The Planning and Zoning Law requires each county and city to adopt a comprehensive, long-term general plan for the physical development of the county or city, which includes, among other mandatory elements, a housing element. That law requires, for the 4th and subsequent revisions of the housing element, the Department of Housing and Community Development (department), in consultation with each council of governments, where applicable, to determine the existing and projected need for housing for each region, region, at least 2 years prior to the scheduled revision of the housing element, as specified. That law requires the departments determination to be based upon population projections produced by the Department of Finance and regional population forecasts developed by the council of governments and used for the preparation of the regional transportation plan, as specified. That law also requires the department to meet and consult with the council of governments regarding the assumptions and methodologies to be used to determine a regions housing need and requires the council of governments to provide data assumptions from the council of governments projections, as specified. That law authorizes the department to accept or reject the information provided by the council of governments and, requires the department, after consultation with the council of governments, to make determinations on the data assumptions and the methodology the department will use to determine the regions housing need, as specified. That law requires the department to provide its determinations to the council of governments, as specified.

This bill would for the 8th and subsequent revisions of the housing element require the department to convene and engage stakeholders to consider improvements to the process of determining the existing and projected housing need for each region before determining any regions existing projected housing need. The bill would require the department department, prior to finalization of the regional determination, as specified, to publish on its the departments internet website a summary of the information the department considered and determinations made by the department to improve the process of determining the existing and projected housing need for each region. The bill would additionally require the department to publish on its internet website the data sources, analyses, and methodology, including assumptions and factors used in and applied to the Department of Finances population projections and engagement process with the council of governments prior to finalization of the regional determination, as specified. The bill would also require the department, for the 7th and subsequent revisions of the housing element, to assemble and convene an advisory panel that includes, among others, a specified expert on described data to advise the department on the assumptions and methodology it will use to determine a regions housing need. The bill would also require the department to consult with the advisory panel before making determinations on the data assumptions and the methodology it will use to determine the regions housing need for the 7th and subsequent revisions of the housing element. determination. The bill would also additionally require the department to publish its determination determinations on the data assumptions and methodology it will use to determine a regions housing need on its the departments internet website.

The Planning and Zoning Law requires each county and city to adopt a comprehensive, long-term general plan for the physical development of the county or city, which includes, among other mandatory elements, a housing element. That law requires, for the 4th and subsequent revisions of the housing element, the Department of Housing and Community Development (department) (department), in consultation with each council of governments, where applicable, to determine the existing and projected need for housing for each region, as specified. That law requires the department, in consultation with the council of governments, to determine the existing and projected need of housing for each region in a specified manner. That law requires the departments determination to be based upon population projections produced by the Department of Finance, Finance and regional population forecasts developed by the council of governments and used for the preparation of the regional transportation plan, as specified. That law also requires the department to meet and consult with the council of governments regarding the assumptions and methodologies to be used to determine each a regions housing need and requires the council of governments to provide data assumptions from the council of governments projections, as specified. That law authorizes the department to accept or reject the information provided by the council of governments and, after consultation with each the council of governments, to make determinations on the council of governments data assumptions and the methodology the department will use to determine each the regions housing need. need, as specified. That law requires the department to provide its determinations to each the council of governments, as specified.

This bill would require the department to publish on its internet website the data sources, analyses, and methodology, as specified, including assumptions and factors used in and applied to the Department of Finances population projections and engagement process with the council of governments prior to finalization of the regional determination. determination, as specified. The bill would also require the department, for the 7th and subsequent revisions of the housing element, to assemble and convene an advisory panel that includes, among others, an a specified expert on the described data assumptions by each council of governments to advise the department on the assumptions and methodology it will use to determine each region a regions housing need. The bill would also require the department to consult with the advisory panel before making determinations on the council of governments the data assumptions and the methodology it will use to determine each the regions housing need for the 7th and subsequent revisions of the housing element. The bill would also additionally require the department to publish its determination on its internet website.

Existing law, the Planning and Zoning Law, requires the legislative body of each county and city to adopt a comprehensive, long-term general plan for the physical development of the county or city and specified land outside its boundaries that includes, among other mandatory elements, a housing element. For the 4th and subsequent revisions of the housing element, as specified, existing law requires the Department of Housing and Community Development to determine the existing and projected need for housing for each region, as prescribed.

This bill would make nonsubstantive changes to those provisions.

SENATE COMMITTEE ON

Senator Anna Caballero, Chair

2023 - 2024 Regular Session

AB 2485 (Juan Carrillo) - Regional housing need: determination

Bill Summary:

AB 2485 would require the Department of Housing and Community Development (HCD) to convene and engage specified stakeholders to consider improvements to the process of determining the housing needs for each region, as specified. The bill would also require HCD to publish specified data and information on its website regarding the decision-making process used to determine regional housing needs.

Fiscal Impact:

• HCD estimates ongoing costs of approximately $205,000 annually for 1.0 PY of staff to convene and moderate stakeholder meetings to consider improvements to the RHNA process, and to publish specified information on the department’s website. (General Fund)

Background:

Existing law requires cities and counties to prepare a general plan comprised of seven mandatory elements, including a housing element that identifies existing and projected housing needs. The housing element must include an inventory of adequate sites zoned for housing at all income levels (very low, low, moderate, and above moderate income) and to accommodate a jurisdiction’s share of the regional housing needs that is sufficient to account for population growth and to overcome existing housing deficiencies over the planning period. Housing elements must be updated every eight years in urban areas, and every five years in more rural areas.

The regional housing needs assessment (RHNA) process is composed of three main stages: (1) development of regional housing need estimates by HCD and the Department of Finance (DOF), in consultation with regional councils of governments (COGs); (2) allocation of housing within each region by the COGs, or by HCD in an area not within a COG; and (3) incorporation of RHNA allocations into city and county housing elements. If the city or county does not have enough sites within its existing inventory of residentially zoned land to accommodate its share of the regional housing needs, it must adopt a program to rezone land within the first three years of the planning period. Every city and county must submit an annual progress report by April 1 of each year to HCD and the Governor’s Office of Planning and Research on its implementation and progress towards meeting its RHNA amount and removing governmental obstacles to housing development, among other things.

Existing law specifies the process for HCD, in consultation with each COG, to determine the existing and projected need for housing in each region. The determination must be based on population projections produced by DOF and regional population forecasts developed by COGs in the preparation of regional transportation plans. If the COG’s estimate is within 1.5% of the DOF estimate, then HCD must use the COG’s estimate. If the difference is greater than 1.5%, HCD and the COG meet to discuss variances in methodology used for population projections and seek agreement on a projection to use for making a regional housing needs determination. If agreement is not reached, then DOF’s population projection is used, and may be modified by HCD as a result of discussions with the COG.

Existing law requires HCD to meet and consult with each COG regarding the assumptions and methodology to be used by HCD to determine regional housing needs at least 26 months prior to the housing element adoption deadline, and prior to developing a region’s housing needs. The COG must provide specified data assumptions, which HCD may accept or reject, or modify its own assumptions or methodology based on the COG’s information. After consultation with a COG, HCD must make a determination of the region’s existing and projected housing need. The COG may file an objection to HCD’s determination, as specified, within 30 days, which HCD must consider within 45 days and make a final written determination of the region’s housing needs that includes an explanation of the information upon which the determination was made. The COG must use HCD’s final determination to create an allocation methodology that distributes the housing need equitably amongst all the local governments in its region.

Proposed Law:

AB 2485 would require HCD, for the eighth and subsequent revisions of the housing element, to do the following:

• Convene and engage stakeholders, including demographers, data experts, and COGs, to consider improvements to the process of determining the existing and projected need for housing for each region, including to the accuracy and transparency of the assumptions and methodologies used to determine a region’s housing need. This engagement process must occur before determining any region’s housing needs.
• Publish on its internet website the data sources, analyses, and methodology, including assumptions and factors used in and applied to the DOF projections and COG engagement process, and a summary of the information and determinations described above, prior to finalization of a region’s housing needs.

Related Legislation:

AB 3093 (Ward), which is currently pending in this Committee, would establish two new categories, acutely low income and extremely low income, that must be accounted for in the RHNA process and housing element law, as specified.

Staff Comments:

In March 2022, the State Auditor examined the RHNA process and identified several errors in HCD’s housing projections, resulting in a decrease in the housing amounts assigned to some jurisdictions. The Auditor attributed HCD’s miscalculations to a lack of oversight in staff data entry and a failure to consider all factors required by state law in its estimates. Additionally, the Auditor found these shortcomings risk eroding public confidence in HCD’s ability to provide accurate information to COGs about housing needs. The report recommended a formal review process and thorough documentation measures to ensure all RHNA calculations provided to COGs by HCD are accurate.

