Assembly Standing Committee on Housing and Community Development

All right, we are just going to go ahead and get started. I know we have a number of committee members who will be joining us. I again want to welcome everyone to the Assembly Housing and Community Development Committee's first informational hearing of 2025. And this is also my first committee hearing as chair.

And so I want to thank the committee staff and the speaker for appointing me to this role. And I'm excited to work with my fellow committee members, new and returning to be able to tackle the big challenges in front of us that we're going to be discussing today and throughout the year. I'll start by stating the obvious.

California is in a housing crisis, plain and simple. We do not have enough housing. To meet the needs of Californians at all income levels, we need millions of new homes, and we need them urgently. I know when we talk about multimillion home deficits, it can feel pretty theoretical, but this crisis has real world impacts on every single one of our constituents. One in three households in the state don't earn enough money to meet their basic needs.

High housing costs force millions of Californians to make hard choices between paying rent for food, paying rent or affording food, health care, childcare, and transportation. As housing costs continue to rise, more and more Californians fall into homelessness. Housing affordability and availability directly affect the people who make our state what it is.

If we fail to address these issues, we risk weakening California's social and economic health. Yet for far too long, it has been too hard to build housing in our state. The Legislature has taken meaningful steps to address these barriers, but we have so much left to do.

Over the past several years, we've passed landmark housing production bills to fast track infill development, reduce bureaucratic permitting delays, and promote housing near transit, jobs, and opportunities. While it takes some time to see the full impact of laws passed just a year or two ago, the early data suggests that some of these laws have been quite successful, while others are still falling short. This hearing is an opportunity to take stock of these efforts.

We'll assess the progress of key housing production bills to understand what's working, what's not, and why. Honest evaluation is critical not only to improve our laws, but also to maintain public trust and ensure future housing legislation can succeed. We shouldn't just keep passing more and more bills just because we can.

We should actually look at what is working, why it's working, how we can do more of what's working, and if it's not working, we should fix it or change it. And to be clear, there are also factors outside of our direct control that have a huge impact on the housing landscape.

The recent Palisades and Eaton Fires destroyed thousands of homes. With climate change, such disasters will only become more frequent. High interest rates over the past several years have significantly increased the cost of home building. There is a persistent shortage of construction workers needed to build these homes. These factors, among others, present a real challenge.

And some of those challenges may even be exacerbated as the year goes on. These things make our work harder, but they also underscore the need for proactive, thoughtful solutions. We must focus on the levers we can control to boost housing supply.

This means ensuring existing laws are effective, addressing barriers to implementation, and being bold in tackling the state's biggest housing challenges. Regardless of where you live in the state, this impacts you. Regardless of what party you're from, this impacts you and your constituents. And the solutions that we explore and pursue together should transcend geographic and political boundaries.

The top issue facing our state is affordability, and the cost of housing is at the heart of that. The work that we do this year to assess what has already been done and to improve on it and to move with urgency to get homes built so that people can afford the housing that they need for them and their family could not be more critical to the work of this Legislature.

Hopefully this hearing will start as a serve as a starting point for those efforts. And so I want to start with an overview of the housing crisis, some of the laws that we've passed and some of the impact that we've seen from the UC Berkeley Terner Center for Housing Innovation. Go bears.

And so I want to invite up our first speaker who is going to join us on the panel now. Welcome, Mr. Metcalf, and we're grateful to have you here. He is the managing director of the UC Berkeley Terner Center for Housing Innovation. He's also, I know has a presentation. Welcome.

Thank you, Chair Haney, Members of the committee. It's my pleasure to be here. Happy to share a little bit about what we're seeing in the housing space, overview a little bit of the depth and extent of the housing crisis in California, and then review a few maybe bright lights if I can. Next slide.

I don't think I have a clicker, is that right? Yeah. So the Terner Center, which I direct, is a research institution within University of California, Berkeley that focuses on research on housing issues. And we particularly focus on policy relevant work that can be useful for policymakers and practitioners, specifically looking at access and supply issues and affordability.

Next slide, next slide. So we do operate within the State of California with under the context of a pretty sophisticated demographic model created by the Department of Finance and overseen by the Department of Housing Community Development that lays out projected growth targets for all of the cities and regions in the State of California.

I thought it'd be good just to start with that, which is, you know, what are we shooting for in terms of thinking we need to hit in the current cycle? What has the state come up with as its own targets? And those are the blue bars broken out by the four income categories. From left to right, going from very low income up to above moderate income. So the blue is where we need to get in the current cycle.

The yellow is where we are as of our most recent data through the end of 2023, and the red is where we ought to be if we were actually on pace to hit those blue bars. And I think what I would just observe here is how far away we are at the moment from being able to do that. And the reality of being able to hit those blue bars by the end of our RHNA cycle means that we would have to catch up quite dramatically.

There is some modest signs of progress in the above moderate income, which is to say market rate housing, but certainly for the very low and moderate income, you can kind of have to squint to see the yellow bars on the category. Unfortunately, just in the first few years. Next slide. And unfortunately, this is not new. This is part of an ongoing durable trend that California has experienced over the last several decades. Really, since the mid-1980s, we've been on a downward trend.

Yes, there have been ups and downs in line with economic cycles, but really, coming out of the great financial crisis, we've seen an inability to get much above about 100,000, maybe 115,000 permitted units a year. We really need to be somewhere closer to double that.

And as this chart reminds us, we have been there. Going back into the 1980s, in fact, when the state had a much smaller population, we were hitting closer to 300,000, almost two to three times what we have now. Next slide. Zooming in just to specifically subsidized affordable housing.

So kind of what are we doing on the low income side. Here, it's quite clear that although we've made progress. I have just three years here captured 2019, 2020, 2021. In fact, the last several years, we've seen a substantial uptick in investment into subsidized housing in the State of California.

That's a big improvement from where we were in the 2010s, but it's still very far short of where we would need to be to be getting the total number of subsidized affordable housing that we would want. And as the chart on the right shows, it's really pretty cross cutting.

While there are some places that are doing better than others, I would actually flag the greater Sacramento region as one comparative bright spot. You know, most of the rest of the state is falling behind in terms of hitting its subsidized affordable housing level up and has been. Next slide.

So the consequence of all of this lack of supply, both from the market, from subsidized affordable housing, means that folks are going to have to get very creative in terms of how they just get by. Now that manifests itself in a lot of different ways. But the most obvious way that we look at is something called housing cost burden. So this is a term that HUD has created. It's a national measure that we use to look at the ratio of housing costs to income.

The general rule of thumb is anything north of 30% burden is problematic and anything north of 50% has all kinds of demonstrable negative externalities to individuals and families. This bar is showing the propensity of folks at different income levels in California to be burdened, with the blue representing the 30% level and the yellow representing, sorry, the yellow represent 30%, the blue representing the 50% severe burden category.

So I think, you know, the obvious conclusion here is if you're poor in California, almost all your income is going towards rent. What's interesting, I think is that, in fact, even among moderate income, we're seeing a high level of rent burden. And across the board for renters in California, we're seeing rent and burden. Next slide.

When we look at this by geography and when we do a time lapse here, so blue is 2010, yellow is 2023, and we look at a handful of different counties in California, we see that for middle income renters in particular, we see this affordable housing crisis now becoming a problem that's sort of cross cutting.

So there we're seeing notable upticks and we're seeing most pronounced upticks in places where we traditionally had the greatest level of affordability. So for Fresno, Sacramento, in fact, Santa Clara County are places where middle income renters are now seeing a much higher share that are paying, that are hitting that rent burden target. Next slide.

So this is, while not uniquely a California problem, it is a particularly California problem. We are in the very top tier of states nationally to experience this level of cost burden, the share of renters that are actually paying this level of their income on housing costs.

We're up there only with a couple of other states at this point. Next slide. Now, all of that that I've been talking about so far has been rental housing. But it's also important to think about the implications of this for homeownership, for wealth building.

Wealth building in California has been the traditional path to moving into the middle class. Purchasing an entry level home has been the way that most families in recent generations have achieved that. This chart shows the increasing cost of those entry level homes. So this is just looking at the price point for the cheapest set of homes that are hitting the market. That the bottom third of homes that are hitting the market in every given year. And what you're seeing is this just incredible run up in prices starting around 2011.

Each line, we have five different colored lines here, represent a collection of different counties. The blue line at the bottom represents Fresno, a historically more affordable place for becoming a homeowner that has been somewhat more immune to this price escalation, but not entirely immune. The lines above represent coastal communities.

The red one at the top, for example, represents Santa Clara County. And so you see this place now where you're getting from the dynamic where you might have needed maybe three or four multiples of your income for a home price. Now you're at a place where it's 7 or 8, 9 times multiple.

Comparing median income to sales price for an entry level home. Next slide. So I want to just dive in a little bit here to tell the story specifically about affordability for middle income households. These again, these are the folks who we would think would be moving into homeownership. These are folks who are forming a household.

They're anticipating having maybe their first child. They want to buy a home. And what we're seeing is the share of homes that are affordable that can reasonably be purchased by those middle income households collapsing. So the blue bar is 2010, the yellow bar is 2023.

These are literally the share of homes that you can that are actually affordable. So let's take Fresno, which I previously said maybe was a little bit of a bright spot, and just compare that for a second. So Fresno in 2010, something like 87% of homes would have been affordable to a median household.

That number has collapsed in 2023 down to about 35%. So only a third of homes can plausibly be purchased in the Fresno area by a home that's solidly in the middle income. Next slide. So this is a problem for reasons all of us in this room already understand, I think.

But just to state the obvious and to remind folks, there is a very large body of literature and research that paints a very compelling picture that this housing affordability crisis has dramatic and quantifiable impacts to communities, to regions, and to the state as a whole.

I should say in terms of these places ability to attract employees, to attract new business, to attract economic investment. For all kinds of ways, it does make it much harder to respond to the realities of a changing climate. Again in ways that a body of research has demonstrated.

Also the rising housing costs demonstrably further patterns of economic segregation and racial segregation. They make it very hard for poorer people to move into more affluent communities, places where the jobs are often available. And for people, when these individuals are experiencing this severe housing cost burden that I was talking about.

We see a very high likelihood of homelessness, very high levels of overcrowding. We see declining rates of economic mobility, so their ability to move up the economic ladder. And we also see just a frustration, right, a raw, palpable frustration by folks who are increasingly frustrated. They're getting increasingly politically sorted. And I think this is demonstrated in what will continue to be increasingly challenging, for example, political alignments and collapsing sort of civic structures. Next slide. And again, I can't...

You know, while this is a cross cutting phenomenon that has really crept up the economic ladder to impact the middle income, we have to also remember that the folks who most consistently are suffering from this are particularized through economic strata, those who are lower incomes or single earners, through racial categories, particularly black and Latino population in this country.

We see particular challenges with the youth and with the elderly. We see particular challenges in those who want to or are currently living in the highest cost regions. And of course, simply anybody who's trying to get ahead in the State of California today. All right, so I'm sorry to have thrown it down. So let me pivot now.

What's working? And I would argue that there are in fact a few bright lights that have come out from policy action by the State of California over the last several years. I think accessory dwelling units are one very clear and tangible bright spot. The permitting data that the state collects shows an increase from 8,900 units in 2018 to more than 28,000 in 2023. There's a direct through line here to active state policy. Next slide. I think the other place is streamlining, particularly of subsidized affordable housing through a combination of bills.

