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 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.