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AB-1068 Affordable housing: alternative forms of development.(2021-2022)

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Date Published: 01/03/2022 02:00 PM
AB1068:v98#DOCUMENT

Amended  IN  Assembly  January 03, 2022

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 1068

Introduced by Assembly Member Santiago

February 18, 2021

An act to add Section 50467 to the Health and Safety Code, relating to housing.


LEGISLATIVE COUNSEL'S DIGEST


AB 1068, as amended, Santiago. Affordable housing: alternative forms of development: model plan development.

Existing law continues into existence the Department of Housing and Community Development (HCD) in the Business, Consumer Services, and Housing Agency. Under existing law, HCD is required to update and revise the California Statewide Housing Plan, which provides, among other things, a housing strategy that coordinates the housing assistance and activities of state and local agencies, including the provision of housing assistance for various populations.

Existing law establishes various programs and funding sources administered by the Department of Housing and Community Development to enable the development of affordable housing, including the Building Homes and Jobs Act, the Multifamily Housing Program, the Housing for a Healthy California Program, and the Veterans Housing and Homeless Prevention Act of 2014. Under existing law governing the State Community Development Block Grant Program, the department is required to distribute funds made available under the program in order to provide decent housing, a suitable living environment, and expand economic opportunities, consistent with federal requirements. Existing federal law also establishes the HOME Investment Partnership Act to, among other things, expand the supply of affordable housing. Existing law designates the department as the state agency responsible for administering the HOME Investment Partnership Act.
Existing law authorizes the Department of General Services (DGS) to dispose of surplus state real property, as provided. Under existing law, DGS is required to offer surplus state real property, that has been determined by DGS not to be needed by any state agency, to any local agency, as defined, and then to nonprofit affordable housing sponsors, as defined, prior to being offered for sale to private entities or individuals.

This bill would require HCD to create a model plan for the use of alternative forms, as defined, of developing affordable housing for the purpose of substantially reducing the cost of a unit of affordable housing. The bill would require the model plan to be used in state agency decisions in all state-subsidized housing loan and grant programs. The bill would also require a local agency, nonprofit affordable housing sponsor, private entity, or individual that receives surplus state real property from the state to use the model plan to guide any housing development on that property. The bill would make findings and declarations in this regard.

This bill would require the department to solicit and consider proposals for adaptive reuse, as defined, that demonstrate cost efficiencies and timely completion in implementing the affordable housing loan and grant programs described above. The bill would require any notice of funding availability issued by the department to state that adaptive reuse of a property for affordable housing purposes is an eligible activity. The bill would require an adaptive reuse proposal to result in at least 50% of all units being affordable to persons who are extremely low and very low income and would require an adaptive reuse proposal to ensure that construction workers on the projects are paid prevailing wages, as defined, and that the contractors use a construction workforce that is skilled and trained, as defined.
This bill would require a local agency, nonprofit affordable housing sponsor, private entity, or individual that receives surplus state real property to consider adaptive reuse in any housing development on the acquired property.
This bill would prohibit a local affordable housing bond measure, including any current local bond program for which the funds are not fully encumbered, from prohibiting or excluding a project proposal that uses an adaptive reuse model solely on the basis that the proposal is for an adaptive reuse project.
The bill would include findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NOYES  

The people of the State of California do enact as follows:


SECTION 1.

