Existing law establishes the Department of Housing and Community Development and sets forth its powers and duties. Existing law creates a housing authority in each county or city, which functions upon the adoption of a specified resolution by the relevant governing body. Existing law authorizes these housing authorities, within their jurisdictions, to construct, reconstruct, improve, alter, or repair all or part of any housing project. Existing law establishes various programs that provide housing assistance.

This bill would enact the Social Housing Act and would create the California Housing Authority as an independent state body, the mission of which would be to ensure that social housing developments that are produced and acquired align with the goals of eliminating the gap between housing production and regional housing needs assessment targets and preserving affordable housing. The bill would prescribe a definition of social housing that would describe, in addition to housing owned by the authority, housing owned by other entities, as specified, provided that all social housing developed or authorized by the authority would be owned by the authority.

This bill would prescribe the composition of the California Housing Authority Board, which would govern the authority, and which would be composed of appointed members and members who would be elected by residents of social housing developments, as specified. The bill would set forth the powers and duties of the authority and the board. The bill would require the authority to seek to achieve revenue neutrality, as defined, and would require the authority to seek to recuperate the cost of development and operations over the life of its properties through mechanisms that maximize the number of Californians who can be housed without experiencing rent burden.

This bill would require the authority to prioritize the development of specified property, including vacant parcels and parcels near transit, and would establish a process for the annual determination of required social housing units. Under the bill, social housing would accommodate a mix of household income ranges and would provide specified protections for residents, who would participate in the operation and management of the units in which they reside.

This bill would require the California Housing Authority to employ 2 leasing models in social housing developments, referred to as the rental model and the ownership model, and would set forth the characteristics of both models. Under the ownership model, the authority would extend a 99-year lease, in the form of a limited equity arrangement, as defined, to individuals who commit to a minimum 5-year term of residence, and would authorize the authority to act as a lender for residents. The bill would specify how the units may be sold and transferred. The bill would establish eligibility requirements for social housing residents and would provide for the selection of residents by lottery, as specified, providing that people who may have been displaced from a property as part of its development would be granted a preference for occupancy. The bill, among other things, would require the authority to accept a local jurisdictions preference for a project parcel if specified conditions are met.

This bill would establish the Social Housing Revolving Loan Fund within the State Treasury to provide, upon appropriation by the Legislature, zero-interest loans for the purposes of constructing housing to accommodate a mix of household incomes. The bill would declare the intent of the Legislature to enact subsequent legislation to provide financing for the activities of the authority through the issuance of general obligation bonds. The bill would authorize the authority to issue revenue bonds, as specified. The bill would require the board to provide for regular audits of the authoritys accounts and records, as specified. The bill would also require the authority to prepare and submit specified reporting information regarding its business plan and progress to the Legislature on an annual basis.

Date of Hearing: May 8, 2024

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 2881

Author:(Lee) – As Introduced Ver:February 15, 2024

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

SUMMARY:

This bill enacts the Social Housing Act and establishes the California Housing Authority (CHA) for the purposes of developing mixed-income social housing.

Among this bill’s provisions:

1. Creates the CHA as an independent entity within state government to develop social housing, defined as mixed-income rental and ownership housing that is publicly owned and permanently affordable, and provides specified protections for residents who have the right to participate in the operation and management of the units in which they reside.
2. Requires the CHA to prioritize development of specified property, including vacant parcels and parcels near transit, and prescribes a process for the annual determination of required social housing units.
3. Prescribes the powers and duties of the CHA and the duties of the board that would govern the authority, which would be composed of appointed members and members who are elected by residents of social housing developments, as specified.
4. Requires the CHA to use two leasing models in social housing developments, to be referred to as the rental model and the ownership model, and specifies the parameters of each model.
5. Requires the CHA’s activities to be conducted according to revenue neutrality and states legislative intent to provide financing for the activities of the CHA through the issuance of general obligation (GO) bonds. This bill also authorizes CHA to issue revenue bonds from time to time to provide sufficient funds for financing social housing developments.

FISCAL EFFECT:

1. Estimated General Fund (GF) costs of an unknown amount, but likely in the tens of millions of dollars annually, to establish and operate a new state entity, the CHA, which would be responsible for the construction, acquisition and maintenance of mixed-income social housing developments. It is unclear how the CHA would interact with other departments with overlapping missions such as the Department of Housing and Community Development (HCD) and the California Housing Finance Agency (CalHFA).
2. Estimated capital costs of an unknown amount, but likely in the low billions of dollars (GF and bond funds) for the construction and development of social housing units. This bill states legislative intent to issue GO bonds to finance the activities of the CHA, but no timeframe or dollar amount is indicated. In addition, the Legislature lacks the ability to issue GO bonds without voter approval and, thus, subsequent legislation would be needed to put a GO bond measure before the voters.