We see a very powerful ability of developers to be able to, as of right, approve sites for affordable housing and to increase the zoning through state density bonus law. That's opening up a lot of opportunities for subsidized affordable housing and it's really pulling forward.

Housing that might have taken a year and a half to entitle to maybe taking 90 days to entitle. We actually see this in the raw numbers as well. Looking back five years, we see about 10,000 affordable housing permitted per year now. Sorry. And now it's close to 20,000 units per year being permitted. Next slide.

This just shows the very dramatic increase from projects just noting that they're using Senate Bill 35 streamlining as one example. Next slide. And you know, you know, there are other examples too. I mean, the state has passed hundreds of bills. Not all of these have borne fruit.

While few of the others have as much sort of demonstrable, quantifiable evidence of impact as the ADUs and subsidized housing examples do, I think there's actually a fair number of other bills, policies, laws that have promise. And maybe the jury's still out a little bit, but we see an anecdotal evidence that they're working, that they're making projects marginally cheaper, marginally faster, marginally easier to build.

I met a couple of bills just sort of threw up here as an example of sort of anecdotally what we're seeing. And certainly there's great cities, you'll hear from one of them later this morning, who have sort of thrown the kitchen sink at trying to make it easier to build. I think we will see results from that. Obviously the housing element 6 cycle is still very much midstream. A lot of those rezonings haven't yet happened. So I think there's some reason for cautious optimism of some improvements there. Next slide.

But all that said, the challenges will continue to be significant and there are many barriers to housing construction, particularly beyond upzoning and streamlining, where I would argue most of the benefit, most of the work has been over the last few years and most of the sort of low hanging fruit have been grabbed.

And so I think, you know, I would just flag four here that I think the following panelists will give you a lot more detail on. But clearly one is the need for increased local capacity. We have at the state created a lot of complexity and it's critically important that we make it easier for folks on the ground, particularly in local government, to be able to implement that. That we look at the constellation of public agencies.

In fact, they're often involved in entitlement and permitting and help figure out ways to have other agencies, whether it's utility companies, other commissions, environmental entities working better in coordination. Rapidly increasing costs. We know about insurance, the cost of financing, material labor, building code increases, impact fees. Those are areas where more work is needed.

State housing governance complexity. Sort of making our own apparatus here at the state work better, work more effectively finding opportunities for realignment, reorganization. And then lastly, obviously I think there's a lot of headwinds coming from the federal government. Rising tariffs on building materials, deportations could contribute to labor shortages, particularly in the single family area. And then I think that the promise of budget cuts is very significant as well on federal programs coming into the State of California. With that, I'll stop. Thank you.

Well, that was sobering. Thank you, Mr. Metcalf. I was hoping your good news section would as long as your bad news. But then you stuck in another bad news slide at the end. It was like mixed mix there. So thank you. Thank you for that. I'm going to ask just a few questions that and then I'll open up to my colleagues who may have questions or thoughts. One of the things, one of your slides, you know, pointed out that California is on the high end when it comes to rent burden.

And I know we also have the lowest home ownership rate and that's connected to the higher cost of homes here. How does California compare when it comes to housing production and housing production per capita? Is that chart, would you say that the chart that shows the level of rent burden, is that somewhat reflected or how would you say it correlates to a similar chart that might show production? Are we also way behind when it comes to production per capita? Are the states that have a lower rent burden by building a lot more and permitting a lot more homes?

Yeah, actually the chart would be quite different in terms of who would be at the top. I mean, I think you saw, I mean, some of the other states that have high rent burden are also very low income places like Louisiana, Florida. If you just ranked it by production per capita, California would be all the way at the end in terms of the least, but it would be flanked by other West Coast and some east coast states. So I think Washington, Oregon, the sort of New England states as well, have also fallen way behind on production per capita. The places that are doing better tend to be inland, southern states, Texas, the Southeast, that are building much more rapidly.

And in terms of what they're doing, do you see certain things in terms of why California lags on housing, permit and production, as opposed to some of those states that are doing better per capita?

It is a constellation of different things, some of which I've touched on. But just to rehit a couple, California does have typically much more restrictive zoning and entitlement processes that make it create fewer available sites and make those sites harder to build on.

It has a more rigid building code, it has higher labor costs and material costs, it has much higher front end development impact fees. So you have basically both an inability to find sites as readily as you do in places like Texas and you have a much higher cost profile. That means that even when you find sites, the ability for developers to have those sites pencil is much harder.

And in terms of, you know, you noted some of the places, San Diego and Sacramento, that are doing relatively well as compared to other places when it, when it comes to new housing priority permits and starts. What are we seeing in terms of not only those regions, but urban, suburban, more rural areas of our state?

I mean, I certainly have heard that there are a lot of concerns and challenges around building in cities and downtowns. I mean, are you seeing any patterns or trends in terms of not only the regions where this is happening, but where, where housing seems to be easier to build in terms of the type of environment? Like is it being built more? I mean, even when you talk about Sacramento or San Diego, that could mean a lot of things for that, for that area. It could mean areas that are much more suburban or city center.

Yeah, I mean, I think one just very important point that I hope my presentation conveyed. But even when we are, even when cities are doing everything right, which is to say zoning, good pathways, good approval processes, we're still not necessarily seeing builders build.

There is a second order cost issue which is coming from these things like high insurance, high interest rates, high materials, et cetera, et cetera. And so I think there are limits to what even the best cities can do to sort of make that easy to happen. Where we generally are seeing construction has been in places where so the costs are lower, where labor is cheaper, where materials are cheaper. So it tends not to be in sort of denser urban areas. It tends to be more suburban or exurban locations where all of those costs are lower.

Right. Now open it up to colleagues. Assembly Member Lee.

Thank you, Mr. Chair. Thank you, Mr. Chair. So thank you, Ben, for coming and presenting all your great work. I just wanted to ask, of all the many solutions out there, what your prognosis on public sector construction is. Last night in Seattle, they delivered a big victory of the social housing developer, where they passed the millionaires tax to fund their efforts. And of course, we've talked before that many jurisdictions in the United States are now trying to adopt social housing as a counter to private construction lagging behind. I know you didn't mention it in your slides or anything, but is there any early prognosis or thoughts you have on public sector construction or social housing?

Thank you. Great question. So, number one, there is a huge amount of public lands that are available in the state that are held through a range of different agencies. I think there's an obvious opportunity to use that land more productively and put it into service of affordable housing.

That's a huge opportunity for the state and for local governments. The second I would say is I've been really impressed by Los Angeles' Measure A. I think that has been one of the rare bright spots in California over the last 6-12 months. And I think trying to use that as a proving ground to sort of test out new ways of doing housing, putting new the funding into new kinds of projects is now obvious opportunity for at least for the state to be watching.

Assembly Member Quirk-Silva.

Yeah. My colleague just mentioned in some ways, and you did, public lands and we had a lot of discussion about our surplus lands and a lot of kind of hurrah about all of the housing that was going to be built. What are your thoughts about it? Because from what I've seen, very little development 10 has actually occurred.

Well, I think a part of it has been the challenge is a disposition. So I think it has been very cumbersome for state and agencies to move land through the disposition process. I think we've also struggled because many of these lands do have significant infrastructure needs.

So there are significant costs that come with building the roads and bringing in the utilities. I think the third challenge that I would just put out there has been maybe this is a little bit higher level. But you know, most of what we've been stuck with is like either we're doing fully subsidized affordable housing or we're doing market rate housing.

I think we've had a hard time figuring out how to use these public lands to unlock sort of low cost, lightly subsidized kind of housing models. And so I think there's an opportunity with these public lands to think about how can we get more middle income or entry level housing that's not heavily taxed, it's not heavily regulated, it's not deeply subsidized. That's been a space that I think California in particular has a hard time trying to solve for. But I think there are huge opportunities there.

Assembly Member Avila Farias.

Thank you, Chair Haney, for acknowledging. Nice to see you again after so many years. Quick question. Of the policies, roughly at what I glanced 100 or so bills have passed through the Legislature. Has there been any analysis you mentioned in your presentation that, you know, some have worked and some have not.

Is this documented somewhere, where we should revisit some of these bills and make them effective? Because we shouldn't have bills on the books that aren't working and we should learn from that to pivot as we create new policy. But I'll let you answer that and I have a few more to segue.

Yeah, 100%. I mean, I completely agree. There's, I think there's a lot of opportunities to go back and get these laws working better. I think it's been challenging just administratively for states and local actors to even keep up with everything that's been happening.

When we look, I mean, what I tried to say here is we see two, we really see two places where the permit data is very conclusive that state action has been effective ADUs and subsidized affordable housing. Sort of everything else, I think is still the jury's out. We're trying to see how it works.

I mean, we can see anecdotally individual projects and we can talk to individual developers who will tell us, hey, this bill is working for me. This bill is working for a handful of projects, but we haven't seen that translate into a significant uptake on permitting. So I think it does behoove us to look at those, continue to look at those two examples and say what has worked so powerfully here and how can we replicate those kinds of approaches?

Great. And I think, you know, I think that's super critical for even the work that we do here on the committees to visit those hundred bills and assess them and have some kind of analysis on it so that as we all are thinking of new bills, maybe we just need to revisit some of these and fine tune them.

Second question I have for you is on the local control that we seem to still be seeing throughout city councils of people who, you know, well intended for their community protected but really don't understand the crisis that we're in now and still fighting the state in regards to our policies. I mean the state is having to step in because of the lack of action. And we saw that through housing elements that people ignored housing elements for decades. And this is the residual effect of that.

And I think we still have a lot more work in education and making sure that city councils understand the importance of, you know, their housing elements and that synergy. And so I'm curious of what are you seeing out there and where can we improve? Because just this week I watched the City Council meeting in my own district and watch all the rhetoric in regards to the state needs to stop intervening in housing. So curious on your thoughts and where we can lean in more.

Yeah, I mean California has a uniquely powerful regime for mandating production targets down to localities. And I think my take is this is an instrument that has a lot of power and actually has a lot of latent power that we haven't fully realized. One example of that for me is I think we've been very effective...

Megan can certainly talk more about this in terms of getting cities to upzone in this last round through the housing element cycle. But we haven't been as effective in getting cities to think holistically about the other barriers that are impediments to housing getting built, whether that's delays at the permit counter, whether that's particularly onerous fees.

And I think we really need to help shift cities' views towards not just we're going to sort of like do the zoning, but we're actually going to really set the table for developers who want to build in our communities to hit the numbers that we've been told we need to hit. So that's one answer to your question.

The other is like I just think we all, you know, you all need to continue to sort of build the narrative here and help connect the dots. I think local electives need to see, local council members need to see that building homes is actually helpful to their communities. It actually has positive benefits. It's good for the residents. They need to lead and they need tools and education to be able to do that more effectively.

And my last before I defer to my colleagues here is, and this is probably another committee, but we really also need to lean into our lending partners in regards to financing because a lot of the debt to income ratios, sometimes financing these affordable housing or even fair market aren't there.

There isn't the loan products now because our market is ever changing. And I think this is going to be collective work that we all need to lean into to be innovative in the finance industry that is not keeping up with what our current needs are in California. And any thoughts and work that you've done with the lending side?

No, I think the point is good. I think that the challenge for California is that the overwhelming majority of both multifamily single family financing is being done through federal GSEs, Fannie Mae, Freddie Mac, and FHA. And so the primary path for California to have impact is actually working back through those federal entities to help them create policies that are more favorable. We've seen this. I actually would offer that one.