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SENATE COMMITTEE ON HOUSING

Senator Nancy Skinner, Chair

2023 - 2024 Regular

Bill No: AB 2485 Hearing Date: 7/2/2024

SUBJECT: Regional housing need: determination

DIGEST: This bill requires the Department of Housing and Community Development (HCD) to take certain actions in determining the existing and projected housing need for each region through the regional housing needs determination (RHND) process

ANALYSIS:

Existing law:

1. Provides that each community’s fair share of housing be determined through the regional housing needs determination and allocation (RHND/RHNA) process. Sets out the process as follows: (a) the department of Finance (DOF) and HCD develop regional housing needs estimates; (b) council of governments (COGs) allocate housing within each region based on these determinations, and where a COG does not exist, HCD conducts the allocations; and (c) cities and counties incorporate these allocations into their housing elements.
2. Requires HCD, in consultation with each COG, and on a specified timeline, to determine the RHND for each region using population projections produced by DOF and regional population forecasts used in preparing regional transportation plans (RTP), in consultation with each COG. If the total regional population forecast for the projection year developed by the COG and used in the RTP is within a range of 1.5% of DOF’s projection, then the COG’s forecast must be used for the RHND. If the difference between the COG and DOF’s projection is greater than 1.5%, then HCD and the COG must meet to discuss variances in methodology used for the projections and seek agreement on a projection for the region to be used for the RHND. If agreement is not reached, then DOF’s projection must be used, and may be modified by HCD as a result of discussions with the COG.
3. Requires HCD, at least 26 months prior to the housing element adoption deadline for the region and prior to developing the existing and projected housing need for a region, to meet and consult with the COG regarding the assumptions and methodology to be used by HCD to determine the RHND. Requires the COG to provide data assumptions from their projections, including, among others:
   1. Anticipated household growth associated with projected population increases;
   2. Household size data and trends in household size;
   3. The rate of household formation, or headship rates, based on age, gender, ethnicity, or other established demographic measures;
4. Allows HCD to accept or reject the information provided by the COG in (3) or modify its own assumptions or methodology based on this information.
5. Requires HCD, after consultation with the COG, to make determinations in writing on the assumptions for each of the factors in (3) and the methodology it shall use, and requires HCD to provide these determinations to the COG.
6. Requires HCD, after consultation with the COG, to make a determination of the region’s existing and projected housing need based upon the assumptions and methodology determined in (3) – (5). Requires the RHND to reflect the achievement of a feasible balance between jobs and housing within the region using the regional employment projections in the applicable regional transportation plan. Requires each city and county to adopt a housing element, which must contain specified information, programs, and objectives.

This bill:

1. Requires HCD to publish on its website the data sources, analyses, and methodology to be used by the department to determine the RHND, including specified assumptions and factors used in and applied to the DOF projections and engagement process with the COGs, prior to finalization of the RHND.
2. Requires HCD, for the seventh and subsequent housing element cycles, to assemble and convene an advisory panel to advise HCD on its assumptions and the methodology it shall use for purposes of the RHND. Requires the panel to be composed of all of the following:
   1. A United States Census Bureau-affiliated practitioner;
   2. An expert on specified data; and
   3. A representative from the COG.
3. Requires HCD to consult with the advisory panel before making determinations in writing on specified data assumptions and the methodology it shall use for the RHND, and to provide the written determinations to the COG and publish them on HCD’s website.

COMMENTS:

1. Author’s Statement. “There are more than 181,000 Californians who are unhoused. I believe we have made good progress at both the state and local levels when it comes to planning for more housing, and with each RHNA cycle, we are refining the process. But we must do better. The California State Auditor’s report published in March 2022 on HCD’s RHNA determination process highlighted the need for accountability and transparency on HCD’s methodology and assumptions. HCD’s assumptions and methodology should be clear and accessible to stakeholders to ensure confidence in the process. That is why AB 2485 is focused on embedding inclusivity and transparency in HCD’s engagement and outreach efforts which are critical to fostering the collaboration and trust that are essential to housing production in California.”

1. Adoption and Implementation of Housing Elements. One important tool in addressing the state’s housing crisis is to ensure that all of the state’s 539 cities and counties appropriately plan for new housing. Such planning is required through the housing element of each community’s General Plan, which outlines a long-term plan for meeting the community’s existing and projected housing needs. Cities and counties are required to update their housing elements every eight years in most of the high population parts of the state, and five years in areas with smaller populations. Localities must adopt a legally valid housing element by their statutory deadline for adoption. Failure to do so can result in certain escalating penalties, including exposure to the “builder’s remedy” as well as public or private lawsuits, financial penalties, potential loss of permitting authority, or even court receivership.

Among other things, the housing element must demonstrate how the community plans to accommodate its share of its region’s housing needs allocation (RHNA), which is a figure determined by HCD through a demographic analysis of housing needs, existing housing stock, and population projections in consultation with DOF and the COG. HCD establishes its determination of each COG’s regional housing targets across the state for the next five- or eight-year planning cycle. Each COG (or in some areas, HCD acting directly as COG) then sub-allocates the RHNA to each local government within the COG’s jurisdiction, and in turn each jurisdiction uses its housing element to show how it will accommodate that number of new housing units, split out by income level and with a focus on certain special needs housing types and on affirmatively furthering fair housing.

It is critical that local jurisdictions adopt legally compliant housing elements on time in order to meet statewide housing goals and create the environment for the successful construction of desperately needed housing at all income levels. Unless communities plan for production and preservation of affordable housing, new housing will be slow or extremely difficult to build. Adequate zoning, removal of regulatory barriers, protection of existing stock and targeting of resources are essential to obtaining a sufficient permanent supply of housing affordable to all economic segments of the community. Although not requiring the community to develop the housing, housing element law requires the community to plan for housing. Recognizing that local governments may lack adequate resources to house all those in need, the law nevertheless mandates that the community do all that it can and not engage in exclusionary zoning practices.

1. RHND/RHNA Methodology. The RHND/RHNA process is used to determine how many new homes, and the affordability level of those homes, each local government must plan for in its housing element to cover the duration of the next eight-year planning cycle. The RHND is assigned at the COG level, while RHNA is suballocated to subregions of the COG or directly to local governments. RHNA is assigned to four income categories: very low-income (0-50% of AMI), low-income (50-80% of AMI), moderate-income (80-120% of AMI), and above moderate-income (120% or more of AMI).

The cycle begins with HCD and the DOF projecting new RHND numbers every five or eight years, depending on the region. DOF produces population projections and the COG also develops projections during its RTP forecast. Then, 26 months before the housing element due date for the region, HCD must meet and consult with the COG and share the data assumptions and methodology that they will use to produce the RHND. The COG provides HCD with its own regional data on several criteria, including projected population increases; household size data; percentage of overcrowded households; the rate of household formation, or headship rates, based on age, gender, ethnicity, or other established demographic measures; vacancy rates; relationship between jobs and housing; percentage of households that are cost burdened; loss of units during a declared state of emergency that have yet to be rebuilt or replaced.

HCD can take this information and use it to modify its own methodology, if it agrees with the data the COG produced, or can reject it if there are other factors or data that HCD feels is better or more accurate. Then, after a consultation with the COG, HCD makes written determinations on the data it is using for each of the factors bulleted above, and provides that information in writing to the COG. HCD uses that data to produce the final RHND. The COG must then take the RHND and create an allocation methodology that distributes the housing need equitably amongst all the local governments in its region.

In past housing element cycles, RHNA had been criticized as being a political rather than a methodologically sound, data-driven process. In the past, jurisdictions with a higher share of wealthier, whiter residents were more likely to have received lower allocations of moderate and lower income housing, while more diverse cities sometimes received higher allocations of those categories. The Legislature made a number of changes to the RHND, RHNA, and housing element process over the past several years to strengthen the law and restrict the ability of jurisdictions to evade their housing obligations.

1. 2022 RHNA Audit. The audit found HCD needs to review its needs assessment of data entry, and consideration of factors including housing vacancy rates. DOF also was found to need to further review their methods and receive information from relevant experts.^[1]

In response to the audit’s findings, HCD committed to, and completed, the following actions:

• 1. Instituting a process for performing multiple reviews of data included in the RHND assumptions to improve quality control;
  2. Creating additional process documents to provide evidence of adequate consideration of all factors required by state law in its needs assessment;
  3. Completing a formal analysis of healthy vacancy rate trends to support their use of a 5% vacancy target rate for healthy housing markets; and
  4. Formalizing a technical assistance document to use when reviewing COG data on comparable regions and healthy housing markets.