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. This bill seeks to address the state’s lack of affordable housing through the use of the social housing model. According to the author:

Social housing is an important tool to ensure housing is affordable to people of all income levels. Social housing is publicly backed, self-sustaining housing that accommodates a mix of household income ranges. Housing is protected from being sold to a private for-profit entity for the duration of its life, and residents are granted the same protections as tenants in private property, if not more.

1. Background. There are a variety of definitions of social housing, but generally it is distinguished from privately-owned, for-profit housing provided through market mechanisms. The Organization for Economic Cooperation and Development (OECD) defines social housing as “the stock of residential rental accommodations provided at sub-market prices and allocated according to specific rules rather than according to market mechanisms.”

Under this definition, there are an estimated 480,000 socially-rented (i.e., subsidized) housing units available for rent in California, or about 3.5% of the state’s housing stock. These deed-restricted affordable rental units are generally built using a mix of public and private financing and residency is restricted to low-income households that make no more than 80% of county area median income (AMI). Other versions of social housing specify permanent affordability requirements and ownership by the government or a non-profit entity. Most of California’s deed-restricted affordable housing is not publicly owned and the length of affordability requirements varies, though permanent affordability is not required in most cases.

According to data from the 2019 American Communities Survey, over half of the state’s renter households are considered rent-burdened, which is defined as paying more than 30% of their income towards rent. For low-income renter households, the share of cost-burdened families is 80%. To address the shortage of affordable housing options, HCD’s most recent update of the Statewide Housing Plan calls for the production of over a million units of affordable housing units for lower-income households in the coming years.

This bill creates an independent state entity, the CHA, to develop social housing, defined as mixed-income rental and ownership housing that is publicly owned and permanently affordable, in an effort to close the gap between a jurisdiction’s current level of housing production and its housing needs.

Last year, the Governor signed SB 555 (Wahab), Chapter 402, Statutes of 2023, which requires HCD, no later than December 31, 2026, to develop, adopt, and submit to the Legislature a Social Housing Study for achieving the social housing unit goals included in the bill. The study must include a comprehensive analysis of the opportunities, resources, obstacles, and recommendations for the creation of affordable and social housing at scale, to assist in meeting the need identified in the statewide projections for below market rate housing affordable to households with extremely low, very low, low, and moderate incomes in the sixth RHNA cycle.

1. Arguments in Support. Various organizations are in support of this bill because they believe allowing state government to develop and own mixed-income housing will help address the shortage of affordable homes for all income levels.
2. Arguments in Opposition. The League of California Cities is opposed because it believes the CHA could build housing on any land the CHA owns undermining the local planning process.
3. Related Legislation. This bill is substantially similar to the introduced version of last year’s AB 309 (Lee). However, AB 309 was substantially amended in the Senate to instead create the Social Housing Program within the Department of General Services (DGS) to identify and develop up to three social housing projects on state-owned surplus land deemed suitable for housing, as specified. AB 309 was vetoed by the Governor over concerns the bill infringed on state sovereignty over state-owned real property and imposed significant cost pressures that are best considered in the annual budget process.

AB 1657 (Wicks), of this legislative session, places a $10 billion bond on the March 2024 ballot to fund affordable and supportive housing. AB 1657 is pending in the Senate Committee on Appropriations.

1. Prior Legislation. AB 2053 (Lee), of the 2021-22 Legislative Session, was substantially similar to this bill. AB 2053 failed passage in the Senate Governance and Finance Committee.

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

Date of Hearing: April 24, 2024

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

Christopher M. Ward, Chair

ABPCA Bill Id:AB 2881 (

Author:Lee) – As Introduced Ver:February 15, 2024

SUBJECT: The Social Housing Act

SUMMARY: Establishes the California Housing Authority (CHA) for the purposes of developing mixed-income social housing. Specifically, this bill:

