[REN #702] New Laws to Solve California’s Housing Crisis

Picture of High Rise Buildings for Real Estate News for Investors Podcast Episode #702

California lawmakers are tackling the housing shortage with a slew of bills to promote the building of more apartments. One is an upgraded version of a bill that died in committee last year. Both bills override local zoning rules to allow more development near transit stops and business districts but the new version addresses some of the concerns that killed the first version. It’s all part of an ambitious plan by Governor Newsom to build millions of new homes in the next several years.
 

3.5 Million New Homes

Governor Gavin Newsom made it a campaign promise — to build 3.5 million new homes by 2025. As reported by the S.F. Chronicle (1) California must quadruple its current rate of home construction to meet that goal. That’s causing a flurry of activity in Sacramento where lawmakers have reportedly introduced more than 200 bills to increase housing.

SB 50 (2) is one of the more controversial bills because it takes some of the control for zoning away from local governments. It was originally introduced as SB 827 last year and was reintroduced as SB 50 in December, by the bill’s author, state Senator Scott Wiener. The new bill has lower height limits, and provisions to prevent the displacement of current renters because of gentrification.
 

Incentives for Housing Development

The bill is also known as the “Density Bonus Law.” That refers to incentives that local governments would be required to offer developers who make a percentage of new units affordable for low-income families. This bill does not require development. It prevents cities from banning the building of apartment buildings along transit corridors, and also provides incentives to do so.

This kind of strategy for increasing the supply of housing is called “upzoning.” The YIMBY organization defines upzoning as a change in the zoning of a land area to more intensive, mixed, and/or higher-density use. If offers an example of zoning changes that would allow 4-unit buildings in a neighborhood that is historically zoned for single-family homes. Decades ago, upzoning meant the complete opposite — that zoning changes would be more restrictive.
 

“Yes In My Backyard”

YIMBY, which stands for “Yes, In My Backyard,” is one of the co-sponsors of the bill. The Non-Profit Housing Association of Northern California is the other. San Francisco Mayor London Breed, Oakland Mayor Libby Schaaf, and Sacramento Mayor Darrell Steinberg support the measure. As reported by the Los Angeles Times (3) and KQED (4), L.A. Mayor Eric Garcetti has tentatively signed on as well. He says, “This bill is a good first step. I will continue working with (Senator Wiener) to make certain that these statewide solutions are the right fit for Angelenos.”

As much as we’ve heard about the need for more housing to help bring housing costs back down in California, there’s big opposition to this bill. The NIMBYs, which are people who say “Not In My Backyard,” are battling the YIMBYs, and competition is fierce. Single-family homeowners don’t want multi-story apartment buildings next door. Housing advocates are worried about those displacement issues. And, cities don’t want state control of their local housing policies and zoning rules.
 

Proposition 13

Look what happened when property taxes skyrocketed back in the 1970’s. Voters approved Proposition 13 for strict limits on property tax increases. Many homeowners are still enjoying those benefits, while more recent homeowners pay much more. The Prop 13 tax breaks also take a bite out of revenue for things like infrastructure repairs and maintenance, and school funding. But homeowner opposition to higher property taxes prevailed.

It’s not surprising that homeowners might oppose this legislation if they feel it will compromise their neighborhoods and turn it into something different than what it is. Some see towering apartment buildings casting shadows on their backyards with renters who may or may not care as much about being a good neighbor. Opponents have also expressed concern about other issues, as well. Traffic is a big one. Many cities are already suffering from horrible traffic problems, and upzoning could make that worse.

YIMBY supporters of SB 50 say this proposal addresses both these issues by limiting the scope of the legislation to certain neighborhoods that are either transit-rich and job-rich. That would leave many old-time single-family neighborhoods unchanged. It also addresses the issue of traffic by locating new developments where there’s good public transit.
 

SB 50 Rules

Under the proposed rules, developers would be allowed to build an apartment building within a half mile of a rail transit stop, within a quarter mile of a busy bus stop, or within a district that provides a lot of job opportunities. The idea of a job-rich neighborhood was added to the new version. Building heights would be limited to 45 or 55 feet depending on whether it’s a quarter or a half mile from transit. Parking space requirements would be reduced.

The bill addresses gentrification issues by banning the demolition of any building that is currently being rented. Local officials can also delay the implementation of this legislation for five years to protect areas that are more vulnerable to displacement. What does that boil down to? That the upzoning plan would only replace single-family homes with apartment buildings, and that would only happen in specific neighborhoods. It would also be limited to more economically stable areas for at least five years.
 

“We have to do things differently.”

In a recent interview about the housing crisis, Wiener said, “We’re at a point in California where we have to do things differently.” He said, “The way we’ve approached housing for many years, where we allow cities to do whatever they want with housing and adopt whatever zoning they want, no matter how restrictive or exclusionary — that time period has come to an end.”

Links:

(1) San Francisco Chronicle Article

(2) SB 50 Bill

(3) Los Angeles Times Article

(4) KQED Article

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