DOF also committed to, and completed, the following actions:

1. Reviewing its population projections for counties after 2020 Census data was made available and adjust the methodology as necessary; and
2. Reviewing assumptions used in projecting household formation rates after the release of more detailed 2020 Census data and better document this review.^[2]
3. Policy Considerations. This bill would require HCD to publish more of its data sources and methodology factors before finalizing the RHND. It would also require HCD to assemble and convene advisory panels for each future COG’s RHND process and consult with those panels during the formation of the RHND methodology and in reviewing all the data points listed above when formulating the existing and projected housing need for each region for each future housing element cycle. This consultation is in addition to the existing consultation requirements that currently exist with the COGs themselves. The panel would have to be comprised of a US Census Bureau-affiliated practitioner, a data expert, and a representative from the COG. This would build in another layer of consultation and review to the RHND process, which is somewhat duplicative given the department’s existing COG consultation obligations, and would cause delays in the development of the final RHND, which HCD must provide to the COG no later than two years prior to the scheduled revision of the housing element. Though the intention of the bill is to fold the panel consultation into the existing RHND timeline, this would extend that process and it is also unclear what HCD’s obligations would be to respond to the advisory panel’s feedback.

The author has agreed to amend the bill to require HCD to engage in a single stakeholder process at the start of each RHNA cycle, rather than hold individual HCD and COG advisory panels. HCD recently completed a similar effort, resulting in part in the California’s Housing Future 2040 Report which includes a number of recommendations that HCD is currently implementing. These amendments would allow the subsequent HCD and COG consultation process to be informed by the various expertise currently required in the bill without causing the delays resulting from individual panels. However, this would only begin to apply in the 8^th cycle. To ensure improved transparency and accountability for the current 7^th RHNA cycle, the author has agreed to work with HCD and the committee going forward to further detail HCD’s ongoing engagement with COGs and other stakeholders.

1. Opposition. South Pasadena Residents for Responsible Growth are opposed to the bill because they don’t believe the RHNA process would truly be improved or become more transparent by the presence of the sponsor on the advisory panel.  

Related Legislation:

AB 2597 (Ward, 2024) — modifies future housing element due dates for the Southern California Association of Governments by creating two split phases of adoption due dates. This bill is pending before the Appropriations Committee.

SB 828 (Wiener, Chapter 974, Statutes of 2018) — made a number of changes to the RHND and RHNA process, including adding more specificity to certain information regarding overcrowding rates, vacancy rates, and adding a requirement to include data on the percentage of cost burdened households in the RHND.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

POSITIONS: (Communicated to the committee before noon on Wednesday,

June 26, 2024.)

SUPPORT:

Southern California Association of Governments (SCAG) (Sponsor)
Association of Bay Area Governments
California Contract Cities Association
California State Association of Counties
City of Cerritos
City of Santa Ana
City of Simi Valley
City of Thousand Oaks
County of Los Angeles
League of California Cities
Livable California
Madera County Transportation Commission
Marin County Council of Mayors and Councilmembers
Metropolitan Transportation Commission
Mission Street Neighbors

OPPOSITION:

South Pasadena Residents for Responsible Growth

-- END --

1. https://www.auditor.ca.gov/reports/2021-125/index.html#section1 ↑

2. https://www.auditor.ca.gov/reports/2021-125/index.html#section6 ↑

ASSEMBLY THIRD READING

ATR Bill Id:AB 2485

Author:(Juan Carrillo)

As Amended Ver:March 19, 2024

Majority vote

SUMMARY

Requires the Department of Housing and Community Development (HCD) to take certain actions in determining the existing and projected housing need for each region through the regional housing needs determination (RHND) process.

Major Provisions

1. Requires HCD to publish on its website the data sources, analyses, and methodology to be used by the department to determine the RHND, including specified assumptions and factors used in and applied to the Department of Finance (DOF) projections and engagement process with the council of governments (COG), prior to finalization of the RHND.
2. Requires HCD, for the seventh and subsequent housing element cycles, to assemble and convene an advisory panel to advise HCD on its assumptions and the methodology it shall use for purposes of the RHND. Requires the panel to be composed of all of the following:
   1. A United States Census Bureau-affiliated practitioner;
   2. An expert on specified data; and
   3. A representative from the COG.
3. Requires HCD to consult with the advisory panel before making determinations in writing on specified data assumptions and the methodology it shall use for the RHND, and to provide the written determinations to the COG and publish them on HCD's website.

COMMENTS

California's Housing Crisis: California is in the midst of a severe housing crisis. Over two-thirds of low-income renters are paying more than 30% of their income toward housing, a "rent burden" that means they have to sacrifice other essentials such as food, transportation, and health care.^[1] In 2023, over 181,000 Californians experienced homelessness on a given night, with a sharp increase in the number of people who became homeless for the first time.^[2] The crisis is driven in large part by the lack of affordable rental housing for lower income people. According to the California Housing Partnership's (CHP) Housing Need Dashboard, in the current market, nearly 2 million extremely low-income and very low-income renter households are competing for roughly 687,000 available and affordable rental units in the state. Over three-quarters of the state's extremely low-income households and over half of the state's very low-income households are severely rent burdened, paying more than 50% of their income toward rent each month. CHP estimates that the state needs an additional 1.3 million housing units affordable to very low-income Californians to eliminate the shortfall.^[3] By contrast, production in the past decade has been under 100,000 housing units per year – including less than 10,000 units of affordable housing per year.^[4]

Adoption and Implementation of Housing Elements: One important tool in addressing the state's housing crisis is to ensure that all of the state's 539 cities and counties appropriately plan for new housing. Such planning is required through the housing element of each community's General Plan, which outlines a long-term plan for meeting the community's existing and projected housing needs. Cities and counties are required to update their housing elements every eight years in most of the high population parts of the state, and five years in areas with smaller populations. Localities must adopt a legally valid housing element by their statutory deadline for adoption. Failure to do so can result in certain escalating penalties, including exposure to the "builder's remedy" as well as public or private lawsuits, financial penalties, potential loss of permitting authority, or even court receivership.

Among other things, the housing element must demonstrate how the community plans to accommodate its share of its region's housing needs allocation (RHNA), which is a figure determined by HCD through a demographic analysis of housing needs, existing housing stock, and population projections in consultation with DOF and the COG. HCD establishes its determination of each COG's regional housing targets across the state for the next five- or eight-year planning cycle. Each COG (or in some areas, HCD acting directly as COG) then sub-allocates the RHNA to each local government within the COG's jurisdiction, and in turn each jurisdiction uses its housing element to show how it will accommodate that number of new housing units, split out by income level and with a focus on certain special needs housing types and on affirmatively furthering fair housing.

It is critical that local jurisdictions adopt legally compliant housing elements on time in order to meet statewide housing goals and create the environment for the successful construction of desperately needed housing at all income levels. Unless communities plan for production and preservation of affordable housing, new housing will be slow or extremely difficult to build. Adequate zoning, removal of regulatory barriers, protection of existing stock and targeting of resources are essential to obtaining a sufficient permanent supply of housing affordable to all economic segments of the community. Although not requiring the community to develop the housing, housing element law requires the community to plan for housing. Recognizing that local governments may lack adequate resources to house all those in need, the law nevertheless mandates that the community do all that it can and not engage in exclusionary zoning practices.

RHND/RHNA Methodology: The RHND/RHNA process is used to determine how many new homes, and the affordability level of those homes, each local government must plan for in its housing element to cover the duration of the next eight-year planning cycle. The RHND is assigned at the COG level, while RHNA is suballocated to subregions of the COG or directly to local governments. RHNA is assigned via four income categories: very low-income (0-50% of AMI), low-income (50-80% of AMI), moderate income (80-120% of AMI), and above moderate income (120% or more of AMI).

The cycle begins with HCD and the Department of Finance projecting new RHND numbers every five or eight years, depending on the region. DOF produces population projections and the COG also develops projections during its RTP forecast. Then, 26 months before the housing element due date for the region, HCD must meet and consult with the COG and share the data assumptions and methodology that they will use to produce the RHND. The COG provides HCD with its own regional data on several criteria, including:

• 1. Anticipated household growth associated with projected population increases;
  2. Household size data and trends in household size;
  3. The percentage of households that are overcrowded, as defined, and the overcrowding rate for a comparable housing market, as defined;
  4. The rate of household formation, or headship rates, based on age, gender, ethnicity, or other established demographic measures;
  5. The vacancy rates in existing housing stock, and the vacancy rates for healthy housing market functioning and regional mobility, as well as housing replacement needs, as specified;
  6. Other characteristics of the composition of the projected population;
  7. The relationship between jobs and housing, including any imbalance between jobs and housing;
  8. The percentage of households that are cost burdened and the rate of housing cost burden for a healthy housing market, as defined; and
  9. The loss of units during a declared state of emergency during the planning period immediately preceding the relevant housing element cycle that have yet to be rebuilt or replaced at the time of the data request.

HCD can take this information and use it to modify its own methodology, if it agrees with the data the COG produced, or can reject it if there are other factors or data that HCD feels is better or more accurate. Then, after a consultation with the COG, HCD makes written determinations on the data it is using for each of the factors bulleted above, and provides that information in writing to the COG. HCD uses that data to produce the final RHND. The COG must then take the RHND and create an allocation methodology that distributes the housing need equitably amongst all the local governments in its region.