1. Creates the CHA as an independent state entity with the mission of producing and acquiring social housing for all California residents, eliminating the gap between housing production and regional housing needs assessment targets, and preserving affordable housing.
2. Defines “social housing” to mean housing with the following characteristics:
   1. Units are owned by a public entity such as the CHA, a public entity, or a housing authority;
   2. All social housing developed by the authority must be owned by the authority;
   3. If a housing unit is in a social housing development, the development contains housing units that accommodate a specified mix of household income ranges;
   4. Units that are owned and managed by a mission-driven not-for-profit private entity must be permanently restricted by deed to be affordable;
   5. Residents of CHA units are given, at a minimum, all protections granted to tenants in private property, as specified, but may be evicted for breaking community standards and for non-payment of rent lasting more than one month;
   6. The housing units must be protected for the duration of their useful life from being sold or transferred to a private for-profit entity to prevent the privatization of social housing; and
   7. Residents of the housing units have the right to participate directly and meaningfully in decision making affecting the operation and management of their housing units.
3. Defines the following terms:
   1. “Revenue neutrality” means a system in which all monetary expenditures that result from the development and operation of CHA units are returned through rents, payments on leasehold mortgages, or other specified subsidies;
   2. “Rent and mortgage cross-subsidization” means a system in which the below-cost rents and leasehold mortgages of certain units are balanced by above-cost payments on others within the same multiunit property;
   3. “Cost rent” means a system in which the rent of a dwelling is calculated on the cost of providing for and maintain the dwelling, only allowing for limited or no proceeds;
   4. “Limited equity arrangement” means an ownership model in which residents are extended a long-term lease, take out a subsidized leasehold mortgage from the CHA, make monthly mortgage payments, and commit to resell at a price designed to balance ongoing affordability and resident wealth generation;
   5. “Regional housing needs assessment” or “RHNA” means a representation of housing needs for all income levels as specified;
   6. “Underutilized parcel” means a parcel of property which contains fewer units than the maximum number of units permissible under local zoning regulations;
   7. “Multifamily property” means a revenue-neutral collection of units featuring units dedicated to a range of affordability levels from extremely low-income to above-moderate income. It may be a single building, multiple buildings on the same or adjacent parcels, or multiple buildings across several blocks within a single jurisdiction, or may be defined by the CHA; and
   8. “Board” means the CHA Board.
4. Specifies income definitions for the following categories, consistent with existing law: extremely low-income, very low-income, low-income, moderate-income, and above moderate-income.
5. Provides that CHA has various powers, including the ability to:
   1. Sue and be sued;
   2. Have a seal and alter the seal at its pleasure;
   3. Make and execute contracts and other instruments;
   4. Make rules with respect to its projects, operations, properties, and facilities;
   5. Through its executive officer, appoint specified personnel and set various policies;
   6. Acquire, by grant or purchase, property or any interest therein and own, hold, clear, improve, rehabilitate, sell, assign, exchange, lease, or otherwise dispose of or encumber it;
   7. Enter into development partnerships with municipalities, joint powers of authority, and other public and private entities in order to further its social housing development goals;
   8. Arrange for the planning, opening, grading, or closing of roads or other places, for the furnishing of facilities, or for the furnishing of property or services in connection with a project;
   9. Prepare project plans for any project, and from time to time modify those plans;
   10. Provide advisory, consultative, training, and educational services, technical assistance, and related work as specified;
   11. Accept funding in any form from any source; and
   12. Call upon the Attorney General for legal services as it may require.
6. Requires the CHA to submit an annual business plan to the Governor and the Legislature which must be made available for public comment at least 60 days before publication.
7. Specifies that the CHA board will consist of nine members who will elect a chair and make decisions by majority vote. The board membership will be as follows:
   1. An expert in housing development and finance;
   2. An expert in housing construction;
   3. An expert in property maintenance;
   4. An appointee of the Speaker of the Assembly;
   5. An appointee of the Senate Committee on Rules;
   6. An appointee of the Governor; and
   7. Three representatives of CHA residents, to be appointed initially by specified entities. Following the occupancy of CHA units, resident representatives are to be elected annually according to specified procedures.
8. Tasks the CHA board with the following duties:
   1. Establish a strategy to eliminate the gap between housing production and acquisition and RHNA targets, set objective and performance targets to this goal, and monitor CHA’s success in achieving the targets;
