiu, Assembly Housing and Community Development Committee Chair.
“Housing costs have gotten so high that families can’t make ends meet, employers can’t recruit, and teachers and police officers can’t live where they work,” said Assembly Speaker Anthony Rendon (D-Paramount), calling the bills a “roadmap to addressing the housing crisis in California.”
“The lack of affordable housing in many communities results in people living in unsuitable and unsustainable conditions, often resulting in significant overcrowding and multiple families living in housing units intended for only two or three people,” adds Assemblymember Anna Caballero (D-Salinas).
“Unfortunately our state was not able to move the needle in any substantial way last year on housing issues. As a result, affordable housing will remain a priority for the upcoming legislative session,” says Assembly Speaker pro Tempore Kevin Mullin (D-San Mateo).
“California did not get into this crisis overnight, and it will take creative efforts and political will over many years to climb out of it,” added Chiu. “I look forward to more legislative proposals in the coming months to create more funding and to address other barriers to housing production and affordability.”
Assemblymember Chiu is also working on additional proposals similar to a Massachusetts law that streamlines the approval of housing projects with high affordable levels and creates a state appeals board to review local denials of affordable projects. Lawmakers are also looking at strategies to create greater responsibility for housing at the regional level in response to situations like a proposed commercial-only development in Brisbane as well as ways to strengthen the state’s fair share housing law.
Here’s a look at the proposed bills:
AB 71 Bring California Home Act: This bill provides an ongoing state funding source for affordable housing by eliminating the state mortgage interest deduction on vacation homes. This deduction results in a revenue loss to the state of approximately $300 million annually. The funds saved as a result of eliminating the deduction would then increase the Low Income Housing Tax Credit (LIHTC) program by $300 million per year.
The largest investment that the state makes on housing is through the mortgage interest deduction. According to the Franchise Tax Board, the deduction on primary homes results in over $5 billion in revenue loss to the state every year. In addition to the deduction taxpayers can take on their primary home, they can take a deduction on a second home. The estimated impact of the vacation home mortgage interest deduction on the general fund was $360 million in 2016-17 and is projected to be $250 million in 2017-18 and $270 million in 2018-19.
The LIHTC program is one of the only remaining sources of funding available for affordable housing development in the state, making it competitive and overprescribed. In 2014, only 49 percent of applicants were awarded credits. By increasing the annual state tax credit allocation amounts to $300 million, California could leverage an additional $600 million in federal housing resources that would otherwise go unclaimed by our state ($200 million in federal 4% credits and $400 million in federal tax-exempt bond authority) as well as hundreds of millions of dollars of private sector investment and local funding dollars.
AB 72 Increased Enforcement of Existing State Housing Laws: This bill appropriates funds to the Attorney General (AG) to enforce existing state housing laws. There are various laws at the state level to hold local communities accountable in approving housing. These include housing element law and the Housing Accountability Act. The AG has had the authority to enforce these laws but does not have funding earmarked for this purpose.
AB 73 Spur production of high-density, transit-oriented housing: This bill spurs production of housing on infill sites around public transportation by incentivizing local governments to complete upfront zoning and environmental review and rewarding them when they permit housing.
According to the McKinsey Global Institute, at current construction rates, California will build an additional one million homes by 2025. However, the population is expected to increase by 3.6 million people during that period, largely due to current residents having children. To meet pent up demand and future population growth, California needs an additional 3.5 million homes by 2025.
AB73 would provide local governments with an incentive payment when they encourage transit oriented development by zoning at higher densities and complete an Environmental Impact Report (EIR) on the area. Twenty percent of the housing in the district must be zoned at affordable levels. Once zoning is complete, the housing sites within the area would be subject to ministerial approval and subject to prevailing wage. The bill also creates a streamlined judicial review on any cases challenging the EIR. Once a city permits housing units within the area, it would receive an additional incentive payment.
AB 74 Housing for a Healthy California: Creates the Housing for a Healthy California program to pay for the cost of housing chronically homeless individuals on Medi-Cal who receive services through the Whole Person Care pilot program, Health Homes, or another county controlled funding source.
Chronically homeless Californians incur disproportionate Medi-Cal costs. Since homeless individuals are exposed to the elements and unable to obtain sufficient rest, follow healthy diets, store medications, or regularly attend appointments, many experience a combination of chronic medical, mental health, and substance abuse conditions costing thousands of dollars per month.
To break the endless cycle of the revolving doors of emergency rooms, inpatient facilities, treatment centers and nursing homes, this new program would shift the paradigm by providing rental assistance for supportive housing to those individuals who are both homeless and receive significant public health care services. Ultimately, this will help to avoid homelessness and be a more effective use of public dollars.