In past housing element cycles, RHNA had been criticized as being a political rather than a methodologically sound, data-driven process. In the past, jurisdictions with a higher share of wealthier, whiter residents were more likely to have received lower allocations of moderate and lower income housing, while more diverse cities sometimes received higher allocations of those categories. The Legislature made a number of changes to the RHND, RHNA, and housing element process over the past several years to strengthen the law and restrict the ability of jurisdictions to evade their housing obligations.

2022 RHNA Audit: A March 2022 audit identified a handful of issues with HCD's RHND data and review processes. In response to the audit's findings, HCD committed to, and completed, the following actions:

• 1. Instituting a process for performing multiple reviews of data included in the RHND assumptions to improve quality control;
  2. Creating additional process documents to provide evidence of adequate consideration of all factors required by state law in its needs assessment;
  3. Completing a formal analysis of healthy vacancy rate trends to support their use of a 5% vacancy target rate for healthy housing markets; and
  4. Formalizing a technical assistance document to use when reviewing COG data on comparable regions and healthy housing markets.

Policy Considerations: This bill would require HCD to publish more of its data sources and methodology factors before finalizing the RHND. It would also require HCD to assemble and convene advisory panels for each future COG's RHND process and consult with those panels during the formation of the RHND methodology and in reviewing all the data points listed above when formulating the existing and projected housing need for each region for each future housing element cycle. This consultation is in addition to the existing consultation requirements that currently exist with the COGs themselves. The panel would have to be comprised of a US Census Bureau-affiliated practitioner, a data expert, and a representative from the COG. This would build in another layer of consultation and review to the RHND process, which may be somewhat duplicative given the department's existing COG consultation obligations, and could cause delays in the development of the final RHND, which HCD must provide to the COG no later than two years prior to the scheduled revision of the housing element. Though the panel consultation would be folded into the existing RHND timeline, it is unclear what HCD's obligations would be to respond to the advisory panel's feedback.

According to the Author

"There are more than 181,000 Californians who are unhoused. I believe we have made good progress at both the state and local levels when it comes to planning for more housing, and with each RHNA cycle, we are refining the process. But we must do better. The California State Auditor's report published in March 2022 on HCD's RHNA determination process highlighted the need for accountability and transparency on HCD's methodology and assumptions. HCD's assumptions and methodology should be clear and accessible to stakeholders to ensure confidence in the process. That is why AB 2485 is focused on embedding inclusivity and transparency in HCD's engagement and outreach efforts which are critical to fostering the collaboration and trust that are essential to housing production in California."

Arguments in Support

According to the California Association of COGs, "On behalf of the state's Councils of Governments that are a key partner to HCD in the Regional Housing Need Allocation (RHNA) process, we support AB 2485 for improvements it would make to the RHNA determination process. … One of the challenges of the RHNA process is that those that must implement it do not always understand the basis for the numbers. As a result, it is often panned as a mere state mandate even by those that understand the need to address the state's housing crises. A process that connects the housing determination to the state goal in an evidence-based way will lead to better policy implementation."

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Assembly Appropriations Committee, HCD estimates ongoing General Fund costs of $200,000 annually for one staff position to accommodate the additional workload. Specific duties include convening and moderating advisory panels for 20 COGs, documenting HCD's determinations, and coordinating updates to the department's website.

According to the Legislative Analyst's Office, the General Fund faces a structural deficit in the tens of billions of dollars over the next several fiscal years. 

VOTES

ASM HOUSING AND COMMUNITY DEVELOPMENT: 8-0-1

YES: Ward, Joe Patterson, Grayson, Kalra, Quirk-Silva, Reyes, Sanchez, Wilson

ABS, ABST OR NV: Lee

ASM LOCAL GOVERNMENT: 8-0-1

YES: Juan Carrillo, Waldron, Valencia, Kalra, Pacheco, Ramos, Ward, Wilson

ABS, ABST OR NV: Essayli

ASM APPROPRIATIONS: 15-0-0

YES: Wicks, Sanchez, Arambula, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Grayson, Haney, Hart, Jim Patterson, Pellerin, Ta, Villapudua

UPDATED

VERSION: March 19, 2024

CONSULTANT: Nicole Restmeyer / H. & C.D. / (916) 319-2085 FN: 0003079

1. https://chpc.net/housingneeds/ ↑

2. https://www.huduser.gov/portal/datasets/ahar/2023-ahar-part-1-pit-estimates-of-homelessness-in-the-us.html ↑

3. https://chpc.net/housingneeds/ ↑

4. https://www.hcd.ca.gov/policy-research/housing-challenges.shtml ↑

Date of Hearing: May 15, 2024

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 2485

Author:(Juan Carrillo) – As Amended Ver:March 19, 2024

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

SUMMARY:

This bill requires the Department of Housing and Community Development (HCD) to publish on its public website the data sources, analyses, and methodology used to complete each regional housing needs determination prior to finalizing the regional determination, among other requirements.

Specifically, this bill:

1. Requires HCD to publish on its website the data sources, analyses, and methodology to be used by the department to complete each regional housing need determination, including specified assumptions and factors used in and applied to the Department of Finance (DOF) projections and engagement process with the council of governments (COG), prior to finalizing of the regional determination.
2. Requires HCD, for the seventh and subsequent housing element cycles, to convene an advisory panel to advise the department on the data assumptions and methodology it should use for determining regional housing needs. Requires the panel to be composed of all of the following:
   1. A United States Census Bureau-affiliated practitioner.
   2. An expert on specified data.
   3. A representative from the COG.
3. Requires HCD to consult with the advisory panel before making determinations in writing on specified data assumptions and the methodology it will use for the regional housing needs determination and to publish these determinations on HCD’s website.

FISCAL EFFECT:

HCD estimates ongoing General Fund costs of $200,000 annually for one staff position to accommodate the additional workload. Specific duties include convening and moderating advisory panels for 20 COGs, documenting HCD’s determinations, and coordinating updates to the department’s website.

According to the Legislative Analyst’s Office, the General Fund faces a structural deficit in the tens of billions of dollars over the next several fiscal years. 

COMMENTS:

1. Purpose. According to the author:

The California State Auditor’s report published in March 2022 on HCD’s RHNA determination process highlighted the need for accountability and transparency on HCD’s methodology and assumptions. HCD’s assumptions and methodology should be clear and accessible to stakeholders to ensure confidence in the process. That is why [this bill] is focused on embedding inclusivity and transparency in HCD’s engagement and outreach efforts which are critical to fostering the collaboration and trust that are essential to housing production in California.

1. Background. The regional housing needs assessment (RHNA) is used to determine the number and affordability level of new homes each local government must plan for in its housing element over the next eight-year planning cycle. HCD first collaborates with regional Councils of Government (COGs) to establish methodologies for calculating housing needs. HCD then communicates its estimations and final determinations to the COGs who then allocate the housing need to subregions of the COG or directly to local governments. Each local government then develops an implementation plan to accommodate its share of need through updates to its housing element. The RHNA is assigned via four income categories: very low-income (0-50% of area medium income (AMI)), low-income (50-80% of AMI), moderate income (80-120% of AMI), and above moderate income (120% or more of AMI).

In March 2022, the State Auditor (Auditor) examined the RHNA process and identified several errors in HCD’s housing projections, resulting in a decrease in the housing amounts assigned to some jurisdictions. The Auditor attributed HCD’s miscalculations to a lack of oversight in staff data entry and a failure to consider all factors required by state law in its estimates. Additionally, the Auditor found these shortcomings risk eroding public confidence in HCDs ability to provide accurate information to COGs about housing needs. The Auditor recommended a formal review process and thorough documentation measures to ensure all RHNA calculations provided to COGs by the HCD are accurate.

This bill responds to this recommendation by establishing an expert panel to advise HCD on its assumptions, data, and analyses prior to final RHNA determinations. The California Association of COGs, writes in support:

On behalf of the state’s Councils of Governments that are a key partner to HCD in the RHNA process, we support [this bill] for improvements it would make to the RHNA determination process. One of the challenges of the RHNA process is that those that must implement it do not always understand the basis for the numbers. As a result, it is often panned as a mere state mandate even by those that understand the need to address the state’s housing crises. A process that connects the housing determination to the state goal in an evidence-based way will lead to better policy implementation.

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

Date of Hearing: April 24, 2024

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Juan Carrillo, Chair

ABPCA Bill Id:AB 2485 (

Author:Juan Carrillo) – As Amended Ver:March 19, 2024

SUBJECT: Regional housing need: determination

SUMMARY: Requires the Department of Housing and Community Development (HCD) to consult with an advisory panel of experts and publish methodologies used while determining the existing and projected housing need for each region through the regional housing needs determination (RHND) process. Specifically, this bill:

1. Requires HCD to publish on its website the data sources, analyses, and methodology to be used by the department to determine the RHND, including specified assumptions and factors used in and applied to the Department of Finance (DOF) projections and engagement process with the council of governments (COG), prior to finalization of the RHND.
2. Requires HCD, for the seventh and subsequent housing element cycles, to assemble and convene an advisory panel to advise HCD on its assumptions and the methodology it shall use for purposes of the RHND. Requires the panel to be composed of all of the following:
   1. A United States Census Bureau-affiliated practitioner;
   2. An expert on specified data; and
   3. A representative from the COG.
3. Requires HCD to consult with the advisory panel before making determinations in writing on specified data assumptions and the methodology it shall use for the RHND, and to provide the written determinations to the COG and publish them on HCD’s website.