One area that we've seen this happen is California was able to have a significant influence on Fannie, Freddie, FHA, on ADU home renovation loans. We saw them make significant changes over the last couple of years, I would say directly in response to California zoning changes. So again, that, that's, that's an example of how it can be done and also a reminder to sort of focus on these sort of at scale entities to get them to be responsive to our needs here in the State of California.

Assembly Member Wicks.

Thank you. Hi, Mr. Metcalf. Thank you for being here today. Also excited to be on the Housing Committee, excited for Mr. Haney's leadership. So you had mentioned sort of permitting delays and other issues. Could you opine on what a permitting reform regime could look like on housing?

So we have a permit streamlining act. We've already made a number of changes to this. I think the challenge is actually get, I mean, actually getting them to work. So we have to create a pathway where permitting departments actually are motivated to hit the deadlines that the state has already set and to have consequences for when they don't. I think that the answers here are significant. They're probably pretty fundamental to how these building departments are actually working on the ground.

I think it means actually giving them, I mean, giving them more resources, making it easier for these cities to hire third party permit inspectors, helping them implement the latest generation of sort of technology and tracking software, which we are very far behind on. But we all need IT overhauls in every city. So I think if you could basically train them, create third party inspectors, do some technology overlays, and have the state really hold their feet to the fire, I think we could get most of the way there. But that's hard work. That takes time.

Yeah. And you know, the Little Hoover Commission came out with recommendations on CEQA reform, including an infill housing CEQA exemption, also elevating the standing requirements and a couple other things. I don't know if you had a chance to take a look at that, but do you have any reactions on some of those reform ideas?

I haven't looked closely at them, no.

Okay. And is it... Do you... How much do you think CEQA is a part of the, you know, equation here that we should be looking at in terms of reforms?

I think it's high on the list. I mean, we have had. There's lots of good work that's been done to show that there are quantifiable delays to CEQA. And when I point to ADUs and subsidized housing streamlining being effective in no small part, that's because those were state by right measures that sidestepped CEQA review. And I think we need to remember that.

And is it your sense that if we're able to expedite streamlining, if there's reforms around CEQA, things that we're doing that reduce the delay, that actually also reduce the cost of housing, which actually helps positively impact the consumer in terms of their ability to actually purchase or rent places?

Yes. Thank you. So that's a quantifiable thing. That is measurable. We have done analyses on this. If you take a year out of the timeline for building a building, it's a material contribution. Somewhere between 1 and 5% of the total cost of the project is removed.

Yeah. So fast tracking could be a good...

And I think the other thing that's a little bit harder to quantify is just the certainty. We rely on institutional capital, we rely on third party investors, equity providers. A whole host of folks need to feel confident before they put any money down that something will happen. And the moment you introduce CEQA, it just creates risk and risk scares people. So, like, it's not just the deals are slower, it's that deals just aren't getting done because the risk profile is now too high for the people who would otherwise participate.

Right. I guess if you're an investor, you just go to another market or go to another place. Yeah. Okay. Thank you.

Assembly Member Gallagher.

Thank you, Mr. Chairman. Also happy to join the committee. It's been a little while since I've been... Well, I've never been on housing committees, so I'm actually on Housing Committee, but it's been a while since I've been on committees in general. So at any rate, something you said struck me, which is really where we're seeing the most progress. Right. Is in the ADUs and then also on the affordable housing side, right? And it strikes me that...

The most quantifiable progress. Right.

And it strikes me that those are, are very, they're really led by private decision making for private sector. Right. I mean, a homeowner decides I'm going to build an ADU, right. And we just make it easier. We kind of get government out of the way, you know, so to speak, to allow those ADUs to get built and permitted. And so a lot of people have made that decision in the market to build ADUs, provides more housing, you know, and that's really helped.

And then also, I mean, on the affordable housing side, I think we've highlighted over the years a lot of problems. It's like maybe too many different programs that aren't really, you know, centralized has been one thing that's been brought up, but largely a lot of private actors going out there and utilizing the incentives, mostly the tax credits system to go out there and build. And so like, is that an argument for like really moving things out of the way? Right. And allowing private sector actors to get out there and build more housing units? Would you agree with that?

Absolutely. I think that the housing space is a very highly regulated area in ways that are not... In ways that are not broadly helpful to the interests of the region or the state. And so I think trying to find ways to make it, to create additional certainty and make it easier for individual owners, investors, developers to build is of paramount importance. Now, cities still have an obligation to do planning. You know, building departments still have an obligation to ensure the quality of these structures. But we need to find pathways to make it clearer, faster, easier for those folks to build homes in the state.

I'll put another question would be, do you feel like that things like that seem to be working better than say, an inclusionary zoning law?

Well, an inclusionary zoning law doesn't increase the supply of housing overall. It achieves a different policy purpose. So to the extent that the goal is to try and have some mix of incomes or to try and have more affordable housing in an area that wouldn't have any affordable housing, I think it's a, it's an option, but it achieves a different policy purpose. And I think...

Working like where we. See inclusionary zoning, you know, local laws put into place, does it work? Do we get more units quantifiably than we are with these other...

We do not get more... We've done work on this. We actually looked recently at Los Angeles's transit oriented communities, which has a sort of a something of a version of inclusionary zoning. What we see is that there are no more units produced as a consequence of inclusionary zoning.

But there are some affordable units that displace market rate units that would have otherwise been built. That's generally positive. I think the challenge with inclusionary zoning, maybe what you're hinting at here is if you ask too much in those thresholds, then you see an overall contraction of supply. And so trying to fine tune that is a real challenge.

It may discourage. Okay. And then my last one was we were talking about permitting. What about the concept of maybe having like say certified engineers who could either stamp, you know, stamp final approval or basically are putting their license on the line. Right. When they kind of... They could final permitting and then that would get filed with the local government rather than having to go everything go through, you know, the inspectors that are at local governments which oftentimes were understaffed.

I know, you know, from my, from my own experience in local government, a lot of times we just didn't have enough inspectors to maybe do all that work at times. Right. There's busier times than others. But is that something that maybe could be looked at as you kind of utilize professionals to make sure.

We have, in California, historically some cities still do rely on third party inspectors. You know, coming out of disasters, we'll see third party inspectors. Other states have significantly invested and facilitated third party inspectors. I think there has to be a place for that in California if we want to increase capacity. And I think there's ways to do that. There's a body of practice suggests that it can be done in ways that don't adversely affect the quality of the buildings.

Assembly Member Caloza.

Thank you to our Chair. Really excited to be here and thank you Ben for your presentation and kind of the big picture view on kind of what housing, the state of housing looks like within our state. I would love to follow up with you after this to get maybe some LA County specific data.

I noticed some of the data points, and I know that you have a very big task to try to quantify cities and counties. I know some of the SoCal data was bunched as one data point. We know that Orange County, LA County, San Diego are very different in terms of the housing market.

So I'd love to dig deeper with you on that. And then just curious, the area that I represent is District 52, which is South Glendale, Northeast LA, and East LA. It is about a block away from the Eaton Fire. That's where I live and so there's been a number of executive orders that have been passed by the governor to streamline the rebuilding and recovery in the LA area, including waiving of CEQA for those impacted by the fires. Just curious if you had a chance or had thoughts on maybe some of the things that we can learn during this disaster about maybe what we can apply to other larger housing issues.

I think it's, from where I sit, it's probably too soon to tell, but I will say that a lot of what we're seeing in LA does build off of what we did in California after the Camp fire, after the Santa Rosa fires. And I think these are interesting testing grounds to sort of see what happens when we get some of the regulatory restrictions out of the way. And I think to understand, okay, how problematic is that, you know, what gets lost when we waive this stuff. I think there are negative consequences, right?

Like there is a role for CEQA to play. But I think it's really helpful to have these kinds of opportunities to sort of understand, okay, well how, how many unintended, negative unintended consequences do we end up with? And are these trades that maybe make sense not just in the context of a fire, but more broadly?

I think they also are amazing opportunities to sort of force us all, and particularly folks working in government, to work differently, to work more collaboratively, to drop some of, you know, to work in more interjurisdictional task forces or interjurisdictional permitting efforts to think about, hey, can we look at, you know, treating different kinds of permit applications, you know, maybe as if they were pre-approved factory permit sets, for example, you can move them through faster if they have certain attributes. I think, I think this will be a testing ground and I'm, I'm cautiously optimistic that we'll learn from this and do things differently statewide afterwards. I certainly hope so. Hope that could be a silver lining.

Yeah, no, thank you, Ben. I'll follow up with you afterwards. And we'd love to pick your brain on LA specific things.

Assembly Member Ta.

Yes, I really appreciate your presentation and I have a question about RHNA housing requirement. There's no surprise that housing crisis has made an impact issue for all the city in California for years. And when I was mayor City of Westminster, I went to the meeting of SCAC and a lot of cities in my district, they have concerns with the number of housing that have to meet from RHNA requirements.

So we understand that we need to come up with a policy to speed up the permitting process. But still the housing number requirement from RHNA is still a concern for all the city in my district. So any policy that you recommend for all the city at the same time that you go to meet the RHNA requirement, but we still have local control and the policy that you recommend that at the same time or the city that.

Some kind to meet the RHNA housing number requirement, but they still have their local control.

I guess I would suggest that local control is valuable and important, but not at the expense of unlocking the housing that's so desperately in the state. And I think housing is a matter of regional significance. It's a matter of statewide significance.

If we don't have the homes built in every community in California that we need, we know that the future of our next generation, their ability to access the middle class will be compromised. We know that hundreds of thousands of middle class Californians will continue to leave the state elsewhere.

We know there are a whole host of negative things that will happen. And so I think we need to help local governments understand that their job has to be to facilitate new housing supply. The question that they have to solve for is how do we do that? Not do we do that? Okay.

Thank you Mr. Metcalf for all of those responses and for your, your presentation. I know we're going to continue to partner closely together on all of these issues as the year moves forward. And thank you to my colleagues for those thoughtful questions. Questions.

I know we're going to have a very engaged Committee this year, so I'm excited for that. And thanks again for being here. My pleasure.

I'm going to invite our next speaker up, Megan Kirkabee from the California Department of Housing and Community Development, who is going to provide an overview of some key housing production laws passed to date and the efficacy of those laws.

I do want to note definitely following up on Assemblymember Avilas Farias's comments, that the reason why we called this as our very first hearing is before we start hearing lots of new bills, let's take stock of what is happening out there.

The Bill, the laws that have already been passed, what's working, what's not working, what needs to be strengthened, and hopefully what is already existing will guide our work as the year moves forward. And so with that I will pass it over to Ms. Kirkeby. Thanks for joining us.

I appreciate that and thank you. Yeah, I. The honored place in first hearing feels, feels really important, certainly a topic I care about. So I'm Deputy Director for Housing Policy for HCD. My name is Megan Kirkeby and we can get started on the next slide. All right, next slide. You guys don't need that one. Next slide.

All right. So once upon a time we were really focused on the idea that the state's role was creating deed restricted affordable housing. And that that was really our main, our main emphasis was this affordable multifamily space.

But that doesn't confront the massive upstream problem that is faced by those building affordable housing and those building any housing in our state. And it also means if we're not confronting those upstream problems, then our state dollars that we put into affordable housing are not stretching as far as they should. Right.

That means that we're effectively wasting state money trying to build something for public purpose.