   2. The ability to hire, fire, and monitor performance of an executive officer;
   3. Approving the annual budget prepared by the executive officer;
   4. Integrating risk management into the authority’s strategic planning process and notify the Governor and the Legislature of specified risks facing CHA;
   5. Adopting and amend regulations, including on resident board elections; and
   6. Holding biannual meetings with resident governance councils.
9. Provides that each CHA-owned multifamily social housing development must form a governance council with specified powers and responsibilities.
10. Requires that the CHA seek to achieve revenue neutrality over the long term and must seek to recuperate the cost of development and operations over the life of its properties through rent cross-subsidization or cost rent.
11. States that the CHA must prioritize development on vacant parcels, certain underutilized parcels without deed-restricted or rent-controlled units, surplus public properties, and parcels near transit.
12. Specifies that if the development requires rehabilitation or demolition of covenanted affordable units, the new development must include a greater number of affordable units.
13. Requires that each multi-unit property must include a variety of mixed income units.
14. Provides that if the development of a property requires the removal of residents, the CHA must cover certain relocation costs and provide displaced residents with the right to live in the new CHA property for their previous rent for one year, or the CHA rent, whichever is lower.
15. Specifies that the CHA will make an annual determination of the required amount of social housing units to be produced as follows:
    1. Annual RHNA targets will be calculated as the total RHNA cycle targets for each jurisdiction divided by the length of the RHNA cycle;
    2. On or before January 1, 2028, and each year thereafter, the CHA will determine the gap between the previous year’s RHNA and actual housing construction; and
    3. Within a given year, the CHA may construct at least the number of units to meet the gap between the previous year’s construction of units and the RHNA targets.
16. Specifies that, in creating housing, the authority shall employ two different leasing models, the rental model and the ownership model, as specified.
17. Provides that, under the CHA rental model, one-year leases will be used, barring extraordinary circumstances.
18. Puts forth the following requirements for CHA ownership units:
    1. The CHA will extend a 99-year limited equity arrangement lease to individuals who commit to five years of residence. After five years, residents can sell the unit, though the CHA will have first right of refusal to purchase. If the CHA does not purchase then it may be sold to an eligible buyer subject to requirements established by the CHA authority which give the seller a reasonable return on investment;
    2. Upon the death of the owner, the unit may be transferred to the deceased’s heir by device or as any other real property may pass. If a transferee is not eligible to be a resident, the transferee shall sell the unit to the authority;
    3. The CHA must strive to ensure that residents pay no more than 30% of income for housing and rent adjustments will be applied annually in a way that does not discourage increased earnings. If resident income changes, the property manager will rent to an appropriate income household;
    4. Residents will pay a 15% down payment with the purchase price set to be affordable for the purchasing household; and
    5. Properties will be sold at the price for which the owner purchased the property, plus documented capital improvements, and adjusted for inflation.
19. Puts forth the following requirements for CHA residency and occupancy and specifies penalties for failure to abide by them:
    1. Unless an above-moderate income unit, it must be resident’s sole residence;
    2. Applicant must be living or working in California at the time of their application subject to specified rules;
    3. Allows an applicant with a prior criminal record to reside in CHA units unless there is evidence of a clear and manifest danger to the development or its residents;
    4. Allows the CHA or the applicable governance council to allow subleasing of units;
    5. Permits a resident to terminate their residency due to specified reasons including job relocation, change in household structure, and serious illness; and
    6. Specifies that, with the exception of those displaced during construction, resident selection is by a lottery stratified by income category.
20. Provides that the CHA can conduct ground-up construction and rehabilitation of existing structures and may dedicate space to commercial use with leases to qualifying entities.
21. Specifies that, when appropriate, the state shall gift public lands to the CHA, though the CHA can also purchase land from other entities.
22. States that the CHA must accept a local government’s preference on project location if certain conditions, including cost and community amenity access, are met. Also directs the CHA to seek input from the jurisdiction’s governing body related to specific site development, height, number of units, and development timeline.
23. Specifies that CHA activities much be conducted with a goal of revenue neutrality, establishes the Social Housing Revolving Loan Fund within the State Treasury to provide zero-interest loans for mixed-income housing, and further states that it is the intent of the Legislature to enact legislation to provide financing for the activities of the authority through the issuance of general obligations bonds.