EXISTING LAW:

1. Provides that each community’s fair share of housing be determined through the regional housing needs determination and allocation (RHND/RHNA) process. Sets out the process as follows: (a) DOF and HCD develop regional housing needs estimates; (b) COGs allocate housing within each region based on these determinations, and where a COG does not exist, HCD conducts the allocations; and (c) cities and counties incorporate these allocations into their housing elements. [Government Code (GOV) §§ 65584-65584.01]
2. Requires HCD, in consultation with each COG, to determine the RHND for each region using population projections produced by DOF and regional population forecasts used in preparing regional transportation plans (RTP), in consultation with each COG. If the total regional population forecast for the projection year developed by the COG and used in the RTP is within a range of 1.5% of DOF’s projection, then the COG’s forecast must be used for the RHND. If the difference between the COG and DOF’s projection is greater than 1.5%, then HCD and the COG must meet to discuss variances in methodology used for the projections and seek agreement on a projection for the region to be used for the RHND. If agreement is not reached, then DOF’s projection must be used, and may be modified by HCD as a result of discussions with the COG. [GOV § 65584.01(a)]
3. Requires HCD, at least 26 months prior to the housing element adoption deadline for the region and prior to developing the existing and projected housing need for a region, to meet and consult with the COG regarding the assumptions and methodology to be used by HCD to determine the RHND. Requires the COG to provide data assumptions from their projections, including, if available, the following data for the region:
   1. Anticipated household growth associated with projected population increases;
   2. Household size data and trends in household size;
   3. The percentage of households that are overcrowded, as defined, and the overcrowding rate for a comparable housing market, as defined;
   4. The rate of household formation, or headship rates, based on age, gender, ethnicity, or other established demographic measures;
   5. The vacancy rates in existing housing stock, and the vacancy rates for healthy housing market functioning and regional mobility, as well as housing replacement needs, as specified;
   6. Other characteristics of the composition of the projected population;
   7. The relationship between jobs and housing, including any imbalance between jobs and housing;
   8. The percentage of households that are cost burdened and the rate of housing cost burden for a healthy housing market, as defined; and
   9. The loss of units during a declared state of emergency during the planning period immediately preceding the relevant housing element cycle that have yet to be rebuilt or replaced at the time of the data request. [GOV § 65584.01(b)(1)]
4. Allows HCD to accept or reject the information provided by the COG in 3) or modify its own assumptions or methodology based on this information. [GOV § 65584.01(b)(2)]
5. Requires HCD, after consultation with the COG, to make determinations in writing on the assumptions for each of the factors in 3) and the methodology it shall use, and requires HCD to provide these determinations to the COG. [GOV § 65584.01(b)(2)]
6. Requires HCD, after consultation with the COG, to make a determination of the region’s existing and projected housing need based upon the assumptions and methodology determined in 3)-5). Requires the RHND to reflect the achievement of a feasible balance between jobs and housing within the region using the regional employment projections in the applicable regional transportation plan. [GOV § 65584.01(c)(1)]
7. Requires HCD to determine the existing and projected housing need for each region at least two years prior to the scheduled revision of the housing element, and requires the appropriate COG, or HCD for cities and counties without a COG, to adopt a final regional housing needs plan that allocates a share of the regional housing need to each city, county, or city and county at least one year prior to the scheduled revision for the region in 2) above. [GOV § 65584(b)]
8. Requires each COG or delegate subregion, at least two years before a scheduled revision of the housing element in 2), to develop, in consultation with HCD, a proposed methodology for distributing the existing and projected regional housing need to cities, counties, and cities and counties within the region or subregion. [GOV § 65584.04(a)]
9. Requires each city and county to adopt a housing element, which must contain specified information, programs, and objectives, including:
   1. An assessment of housing needs and an inventory of resources and constraints relevant to the meeting of these needs, including a quantification of the locality’s existing and projected housing needs for all income levels; an inventory of land suitable and available for residential development; an analysis of potential and actual governmental and nongovernmental constraints upon the maintenance, improvement, or development of housing for all income levels; and a demonstration of local efforts to remove constraints that hinder the locality from meeting its share of the regional housing need, among other things;
   2. A statement of the community’s goals, quantified objectives, and policies relative to affirmatively furthering fair housing and to the maintenance, preservation, improvement, and development of housing; and
   3. A program that sets forth a schedule of actions during the planning period, and timelines for implementation, that the local government is undertaking to implement the policies and achieve the goals and objectives of the housing element, including actions that will be taken to make sites available during the planning period with appropriate zoning and development standards and with services and facilities to accommodate that portion of the local government’s share of RHNA for each income level that could not be accommodated on sites identified in the sites inventory without rezoning, among other things. [GOV § 65583(a)-(c)]

FISCAL EFFECT: This bill is keyed fiscal.

COMMENTS:

1. Bill Summary. This bill requires HCD to take certain actions in determining the existing and projected housing need for each region through the RHND process to ensure transparency and accuracy in RHNA calculations and allocations, as follows:
2. Advisory Panel of Experts. Currently, HCD is required to meet with COGs during the RHNA calculation process to discuss methodologies and data sets being used through a flexible and undefined consultation process. This bill would require HCD to further convene with an advisory panel of experts implemented within the existing consultation timeline to promote accuracy in the data assumption and calculation process. The panel would include a United States Census Bureau-affiliated practitioner, an expert on specified data, and a representative from the COG. Additionally, this panel would be purely advisory and hold no authority to make an executive decision whatsoever.
3. Website Publishing. After HCD consults with the advisory panel of experts, it will be required to publish the data sources, analyses, and methodologies that they will use in determining the RHND prior to finalizing the amount. HCD will also need to include specified assumptions and factors used in and applied to the DOF projections and the engagement process with the COGs and advisory panel of experts.

This bill is sponsored by the Southern California Association of Governments (SCAG).

1. Author’s Statement. According to the author, “There are more than 181,000 Californians who are unhoused. I believe we have made good progress at both the state and local levels when it comes to planning for more housing, and with each RHNA cycle, we are refining the process. But we must do better. The California State Auditor’s report published in March 2022 on HCD’s RHNA determination process highlighted the need for accountability and transparency on HCD’s methodology and assumptions. HCD’s assumptions and methodology should be clear and accessible to stakeholders to ensure confidence in the process. That is why AB 2485 is focused on embedding inclusivity and transparency in HCD’s engagement and outreach efforts which are critical to fostering the collaboration and trust that are essential to housing production in California.”
2. California’s Housing Crisis. California is in the midst of a severe housing crisis. Over two-thirds of low-income renters are paying more than 30% of their income toward housing, a “rent burden” that means they have to sacrifice other essentials such as food, transportation, and health care. In 2023, over 181,000 Californians experienced homelessness on a given night, with a sharp increase in the number of people who became homeless for the first time. The crisis is driven in large part by the lack of affordable rental housing for lower income people. According to the California Housing Partnership’s (CHP) Housing Need Dashboard, in the current market, nearly 2 million extremely low-income and very low-income renter households are competing for roughly 687,000 available and affordable rental units in the state. Over three-quarters of the state’s extremely low-income households and over half of the state’s very low-income households are severely rent burdened, paying more than 50% of their income toward rent each month. CHP estimates that the state needs an additional 1.3 million housing units affordable to very low-income Californians to eliminate the shortfall. By contrast, production in the past decade has been under 100,000 housing units per year – including less than 10,000 units of affordable housing per year.
3. Adoption and Implementation of Housing Elements. One important tool in addressing the state’s housing crisis is to ensure that all of the state’s 539 cities and counties appropriately plan for new housing. Such planning is required through the housing element of each community’s General Plan, which outlines a long-term plan for meeting the community’s existing and projected housing needs. Cities and counties are required to update their housing elements every eight years in most of the high population parts of the state, and five years in areas with smaller populations. Localities must adopt a legally valid housing element by their statutory deadline for adoption. Failure to do so can result in certain escalating penalties, including exposure to the “builder’s remedy” as well as public or private lawsuits, financial penalties, potential loss of permitting authority, or even court receivership.

Among other things, the housing element must demonstrate how the community plans to accommodate its share of its region’s housing needs allocation (RHNA), which is a figure determined by HCD through a demographic analysis of housing needs, existing housing stock, and population projections in consultation with DOF and the COG. HCD establishes its determination of each COG’s regional housing targets across the state for the next five- or eight-year planning cycle. Each COG (or in some areas, HCD acting directly as COG) then sub-allocates the RHNA to each local government within the COG’s jurisdiction, and in turn each jurisdiction uses its housing element to show how it will accommodate that number of new housing units, split out by income level and with a focus on certain special needs housing types and on affirmatively furthering fair housing.