 (a) The homelessness crisis in our state has reached levels that are tragic and shameful. One-quarter of the homeless population in our nation resides in California, numbering at about 150,000 families and individuals.
(b) The Department of Housing and Community Development (HCD) in its most recent housing needs assessment (2018) projected that the state needs to construct 1,800,000 housing units through 2025.
(c) According to that HCD analysis, the state needs to produce an average of 180,000 housing units per year to meet these goals. The state has been constructing only 80,000 housing units per year.
(d) Projections indicate that 1,300,000 of those housing units need to be available for persons who are extremely low or very low income, indicating that at least 70 percent of the housing construction need is for California’s most disadvantaged citizens.
(e) With 30 percent of all California renters being rent burdened, meaning that at least 50 percent of their income is needed to cover rent payments, millions of renters are less than a paycheck away from being forced to live on the streets.
(f) In recent years, the cost of constructing a unit of housing has reached five hundred thousand dollars ($500,000) or more per unit. Mathematically, it cannot work to rely on new construction only and achieve the number of units necessary to meet the need.
(g) At the same time, the state needs to maintain good middle-class jobs in the construction industry that enable workers in California to support their families and afford housing.
(h) The state also needs to ensure the development and continual replacement of a skilled and trained construction workforce in California that can efficiently complete housing projects, and the state needs to encourage contractors to hire apprentices in the state’s apprenticeship training system for construction workers, so new workers will have a pathway to good careers.
(i) Existing state programs that generally subsidize the construction of new affordable housing units need to expand their focus to include adaptive reuse of existing properties as an alternative form of housing development.
(j) Therefore, it is the intent of the Legislature that state housing construction subsidy programs emphasize adaptive reuse to produce housing units that are cost effective.
(k) It is further the intent of the Legislature that the development of housing on surplus state lands shall emphasize adaptive reuse to produce housing units that are cost effective.
(l) It is further the intent of the Legislature that state housing construction subsidy programs and housing developed on surplus state lands be designed to produce housing units in the most efficient and cost-effective manner, create construction jobs that pay prevailing wages, and use a skilled and trained workforce to complete the projects.

SEC. 2.

 Section 50467 is added to the Health and Safety Code, to read:

50467.
 (a) (1) In implementing its affordable housing loan and grant programs, the department shall solicit and consider adaptive reuse proposals that demonstrate cost efficiencies and timely completion. Any notice of funding availability issued by the department for an affordable housing loan and grant program shall state that adaptive reuse of a property for affordable housing purposes is an eligible activity. An adaptive reuse proposal shall result in at least 50 percent of all units being affordable to persons who are extremely low and very low income as defined in Section 50106 and Section 50105, respectively, and shall include permanent housing or permanent supportive housing.
(2) An adaptive reuse proposal shall define how applicants will ensure that construction workers on the projects are paid prevailing wages as defined in Article 2 (commencing with Section 1770) of Chapter 1 of Part 7 of Division 2 of the Labor Code, and ensure that contractors use a construction workforce that is skilled and trained as defined in Chapter 2.9 (commencing with Section 2600) of Part 1 of Division 2 of the Public Contract Code to complete the projects.
(3) This subdivision shall apply to the federal programs described in subparagraph (F) of paragraph (2) of subdivision (d) only to the extent that it is consistent with applicable federal requirements.
(b) A local agency, nonprofit affordable housing sponsor, private entity, or individual that receives surplus state real property pursuant to Section 11011.1 of the Government Code shall consider adaptive reuse in any housing development on the acquired property.
(c) A local affordable housing bond measure, including any current local bond program for which the funds are not fully encumbered, shall not prohibit or exclude a project proposal that uses an adaptive reuse model for an affordable housing project development solely on the basis that the proposal is for an adaptive reuse project.
(d) As used in this section, all of the following definitions shall apply:
(1) “Adaptive reuse” means the repurposing and rehabilitation of an existing building for use as permanent or long-term residences.
(2) “Affordable housing loan and grant programs” includes all of the following:
(A) The competitive component of the Building Homes and Jobs Act (Chapter 2.5 (commencing with Section 50470)).
(B) The Multifamily Housing Program (Chapter 6.7 (commencing with Section 50675)).
(C) The Housing for a Healthy California Program (Part 14.2 (commencing with Section 53590)).
(D) The Veterans Housing and Homeless Prevention Act of 2014 (Article 3.2 (commencing with Section 987.001) of Chapter 6 of Division 4 of the Military and Veterans Code).
(E) The Affordable Housing and Sustainable Communities Program (Part 1 (commencing with Section 75200) of Division 44 of the Public Resources Code).
(F) The following federal programs administered by the department:
(i) The Community Development Block Grant Program (42 U.S.C. Sec. 5301 et seq.).
(ii) The HOME Investment Partnership Program (42 U.S.C. Sec. 12721 et seq.).
(3) “Local agency” means the same as defined in subdivision (a) of Section 54221 of the Government Code.
(4) “Nonprofit affordable housing sponsor” means the same as defined in subparagraph (B) of paragraph (2) of subdivision (b) of Section 11011.1 of the Government Code.
(5) “Permanent housing” means housing assistance that is not transitional, emergency, or temporary that is provided to assist persons who are homeless or at risk of homelessness
(6) “Permanent supportive housing” means permanent housing in which housing assistance and supportive services are provided to assist persons who are homeless or at risk of homelessness.
(7) “Surplus state real property” means the same as defined in subdivision (a) of Section 11011.1 of the Government Code.