EXISTING LAW:

1. Specifies that a housing authority may engage in a number of activities in order to provide housing to low income individuals, including:
   1. Preparing, carrying out, acquiring, leasing and operating housing projects and developments for persons of low income;
   2. Providing for the construction, reconstruction, improvement, alteration, or repair of all or part of any housing project;
   3. Providing leased housing to persons of low income; and
   4. Offering counseling, referral, and advisory services to persons and families of low or moderate income in connection with the purchase, rental, occupancy, maintenance, or repair of housing. (Health and Safety Code Section 34312)
2. Requires each city and county to prepare, adopt, and administer a general plan for their jurisdiction, which must include a housing element, to shape the future growth of its community. (Government Code (GC) Sections 65300 - 65404)
3. Specifies that each community’s fair share of housing be determined through the RHNA process, which involves three main stages: (a) the Department of Finance and HCD develop regional housing needs estimates at four income levels: very low-income, low-income, moderate-income, and above moderate-income; (b) councils of government (COGs) use these estimates to allocate housing within each region (HCD is to make the determinations where a COG does not exist); and (c) cities and counties plan for accommodating these allocations in their housing elements. (GC 65580 - 65589.11)
4. Establishes HCD oversight of the housing element process, including the following:
   1. Local governments must submit a draft of their housing element to HCD for review;
   2. HCD must review the draft housing element and determine whether it substantially complies with housing element law, in addition to making other findings;
   3. Local governments must incorporate HCD feedback into their housing element; and
   4. HCD must review any action or failure to act by local governments that it deems to be inconsistent with an adopted housing element. HCD must notify any local government, and at its discretion the office of the Attorney General, if it finds that the jurisdiction has violated state law. (GC 65585)
5. Requires each city and county to submit an Annual Progress Report (APR) to the Governor’s Office of Planning and Research (OPR) and HCD by April 1 of each year, including the following:
   1. The report must evaluate the general plan’s implementation, including the implementation of their housing element, and provide specified quantitative outcomes, such as number of applications for housing projects received and housing units approved;
   2. Authorizes a court to issue a judgement to compel compliance should a city or county fail to submit their APR within 60 days of the statutory deadline; and
   3. Requires HCD to post all city and county APRs on their website within a reasonable time after receipt. (GC 65400)
6. Requires HCD no later than December 31, 2026, to complete a California Social Housing Study. The study shall consist of a comprehensive analysis of the opportunities, resources, obstacles, and recommendations for the creation of affordable and social housing at scale, to assist in meeting the need identified in the statewide projections for below market rate housing affordable to households with extremely low, very low, low, and moderate incomes in the sixth Regional Housing Needs Assessment cycle. (HSC 50613)

FISCAL EFFECT: Unknown.

COMMENTS:

Author’s Statement: According to the author, “Housing is too expensive for millions of Californians. More than two in five households are considered rent burdened and spend over 30% of their income on housing, and more than one in five households spend over 50% of their income on housing. Over 97% of cities and counties haven’t produced enough affordable housing, and existing strategies to address the lack of affordable housing have not been nearly enough to meet demand. Affordable housing relies on government subsidies, and there is significantly more demand for them than supply.

Social housing is an important tool to ensure housing is affordable to people of all income levels. Social housing is publicly backed, self-sustaining housing that accommodates a mix of household income ranges. Housing is protected from being sold to a private for-profit entity for the duration of its life, and residents are granted the same protections as tenants in private property, if not more. Many countries throughout the world have successful social housing programs, and in the US, there are social housing developments such as in Montgomery County, Maryland using a similar model. Social Housing is how we provide and realize housing as a human right.”

Background on Social Housing: There is no widely shared consensus on how to define social housing. However, all definitions of social housing distinguish it in various ways from privately-owned, for-profit housing provided through market mechanisms. The Assembly Select Committee on Social Housing held an informational hearing on October 20, 2021 and Rob Weiner from the California Coalition for Rural Housing shared the Organization for Economic Cooperation and Development (OECD) definition of social housing as “the stock of residential rental accommodations provided at sub-market prices and allocated according to specific rules rather than according to market mechanisms.”^[1]

Under this definition, there are an estimated 480,000 subsidized housing units available for rent in California, or about 3.5% of the state’s housing stock. These deed-restricted affordable rental units are generally built using a mix of public and private financing and residency is restricted to low-income households that make no more than 80% of county area median income (AMI). Other versions of social housing specify permanent affordability requirements and ownership by the government or a non-profit entity. Most of California’s deed-restricted affordable housing is not publicly owned and the length of affordability requirements varies, though permanent affordability is not required in most cases.

Another variation of social housing involves making accommodations available to all individuals regardless of their household income. In particular, Vienna, Austria is often held up as an example of a large city with widespread mixed-income social housing—an estimated 40% of the city’s housing stock is social housing. In the Viennese model higher income households pay market rate rents which then subsidize the below market rents for lower-income households. This mechanism is referred to as “cross-subsidization” and it is the same logic that underlies California’s density bonus law, a policy that allows residential developers to receive added density and other concessions and incentives from a local government in exchange for building a certain percentage of affordable units.

Planning for Housing and the RHNA Process: As noted above, with the exception of deed-restricted affordable housing, California generally relies on the private sector to build most housing accommodations. However, cities and counties are required to plan for a certain amount of housing development across various income categories. This happens through “general plans” for land use that each city and county’s legislative body adopts. Every general plan must include a “housing element” that details existing housing conditions within the jurisdiction, the need for new housing at various household income levels, and the strategy that the jurisdiction will use to address that need. The need for new housing is determined through the RHNA process, which involves three main stages:

• The Department of Finance and HCD develop regional housing needs estimates at four income levels: very low-income, low-income, moderate-income, and above moderate-income;
• COGs use these estimates to allocate housing needs within each region to cities and counties. HCD makes the determinations where a COG does not exist; and
• Cities and counties plan for accommodating these allocations in their housing elements.