1. RHND/RHNA Methodology. The RHND/RHNA process is used to determine how many new homes, and the affordability level of those homes, each local government must plan for in its housing element to cover the duration of the next eight-year planning cycle. The RHND is assigned at the COG level, while RHNA is suballocated to subregions of the COG or directly to local governments. RHNA is assigned via four income categories: very low-income (0-50% of AMI), low-income (50-80% of AMI), moderate income (80-120% of AMI), and above moderate income (120% or more of AMI).

The cycle begins with HCD and the Department of Finance projecting new RHND numbers every five or eight years, depending on the region. DOF produces population projections and the COG also develops projections during its RTP forecast. Then, 26 months before the housing element due date for the region, HCD must meet and consult with the COG and share the data assumptions and methodology that it will use to produce the RHND. The COG provides HCD with its own regional data on several criteria, including:

• 1. Anticipated household growth associated with projected population increases;
  2. Household size data and trends in household size;
  3. The percentage of households that are overcrowded, as defined, and the overcrowding rate for a comparable housing market, as defined;
  4. The rate of house formation, or headship rates, based on age, gender, ethnicity, or other established demographic measures;
  5. The vacancy rates in existing housing stock, and the vacancy rates for healthy housing market functioning and regional mobility, as well as housing replacement needs, as specified;
  6. Other characteristics of the composition of the projected population;
  7. The relationship between jobs and housing, including any imbalance between jobs and housing;
  8. The percentage of households that are cost burdened and the rate of housing cost burden for a healthy housing market, as defined; and
  9. The loss of units during a declared state of emergency during the planning period immediately preceding the relevant housing element cycle that have yet to be rebuilt or replaced at the time of the data request.

HCD can take this information and use it to modify its own methodology, if it agrees with the data the COG produced, or can reject it if there are other factors or data that HCD feels is better or more accurate. Then, after a consultation with the COG, HCD makes written determinations on the data it is using for each of the factors bulleted above, and provides that information in writing to the COG. HCD uses that data to produce the final RHND. The COG must then take the RHND and create an allocation methodology that distributes the housing need equitably amongst all the local governments in its region. The RHNA methodology is statutorily obligated to further all of the following objectives:

1. Increase the housing supply and mix of housing types, tenure, and affordability in all cities and counties within the region in an equitable manner, which must result in each jurisdiction receiving an allocation of units for low- and very low-income households;
2. Promote infill development, socioeconomic equity, the protection of environmental and agricultural resources, and achievement of regional climate change reduction targets;
3. Promote and improve intraregional relationship between jobs and housing, including an improved balance between the number of low-wage jobs and the number of housing units affordable to low-wage workers in each jurisdiction;
4. Allocate a lower proportion of housing need to an income category when a jurisdiction already has a disproportionately high share of households in that income category; and
5. Affirmatively further fair housing.

In past housing element cycles, RHNA had been criticized as being a political rather than a methodologically sound, data-driven process. In the past, jurisdictions with a higher share of wealthier, whiter residents were more likely to have received lower allocations of moderate and lower income housing, while more diverse cities sometimes received higher allocations of those categories. The Legislature made a number of changes to the RHND, RHNA, and housing element process over the past several years to strengthen the law and restrict the ability of jurisdictions to evade their housing obligations.

1. 2022 RHNA Audit. In a March 2022 letter to the Legislature, the California State Auditor wrote:

“As directed by the Joint Legislative Audit Committee, my office evaluated the Regional Housing Needs Assessment (needs assessment) process that the Department of Housing and Community Development (HCD) uses to provide key housing guidance for the State’s local governments. The availability of sufficient housing is of vital statewide importance, and HCD’s needs assessments are what allow jurisdictions to plan for the development of that housing. Overall, our audit determined that HCD does not ensure that its needs assessments are accurate and adequately supported.

“In reviewing the needs assessments for three regions, we identified multiple areas in which HCD must improve its process. For example, HCD does not satisfactorily review its needs assessments to ensure that staff accurately enter data when they calculate how much housing local governments must plan to build. As a result, HCD made errors that reduced its projected need for housing in two of the regions we reviewed. We also found that HCD could not demonstrate that it adequately considered all of the factors that state law requires, and it could not support its use of healthy housing vacancy rates. This insufficient oversight and lack of support for its considerations risks eroding public confidence that HCD is informing local governments of the appropriate amount of housing they will need.

“HCD’s needs assessments also rely on some projections that the Department of Finance (Finance) provides. While we found that most of Finance’s projections were reasonably accurate, it has not adequately supported the rates it uses to project the number of future households that will require housing units in the State. Although these household projections are a key component in HCD’s needs assessments, Finance has not conducted a proper study or obtained formal recommendations from experts it consulted to support its assumptions in this area. Finance intends to reevaluate its assumptions related to household growth as more detailed 2020 Census data becomes available later in the year, but without such efforts, Finance cannot ensure that it is providing the most appropriate information to HCD.”

In response to the audit’s findings, HCD committed to, and completed, the following actions:

• 1. Instituting a process for performing multiple reviews of data included in the RHND assumptions to improve quality control;
  2. Creating additional process documents to provide evidence of adequate consideration of all factors required by state law in its needs assessment;
  3. Completing a formal analysis of healthy vacancy rate trends to support their use of a 5% vacancy target rate for healthy housing markets; and
  4. Formalizing a technical assistance document to use when reviewing COG data on comparable regions and healthy housing markets.

DOF also committed to, and completed, the following actions:

1. Reviewing its population projections for counties after 2020 Census data was made available and adjust the methodology as necessary; and
2. Reviewing assumptions used in projecting household formation rates after the release of more detailed 2020 Census data and better document this review.
3. Arguments in Support. The Southern California Association of Governments (SCAG), sponsor of this bill, states, “Given the importance of the RHNA program to alleviate the state’s housing crisis, accompanied by the sheer magnitude of needed housing compared to what has been built in the past, there is a severe risk to the credibility of the process if it is insufficiently transparent, credible, and robust. AB 2485 would mitigate such risks by improving the development of the RHNA determination and ensuring its accuracy and transparency in two pivotal ways. First, AB 2485 would establish procedures for HCD to publicize its data sources, analyses, and methodology before finalizing a region’s regional determination. Second, AB 2485 requires HCD to establish and convene a panel of experts to advise the department on its assumptions, data, and analyses before making its final determination on a region.

“If a local Housing Element is based on an inaccurate RHNA determination, that could directly translate to housing units that are unaccounted for and thus remain unbuilt. This is made even more critical given that RHNA accounts for future growth as well as current needs. In a March 2022 letter to the Legislature, the California State Auditor found that two of the three COG regions it studied had received underassessed housing needs. Therefore, it is imperative that the determinations provided to each region and the housing allocation provided to each jurisdiction be as accurate as possible while ensuring that the communities using these numbers are confident in that accuracy.”

1. Arguments in Opposition. None on file.
2. Related Legislation. AB 2361 (Davies) would reauthorize localities in the counties of Orange and San Diego to trade or transfer their RHNA in exchange for financial compensation. This bill is currently pending in the Assembly Committee on Housing and Community Development.

AB 2597 (Ward) would modify future housing element due dates for the Southern California Association of Governments by creating two split phases of adoption due dates. This bill passed out of the Assembly Committee on Housing and Community Development on a 9-0 vote and recently passed out of the Assembly Committee on Local Government on a 9-0 vote. This bill is currently pending on the Assembly Floor.

1. Previous Legislation. SB 828 (Wiener), Chapter 974, Statutes of 2018, made a number of changes to the RHND and RHNA process, including adding more specificity to certain information regarding overcrowding rates, vacancy rates, and adding a requirement to include data on the percentage of cost burdened households in the RHND.
2. Double Referral. This bill was double-referred to the Assembly Housing Committee where it passed on a 9-0 vote on April 17, 2024.

REGISTERED SUPPORT / OPPOSITION:

Support

Southern California Association of Governments (SPONSOR)

California Association of Councils of Governments

City of Chino Hills

City of Lomita

City of Monrovia

City of Palm Desert

City of Thousand Oaks

Livable California

San Gabriel Valley Council of Governments

Opposition

None on file.