And many of you in the room have been part of this massive shift where we've really, instead of thinking about one big solution, really building a net of laws that address the variety of barriers and constraints that are necessary to put us in the right place.

And so the goal of these state housing laws is promote housing production at all income levels in every community throughout the state. Next slide. And I won't. My colleague Ben, I think had like eight slides on the problem. So you're just going to get one from me. But you know, I think you're well versed in it.

But, but the one place I really want to dig in a little bit is on that wonky term he talked about cost burden. So you know, this is, this is how much of your income that you're paying toward your housing costs every month.

And it's really important to understand that when that number gets too big, our communities don't have the buffer against the economic shocks that we all experience. Right. That means that you can be one car breakdown away from homelessness, one medical incident away from homelessness. But, but it also has a giant impact on our homeownership rate in California.

So when our renters are too highly cost burdened, they also don't have that buffer to save for home ownership or for a down payment. So we are both deeply impacting ourselves from a homelessness perspective, but also cutting ourselves off from home ownership. And so that can be a counterintuitive thought for people.

But it is really important to remember that affordable rental housing that helps get cost burden down and a significant supply of it is the most important thing we can do as California to promote greater home ownership ability long term in the state.

That's the next slide as we moved more into this net approach to really trying to tackle a problem holistically. The state laws fall into categories of making it easier and faster to build housing, promoting housing in more places. Again, another counterintuitive.

There's a lot of counterintuitives in housing policy, but it's actually harder to build housing in the places we want it most. Infill housing, near jobs, near transit. Those have historically been the Places that are most cut off and take the longest development timelines have the highest barriers and constraints associated with them.

A lot of the laws really tried to tackle that problem, facilitating housing at higher densities. And you know, this is really important for a high cost state like California, right?

We, at the end of the day we only have certain amounts of land and being able to build more densely is one of the, one of the ways that we're going to actually be able to bring costs down and then ensuring housing is available at all income levels.

And you know, I hope most legislators feel strongly about, as strongly as I do about this, but the point of passing laws is that they're followed, right? We don't want to just create laws and then have them have no enforcement.

And so a big shift over the past few years has also been implementation and enforcement of those state laws, which takes a variety of avenues. Right. That's a lot of work on our, our front from an education perspective. Ben mentioned this as well.

You know, with a lot of new laws, that's a lot of education to do to make sure that it's not overwhelming for folks. So we do, we do a lot of that. The state very generously allowed HCD to put out SB2 planning grants, LEAP planning grants and reap planning grants before this housing element cycle began.

You know, that I think you can think of as also part of the puzzle of why the ADUs are so successful.

You know, we were able to go into local governments and give them funding at the regional and local level so that they could do things like create pre approved plans for ADUs, like create a public counter for ADUs, but they also could update things like objective standards.

A big part of this is let's do the planning up front so that communities do get input in what they, what they want to see. But we all reach the end goal that we want together. So. Next slide. So it's a little hard to see here, but this is a little victory lap for many of you.

But these are some of the laws that have happened in the past few years or have been updated in the past few years, including 2011, which really impacted that housing in more places ability and again, really, really an important tool for stretching our affordable housing dollars further.

But you know, all of these laws are touching a piece of that puzzle and working together, they are having major impact. Next slide. So this is a little bit, I wanted to talk a little bit about what it, what it means for us at HCD to implement and enforce the laws that have been passed by the state.

So we want to ensure that all jurisdictions are meeting their fair share of their housing needs, promoting that housing production at all levels. And like I said, sometimes that's going to be planning grants, sometimes that's going to be educational tools. A lot of our letters are even requested by local governments wanting clarity on the laws.

But then we do also hold jurisdictions accountable for following the law through enforcement action if education technical assistance is not the pathway. Next slide. So a little bit of background on the Housing Accountability Unit. This is something that we really formed under Governor Newsom and the enforcement authorities have expanded over time.

It's now 47 staff Members across five teams trying to, trying to do all those things that I've been talking about so far. Next slide. And little context of where that sits.

In our, in our land use division we have the, the planning grants and incentive side of things that I was talking about sort of that upstream Ta funding to local governments. And we do, we do know that a lot of the things local governments are committing to do or are hard.

And so part of what we do on an ongoing basis is have the pro housing designation program where you can get, you know, effectively a gold star for being a jurisdiction that goes above and beyond the law in terms of evidence based practices that promote housing development and equity goals and other housing goals.

And then we have our pro housing incentive program. So some extra money, flexible funds for local governments that are pro housing. And the higher your pro housing score you get, the higher your pro housing incentive amounts can be. So we know it's hard and we want there to be rewards for doing that hard work.

So that's one side of the shop. And then our Housing Accountability Unit even they still do education and technical assistance work, but they also are how we enforce if that isn't working. And then they are also, well you can see it on the next slide. So we have our complaint based enforcement work.

So this is where you're a local homeowner and you're trying to build an ADU and your town says no, we don't allow ADUs. Right. Like, or you're a housing developer and you've hit a wall. You know that the law says that you should be entitled to something and that's not really showing up in real life. Right.

So we have a portal where we receive complaint based investigations and then or complaints and then we do an investigation and follow up when then we have our proactive enforcement side. You know, this is housing element implementation.

Each housing element is a contract for those eight years of how you are going to address those governmental constraints in your community, how you're going to do make it easier to actually achieve those housing goals. And so once you're compliant, you've made commitments about things you're gonna do throughout those eight years.

And so the housing element implementation piece is really checking on that. Right. Like, which is something new this cycle. We didn't actually used to check if people kept their promises and that's not really good practice. Right. So we're very grateful to have the capacity to do that this go around. Including things like rezones. Right.

Rezones were things that didn't used to result in you losing your housing element compliance. You could make the promise of doing the rezone and then not do it. Right. And that's not going to lead to actual housing production. So that's new this cycle. And then Surplus Land Act is a.

I'll talk a little bit more about that later. But that is a big piece of the puzzle for us in terms of affordable housing production in recent years and then affordable housing preservation.

So making sure tenants are properly noticed if there's expiring covenants, doing the, the right processes to make sure that the affordable housing we have built as a state doesn't convert to market rate and lead to increases in homelessness or evictions when it's such a much more cost efficient situation to preserve that affordable housing. Next slide.

This is a big part of collaboration with that all of this is done in collaboration with stakeholders that like I said, it can be developers, homeowners, but we get a lot of local jurisdictions asking us to weigh in.

And I make, I say this very publicly to many local governments I meet with right now my Boss is very happy with me being the bad guy. Right.

So if I'm the one who needs to come in and write a letter that says yes, the law says X, I'm very happy to do that and, and to take some of the pressure off, you know, because it can be a hard position to be a local representative when you're talking about change.

So we have various ways where, where technical assistance requests or complaints can come through. Next slide.

So what's been happening? We've written 616 of those letters I just talked about. We've gotten to a place. The drop between that number and the next number should feel pretty good for people. We write a letter, we say the law means X and then the issue is resolved. Right?

Only, only 17 times have we had to rise to notice of violation to say, you are breaking the law. You didn't stop when we told you what the law was. You are now breaking the law.

On housing elements, we've had, you know, 27 where we've had to say like, hey, you know, your housing element was due a real long time ago. This is the log. You're not getting into compliance or you failed to do your reasons even then.

Only that has led to four full revocation letters where someone was in compliance and they lost their compliance. We've had a few lawsuits, a few successes there and several settlements as well. And stipulated judgments around the housing elements. Particularly proud of the stipulated judgments around the housing elements.

You know, that is a way to basically say, look, you know this, you need to do this planning. We are getting you on a timeline, you're going to get into compliance. And we want to get you back into a place where you have full access to funding as a state and where you're in the right place from a planning perspective. And then we filed some amicus brace as well in other, in other lawsuits. Next slide, next slide. Impact and successes.

So that, what does that work actually get us? The complaint based work, all those letters has led to unlocking nearly 8,000 total homes, total housing units, and of those, nearly 3,000 of those are affordable. The Surplus Land act, as I said, this is a huge contributor. We have oversight over the Surplus Land Act.

So when locals dispose of local land, so state land works a little different, but for local land, local land that gets disposed of needs to be in compliance with the Surplus Land Act and go through a process.

We review all those materials, we give them technical assistance, we review exemptions to the Surplus Land act and at the end of the day, the total homes to come out of that is nearly 32,000 homes with nearly 20,000 of those being affordable. And that's in a pretty short timeline.

We've only been overseeing the Surplus Land act for a little bit for the last 34 years. Next slide. And so that's where we're getting in terms of homes, but what else? Right. And what beyond sort of the ones we touched, specifically completed residential Construction is up 13.1% from 2022 to 2023. That's a pretty big jump.

Construction has been up every year for six years in a row since 2018. ADU production continues to. You know, I think I'll steal Ben's bright spot language with a new high of nearly 28,000 ADUs in 2023. Next slide. And then affordable housing growth.

You know the share of lower income units and new development has nearly doubled since 2018. That is I would say a lot of the laws that I mentioned, including 2011, including some of the other streamlining laws that include an affordable component. But you are getting that certainty.

You are getting that streamlining that has a big impact in our affordable housing growth as well as obviously major investment from this Administration as well. So that that now represented 19% of the permitted units and 16% of the completed units in 2023. Very low income unit.

That's sort of Jargon but means like housing affordable to very Low income households. The completed units increased from 44 by 44% from 2022 to 2023 and lower income unit completions rose by 75.7%. So. And there was an overall 61.5% increase in affordable housing production. Next slide. This one I'm probably more proud of than all the others.

I think this really is the evidence of all those laws working together. The time from application submittal to entitlement has been significantly reduced. The average timeline decreased from 145 days in 2018 to 64 days in 2023. Everyone in this room who worked on these laws should feel proud of that. That is huge cost reduction contributor to housing.

That is how we are going to get costs to come down are things like that. And the entitlement to permit processing is down to 85 days. And the construction phase has shortened by 33% since 2018. That is real impact of loss.

The density bonus has also been a major success with deed restricted affordable unit entitlements surging from 29,000 in 2021 pretty good to 48,000 in 2020. Three of those deed restricted units increased from the deed restricted affordable units increased from about 20,000 to about 36,000.

So we can really see things like the effectiveness of 2345 and the streamlined ministerial approval process that comes from SB35. Now SB423. I think we'll. This is something we've been tracking since that since about 2021 and the use of that program has increased from 14% to increase by 14% from 2021 to 2023.

And there were a total of nearly 22,000 homes approved under that streamlined process with many nearly 80% of those being affordable units. And we'll begin to see other streamlining numbers. Newer streamlining programs also be reported on the through this data as well in future years. Next slide. Great. So the.

Sorry, I've entered my bifocal era so but I wanted to just make sure I got all of this. But yes, so I think mostly just wanted to share that, you know, we're grateful for everything that's happened so far.

HCA is really proud to be an implementer of these laws and to also work in partnership with local governments to disseminate this information. This was mentioned a little bit in passing in Ben's presentation.

But just want to say that, you know, especially with those accountability numbers I showed in the complaint based nature of things that the work that we put into a developer that chooses to come forward or a local homeowner that says I'm having trouble building my adu, you know, we take credit for that specific case but when we do that we're often changing the policy at that local level and can have those, those letters get disseminated and are also set precedent that have the broader impact beyond those specific.

And I think we're seeing an era where, you know, the hope was always that by the state playing this enforcement role it would take some of the pressure off of those individuals to file lawsuits themselves or to do all the work one by one. And I think we're really seeing that.