SEC. 3.

 The Legislature finds and declares that facilitating the development of affordable housing to combat the state’s housing crisis is a matter of statewide concern and is not a municipal affair as that term is used in Section 5 of Article XI of the California Constitution. Therefore, Section 2 of this act adding Section 50467 to the Health and Safety Code applies to all cities, including charter cities.

SEC. 4.

 If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.
SECTION 1.

The Legislature finds and declares the following:

(a)The Department of Housing and Community Development (HCD) projects that the state needs to construct 1,800,000 units of housing between now and 2025.

(b)HCD also projects that 1,500,000 of those units need to be available for persons who are extremely low or very low income, indicating that at least 80 percent of the housing construction need is for California’s most disadvantaged citizens.

(c)According to HCD’s analysis, the state needs to produce an average of 180,000 units per year to meet these goals. Currently, the state has been constructing 80,000 units per year.

(d)In recent years, the cost of constructing a unit of housing has soared, due to a combination of escalating construction and material costs as well as increased land acquisition costs.

(e)In Los Angeles, the average cost per unit is over $500,000 and climbing. San Francisco has eclipsed New York as the most expensive city in which to build a unit of housing, at over $700,000 each. San Diego is approaching Los Angeles’ costs, at more than $475,000 per unit.

(f)Income limits for most affordable housing programs range from 30 percent of the area median income for extremely low income households to 120 percent of the area median income for moderate-income households. In Los Angeles, for example, the area median income was $73,000 in 2019, which translates to $31,300 for an extremely low income family of four and $52,200 for a very low income family of four.

(g)The homelessness crisis in our state has reached levels that are tragic and shameful. One quarter of the homeless population in our nation resides in California, numbering at about 150,000 families and individuals.

(h)With 30 percent of all California renters being rent-burdened, meaning that at least 50 percent of their income is needed to cover rent payments, millions of renters are less than a paycheck away from being forced to live on the streets.

(i)Research from the University of California, Los Angeles, points to a direct correlation between high housing costs and high numbers of homeless people.

(j)Families at very low income levels cannot afford to pay rent on a unit that costs $500,000 or more to build.

(k)The gap between the costs of constructing a unit of housing and the affordability of that unit for low-income Californians continues to widen.

(l)Existing state programs that subsidize the construction of new affordable housing units perpetuate the high cost of construction. The irony of California’s affordable housing laws is that the units constructed are not affordable to the vast majority of Californians for whom they are targeted.

(m)The current tension between construction costs and affordability is unsustainable. California will never build itself out of its current affordable housing construction crisis if it does not change today’s construction cost paradigm.

(n)Even programs like Proposition HHH, a 2016 $1,200,000,000 supportive housing construction program to combat homelessness that was overwhelmingly approved by the voters of Los Angeles and that has a project cost per unit of $350,000, have failed to rein in high construction costs, resulting in new HHH construction costs that range from $500,000 per unit to $700,000 per unit and a reduction of 41 percent in anticipated new housing. Four years later, as of September 2020, HHH had delivered only three projects with 228 units.