Analysis Prepared by: Claire Norton / L. GOV. / (916) 319-3958

Date of Hearing: April 17, 2024

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

Christopher M. Ward, Chair

ABPCA Bill Id:AB 2485 (

Author:Juan Carrillo) – As Amended Ver:March 19, 2024

SUBJECT: Regional housing need: determination

SUMMARY: Requires the Department of Housing and Community Development (HCD) to take certain actions in determining the existing and projected housing need for each region through the regional housing needs determination (RHND) process. Specifically, this bill:

1. Requires HCD to publish on its website the data sources, analyses, and methodology to be used by the department to determine the RHND, including specified assumptions and factors used in and applied to the Department of Finance (DOF) projections and engagement process with the council of governments (COG), prior to finalization of the RHND.
2. Requires HCD, for the seventh and subsequent housing element cycles, to assemble and convene an advisory panel to advise HCD on its assumptions and the methodology it shall use for purposes of the RHND. Requires the panel to be composed of all of the following:
   1. A United States Census Bureau-affiliated practitioner;
   2. An expert on specified data; and
   3. A representative from the COG.
3. Requires HCD to consult with the advisory panel before making determinations in writing on specified data assumptions and the methodology it shall use for the RHND, and to provide the written determinations to the COG and publish them on HCD’s website.

EXISTING LAW:

1. Provides that each community’s fair share of housing be determined through the regional housing needs determination and allocation (RHND/RHNA) process. Sets out the process as follows: (a) DOF and HCD develop regional housing needs estimates; (b) COGs allocate housing within each region based on these determinations, and where a COG does not exist, HCD conducts the allocations; and (c) cities and counties incorporate these allocations into their housing elements. (Government Code (GC) Section 65584 and 65584.01)
2. Requires HCD, in consultation with each COG, to determine the RHND for each region using population projections produced by DOF and regional population forecasts used in preparing regional transportation plans (RTP), in consultation with each COG. If the total regional population forecast for the projection year developed by the COG and used in the RTP is within a range of 1.5% of DOF’s projection, then the COG’s forecast must be used for the RHND. If the difference between the COG and DOF’s projection is greater than 1.5%, then HCD and the COG must meet to discuss variances in methodology used for the projections and seek agreement on a projection for the region to be used for the RHND. If agreement is not reached, then DOF’s projection must be used, and may be modified by HCD as a result of discussions with the COG. (GC 65584.01(a))
3. Requires HCD, at least 26 months prior to the housing element adoption deadline for the region and prior to developing the existing and projected housing need for a region, to meet and consult with the COG regarding the assumptions and methodology to be used by HCD to determine the RHND. Requires the COG to provide data assumptions from their projections, including, if available, the following data for the region:
   1. Anticipated household growth associated with projected population increases;
   2. Household size data and trends in household size;
   3. The percentage of households that are overcrowded, as defined, and the overcrowding rate for a comparable housing market, as defined;
   4. The rate of household formation, or headship rates, based on age, gender, ethnicity, or other established demographic measures;
   5. The vacancy rates in existing housing stock, and the vacancy rates for healthy housing market functioning and regional mobility, as well as housing replacement needs, as specified;
   6. Other characteristics of the composition of the projected population;
   7. The relationship between jobs and housing, including any imbalance between jobs and housing;
   8. The percentage of households that are cost burdened and the rate of housing cost burden for a healthy housing market, as defined; and
   9. The loss of units during a declared state of emergency during the planning period immediately preceding the relevant housing element cycle that have yet to be rebuilt or replaced at the time of the data request. (GC 65584.01(b)(1))
4. Allows HCD to accept or reject the information provided by the COG in 3) or modify its own assumptions or methodology based on this information. (GC 65584.01(b)(2))
5. Requires HCD, after consultation with the COG, to make determinations in writing on the assumptions for each of the factors in 3) and the methodology it shall use, and requires HCD to provide these determinations to the COG. (GC 65584.01(b)(2))
6. Requires HCD, after consultation with the COG, to make a determination of the region’s existing and projected housing need based upon the assumptions and methodology determined in 3)-5). Requires the RHND to reflect the achievement of a feasible balance between jobs and housing within the region using the regional employment projections in the applicable regional transportation plan. (GC 65584.01(c)(1))
7. Requires HCD to determine the existing and projected housing need for each region at least two years prior to the scheduled revision of the housing element, and requires the appropriate COG, or HCD for cities and counties without a COG, to adopt a final regional housing needs plan that allocates a share of the regional housing need to each city, county, or city and county at least one year prior to the scheduled revision for the region in 2) above. (GC 65584(b))
8. Requires each COG or delegate subregion, at least two years before a scheduled revision of the housing element in 2), to develop, in consultation with HCD, a proposed methodology for distributing the existing and projected regional housing need to cities, counties, and cities and counties within the region or subregion. (GC 65584.04(a))
9. Requires each city and county to adopt a housing element, which must contain specified information, programs, and objectives, including:
   1. An assessment of housing needs and an inventory of resources and constraints relevant to the meeting of these needs, including a quantification of the locality’s existing and projected housing needs for all income levels; an inventory of land suitable and available for residential development; an analysis of potential and actual governmental and nongovernmental constraints upon the maintenance, improvement, or development of housing for all income levels; and a demonstration of local efforts to remove constraints that hinder the locality from meeting its share of the regional housing need, among other things;
   2. A statement of the community’s goals, quantified objectives, and policies relative to affirmatively furthering fair housing and to the maintenance, preservation, improvement, and development of housing; and
   3. A program that sets forth a schedule of actions during the planning period, and timelines for implementation, that the local government is undertaking to implement the policies and achieve the goals and objectives of the housing element, including actions that will be taken to make sites available during the planning period with appropriate zoning and development standards and with services and facilities to accommodate that portion of the local government’s share of RHNA for each income level that could not be accommodated on sites identified in the sites inventory without rezoning, among other things. (GC 65583(a)-(c))

FISCAL EFFECT: Unknown.

COMMENTS:

Author’s Statement: According to the author, “There are more than 181,000 Californians who are unhoused. I believe we have made good progress at both the state and local levels when it comes to planning for more housing, and with each RHNA cycle, we are refining the process. But we must do better. The California State Auditor’s report published in March 2022 on HCD’s RHNA determination process highlighted the need for accountability and transparency on HCD’s methodology and assumptions. HCD’s assumptions and methodology should be clear and accessible to stakeholders to ensure confidence in the process. That is why AB 2485 is focused on embedding inclusivity and transparency in HCD’s engagement and outreach efforts which are critical to fostering the collaboration and trust that are essential to housing production in California.”

California’s Housing Crisis: California is in the midst of a severe housing crisis. Over two-thirds of low-income renters are paying more than 30% of their income toward housing, a “rent burden” that means they have to sacrifice other essentials such as food, transportation, and health care.^[1] In 2023, over 181,000 Californians experienced homelessness on a given night, with a sharp increase in the number of people who became homeless for the first time.^[2] The crisis is driven in large part by the lack of affordable rental housing for lower income people. According to the California Housing Partnership’s (CHP) Housing Need Dashboard, in the current market, nearly 2 million extremely low-income and very low-income renter households are competing for roughly 687,000 available and affordable rental units in the state. Over three-quarters of the state’s extremely low-income households and over half of the state’s very low-income households are severely rent burdened, paying more than 50% of their income toward rent each month. CHP estimates that the state needs an additional 1.3 million housing units affordable to very low-income Californians to eliminate the shortfall.^[3] By contrast, production in the past decade has been under 100,000 housing units per year – including less than 10,000 units of affordable housing per year.^[4]

Adoption and Implementation of Housing Elements: One important tool in addressing the state’s housing crisis is to ensure that all of the state’s 539 cities and counties appropriately plan for new housing. Such planning is required through the housing element of each community’s General Plan, which outlines a long-term plan for meeting the community’s existing and projected housing needs. Cities and counties are required to update their housing elements every eight years in most of the high population parts of the state, and five years in areas with smaller populations. Localities must adopt a legally valid housing element by their statutory deadline for adoption. Failure to do so can result in certain escalating penalties, including exposure to the “builder’s remedy” as well as public or private lawsuits, financial penalties, potential loss of permitting authority, or even court receivership.

Among other things, the housing element must demonstrate how the community plans to accommodate its share of its region’s housing needs allocation (RHNA), which is a figure determined by HCD through a demographic analysis of housing needs, existing housing stock, and population projections in consultation with DOF and the COG. HCD establishes its determination of each COG’s regional housing targets across the state for the next five- or eight-year planning cycle. Each COG (or in some areas, HCD acting directly as COG) then sub-allocates the RHNA to each local government within the COG’s jurisdiction, and in turn each jurisdiction uses its housing element to show how it will accommodate that number of new housing units, split out by income level and with a focus on certain special needs housing types and on affirmatively furthering fair housing.

It is critical that local jurisdictions adopt legally compliant housing elements on time in order to meet statewide housing goals and create the environment for the successful construction of desperately needed housing at all income levels. Unless communities plan for production and preservation of affordable housing, new housing will be slow or extremely difficult to build. Adequate zoning, removal of regulatory barriers, protection of existing stock and targeting of resources are essential to obtaining a sufficient permanent supply of housing affordable to all economic segments of the community. Although not requiring the community to develop the housing, housing element law requires the community to plan for housing. Recognizing that local governments may lack adequate resources to house all those in need, the law nevertheless mandates that the community do all that it can and not engage in exclusionary zoning practices.

