Date of Hearing: May 8, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 1568

Author:(McCarty) – As Amended Ver:April 11, 2019

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill prohibits a city or county from applying for state grants, except for specified transportation funding, if the city or county is found to be in violation of state housing law. Specifically, this bill:

1. Prohibits a city or county, until January 1, 2025, from applying for a state grant if the Department of Housing and Community Development (HCD) has determined the city or county has violated state housing law or its housing element is out of compliance, unless either of the following conditions are met:
   1. The fund source of the grant is protected by Article XIX of the California Constitution (Highway Users Tax Account).
   2. The state grant funds, if awarded, would assist the city or county with complying with state housing law.
2. Allows a city or county found by HCD to have violated state housing law to submit to HCD evidence that the city or county is no longer in violation of state law and request the department issue a written finding that the city or county is no longer in violation.
3. Requires HCD to notify a city or county if it determines the city or county is no longer in violation of state housing law.

FISCAL EFFECT:

1. Estimated costs of $935,000 (GF) in the first year, and $858,000 (GF) annually thereafter, to HCD for five program staff positions to carry out the requirements of the bill, including developing a form to receive evidence of compliance from jurisdictions, reviewing and commenting on program guidelines, providing technical assistance to local governments to come into compliance, publishing a list of all jurisdictions ineligible for all state funding and working in partnerships with other state entities that provide grant funding review.
2. Unknown costs to HCD for administrative support for the new workload.

COMMENTS:

1. Purpose. This bill seeks to increase city and county compliance with state housing laws by prohibiting a city or county out of compliance from applying for state grants until January 1, 2025.
2. Background. AB 72 (Santiago), Chapter 370, Statutes of 2017, gave HCD authority to revoke a local government’s housing element if the department determines a city or county acts or fails to act to substantially comply with housing element and state housing law. If HCD finds a city or county’s housing element out of compliance or the city has violated state housing law, including the Housing Accountability Act, downzoning a site or reducing the density on a site in its housing inventory, Density Bonus Law, or discriminating against affordable housing, HCD has authority to refer a violation to the Attorney General (AG). Earlier this year, the AG sued the City of Huntington Beach for failing to adopt a compliant housing element. Approximately 37 cities and counties currently do not have compliant housing elements.
3. Governor’s Budget Proposal. The governor has proposed linking housing goals with transportation funding. By December 31, 2022, the governor proposes the State Transportation Agency and the Office of Planning and Research, after a stakeholder process, propose opportunities to link transportation and other non-housing funding, including funds in the Streets and Highways Account, with housing goals. Housing element and annual report compliance are included as potential policies to measure housing goals. Streets and Highway funds would be withheld beginning July 1, 2023, from local governments that do not have a compliant housing element and have not zoned or entitled for its annual goals, based on the most recent Regional Housing Needs Allocation (RHNA).

Analysis Prepared by: Jennifer Swenson / APPR. / (916) 319-2081

Date of Hearing: April 24, 2019

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

David Chiu, Chair

ABPCA Bill Id:AB 1568 (

Author:McCarty) – As Amended Ver:April 11, 2019

SUBJECT: Housing law compliance: prohibition on applying for state grants

SUMMARY: Prohibits cities and counties from applying for state grants, except for specified transportation funding, if the city or county has been found to violate state housing law. Specifically, this bill:

1. Prohibits a city or county, on or before January 1, 2025, from applying for a state grant if the Department of Housing and Community Development (HCD) has determined the city or county has violated state housing law or its housing element is out of compliance, unless either of the following conditions are met:
2. The fund source of the grant is protected by Article XIX of the California Constitution (Highway Users Tax Account); and,
3. The state grant funds, if awarded, would assist the city or county with complying with state housing law.
4. Allows a city or county that has been found by HCD to have violated state housing law to submit evidence that the city or county is no longer in violation of state law to HCD and request the department issue a written finding that the city or county is no longer in violation.
5. Requires HCD to notify a city or county if the department determines the city or county is no longer in violation of state housing law.