Local governments must adopt a new housing element every eight years (though some rural jurisdictions must do so every five). These adopted housing elements must be approved by HCD, which must find them in “substantial compliance” with the law. Every eight years a new RHNA cycle begins and the process restarts. Currently the state is in the 6^th RHNA cycle and housing element updates in this cycle also need to include information on steps the local government is taking to affirmatively further fair housing objectives.

Each year, the local government’s planning agency must submit an APR to HCD and OPR that documents implementation of its housing element and progress towards meetings its RHNA target. The APR must include information about all proposed and approved development projects, a list of rezoned sites to accommodate housing for each income level, and information on density bonus applications and approvals, among other provisions. The APRs provide statewide and local data across California’s 539 cities and counties which allow for tracking the amount, type, location, and affordability of new housing development. In addition to providing completed residential construction data in the jurisdiction, APRs also include data on the number residential developments which are still in the initial permitting and entitlement phases.

Planning vs. Building Affordable Housing: While the RHNA process requires local governments to plan to address housing need in their jurisdiction, it does not mean housing will actually get built. A number of factors affect housing development and, in order to build affordable units for low-income and very low-income households, government subsidies are generally needed to make the project economically viable. According to the California Housing Partnership Corporation, while California has more than doubled its production of deed-restricted affordable units in the prior three years, in 2021 the available public funding for affordable housing provided just 16% of the units that would be needed to meet the state’s targets for low-income homes.^[2]

The lack of affordable housing disproportionately impacts California’s most economically-vulnerable households. According to data from the 2019 American Communities Survey, over half of the state’s renter households are considered rent-burdened, which is defined as paying more than 30% of their income towards rent. For low-income renter households in the state the share of cost-burdened families is even higher at 80%. To address the shortage of affordable housing options, HCD’s most recent update of the Statewide Housing Plan call for the production of over a million units of affordable housing units for lower income households in the coming years.^[3]

Creation of the California Housing Authority (CHA): This bill proposes to establish the CHA as a new, independent entity within the state government to develop social housing, which is defined as mixed-income rental and ownership housing that is publicly owned and permanently affordable. The CHA’s mission would be to close the gap between a jurisdiction’s current level of housing production and their RHNA amount while maintaining revenue neutrality. The CHA would be governed by a nine-member board consisting of: three resident representatives living in CHA accommodations, a housing development and finance expert, a housing construction expert, a property maintenance expert, an appointee of the Speaker of the Assembly, an appointee of the Senate Committee on Rules, and an appointee of the Governor. Decisions would be made by majority vote of the board and the board would also have the authority to appoint a board chair and an executive officer.

Development of CHA Housing: This bill specifies that the CHA could build residential housing to make up the different between a jurisdiction’s RHNA and the actual amount of housing built. These calculations would be made annually using each local government’s APR data beginning on January 1, 2027. Development would be prioritized on vacant parcels, surplus public properties, and parcels near transit, though the bill does not indicate a particular distance from transit or the frequency of transit service that would be required for a parcel to be considered “near transit.” Additionally, underutilized parcels (i.e., those containing fewer than the maximum number of allowable units per the jurisdiction’s zoning) would be prioritized for CHA developments so long as they do not contain rent controlled units or deed-restricted affordable housing.

This bill requires the CHA to seek input from the local government about certain aspects of a proposed development, including the number of units and the timeline for completing the project. When the CHA has multiple potential sites for development in a jurisdiction it would need to defer to the local government on their preferred site if property acquisition costs and amenities are generally similar and if the site would allow the local government to meet its RHNA targets. If a CHA development would lead to the displacement of existing residents, those households would be eligible for relocation assistance and would have the first right of refusal to live in a CHA housing unit.

CHA housing developments are required to be mixed-income housing developments, though the specific mix is not spelled out in the bill and there is no intent language indicating minimum proportions of affordable units nor the depth of affordability. The CHA also has the ability to develop mixed-use buildings with commercial space.

Policies Governing Residency in CHA-Built Housing: In CHA-built developments, individuals could either rent or purchase a unit through an ownership model and the CHA unit would need to be the person’s sole residence unless they fall into the above-moderate income category. In the ownership model, CHA provides the resident a 99-year lease and they would need to commit to a minimum of five years of residency in the CHA building. The ownership model requires a down payment of 15% of the purchase price. When a resident in the ownership model wishes to sell their unit, the CHA would have first right of refusal to purchase the unit. If the CHA declines to repurchase the unit then it can be resold to a qualified buyer in a manner that allows the resident to have a reasonable return on investment. The bill states that ownership units would be sold for the original purchase price plus documented capital improvements and an adjustment for inflation.