RHND/RHNA Methodology: The RHND/RHNA process is used to determine how many new homes, and the affordability level of those homes, each local government must plan for in its housing element to cover the duration of the next eight-year planning cycle. The RHND is assigned at the COG level, while RHNA is suballocated to subregions of the COG or directly to local governments. RHNA is assigned via four income categories: very low-income (0-50% of AMI), low-income (50-80% of AMI), moderate income (80-120% of AMI), and above moderate income (120% or more of AMI).

The cycle begins with HCD and the Department of Finance projecting new RHND numbers every five or eight years, depending on the region. DOF produces population projections and the COG also develops projections during its RTP forecast. Then, 26 months before the housing element due date for the region, HCD must meet and consult with the COG and share the data assumptions and methodology that they will use to produce the RHND. The COG provides HCD with its own regional data on several criteria, including:

• • Anticipated household growth associated with projected population increases;
  • Household size data and trends in household size;
  • The percentage of households that are overcrowded, as defined, and the overcrowding rate for a comparable housing market, as defined;
  • The rate of household formation, or headship rates, based on age, gender, ethnicity, or other established demographic measures;
  • The vacancy rates in existing housing stock, and the vacancy rates for healthy housing market functioning and regional mobility, as well as housing replacement needs, as specified;
  • Other characteristics of the composition of the projected population;
  • The relationship between jobs and housing, including any imbalance between jobs and housing;
  • The percentage of households that are cost burdened and the rate of housing cost burden for a healthy housing market, as defined; and
  • The loss of units during a declared state of emergency during the planning period immediately preceding the relevant housing element cycle that have yet to be rebuilt or replaced at the time of the data request.

HCD can take this information and use it to modify its own methodology, if it agrees with the data the COG produced, or can reject it if there are other factors or data that HCD feels is better or more accurate. Then, after a consultation with the COG, HCD makes written determinations on the data it is using for each of the factors bulleted above, and provides that information in writing to the COG. HCD uses that data to produce the final RHND. The COG must then take the RHND and create an allocation methodology that distributes the housing need equitably amongst all the local governments in its region. The RHNA methodology is statutorily obligated to further all of the following objectives:

1. Increase the housing supply and mix of housing types, tenure, and affordability in all cities and counties within the regional in an equitable manner, which must result in each jurisdiction receiving an allocation of units for low- and very low-income households;
2. Promote infill development, socioeconomic equity, the protection of environmental and agricultural resources, and achievement of regional climate change reduction targets;
3. Promote an improved intraregional relationship between jobs and housing, including an improved balance between the number of low-wage jobs and the number of housing units affordable to low-wage workers in each jurisdiction;
4. Allocate a lower proportion of housing need to an income category when a jurisdiction already has a disproportionately high share of households in that income category; and
5. Affirmatively further fair housing.

In past housing element cycles, RHNA had been criticized as being a political rather than a methodologically sound, data-driven process. In the past, jurisdictions with a higher share of wealthier, whiter residents were more likely to have received lower allocations of moderate and lower income housing, while more diverse cities sometimes received higher allocations of those categories. The Legislature made a number of changes to the RHND, RHNA, and housing element process over the past several years to strengthen the law and restrict the ability of jurisdictions to evade their housing obligations.

2022 RHNA Audit: In a March 2022 letter to the Legislature, the California State Auditor wrote:

As directed by the Joint Legislative Audit Committee, my office evaluated the Regional Housing Needs Assessment (needs assessment) process that the Department of Housing and Community Development (HCD) uses to provide key housing guidance for the State’s local governments. The availability of sufficient housing is of vital statewide importance, and HCD’s needs assessments are what allow jurisdictions to plan for the development of that housing. Overall, our audit determined that HCD does not ensure that its needs assessments are accurate and adequately supported.

In reviewing the needs assessments for three regions, we identified multiple areas in which HCD must improve its process. For example, HCD does not satisfactorily review its needs assessments to ensure that staff accurately enter data when they calculate how much housing local governments must plan to build. As a result, HCD made errors that reduced its projected need for housing in two of the regions we reviewed. We also found that HCD could not demonstrate that it adequately considered all of the factors that state law requires, and it could not support its use of healthy housing vacancy rates. This insufficient oversight and lack of support for its considerations risks eroding public confidence that HCD is informing local governments of the appropriate amount of housing they will need.

HCD’s needs assessments also rely on some projections that the Department of Finance (Finance) provides. While we found that most of Finance’s projections were reasonably accurate, it has not adequately supported the rates its uses to project the number of future households that will require housing units in the State. Although these household projections are a key component in HCD’s needs assessments, Finance has not conducted a proper study or obtained formal recommendations from experts it consulted to support its assumptions in this area. Finance intends to reevaluate its assumptions related to household growth as more detailed 2020 Census data becomes available later in the year, but without such efforts, Finance cannot ensure that it is providing the most appropriate information to HCD.^[5]

In response to the audit’s findings, HCD committed to, and completed, the following actions:

• • Instituting a process for performing multiple reviews of data included in the RHND assumptions to improve quality control;
  • Creating additional process documents to provide evidence of adequate consideration of all factors required by state law in its needs assessment;
  • Completing a formal analysis of healthy vacancy rate trends to support their use of a 5% vacancy target rate for healthy housing markets; and
  • Formalizing a technical assistance document to use when reviewing COG data on comparable regions and healthy housing markets.

DOF also committed to, and completed, the following actions:

• • Reviewing its population projections for counties after 2020 Census data was made available and adjust the methodology as necessary; and
  • Reviewing assumptions used in projecting household formation rates after the release of more detailed 2020 Census data and better document this review.^[6]

Policy Considerations: This bill would require HCD to publish more of its data sources and methodology factors before finalizing the RHND. It would also require HCD to assemble and convene advisory panels for each future COG’s RHND process and consult with those panels during the formation of the RHND methodology and in reviewing all the data points listed above when formulating the existing and projected housing need for each region for each future housing element cycle. This consultation is in addition to the existing consultation requirements that currently exist with the COGs themselves. The panel would have to be comprised of a US Census Bureau-affiliated practitioner, a data expert, and a representative from the COG. This would build in another layer of consultation and review to the RHND process, which may be somewhat duplicative given the department’s existing COG consultation obligations, and could cause delays in the development of the final RHND, which HCD must provide to the COG no later than two years prior to the scheduled revision of the housing element. Though the panel consultation would be folded into the existing RHND timeline, it is unclear what HCD’s obligations would be to respond to the advisory panel’s feedback.

Arguments in Support: According to the California Association of COGs, “On behalf of the state’s Councils of Governments that are a key partner to HCD in the Regional Housing Need Allocation (RHNA) process, we support AB 2485 for improvements it would make to the RHNA determination process. … One of the challenges of the RHNA process is that those that must implement it do not always understand the basis for the numbers. As a result, it is often panned as a mere state mandate even by those that understand the need to address the state’s housing crises. A process that connects the housing determination to the state goal in an evidence-based way will lead to better policy implementation.”

Arguments in Opposition: None on file.

Related Legislation:

AB 2361 (Davies) of the current legislative session would reauthorize localities in the counties of Orange and San Diego to trade or transfer their RHNA in exchange for financial compensation. This bill is currently pending before this committee.

AB 2597 (Ward) of the current legislative session would modify future housing element due dates for the Southern California Association of Governments by creating two split phases of adoption due dates. This bill recently passed out of this committee on a 9-0 vote and is currently pending before the Assembly Committee on Local Government.

SB 828 (Wiener), Chapter 974, Statutes of 2018: Made a number of changes to the RHND and RHNA process, including adding more specificity to certain information regarding overcrowding rates, vacancy rates, and adding a requirement to include data on the percentage of cost burdened households in the RHND.

Double Referred: This bill was also referred to the Assembly Committee on Local Government, where it will be heard should it pass out of this committee.

REGISTERED SUPPORT / OPPOSITION:

Support

Southern California Association of Governments (Sponsor)

Association of California Cities - Orange County (ACC-OC)

California Association of Councils of Governments

California State Association of Counties

City of Chino Hills

City of Glendora

City of La Verne

City of Lomita

City of Monrovia

City of Palm Desert

City of Thousand Oaks

League of California Cities

Livable California

San Gabriel Valley Council of Governments

Opposition

None on file.

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

1. https://chpc.net/housingneeds/ ↑

2. https://www.huduser.gov/portal/datasets/ahar/2023-ahar-part-1-pit-estimates-of-homelessness-in-the-us.html ↑

3. https://chpc.net/housingneeds/ ↑

4. https://www.hcd.ca.gov/policy-research/housing-challenges.shtml ↑

5. https://www.auditor.ca.gov/reports/2021-125/index.html#section1 ↑

6. https://www.auditor.ca.gov/reports/2021-125/index.html#section6 ↑