But we do still see that it can be, it can be nervous making to be the one to come forward and say hey, my city's pushing me too hard. And so often we are still getting a complaint after a developer has conceded many, many points that they didn't need to concede under the law.

And we are seeing developers who still don't really want to come all the way forward to risk relationships and things like that. And so I think part of the era we're into is that some of these laws, even without further change, are going to keep being more effective over time as we see it becomes, become sort of more normalized in the community to use them and point to these laws.

And I think also just as people get more adept at understanding the laws and staff get more adept at processing permits under streamlined protocols. So I think we still have more gains to see but we should be proud of what we've gotten so far, so thank you all.

Thank you so much for the presentation and for the work. So, so critical of course, that we pass laws and that you all make sure that they're actually being followed and enforced. It's something that we, we obviously need in order for any of these things to be effective.

I just wanted to ask a couple just quick questions, then I'll open up to my colleagues. So one of the things that, that would be helpful for me is sort of understanding the, the role that you all are playing as we get further within the, this particular arena cycle and monitoring of housing elements.

One thing that, that I haven't yet seen and I'm wondering about, Obviously, you know 2021-2022 give or take these start they go to 2030 give or take. Now within that we should, we should be beginning to see what level of progress various areas are making and I wonder if we're tracking what jurisdictions are making progress which are making no progress or zero progress and sort of what role you all play as we get further into this and what are the sort of accelerating interventions that you may have.

As you see certain jurisdictions that may have housing elements that are just making no progress towards that or very little progress towards actually building or permitting units and looking at what may be blocking that from happening and how you intervene.

I know some of the things are built into the law and maybe you can sort of help to clarify that for us. But how you see that as we are now approaching halfway through this cycle and should have a lot of real world impacts on what is or isn't happening as a result of these housing elements.

Yes, the whole state's on a rolling cycle with San Diego being first and then Southern California and Sacramento. And I won't go through the whole calendar, but we're in the phase right now where you have three years to complete the rezones for your housing element. So you know, the, the housing element really sets the table.

It says here's where our capacity is going to be. Here's the kind of policy changes we're going to make to address constraints or equity or whatever specific situation that community might have. Maybe it's a farm worker thing, maybe it's, it can be, it can be lots of things that are very specified to the community.

But we track all of the program commitments and that the updates on those commitments come in through our annual progress reports every year. So we've, we've really built out the housing element, the proactive housing element team to be able to track all those and be having sort of check in points with all the jurisdictions.

And this year, this, the, this almost this exact moment we're were at the three-year mark for skag. So the Southern California, the largest region, 197 jurisdictions, all of their, if they had not completed their reasons initially, they would be due, they would be new. They're due right now.

So obvious we're in the, that involves us working with all those communities, making sure all of those reasons are actually adopted and reviewing to make sure that they match those commitments that were made in the housing element. And that same process is happening region by region.

And then all those additional things which might include stuff like, hey, we're going to update our design review guidelines to make them more simplified. All of those pieces, those will actually be checked and we can revoke compliance if we find that jurisdictions are not doing the things they committed to do.

But you know, to be blunt, our preference is to just make sure they do it. And so the work is a combination of that technical assistance I talked about, of like, okay, so like you said you were going to do X, it's not done yet. Like, what do we need to get that done?

And then if there is recalcitrants, you know, using enforcement as we need to. But most jurisdictions want to do the right thing and it's a capacity challenge. So if we come in with help, with the planners on our team being willing to support, mostly we're being met with, not met, I don't want to say happily, but you know, it's okay, it's going okay.

So to be clear on that, what they're responsible for is really what they said they were going to do and the ongoing changes and adjustments that may be required, they aren't, they aren't necessarily held accountable for whether they're actually meeting their goals around housing production. And if they've done all the things they said they're going to do, yet no housing is being permitted or built, what is the role that you play in.

No, that's good. I'm sorry, I forgot that part of your question. So the big checkpoint on that is through SB35, SB423, the streamline ministerial approval process. So every year when the APR data, so many wonky terms, when the housing data comes in, we check that up against where they should be.

And at the midpoint and the end point of the cycle, they need to be at 50% progress and they need to be at 100%. At, at the end they need to be at 100% progress. Otherwise that clicks on. Not a punishment for the jurisdiction.

I don't believe it's a punishment it is simply saying that additional streamlining kicks in should those production goals not be being met. And to me that's a pretty logical conclusion is. And then I would say the other place that production. Well, I think that's the main place that production comes into play.

50% and 100%. And at 50% of the cycle they have to be at 50% production.

That's right.

And so, and for some places we will be nearing that in the cup.

In a couple and that. So each region, you know, is on that timeline. But yes, like, so each year, like new ones kind of come into the fold. The City and County of San Francisco is the one exception. They are evaluated annually, but yeah, so they're at like 1-828-3848 etc.

Great. Thank you, Assemblymember Kalra and then Wicks.

Thank you. Thank you for the presentation. Thank you for the work and kind of giving us a sense of what we accomplished. I think sometimes we focus on how much more work there is to do because there's a lot more work to do. There's a couple comments. One on the Surplus Land Act.

I know last year there was some pressures that I think are put on it and I know that it's such a critical tool because a lot of local jurisdictions would rather do other revenue generation options for their land.

And by having Surplus Land Act, I think it really does give a lot of leverage, appropriate leverage for us to ensure that when there's an opportunity that that housing is built. And so I appreciate, you know, kind of you mentioned that.

I just want to, I guess as a General comment that I think we need to continue to be protective of the Surplus Lands act and, and on the ADU front, I know in, in, in August, San Jose allowed for the sale of ADUs as, as individual commandos. I don't know what the numbers are of that.

It's a different kind of concept if you have, if you actually live there and you're selling your, you know, creating a condo in your backyard. So it'll be interesting to see. It might be more effective if someone has a rental property in ADO and want to sell it. But I think it's an interesting concept that, you know, in maybe a few more months we'll have some numbers to see if it's, if it's been effective.

I think that certainly if folks are looking, you know, to move out of the area, what have you, that it may move them kind of sell as separate properties as well to create more home owning opportunities for folks, and the question I have for you on the side regarding the very low-income unit completions increasing by 44% and then low-income unit by 75%.

Those are really great numbers in terms of percentages, but I imagine the raw numbers are pretty low to begin with. And so I, I just mentioned that because I imagine, I imagine that the concentration of those homes are probably in this. Just similar jurisdictions.

Like it's the same jurisdictions that tend to build a lot of the affordable housing. Do you have that, that slide? They're very good numbers, but I just not sure. I think in sheer numbers, you know, as opposed to pure percentages, because the starting point was probably relatively low, especially coming out of the pandemic.

I think it's a very fair point. My background's in fair housing and really thinking about those exact issues, I think that's a place where some of the other laws have helped quite a bit.

So, yes, I would say probably I don't have the breakdown jurisdiction by jurisdiction in front of me, but a lot of the work of the last cycle was really about opening up areas. And so we are, we are seeing the fruits of that. You know, we are seeing zoning in places that didn't have multifamily zoning before.

We are, you know, Santa Monica not to meet its RHNA goal, but to meet its fair housing goal. And its housing element changed its R1 zoning to allow. I'm gonna, I hope I don't get this wrong. Somebody will send me an email if I do. But I believe it was up to 10 units per acre.

So a lot of jurisdictions are thinking because the housing element, the cycle, required them to look at their racial history, it required them to look at their economic breakdowns across their community, to look at where people live and where resources are. I think that changed some of the conversation about zoning.

And then a number of other laws like the Housing Accountability Act changes have really raised the bar on saying no to affordable housing. And there, there are fines associated now with saying no and sort of if after the fact you can be proven that you said no for a forbidden reason, you know, for not a health and safety or et cetera reason. So I don't have the breakdown in front of me.

Certainly the history has not been good on that, but I think there's some reasons to be optimistic.

Yeah, and not obviously today, but at some point in the future, it'd be great to see those numbers broken down as to who's actually building the housing and what the kind of raw numbers are. But it's great to hear that there's been a shift in behavior just based upon some of the requirements that are there. Thank you.

Thank you.

Senator Wicks, thank you.

Thank you for testifying today. Just a couple quick questions on the presentation on the faster development timelines, those averages. Is that affordable or market rate or both?

This is everything altogether. Everything altogether great.

And then I assume there's some outliers. I know, like, San Diego is, is very quick and is sort of a model, I think, for the state. I think they're what, 30 days?

Yes, there is. It. I, you know, there's definitely some outliers. Yeah. This is part of how San Francisco got on our radar for the policy and practice review was they had an outlier. The bad direction. You know, we're really proud of how far they've come and I think they've, they've changed a lot of that. But, yeah, I'm happy to.

Is there any way to see, like, I don't know, by county or by region or something? Absolutely, that'd be super helpful. Or jurisdiction, whatever makes sense.

Yep, that would be great. And then I was just looking at the density bonus success and it just spurred a larger question. How much of our, how much of our housing, our affordable housing is through, you know, inclusionary or density bonus versus 100% subsidized?

Yep.

I, I can get back to you on that. I'll say it's a, It's a changing landscape. And this is something, I think the affordable housing. Actually you have affordable housing developers later on.

Why I would, I would ask them about that too, but yeah, it has been changing this landscape with, with, with giving so much streamline in exchange for affordability. You know, we see more of the, the market rate space doing affordable units, and sometimes that's in partnership with affordable developers and sometimes it's not.

So I, it's definitely a place I've been watching from sort of an academic lens, but I don't have that. Like, I could probably. That would be very easy to pull that number of, like what percentage is from those, those two venues. That'd be great. I appreciate it.

Thank you. Yeah.

Senator Quirk-Silva

Thank you. It is encouraging to get this after the first presentation, because the first presentation is so dire and yet I agree that we have a lot of work to do and it is good to once in a while see that some progress is going to be made.

But I wanted to look at the slide with the enforcement actions and sadly, personally for me, I have my home city, Fullerton, on there. Anaheim, another city I represent in several Orange County cities.

So certainly getting the breakdown of across counties, I think would not be surprising when we get that data that some jurisdictions or counties are doing a much better job than others and some continue to fight. So when you say, well, we're not punishing, I'm okay with punishing.

I know that that doesn't make me popular with a lot of people. But the truth is you've got to build, and if you don't build, there should be a consequence. And we all too often see local cities and jurisdictions that are trying to still find their way out of building.

So I also appreciate this opportunity for individuals or even developers to go to the site and do their own complaints, because I didn't know about that till today. So I do appreciate that.

One of the big things coming out of the budget this cycle is the Governor office talking about splitting the business consumer services and the housing agency. How does, how do you feel about that and how do you see that happening? I know we've had a chart in other committees that show all of the different elements.

So that's one question. And then the second is again on the Surplus Land Act. I know that my colleague asked about it. I asked early and I know we had a special hearing on that at 1.0. And you were talking about the units coming on at some time.

So the numbers reflected, are those completed units or are those units that are coming on in the next handful of years? So those two questions, the business consumer split and the Surplus Land act, just.

The surplus one, I'll do first. So those are, those are coming online. They are not completed units, but they are, they are required through the deed restriction paperwork of the Surplus Land Act. So they, they are somewhat protected to come into fruition in that way that they, that those requirements run with the land.

So within the next like say five years, they should be built.