EXISTING LAW:

1. Requires HCD to review any action or failure to act by a city and county that it determines is inconsistent with the following:
   1. An adopted housing element;
   2. Its inventory of sites suitable to accommodate the city and county's regional housing needs assessment (RHNA); and
   3. A program to rezone sites to meet a city or county's RHNA.
2. Allows HCD to revoke its findings that a housing element or an amendment to the housing element is in substantial compliance, until the city, county, or city and county comes into compliance, if it determines that an action or failure to act by a city and county does not substantially comply with housing element law.
3. Allows HCD to consult with and to receive any written comments from a city, county, or city and county, public agency, group or person regarding a city’s and county's action or failure to act to determine whether or not a housing element is in substantial compliance with housing element law.
4. Requires HCD to notify the local government of a violation of law and gives HCD authority to refer a violation to the Office of the Attorney General (AG) if it finds that the city has violated the law by taking any action contrary to the housing element or an amendment to the element, or any action or failure to act pursuant to 1) or that any city and county has taken an action in violation of the following:
5. The Housing Accountability Act (Government Code (GOV) Section 65589.5);
6. No-net-loss in zoning density law limiting downzoning and density reductions (GOV Section 65863);
7. Density Bonus Law (GOV Section 65915); and
8. Prohibiting discrimination against affordable housing (GOV Section 65008).
9. Requires HCD, after notifying a city and county of a violation of law, to give the city and county a reasonable time, but no longer than 30 days to correct the violation before finding a housing element out of compliance or referring the case to the AG.

FISCAL EFFECT: Unknown.

COMMENTS:

Housing element compliance: In 2017, AB 72 (Santiago), Chapter 370, gave HCD authority to revoke a local government’s housing element if the department determines that a city or county acts or fails to act to substantially comply with housing element and state housing law. If HCD finds a city or county’s housing element out of compliance or that the city has violated state housing law, including the Housing Accountability Act, if the city down zones a site or reduces the density on a site in its housing inventory, Density Bonus Law, or discriminates against affordable housing, HCD has authority to refer a violation to the Attorney General (AG). Earlier this year, the AG sued the City of Huntington Beach for failing to adopt a compliant housing element. Approximately 37 cities and counties do not have compliant housing elements.

Governor’s Budget Proposal: The Governor has proposed linking housing goals with transportation funding. By December 31, 2022, the Governor proposes that the State Transportation Agency and the Office of Planning and Research, after a stakeholder process, propose opportunities to link transportation and other non-housing funding, including funds in the Streets and Highways Account, with housing goals. Housing element and annual report compliance are included as potential policies to measure housing goals. Streets and Highway funds would be withheld beginning July 1, 2023 from local governments that do not have a compliant housing element and have not zoned or entitled for its annual goals based on the most recent Regional Housing Needs Allocation (RHNA).

Purpose of this bill: This bill would prohibit cities and counties from applying for any state grant funds, except for transportation funds in the Highway Users Tax Account, if the city or county has been found by HCD to have violated state law or their housing element is out of compliance. The city or county can also apply for state grant funds if the funds would assist the city or county in complying with state housing law.

Arguments in opposition: The California State Association of Counties writes in opposition to this bill, “the bill includes narrow exceptions for grant programs funded by certain vehicle fees and fuel tax revenues and grants that may facilitate compliance with housing law.

In addition to their municipal government functions, counties implement a broad array of countywide and state programs in health and human services, mental health, agriculture and natural resources, non-transportation infrastructure, and public safety. AB 1568 does not include a clear definition of what constitutes a state grant for the purposes of the bill, and accordingly puts at risk a significant amount of funding available to county governments and necessary to implement vital services, many of which serve the most vulnerable residents of our state.

CSAC expects that a very small number of counties, if any, will ever be found to be in violation of the state housing laws specified in subdivision j of Government Code Section 65585. Nevertheless, the breadth of state funding passed through to counties as grant funding makes the bill’s prohibition too great of a risk. Moreover, while it will continue to be unlikely that any county will be found to be in violation of the specified laws, current legislation proposes to add to subdivision j at least one additional law that involves greater local discretion and for which the risk of accidental violation is significantly higher.”

Staff comments: The bill does not define state grant funds, so the universe of programs the bill applies to could be considerable. Staff is aware of several programs that would be included: Housing for a Healthy California, CalWORKs Home Visiting Initiative, Bringing Families Home, and Home Safe. In addition the bill would seem to apply to grants for parks, water districts, and Cap and Trade-funded programs.

The author has indicated the intent of the bill is to prohibit a city or county to apply for state grants if its housing element is out of compliance or has a violation of state housing law beginning January 1, 2025. As currently drafted, the requirement would apply from the time the bill is law until January 1, 2025.

REGISTERED SUPPORT / OPPOSITION:

Support

California Apartment Association (co-sponsor)

California Association of Realtors (co-sponsor)

Opposition

BizFed

California State Association of Counties

Marin County Council of Mayors and Councilmembers

Analysis Prepared by: Lisa Engel / H. & C.D. / (916) 319-2085