Renters in CHA units would be required to commit to a year of residency, though exceptions would be allowed in some cases such as illness or employment changes. Renters living in CHA-owned properties are provided tenant protections including protection against termination of tenancy without just cause. Additionally, the bill specifies that each multifamily social housing development produced by the CHA will have a resident governance council elected by residents of the housing complex. Governance councils will host regular meetings, interact with property management, handle budgeting for development, and represent the community at biannual meetings with the CHA board. Though the bill specifies that the governance council is to be made up of no more than 10% of the overall population for development, it is unclear if this is per unit or per resident. In a 20-unit building with only one individual per unit, there would be only two members on the council, which would pose an issue for any decisions that the two members disagree on.

Financing Start-Up Costs and Revenue Neutrality: This bill states that the CHA would operate according to principles of revenue neutrality, though it does not specify the time period over which revenue neutrality would be achieved. Presumably a significant amount of start-up capital would be needed to create the CHA and it would have ongoing expenses including the costs of developing and managing mixed-income housing, mortgage servicing, staff time, facilities, legal services, and IT. AB 2881 also includes language stating that it is the intent of the Legislature to fund the CHA’s activities through the issuance of general obligations bonds, though no specific timeline or dollar amount for bond issuance is included in the bill text. However, because the Legislature lacks the ability to issue general obligation bonds without voter approval, another bill would need to pass with a two-thirds vote of both houses of the Legislature to put the question of CHA general obligation bond issuance before the voters.

Given that there is no other bill this legislative session proposing to put a CHA general obligation bond measure to the voters, it is unclear where the initial funds for the CHA would originate from. The Governor did not specify any funding for social housing or for the creation of an entity like the CHA in his January 2024 budget, and in fact proposed cuts totaling $1.2 billion to existing affordable housing programs. The bill also includes language giving the CHA the ability to issue revenue bonds that would ostensibly be secured with the rental income generated from CHA-provided housing, but such bonds could only be issued after a reliable stream of rental income is being generated from CHA-owned properties.

Policy Considerations: Without further specificity on initial start-up costs and the timeframe for achieving revenue neutrality it is challenging – if not impossible – to predict the amount of housing the CHA could be reasonably expected to produce. It is also unclear how long it would take for the first units of CHA housing to be built given that the state has not historically undertaken direct construction of rental or ownership housing. The state also generally does not directly manage rental or ownership housing outside of some limited exceptions, such as student housing for California State University campuses and employee housing for a small number of state parks employees.

Moreover, since the goal of the bill is to close the gap between a jurisdiction’s RHNA goals and the actual production of housing, presumably a CHA development would not be able to include units from a particular income category (e.g., above moderate) if the jurisdiction has already exceeded their RHNA targets for that category. This may provide an incentive for jurisdictions to quickly approve above moderate income housing to make CHA developments less economically feasible. One way to avoid such an outcome would be to drop the bill’s revenue neutrality goal and instead focus the CHA’s mission on producing affordable units for low-income households in a more cost-effective manner than the existing affordable housing development process.

CHA and Social Housing in the Context of Other Efforts to Address the Housing Crisis: On the one hand it could be argued that this bill runs counter to the Legislature’s recent efforts to streamline and consolidate affordable housing development. For example, AB 434 (Daly), Chapter 192, Statutes of 2020, required HCD to align several rental housing programs administered by HCD with the Multifamily Housing Program (MHP), to allow HCD to issue a single application and scoring system for making coordinated awards under seven different programs. As a result of AB 434 (Daly), HCD released the guidelines for the first MHP “super Notice of Funding Availability (NOFA)” to allow developers to apply for seven different affordable rental programs at one time, and granted the first super-NOFA awards in spring 2023.

On the other hand, the CHA would generally not be aiming to duplicate the funding, oversight, policy, or technical assistance work of other state housing entities. Instead it seeks to do something the state has never attempted to do: build large amounts of permanently affordable mixed-income rental and ownership housing to close the gap between actual housing production and the estimated need for additional housing in a community. This may prove to be a tall order for a state which has a decidedly mixed record with delivering ambitious new programs and infrastructure in recent decades.

Yet, at the same time it is clear that the state’s existing approach to housing has left affordable housing out of reach for far too many. As noted above, the current system for producing deed-restricted affordable housing for low-income Californians is not adequately funded. And many of the affordable housing funding sources that the state currently draws on are one-time funds from voter-approved bonds that will be depleted in the coming years. This bill proposes creating a new entity to take on housing development and ongoing management of properties it builds. There may be cost savings and potential efficiencies in state-sponsored housing development through the CHA, but it could also end up costing more to establish a new entity that would be taking on work state governments have not typically engaged in.

