Last Friday, in the closing hours of the 2017 legislative session, state lawmakers passed a package of 15 bills meant to address California’s affordable housing crisis. Three of the most talked about bills create a new permanent source of funding for affordable housing construction, streamline the development review process and, if approved by voters next year, will cover billions of dollars in additional affordable housing construction. Though there were dissenting votes and disagreements on the details, the bills’ passage marks a somewhat rare instance of cooperation on affordable housing among the legislature and Governor Jerry Brown and municipal leaders throughout the state. All have clashed on the issues in the past.
Senate Bill 2 creates a new fee of $75 to $225 on real estate transactions such as home refinancing or the filling of other real estate documents. The fee is projected to raise $225 million annually to finance affordable housing construction.
Senate Bill 35 streamlines the approval process for new housing construction when it meets certain affordability, density, zoning and environmental criteria. Senate Bill 3 will put a massive $4 billion bond measure on the November 2018 ballot. If approved by voters, the bond will fund $3 billion in affordable housing construction and $1 billion in home loans for veterans.
“These are significant steps in the right direction. For the last several years, state leaders haven’t been able to make progress on finding a solution to the state’s housing crisis. … By no means is the scale of what they’ve put in place going to solve the problem, but it’s moving in a direction they can expand upon going forward,” says Chris Hoene, executive director California Budget & Policy Center.
In late August, mayors from Los Angeles, San Francisco, Oakland, San Diego, San Jose and Santa Ana traveled to Sacramento to lobby for senate bills 2 and 3. They see the new funding streams as critical replacements for the low- and moderate-income housing funds lost when Governor Jerry Brown ended the state redevelopment agency program in 2011.
“This is not just an issue for local jurisdictions, but one that the county or state need to tackle in partnership together,” says Joanne Karchmer, Oakland Mayor Libby Schaaf’s deputy chief of staff. “We’ve really been hard-pressed since the governor ended redevelopment to find a steady, permanent source of revenue to do that.”
Created by the state legislature in 1945, local redevelopment agencies were given authority to invest in blighted properties to kick-start private development. The agencies then kept most of the property taxes generated in the project area. There were some stipulations on how that money had to be distributed, however, including that 20 percent be spent on building housing affordable to people with low and moderate incomes. The nearly 400 redevelopment agencies statewide generated about $5 billion in revenue each year, creating a billion-a-year housing fund. Despite protests from local-level leaders, Brown eliminated redevelopment in the midst of the recession as part of his effort to balance the state budget.
Officials in blue city halls in red states grappling with preemption — with more conservative state legislatures taking away power from more progressive cities — can be forgiven for taking a bit of solace in that even with a Democrat-controlled legislature and mostly progressive major cities, California isn’t immune to conflict between the state and local municipalities. Still, Hoene says there are important distinctions.
“I don’t see it as the same kind of friction of red legislatures and cities that are largely blue,” says Hoene. “It’s more the natural friction that comes from state and local government roles. The state levers by definition often impinge upon local control. Housing is one arena where it plays out a lot.”
Now retired, Peter Detwiler is the former staff director for the California State Senate’s Committee on Local Government. One of his final tasks was to help dissolve the redevelopment program. He says it is an excellent illustration of that dynamic Hoene describes.
“By the time redevelopment went away in 2011, it was only lightly constrained by state law,” he explains. “We played cat and mouse with local officials on the spending of that money. We found that many municipalities, especially suburban ones weren’t spending it [on affordable housing]. They were just stockpiling the money.”
And though there are many examples of racist urban renewal wiping out black and Latino neighborhoods, Detwiler says, in the latter years of the program big-city mayors “began to do a really good job building affordable housing with their redevelopment money.”
Other state housing laws were met with outcry and pushback from the cities. In 1963, the state passed a fair housing law called the Rumford Act, which banned housing discrimination on the basis of race, sex, religion, marital status or physical disability. In response, citizens passed Proposition 14, overturning the new law. The state supreme court in turn ruled that the proposition was unconstitutional.
In 1967, the state passed its fair share housing law, which requires every city and county to plan for a “fair share” of housing for people of all income levels. “To the extent that income and class and race are correlated, that means that everyone has to take their fair share of minority households,” says Detwiler. “That did not sit very well with some communities. … In addition, there was resentment at the local level that the state was mandating this fair share housing policy without providing very much financial support for enacting it.”
That question of financial support is often at the heart of conflict between cities and the state, says Max Neiman, a senior research fellow at University of California Berkeley’s Institute of Governmental Studies.
“The relationship has become more complex and involves more frustration between cities and the state over the years,” Neiman says. “Cities always feel the state is trying to balance the books on the backs of local government, particularly during times of financial stress. There’s an almost adversarial relationship when it comes to dealing with finances and the relative share of all that.”
So why, given that history, was the legislature able to pass a housing package that will benefit cities and that many mayors lobbied for?
“I think it’s no surprise or shock to anyone as you walk down the streets of Oakland or any other city that we’re in a homeless crisis that’s leading to a rise in the number of unsheltered,” says Karchmer. “More than 30 percent of California homeowners and renters are spending more than a third of their income on housing. California has 12 percent of the nation’s population, but more than 20 percent of the nation’s homeless population. It demands the state take action.”