The last time a major State housing proposal was proposed was when Proposition 1C was included as a part of an infrastructure compromise that included transportation, education, and disaster preparedness.  That was 2006.  While Prop 1C, as approved by the State’s voters, included over $2 billion dollars for State affordable housing programs, the funds have long since been committed.  Since that time, we have seen significant reductions in funding for affordable housing, with the greatest hit being the loss of $1 billion in annual funding created with the dissolution of Redevelopment Agencies in 2011 ($60 million annually in Santa Clara County).

Also since that time, we have seen housing prices change dramatically.  Housing prices were at a peak level at that time—before the real estate recession of 2007—with median sales prices for single-family homes at $740K in Santa Clara County[1].  And, monthly two-bedroom rents in San Jose averaged $1,239[2].  Housing prices dipped until 2012, and have been rapidly increasing since that time. Now, you’d be lucky to find a two-bedroom house with a $1,239 monthly rent.    According to RentCafe, a two-bedroom in San Jose now averages $2,893, a number that is less than other sites like Zillow and RentJungle and that is far less than prices in North County.  Home prices in the County now average $1.15 million[3], and we’ve all seen the stories about homes going for hundreds of thousands of dollars over asking prices.[4]

So it’s clear we have a crisis.  And it’s clear action was needed.

This year, the Legislature stepped up with a package of bills in response.  Some of the bills in the package had been introduced before, but encountered trouble getting the needed votes or ran into the Governor’s veto pen once reaching his desk.  The atmosphere in the Capitol Building was different this year, with the Governor signaling his willingness to sign money bills if bills proposing development streamlining were also brought forward, and legislators willing to compromise rather than fail to act.

So, on Friday, September 29^th, the Governor signed a comprehensive package of housing bills. Check out this article with brief blurbs about each of the 15 bills.  Note that the Governor and many of the Legislative and local elected officials in attendance on Friday stated emphatically that they were not done, that there is more to do to really make the needed change.

We’re ready.  Governor Brown has one more year in office.  SV@Home will be counting on him to sign more bills this time next year.

Here is SV@Home’s summary of key bills and how they respond to the housing crisis here in Santa Clara County.

Senate Bill 2 (Senator Toni Atkins)—After years of trying, Senator Atkins was successful in getting a permanent source housing bill signed.  The bill is expected to create up to $300 million annually.  The first year, the funds will be equally divided into two pots—one that will provide funding for planning studies, and one that will provide funding for homeless programs.  Both pots will be administered by the State Department of Housing and Community Development (HCD).  The Director of HCD, Ben Metcalf, stated that he expects that funds could be available as early as the second quarter of 2018.

After the first year, 70% of the funds collected will be block granted to local governments using the CDBG entitlement formula (with HCD administering a non-entitlement program for smaller jurisdictions).  By virtue of the block grant nature, the funds can be used for a variety of affordable housing purposes based on individual jurisdiction needs.

What this means for Santa Clara County—

1. Funds for planning studies (including specific plans, General Plans, and other studies) will be available soon. Funds will be awarded as applications are received by HCD.  An immediate local application opportunity would be from San Jose, where these dollars could help fund the costs of implementing the Mayor’s new housing plan.
2. Some monies for homelessness will be available, though the money will not be significant. Assuming that Senate Bill 2 funds come in at about $60 million a quarter, these funds won’t go far when you consider the size of the State and the size of the problem.  Santa Clara County does have one of the largest homeless counts in the nation though, so it is possible that it could receive a sizable portion.
3. After year 1, when 70% of the funds are distributed by CDBG formula, Santa Clara County may not fare as well as San Francisco, Oakland, and Los Angeles, which by virtue of the age of housing stock and concentrations of poverty, receive a higher allocation of funds through this formula. Example:  San Francisco’s population is 15% lower than San Jose’s, but SF receives twice as much CDBG funding through the allocation formula.  More will be determined once HCD provides guidance on how the funds will be allocated.

Senate Bill 3 (Senator Jim Beall)—Senate Bill 3 is a bond measure that will need to go to the voters of the State in November of 2018.  While the bill required a 2/3rds vote to get out of the Legislature, it only requires a 50% +1 vote to pass.  This is a much easier threshold than the 2/3^rds vote require for Measure A last year.  This bill will provide $4 billion, including $1 billion for veteran’s housing. The funds will be administered by HCD through existing programs, with the largest share of the funds going to the Multi-Family Housing Program (MHP).

What this means for Santa Clara County—

1. We need to get out the vote in November!

Assembly Bill 1505 (Assemblymember Richard Bloom)—This bill recognizes the rights of local governments under their zoning authority to require that market rate residential rental developments include affordable units.  Known as inclusionary zoning, this right had been on hold since a court case in 2009 (Palmer Sixth Street Properties v City of Los Angeles) invalidated inclusionary ordinances.  As required by the new law, ordinances may not require that more than 15% of the units in a development be affordable without conducting a feasibility study; any ordinance that exceeds that number is subject to review by HCD.