(o)This paradigm will never change if the state sustains the current housing construction model that is driving these high costs.

(p)There are alternatives to current construction modalities that can align the cost of producing a unit of housing with the affordability of the unit for persons who are low income.

(1)HCD, in summarizing its commissioned report on alternative housing by the California Polytechnic State University, San Luis Obispo, has stated that there are strategies to cross-subsidize the price of units for low- and moderate-income households by using proceeds from high-income market-rate units within the same development.

(2)Adaptive reuse is the reuse of an existing building for a purpose other than that for which it was originally constructed. Examples of adaptive reuse include the rehabilitation of hotels and motels and converting unused public buildings into individual and family units.

(3)Modular construction is the use of factory-produced, preengineered units that are delivered and assembled onsite and has recently included the frequent rehabilitation of shipping containers into residential units.

(q)California needs to lead the way in reducing the cost of constructing a unit of housing, and the state has the authority through its housing construction subsidy programs to demand those cost reductions.

(r)At the same time, the state needs to take advantage of the most progressive and innovative thinking in the housing development industry.

(s)Therefore, it is the intent of the Legislature that state housing construction subsidy programs prioritize alternative methods to produce housing units that are cost effective.

(t)It is further the intent of the Legislature that the development of housing on surplus state lands shall prioritize alternative methods to produce housing units that are cost effective.

SEC. 2.Section 50467 is added to the Health and Safety Code, immediately following Section 50466, to read:
50467.

(a)The department shall create a model plan for the use of alternative forms of developing affordable housing for the purpose of substantially reducing the cost of a unit of affordable housing. “Alternative forms” include, but are not limited to, adaptive reuse of existing buildings, modular housing, and cross-subsidization that results in at least 50 percent of all units being affordable to persons who are extremely low and very low income.

(b)The model plan described in subdivision (a) shall be used in state agency decisions in all state-subsidized housing loan and grant programs, including, but not limited to, all of the following:

(1)The Building Homes and Jobs Act (Chapter 2.5 (commencing with Section 50470)).

(2)The Multifamily Housing Program (Chapter 6.7 (commencing with Section 50675)).

(3)The Local Housing Trust Fund Matching Grant Program (Chapter 13 (commencing with Section 50842.1)).

(4)The Housing for a Healthy California Program (Part 14.2 (commencing with Section 53590)).

(5)The Veterans Housing and Homeless Prevention Act of 2014 (Article 3.2 (commencing with Section 987.001) of Chapter 6 of Division 4 of the Military and Veterans Code).

(6)The Affordable Housing and Sustainable Communities Program (Part 1 (commencing with Section 75200) of Division 44 of the Public Resources Code).

(c)A local agency, nonprofit affordable housing sponsor, private entity, or individual that receives surplus state real property pursuant to Section 11011.1 of the Government Code shall use the model plan described in subdivision (a) to guide any housing development on that property.

(d)As used in this section, all of the following definitions apply:

(1)“Local agency” has the same meaning as in subdivision (a) of Section 54221 of the Government Code.

(2)“Nonprofit affordable housing sponsor” has the same meaning as in subparagraph (B) of paragraph (2) of subdivision (b) of Section 11011.1 of the Government Code.

(3)“Surplus state real property” has the same meaning as in subdivision (a) of Section 11011.1 of the Government Code.

(e)Nothing in this section shall be construed to require loans or grants to be given to applicants for an alternative form of development as defined in subdivision (a) if that alternative form would be more expensive than traditional methods of development or if other factors would ensure that a traditional development would achieve actual affordable housing unit outcomes more successfully.

SEC. 3.

The Legislature finds and declares that facilitating the development of affordable housing to combat the state’s housing crisis is a matter of statewide concern and is not a municipal affair as that term is used in Section 5 of Article XI of the California Constitution. Therefore, Section 2 of this act adding Section 50467 of the Health and Safety Code applies to all cities, including charter cities.