And yes, and I, I can, I believe we'll be receiving information annually through the annual progress report as they do become built. But I can, I'll put that as one of my action items as well to make sure. Thank you. And then, you know, the housing agency, the.

I don't, I don't have a lot to add beyond what was in the budget. But you know, I, I'm with housing. It won't change much from my perspective, but it will create more, it will create more attention for my agency on this particular, be able to attention and focus on housing for my agency.

So that is always a benefit. But there's, you know, we're at the stage right now where this proposal will go to the Hoover Commission in spring for. Of the Little Hoover Commission in spring for more discussion. So, you know, I think.

I think we'll hear from a lot of perspectives about, you know, how do we do this in a way that is most effective, creates the focus we need and streamlines things at the government level.

You know, if I'm asking that of locals, I want to make sure that we're doing that at the state level too, and be thinking about how we can be efficient and coordinated.

Can you put down on your list, since we're here? And one thing that came out of the big budget discussion on Monday was exactly this, that the Governor would be having this looked at by the Little Hoover Commission.

But the timeline for them to look at this and the timeline for our budget, we're in a very tight timeline. So as you said, if it goes in the spring, do we have any guarantees we're going to get back their analysis before we hit the budget, which is obviously coming up very quickly here.

So if we can get some kind of information. All right, thank you for that. Thank you.

Thank you, colleagues. And I have no doubt that we could sit here all day and ask you questions because of how critical your work is to all of the things we are considering. But unless there are other. Oh, yeah.

Thank you, Chair, and thank you for the presentation again I'm so sorry for everything that your community is going through right now.

Thank you. Mostly impacted, too, by the Assemblymember - and Irwin, who I know are not represented here. So I always feel a need to kind of raise. It's more than just your community, but. Yes, yes. Your shared community. Yes.

But just a quick question, kind of similar to the questions that Assemblymember Quirk-Silva was asking around some of the HAU enforcement actions. Can you just elaborate and explain how your Department works with the Department of Justice and the Housing Strike force? Is there any coordination and collaboration with the work that's done there?

Yes, absolutely. So we're in very close collaboration with the housing strike force. We meet with them at least weekly. But HCD really takes a lot of the technical assistance, the education work, the pre work with locals. That's all on hcd. We bring in the Housing Strike Force when things are moving toward that enforcement type.

So obviously our preference is we just want everyone to follow the law, but they're our partners in crime fighting, if that's what it becomes to.

Thanks for sharing that and I can follow up with you after. I don't want to take up more time during this hearing. But, yeah, we'll follow up with you on some of the enforcement actions, maybe any additional things that the Department may need, whether it's in policy or otherwise, that we can do to really strengthen the work that you're doing.

I know that's a tool that we've had to use a lot more to ensure that all of our housing laws are being enforced and followed. And then maybe I can work with our chair to maybe at a later time, we can get more information on some of the programs that impact our unhoused community and around homelessness.

I know we're talking a lot about housing production today, but would love to hear more on the homelessness front.

Absolutely, and we're also doing a lot more in that space. So we're always happy to talk about that. Thank you.

Now that that has come, I have one last question, and it's sort of on moving forward, how we both track what is happening and the transparency and data that's available.

Both on this question of laws that we've passed and which jurisdictions are taking advantage of those laws and to what extent, you know, and when that's reported, you know, for some of the SB9, SB10, 2011, all these bills that we throw out, these numbers there, do we have a way that jurisdictions are reporting or you're tracking very clearly and at what points we know how many permits have been submitted under that law, and how do you report that?

How do you track that? How do people access that? Is there transparency there in terms of can the public see that somewhere? And then similarly, for the progress that jurisdictions are making towards their housing element goals, how many units they've built, how many permits.

We also looked at this in the case of trying to take stock of, for example, how many affordable units are in a city or a county that either exist or have being built.

How does all of that come together in terms of what data is available when it's reported and how it's available transparently to either to us or to the public?

Great. As I think this is one of the biggest advancements in HCD in the past 10 years. But each local government provides a annual progress report. It's just like taxes. It's due in April, reporting on the prior calendar year.

And, you know, at the beginning of this, I think it was, it was pretty much just permits by income level. But with the advent of all these new laws, that report is pretty lengthy so that it can encompass all of these things. And so all that data feeds into what we call the APR dashboard.

So 100% of the data is publicly available at all times. It is available both in raw form for academics that want to slice and dice it however they want to.

It's also in a dashboard for people like myself that just want to be able to click and see like what their entitlement timeline was and what their, how many, how many ADUs they built. And so all of that is very publicly available. I will say it's enough information.

It can sometimes be overwhelming for folks, but it is, it is all there and we're always happy to walk people through it.

And so somebody could click on their city and see, you can see everything you're saying.

And it's annual.

So, so you have it from last April. So it will be update. When do these be up? When will it be updated? If they're submitting in April.

So they're technically the dashboard's updated at 2am every day. So that if, you know, so it's.

Real time update or it's updated once they submit.

So it's. Yeah, see that, that it's, it's updated so that if somebody for example, submitted a correction to their reporter or something like that, that would change. But yes. So the numbers that are there now reflect the. So we're in 2025. So come April all the 2024 data will be there. We kind of, they're due April 1st.

There is a little bit of a grace period in statute to get them to June. And so we do the, the SB35, SB4 23 determination at the end of June every year to just allow that grace period to be there. But basically by, by spring to summer every year the data from the prior year becomes available.

Yes, and also to cross-reference data because there's that the, the pipeline of construction. But then the data elements that HCD and Cal FHA would have of actual affordable housing developments that are being constructed because just a year ago we did 5 billion in.

Affordable housing lending that is also a marker of knowing where fair market rate and affordable are aligning and where the production is going. So that's also data that we can overlay to cross reference. That's right.

Great. Well, thank you again, Megan, for your time and your work. And I know we're going to continue to work together and partner and learn from you and support your work. So please extend that to all of your colleagues as well. Our gratitude. All right. For our last panel, we've got four practitioners.

We really wanted to have folks who are out there building housing, navigating, taking advantage of the laws that we're passing and get a sense from them what they're seeing and what their experiences have been. We have four individuals from various perspectives and regions.

Ann Silverberg, who is the CEO of Related California, will speak to how these laws are working for both affordable and market rate developments.

Cesar Covarrubias, Executive Director of the Kennedy Commission and Affordable Housing Advocacy Group, Eric Phillips, partner at Cox, Castle and Nicholson, a law firm directly using these laws and Tom Pace, the Community Development Director for City of Sacramento.

I'm going to facilitate this panel, but then folks can jump in when they have follow up questions or comments from the Committee. So we're going to start with hopefully some positive things because our Committee wanted to hear some more success stories.

So I would love to start if each of you would share quickly a success story or two and tell us about ways in which some of the laws we've discussed today are working. Whoever wants to start and then we'll just go down from there. Sure.

Since I got the point position at the table, I'll start. Thank you very much, Chair, Very happy to be here with the Committee this morning. I am, as you mentioned, a land use lawyer. My practice, I'm a partner in San Francisco at Burke Williams Sorenson. I'm also technical advisor to the board for California APA.

So my practice is focused both on supporting local agencies comply with the laws. And I represent a number of both affordable housing and market rate developers secure project entitlements and defend them.

And one of the successes that we heard from both of the earlier presentations dealt with the ADU laws and the very quantifiable jump in permitting that we've seen as a result of those laws.

And I just want to highlight three of the, I think aspects of that law that have been so successful and that translate to other areas of securing project approvals and defensibility. First is that the law has predictability with respect to the process and the timeframe for securing approvals.

We also heard during the earlier presentations how important the length of the approval processes and time really is. Money and feasibility for projects and the ADU laws set very specific timeframes for reviewing projects, for responding to comments and for taking final action. So that's a very predictable process.

The second aspect of it that I think has been very successful is the way it handles development standards. It provides certainty with respect to to size, height, setbacks. So the building envelope is very clear, but it still leaves room for flexibility.

If your ADU is below a certain size, many other development standards don't necessarily apply to that project. So you have flexibility to adjust to your individual site. So that balance is very important. And then the final aspect is the defensibility once entitlements are secured.

It's a lot of what I see and deal with is you have challenges to projects that have been approved, but under the ADU laws, because those are ministerial approvals, there's no CEQA review that's required, so they're not at risk for being challenged due to a CEQA lawsuit.

There's no public hearing process because you're simply applying pre adopted standards to an application and evaluating how that application meets those predefined standards. So there's very limited opportunities to challenge a project like that.

So when you look at those three principles again, the timing, predictability, both a limited number of standards and flexibility with how they apply, and defensibility once entitlements are secured. I think we see how some other successes have played played out, for example with the Housing Accountability Act.

I think that the changes that we've seen starting all the way back in 2016 through today, have really focused on two of those three goals. They it's done a great job in making it very clear that a project really can't be denied if it complies with enumerated objective standards.

But it still leaves room for flexibility when it's paired with the density bonus law because you have the opportunity to waive standards that conflict with a particular development. But even more important is that it can operate as both, I think, a sword and a shield.

If you have a jurisdiction that is hesitant to approve a project, the Housing Accountability act makes it very clear that their options are limited. To deny it and the risk of denying it is quite high.

But if you have a jurisdiction that supports a project, the Housing Accountability act gives them both a very clear cover from any political blowback they might get from constituents and from anyone else that wants to challenge the project. You have a very strong legal defense for why that project was properly approved.

And the courts have been very good at applying the HAA and upholding those individual standards. And then the last thing I'll highlight quickly before I pass the mic to the next presenter here would be some of the CEQA streamlining laws that have also played into those three topics that I was talking about.

And some of them actually are old. These are not all new laws. I want to highlight the, the government code exemption for projects that are consistent with a specific plan. I want to highlight the community plan exemption that's both in the statute and the guidelines of ceqa and the infill exemption in ceqa.

All three of those share a commonality in that you have to be consistent with your adopted planning standards, the General plan or specific plan, or your zoning.

But once that higher level plan has been adopted and subject to environmental review, projects that are consistent with that don't need to go through environmental review again unless there are very specific project specific environmental impacts.

But the reason that those three, I think are so successful compared to some of the other statutory exemptions that we've seen is that those are the only requirements to use them. There's not increased affordability contributions, high labor standards, other criteria that would keep you from being able to qualify and use them.

So that is, I think, key to making a strong CEQA exemption successful. So I'll pause there. There's a lot we can come back to, but I'd like to pass it to the next presenter.

All right, I'll jump in. Okay. Honorable Chair and Members of the Committee, my name is Ann Silverberg and I'm CEO for Northern California Affordable and Northwest Divisions at Related. I'm here representing Related, a developer. We develop both affordable and market housing. In our history 35 years, we've developed about 20,000 units, 16,000 of which are affordable.

So very big part of what we do and the rest is market rate. We have about 10,000 units in our pipeline, so a lot of production. I'm here to give you the from the ground perspective on some of what you've been hearing about today and a few other things as well.

So I'm very excited to talk about what's working and I agree with Megan. I think she talked about it as a victory lap for many of you who are here and those who preceded you in this case Committee.

And you know, for all of your hard work and commitment to addressing this very serious housing crisis and affordability crisis that we have in the state, I just want to say thank you very much for what's already happened and also for the hard work that's ahead of us. So a lot is working, not everything.

We still have a crisis, but a lot is working. So I want to tackle two topics. The first one is land availability, kind of starting at the beginning.