What this means for Santa Clara County—

1. Jurisdictions that placed their rental inclusionary policies on hold can reinstate them effective January 1, 2018. Eleven of the 15 cities in Santa Clara County had inclusionary ordinances on the books at the time of the Palmer decision, though the requirements in each ordinance differed (Gilroy, Los Altos Hills, Morgan Hill, and Saratoga do not have inclusionary ordinances or impact fees).  None of the ordinances currently have requirements that exceed 15% affordability.
2. Cities that adopted (or are considering adoption) of Housing Impact Fees (HIF) may reconsider whether to continue these fees or instead reinstate their inclusionary requirements. Though some have expressed concern that cities will use both tools for the same development, that is highly unlikely.  San Jose has already expressed its intention to implement its inclusionary ordinance come January and no longer implement its HIF program.
3. Inclusionary ordinances can provide more flexibility for the development community as long as there are alternative compliance options. They also can provide more affordable units in many circumstances, as fees were never high enough to compensate for the cost of affordable housing development.  SV@Home supports inclusionary policies that provide these choices.  See our recommendations for inclusionary programs here, though note we need to update this page to recognize Friday’s action!

Senate Bill 35 (Senator Scott Wiener)–  SB 35 is the streamlining bill that Governor Brown wanted.  Believing that local regulation and unwillingness of some jurisdictions to approve new development is the main driver of high housing costs, the Governor unsuccessfully tried to move a streamlining bill during last year’s budget process.  Newly seated Senator Wiener took on a huge challenge by pushing forward SB 35 this session.

So, what does it do?  SB 35 requires jurisdictions to approve projects that meet General Plan and zoning code requirements “by right,” if those jurisdictions have not met their housing production goals under their General Plan Housing Element.  Cities that meet production requirements for one income category will not be required to streamline applications for developments serving that income group.  For example, if a jurisdiction is meeting its production goals for market-rate housing (those earning 120% of area median income and above) but not for housing for people earning less than 120% (lower- and moderate-income households), then streamlining would apply only to the latter and not to developments proposing market-rate homes. To be streamlined, developments must include a percentage of affordable housing and must pay prevailing wages “in addition to other affordability, density, zoning, historic and environmental standards.”

What this means for Santa Clara County–

1. One of the provisions of the bill would require charter cities to report housing production annually to HCD. In the past, only general law cities were required to do so.  As a practical matter, many charter cities already reported, as it was a condition of some State housing sources.  (In Santa Clara County, Gilroy, Mountain View, Palo Alto, San Jose, Santa Clara, and Sunnyvale are all Charter Cities.)  Here is the page that details the jurisdictions that have submitted reports by year.
2. Most Santa Clara cities did not meet their affordable housing goals in the last Regional Housing Needs Allocation (RHNA) cycle. Exceptions were Los Altos Hills, which met its very low-income goals, Campbell, Monte Sereno, and Santa Clara County, which met their low-income goals, and Sunnyvale, which met its moderate-income goals.  All but five cities exceeded their market-rate goals (Campbell, Palo Alto, San Jose, Saratoga, and Los Gatos), though Los Gatos met 97% of its market-rate goals.  The likelihood is that most development proposing units affordable to households earning less than 120% of area median income would be streamlined.
3. Whether or not developers will request streamlining given the requirements for affordability and prevailing wage, among other requirements, is an unknown at this time.

Assembly Bill 1397 (Evan Low)—AB 1397 would require that jurisdictions include realistic sites in their housing inventories that are submitted with each Housing Element.  This bill responded to the concern that jurisdictions sometimes include land in their Housing Elements that is unavailable for housing development, even if properly zoned, due to other circumstances.  An example would be a commercial center with a long-term lease.  Another would be a site that is irregular or that is on a slope that is not suitable for housing development at proposed densities.

What this means for Santa Clara County–

1. When cities prepare their next Housing Elements (for the period 2023- 2031), they will need to ensure that the sites included in their land inventory can be developed during the required time period. Additionally, the inventory of sites must determine that each site is adequate to accommodate housing for different income groups.

Assembly Bill 678/Senate Bill 167-Housing Accountability Act (Assemblymember Raul Bocanegra and Senator Nancy Skinner)—These bills strengthen the Housing Accountability Act, an existing, but not well known, law that “prohibits a local agency from disapproving, or conditioning approval in a manner that renders infeasible, a housing development project for very low, low-, or moderate-income households or an emergency shelter unless the local agency makes specified written findings based upon substantial evidence in the record.”  The bill makes a number of changes, well summarized in this brief by YimbyAction.

Despite having this law on the books, jurisdictions have continued to deny developments that include affordable homes. A recent example where the Housing Accountability Act was used is Eden Housing, Inc., SummerHill Homes, LLC, and Grosvenor USA Limited versus the Town of Los Gatos, where the developers sued over a decision to deny a housing development on land known as the North 40.  The developers prevailed, and the Town later approved the development, but with added cost, time, and complication for the housing projects.  If these bills had been in place, Los Gatos would have had to have made stronger findings, and would have been subject to fines if found to have taken inappropriate action.

What this means for Santa Clara County

1. Simply, local jurisdictions will not be able to deny developments that include affordable homes without clear and convincing evidence that the development would have a negative impact on human health or safety.

This is a long list of bills… and we covered less than half of the package!  As we get more information on the bills, including more thorough legal analysis, we will post them to our website here.

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[1] Santa Clara Association of Realtors, January 2007 for Q4 2006

[2] RealFacts through December 2006, including rental projects with 50+ units

[3] California Association of Realtors, August 2017

[4] http://www.mercurynews.com/2017/09/14/tip-of-the-iceberg-more-on-the-sunnyvale-house-that-sold-for-782000-over-asking-and-what-it-all-means/