SB 555: Stable Housing Act of 2023: Last year, the Governor signed SB 555 (Wahab), Chapter 402, which requires HCD, no later than December 31, 2026, to develop, adopt, and submit to the Legislature a Social Housing Study for achieving the social housing unit goals included in the bill. The study must include a comprehensive analysis of the opportunities, resources, obstacles, and recommendations for the creation of affordable and social housing at scale, to assist in meeting the need identified in the statewide projections for below market rate housing affordable to households with extremely low, very low, low, and moderate incomes in the sixth RHNA cycle.

Arguments in Support: Various organizations are in support of this bill because of they believe allowing state government to develop and own mixed-income housing will help address the deficit in affordable housing. They argue that CHA would deliver housing near transit and would help reduce greenhouse gas emissions.

Arguments in Opposition: The League of Cities is opposed to this bill, because, “AB 2881 would disregard this state mandated planning process and force cities to allow housing developments in nearly all areas of a city. This seriously questions the rationale for the regional housing needs allocation (RHNA) process. If the California Housing Authority can build housing on any parcel they own or acquire, why should cities go through the multiyear planning process to identify sites suitable for new housing units for those plans to be ignored and housing built on sites never considered for new housing.”

Related Legislation:

AB 309 (Lee) of 2023 would have created the Social Housing Program (Program) within the Department of General Services (DGS) to identify and develop up to three social housing projects on state-owned surplus land deemed suitable for housing, as specified. This bill was vetoed by the Governor.

Veto message:

I am returning Assembly Bill 309 without my signature.

This bill would create the Social Housing Program in the Department of General
Services (DGS). The program would identify and produce three social housing projects on excess state-owned property through development or acquisition.

This bill infringes on state sovereignty over state-owned real property by establishing a new process for local government review of state projects authorized under the bill and could potentially cost the state several hundred million dollars in capital expenditures.

State-owned sites identified as suitable for housing development already are being developed as affordable housing through the State Excess Sites program. This program, instituted through Executive Order (EO) N-06-19 and further codified through AB 2233 (Quirk-Silva, Chapter 438, Statutes of 2022) and SB 561 (Dodd, Chapter 446, Statutes of 2022), has already awarded state land for 17 residential or mixed-use projects with significant affordable housing components.

While I appreciate the author's commitment to build more affordable housing in the state, this bill creates new additional cost pressures and must be considered in the annual budget in the context of all state funding priorities.

In partnership with the Legislature, we enacted a budget that closed a shortfall of more than $30 billion through balanced solutions that avoided deep program cuts and protected education, health care, climate, public safety, and social service programs that are relied on by millions of Californians. This year, however, the Legislature sent me bills outside of this budget process that, if all enacted, would add nearly $19 billion of unaccounted costs in the budget, of which $11 billion would be ongoing.

With our state facing continuing economic risk and revenue uncertainty, it is important to remain disciplined when considering bills with significant fiscal implications, such as this measure.

For these reasons, I cannot sign this bill.

AB 2053 (Lee) of 2022 would have establishes the CHA for the purposes of developing mixed-income social housing. This bill failed passage in the Senate Governance and Finance Committee.

AB 1657 (Wicks) of the current legislative session would place a $10 billion bond on the March 2024 ballot to fund affordable and supportive housing. This bill passed this committee on a vote of 6-1 on April 26, 2023 and is currently pending in the Senate Appropriations Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

AIDS Healthcare Foundation

California Community Living Network

California Democratic Party Renters Council

California School Employees Association

City of Gilroy Council Member Zach Hilton

Common Ground California

Culver City Democratic Club

East Bay for Everyone

East Bay YIMBY

Grow the Richmond

Mountain View YIMBY

Napa-Solano for Everyone

Northern Neighbors

Peninsula for Everyone

Progress Noe Valley

San Francisco YIMBY

San Luis Obispo YIMBY

Santa Cruz YIMBY

Santa Monica Democratic Club

Santa Rosa YIMBY

South Bay YIMBY

Southside Forward

Streets for People

Urban Environmentalists

Ventura County YIMBY

YIMBY Action

Opposition

Housing Contractors of California

Oppose Unless Amended

Fieldstead and Company
League of California Cities

Livable California

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

1. https://www.assembly.ca.gov/media/assembly-select-committee-social-housing-20211020/video ↑

2. https://1p08d91kd0c03rlxhmhtydpr-wpengine.netdna-ssl.com/wp-content/uploads/2022/03/California-Affordable-Housing-Needs-Report-2022.pdf ↑

3. https://statewide-housing-plan-cahcd.hub.arcgis.com/ ↑