And I do think that there are improvements that we're seeing in housing ele with rehna, but more particularly with the Surplus Land Act and the administration's Excess Site program, we are really starting to see accessibility and availability of land for affordable housing. And that is really making a very big difference.

In the Bay Area, for example, on the peninsula where land is for sale for 10 or $15 million an acre, it's very hard to make affordable housing work when you're acquiring land conventionally. So a long term lower cost ground lease is a very good way to ensure that housing is feasible and can move forward.

So, you know, as an example, we are, we just closed on Friday the third of four phases in El Dorado county in South Lake Tahoe, in the Tahoe Basin area. And that's an area that has been very impacted by immigration, a lot of that from COVID But the workforce could not afford to live there.

Many folks were doubling up or overcrowding or commuting from far away. There are folks who were traveling from Auburn every day to their jobs in South Lake Tahoe and Reno. You can imagine doing that drive every day in the winter. And some folks just stopped going to their jobs.

And it was affecting not just the people but also the economy. So we're happy to see that moving forward. Second category of victory laps here, I'll say, is the recent suite of land use reform bills. I mean, it is really unbelievable.

You've been hearing about this all morning and it's really made an absolute difference in the way that we are going about entitling affordable housing and moving those projects forward to fruition. Starting of course with SB35 and which is now 4:23.

And we've used that, that law as well as, you know, SB330, 2162 for permanent supportive housing, 2923 on BART land1449, 1397. I won't list them all because there are too many. I think there are five pages of bills listed or laws listed, but of course AB 2011 as well. We've used many, many of these.

Our organization alone has now entitled 2000 units using these streamlining laws and we have another thousand units behind that. So it's a very big part of how we're moving affordable housing forward. So I do want to say on a micro level, we are saving years.

I was surprised at the average length of time for conventionally entitled projects because we have experienced much, much longer timelines, and there's a lot of uncertainty in that process. And you could be challenged, you are facing a lawsuit, all kinds of things. So we are saving money, we are saving time, and most importantly, infusing certainty into the.

The process. And that is really making a difference. And on a macro level, if you think about the state, we are building a very, very strong, robust pipeline of projects that could be built. There are other challenges. Talk about those when we get to challenges.

But really building a very strong pipeline of projects, and that's what we need to address the crisis. The New York Times, I think, said it best when they said California has a housing crisis. The answer is more housing. We just need to build more housing. So this has really made a difference. Thank you.

Thank you.

Good morning. It's a pleasure to be here. I'm Tom Pace. I'm the Director of Community Development for the City of Sacramento, and I'm also a technical advisor, along with Eric, to the California chapter of the American Planning Association. And I will echo the comments of the previous speakers. I agree with them.

I'll also say that I think just generally the. The cumulative effect of these has been to create a different kind of culture around housing development in the state, a pro housing culture. And I'm proud to say that Sacramento is the first pro housing community in California.

And, you know, we've tried to look under every rock to figure out what we can do to facilitate housing development in our community. And we still struggle, and the struggle really. Well, we'll talk about struggles later, focusing on the positive. So I think the cultural change is really important. Important.

I'd like to highlight some of the financial aspects as well. I think that planning grants, the REAP and LEAP programs have been very helpful. You know, there's a lot of work that you all have created for us as planners and local government practitioners. And that requires resources.

It requires people to do that work and often consultants to assist in doing that work. And so the financial resources to help with that are really valuable and important. I'd also like to mention the Infill infrastructure grant program. You know, I'll talk a little bit more about infrastructure later, but any resources to help.

You know, we want to drive development into infill areas and revitalize our older communities and put housing close to transit and jobs, but that often means putting housing in areas that may not have been originally developed for for it or have the infrastructure adequate to support it.

And so the infill infrastructure grant and other similar grant and loan programs and financing mechanisms that the state has have been very helpful to facilitate those, you know, those projects happening there.

Also mention SB743 by former pro Tem Steinberg and our former mayor in Sacramento, which created a mechanism whereby specific plans that are approved in transit priority areas. Really it streamlines the environmental review process for developments in those areas. And we have entitled 6,000 units in Sacramento as a result of that piece of legislation alone.

And I'll also highlight Eric's comment about simplicity and ease of use laws that have very clear and easy to follow follow criteria and not, you know, the really long laundry lists of limitations and restrictions and extra requirements makes them easy to understand and easy to use. And so we really appreciate those laws that fit those criteria.

Thank you.

Thank you. Good morning. Cesar Covarrubias, I'm the Executive Director of the Kennedy Commission, an organization that works to increase affordable housing opportunities in Orange County and throughout California. Thank you.

I want to echo the comments of my colleagues here at the table, also highlighting that an important piece of making sure that housing gets developed is the framework that the state has set out in the housing element and the implementation of those housing elements and working with the State Department of Housing to ensure that those documents become documents that are going to be interpreted in your community in different ways and are going to be translated into housing that is going to be made affordable to all income segments.

I think the incredible partnership that has been formed through SB2, for example, is really important.

Some of the funding that's come down from the state to the cogs and localities has made its way to create new partnerships with community organizations like ours and others who can provide a voice in terms of the need of affordable housing, the need of different amenities in your community and how you should be planning.

So that's really important to be able to signify a lot of the laws that have been mentioned already here today, I think have been crucially important to provide certainty and development in local governments and provide a roadmap for development in many of our communities.

We have very limited staff in our planned departments and the ability of having some technical support at the state level that provides some guidance on each of these laws is vital and critical. And we have been hearing that that's been something that some cities have taken advantage of and the state has been really well equipped to do.

Aside from those areas Also, providing the ability to move forward with additional frameworks that will allow for development is proven to be a great tool for local governments and also for advocates such as us who are ready to be able to be a partner with the city and with the state for the implementation of these laws.

Thank you. I'm actually going to have it go through the whole thing and then we'll open it up to questions. So if folks can just sort of jot down the questions they have and then we'll let everybody finish and then go to that. So that was the good news. We're now going to hear a little bit more.

I know some of you had to bite your tongue to not go into the. To the challenges, but why don't we go back around again and talk a bit about some of the continued challenges or frustrations or barriers that you're facing.

Thank you, Chair. I'll start and actually I'll almost do the reverse. I'm going to start with a case study that illustrates a lot of these laws that were working well. But then at the end, it does highlight some significant challenges that remain so. Working on a project in the City of Livermore, the city adopted a specific plan.

It did an EIR for that specific plan to analyze environmental impacts. It received an application in January of 21 for a project that was consistent with that specific plan, 100% affordable housing on a site designated for housing within its specific plan. The city was supportive of this particular project.

It moved it through the entitlement process and actually was able to approve it by May of 2021.

So a relatively compressed period of time, the project, in addition to qualifying for that government code specific plan exemption because it was 100% affordable, it could use waivers and concessions under the density bonus law to make sure that it was consistent with any applicable standards from the specific plan and modify those where there might be conflicts.

However, despite those relatively straightforward streamlining processes for approving the project, it was challenged by a neighborhood group and we had to then defend the project in court. The timeframe there even was remarkably short. I would say. May 2021, the project was approved. The trial court upheld those approvals in October of 2021.

The trial court even observed that the lawsuit had no merit and that the project it was not a close case. The project clearly complied with both CEQA and and the standard of review under the Housing Accountability Act. But undaunted, the project opponents appealed.

We then worked with HCD and the Department of Justice to get amicus briefs to uphold the use of the statutory exemptions to promote quick development of housing. And even with those partnerships, the Court of Appeal was able to act. It still took over a year.

It wasn't until December of 2022 that the court of Appeal upheld that project approval and dismissed the lawsuit, again finding that it wasn't a close case and that the city and the developer had done everything right to advance the state policy goals. But despite that, the project lost out on tax credits. It lost its financing.

It's still approved, but it hasn't been built today, almost four years after it was originally applied for and approved because of the challenges from this lawsuit.

So I tell this story to highlight the challenge that CEQA still presents to even a project that is 100% consistent with zoning that has been analyzed in an earlier EIR can still be vulnerable to a lawsuit and delay that can keep that needed housing from coming online.

So there is definitely, as we move to the opportunities in the next section, I think opportunity there to strengthen the processes and to help fulfill the promise of some of those streamlining laws by offering further protections. I'll pause there and then we'll continue with other challenges as we go.

Thank you. So I have three things to mention. I'll try to talk very quickly. One has not yet been mentioned today, so I definitely want to cover this one.

But I will mention for all of the success that we have seen with the streamlining legislation for affordable housing, it has not been working as well for market rate housing. And I do think there's some opportunity there. Some of the ideas have already been covered.

More robust CEQA reform with fewer restrictions and requirements so as not to increase cost, I think could help market rate development take advantage of some of these streamlining ideas and goals.

I want to add a second thought here on opportunities beyond the land use reform that we've seen in the streamlining, I think that this would help both affordable and market rate development, which is streamlining other aspects of the development process.

Also mentioned earlier today, streamlining or putting timelines or deadlines on the permitting process or if there are agency reviews like dtsc, having deadlines for reviews could be very, very helpful in ensuring that projects don't get stalled out or don't take too long to move through the process.

And on the affordable side, we're committing ourselves to close within a certain period of time. And there are certain aspects of the development process that are outside of that timeline. We are at risk. So we will wait and hold a project until we're through with that process, which doesn't make sense that's slowing things down.

So syncing up the deadlines I think could be very beneficial. The last thing I want to mention, and probably no one will be surprised that I'm mentioning this, but a very important and very large, I'll say opportunity is to address funding for affordable housing.

We have made, as you've been hearing all morning, such incredible progress, excuse me, in moving projects forward through the land and entitlement process. We've created this great and robust pipeline and now we're bottlenecked at the funding stage.

And this is really very acute, more so than I've seen in the many, many years that I've been doing this while again, we're making progress and incremental progress. I think to actually address the housing crisis, we need to bring more sources in to Fund projects. You can use the state level competitions as an illustration of this.

So state level funding, mhp, asic, state credits. These are things that have been funded in recent years. Over subscribe. 4 to 15 to 111 to 1. What that means is for every one project that makes it through, there are 10 others that could get built but for housing, but I mean, but for funding. Excuse me.

And we really, really need to address this in order to make progress. I have four suggestions here. One very, very immediate. The budget. The administration's budget had housing dollars zeroed out. Very valuable program funds for housing zeroed out. Iag, as was mentioned, MHP state credits.

We recommend restoring those or increasing the funding through the budget that will help us continue with at least some of the housing that's ready to be built. I second can't emphasize enough the importance of the housing bond right now. Assembly Member Wicks, thank you for your leadership on this.

We had a housing bond in 2018 that is partially responsible for the uptick in production. That money has been spent. It's no longer available. And we need to make sure that we have that resources. It goes beyond our ability to Fund within the budget right now. I also 3 recommend a permanent source.

It's something that's been talked about, but this is a great time to take action. And this is a way to build a legacy for, you know, for yourselves in housing here. Just the way we have done an incredible job with streamlining.

If we had a permanent source that was predictable and reliable, it would increase the efficiency of the housing delivery system. We'd get more housing built for less money. So we absolutely should. And there are many examples of this in other states. There are states that put a lot of money in through the General Fund.

They have ongoing contributions from the General Fund. They have housing trust funds that are funded in a regular way. We could increase or expand SB2 as an idea. So I think that there are a lot of ways to address this. And then the last thing is Redevelopment 2.0.

Redevelopment, as we all know, disappeared in 2011 when the redevelopment agencies were abolished. But there was a very, very valuable source of funds that was available at the local level. Now we have diminishing contributions from the Federal Government. We have very little ability to Fund at the, at the local level.

And it's on the shoulders of the state, which I, I feel for you. It's very difficult. There's a lot to address here. But we do want to introduce that idea again if we can, just to give some agency and some, some money flowing at the local level as well. So, again, thank you for all of your leadership.

I'm sorry to bring up this big issue, but it's important to us on the ground.

Thank you.

I'll mention three things. Infrastructure, the ADU permitting process, and condominiums. So on the infrastructure side, as I said earlier, you know, in Sacramento, we're one of the oldest cities in the state, and so infrastructure is a real challenge. Water, particularly water, consumer and drainage infrastructure that is necessary to serve new housing.

And, you know, we have a good, or have had at least a good state and federal program for transportation infrastructure funding, but nothing equivalent for water, sewer and drainage infrastructure. And of course, various laws over the years have tied the hands of local governments to be able to use ratepayer funds to increase water, sewer.

Or drainage infrastructure. So it falls squarely on developers, you know, to make those improvements unless there are grants or other financing mechanisms available like redevelopment. So I'll mention that. I'll also mention an issue that we've discovered with respect to the ADU permitting process. Recent legislation eliminated the ability to have any kind of a preliminary planning review before someone applies for a building permit for an adu. And as a result, an applicant has to prepare a completely engineered, completely thoroughly designed, ready to build set of plans to apply for an ADU permit.

And if they have designed their ADU wrong, they don't meet the setbacks or the height limits, or there's something about the design of that project that doesn't fit, they wasted a lot of money if they have to redesign.

And that would have been something we would have caught at the planning stage where much less detailed plans are required, much more conceptual drawings are required at a planning stage. We were approving ADUs in two weeks, so I don't believe it was an impediment to ADU production.

But now people who aren't experienced developers think they're doing the right thing, submit a building permit application and then have to start over when there's some serious flaws in the design. So I'll just park that idea and then condominiums. The construction defect liability issue.

We've heard repeatedly from developers that can do multi family projects that could be either rental or for sale, lack the flexibility to pivot when the market changes, whereby maybe the rental market is down, but the for sale market could work and they could still salvage a project if they did condos, but the construction defect liability prevents them from moving forward.

So if we could solve for that, I think we could get more affordable ownership product and we could just salvage projects that otherwise, you know, could have gotten built that don't get built if they depend only on favorable rental market conditions.

For the streamlining bills, we have heard that there's a lot of great successes, a lot of new units coming online. I think a critical piece that we are missing there is who is it affordable to and is it really affordability?

And an example of that would be when we look at ADUs now, we can take credit as a city for one fourth of your arena for low, very low ADU's.

There's no need for any restrictions on deeds and that's clearly a missed opportunity I think because what we are seeing in the market is a creation of a lot of new units coming online.

But they are market rate units that are being rented at probably a higher price per square foot because they're smaller than traditional market rate apartments, so not affordable to a large segment of the population of our communities.

Additionally, I would also say that if we're looking at extremely Low, very Low and acutely Low, those are the categories that these streamlined bills are not addressing completely.

We have some units that are addressing that, but we're missing clearly that big segment of individuals or families, family of four making $30,000 all the way to about 120,000 that are still struggling to find housing opportunities that are equitable and affordable to them.

Going to the second part of the discussion, I think it is critical that we do talk about: how do we fund affordable housing in the more consistent way in the state?

How do we make sure that there's a plan, 10 year plan, a 20 year plan to address affordability in the way that is going to be equitable, in the way that it's going to be consistent, that provides certainty for the affordable housing community that's building affordable housing for those critical parts that are not being addressed by the market to ensure that there is funding available.

And we talked about a few items up here in terms of a housing bond in 2026, also making sure that there is a direct commitment from the Legislator and the Governor in each budget. It's always surprising to me that there's a line item for education, line item for a variety of other things, but not for housing.

And we continue to have this discussion year in, year out of how important it is to address the critical need of affordable housing, but the resources are not being made available to do so.

Thank you. So I know we had a third question that you all were prepared for, though some of you addressed this.

But if anybody wants to share anything further on some opportunities for improvement or legislative gaps, I know that was addressed, but so no pressure, but if you wanted to add anything and then we'll open it up for our last couple questions.

And yeah, I'll say two things quickly in response to that. One, and some of this builds off of what Ian had just raised. Looking at SB 35 and 423, the Turner center has data. I'll borrow that from Ben if he doesn't mind that from the first four years that SB35 was in place, almost 20,000 units were entitled.

72% of those were affordable to Low income households and the majority of them were concentrated in either the Bay Area or Los Angeles. And that clearly is a success for making the process easier to deliver those units. But as Ann highlighted in her comments, that's also an opportunity to grow where it applies and the types of projects it applies to.

Because if more market rate projects and more parts of the state could benefit from that type of streamlining, I think that we would do a lot towards putting, providing additional units and addressing that sector of housing and then hopefully freeing up resources to devote towards more subsidized and permanently affordable housing.

And then the other comment that I wanted to just quickly say also was reflected in the opportunities that the CO panelists were talking about, but that the streamlining and entitlement issues are necessary reforms, but they're not sufficient reforms.

We also need, you know, support financially for capacity building so that local governments can implement these effectively and that we can bring down the costs of housing by funding infrastructure and making it more financially viable to deliver the housing units in the communities where we need them.

I, I think I'm good. I added my last two comments earlier.

Absolutely. If anybody has any.

Yes, I'll definitely echo the importance of capacity building for, you know, for the planning process. I'm lucky to lead an agency that has, it's pretty well resourced and it's one of the largest in the state.

But most of our communities have maybe one planner or a part time person or an occasional consultant to help them with their, with their planning work. And so resources really to implement all of these laws would be very, very helpful.

I would also mention that as we are looking to implement and potentially increase new bills that would facilitate development, we're also thinking about the impacts, we're thinking about what that does to the market.

In some cases, we have seen the streamlining bills create pressures not only in that particular project, but in the community itself in terms of rents going up, right? Because you are seeing a diversification of new housing coming into communities that traditionally did not have housing development happen.

And we are seeing rents increase not only in that immediate project, but the community as a whole. So I would encourage us to look at those. I know we have some measures under SB 330 which provides some certainty and also some, some supports for individuals that may be impacted by displacement, relocation and having priority, but we have to make sure that we have more data on that.

So I would encourage maybe having HCD look at that as an opportunity for us to provide more data as to whether that's working and how we provide technical support to cities to ensure that the implementation of these goals are equitable.

Mm, great. Thank you. And I have many, many, many questions, but I'm not gonna ask them right now. I mean, we did write down everything that was said and we will I'm sure be following up. One thing I just did want to follow up because this has been an area of interest that I've had and would love just if there are any thoughts on this.

I certainly understand the areas in which we need to have a lot more investment in funding and some of the levers that we have around that for affordable housing.

One thing though, that I would love to get a little more insight into, is to what this looks like on not 100% affordable projects, but on more market rate or mixed projects and what are some of the financial tools to affect that bottom line that we may be able to look at.

I certainly, you know, we passed and will continue to pass a lot of laws on zoning and streamlining and permitting and all of these things. And yet there are many projects where that's not the barrier. There just isn't the investment. There isn't they can't make the project work financially. And we're talking a lot about this.

And what are some of the levers that we've been able to do? You mentioned infrastructure, you mentioned supporting local capacity. But are there other things as you all are looking at projects or thinking about? Bill?

I mean I have, in my area and downtown San Francisco, we've had some projects where they've been fully approved for a long time and they're just have the land just sitting there empty. They can't build it because they can't make it work and they don't have the investment to make it happen.

Or certainly that happens early in the process sometimes. So I wonder if you can speak to that, particularly considering the scale of building that we need to see happen at all income levels.

It just seems we could change every zoning and streamlining and whatnot law we want, but there's not enough folks who are willing to invest to build it considering the return on it.

And just as a little bit if anybody wants to speak to also the issues around labor and labor supply and labor costs, I hear different things around this and certainly folks within labor feel like they have a lot of people who are out of work and they have people available.

And yet and in some cases we hear from folks that there still feels like there's a shortage in some areas. So if either of those issues you can speak to and then I'll open it up for any final thoughts.

I wonder if I might jump in there. I think one thing that we've identified in Sacramento is that we have some different economic dynamics than the Bay Area has We have often very similar construction costs and similar labor costs, but substantially lower income levels. And.

And so to build a unit may cost a very similar amount in Sacramento as it would in the Bay Area, yet the people in Sacramento can't afford it as easily as the people in the Bay Area can on average.

And so I think we're always mindful of, for example, the effect of inclusionary mandates that increase the cost to a development project by requiring the project to internally subsidize below market rate units may impair the feasibility of the project to happen at all.

And it may sit there in the way that you're describing a project that you mentioned. Also the labor cost aspect, we don't see union labor being used on most housing that is built in Sacramento. It's really high rise housing or housing that receives specific government subsidies that mandates the union labor.

And so for unsubsidized projects as well as projects that don't have those mandates, the vast majority of housing is predominantly not union labor. And the development community simply says it's a cost issue. That's just what it really comes down to.

And as a result, but yet at the same time, we do see a severe shortage of labor supply in every aspect of the development industry, but particularly construction workers. And we compete with the construction industry to hire building inspectors who often come from the trades. And so, you know, we also struggle to fill those positions as well.

And in addition to the, the constraints that Tom was identifying, all of which are, are correct and that I agree with also this, the state building code changes to the state building code dramatically increase costs and without always dramatically improving performance.

I think there needs to be a better relationship between the increase in standards and the outcomes that those are resulting in and the cost implications that has on developing housing. And then the feasibility question is coming up.

You mentioned San Francisco and entitled projects are stalled out and the city itself is looking back and reducing its own inclusionary requirements to try and help those projects become more feasible. I know in AB 2011 and 1893 the state started looking at trying to get the balance right so that affordability mandates wouldn't keep projects from being feasible.

But that still I think is an opportunity to optimize and control costs. And earlier we heard in the the Turner center presentation about impact fees. This one I think is more challenging because of the limitations on the way locals, local governments can finance their operations and finance public improvements.

They rely so heavily on impact fees because of other limitations, Prop 13 and the like. But impact fees can keep projects from that Part of why you can get an approved project that then sets and doesn't turn into actual units.

So finding ways to help address those real revenue demands and the need for service that governments are trying to Fund through those impact fees without making individual projects shoulder that entire burden, I think would be quite helpful.

Thank you all. Very informative. And you know, it just obviously highlights the big elephant in the room that has to be eaten and bitten in different angles from public policy to streamlining to the financing. But beyond the housing bond, we definitely need to figure out how to bring a redevelopment 2.0. I mean that's super critical.

And yes, Wyatt had its criticisms. I mean the element of that should be increased from the 20% affordable housing required to a higher end to kind of make it more palatable to people. So I think definitely work of the Committee here should be to lean into that space in regards to technical assistance.

I know we were all over the map on different policy angles, but I know through California Housing Finance Agency, we were looking at as one of the leads around ADU in the State of California.

Not only did we create a grant program, we were looking at creating a financing tool for the ADUs because as we saw through the grant program, over 2,000 applications came through immediately once a funding source or Scott created.

So I think the work of this Committee should also be leaning into developing a financing tool that allows developers to not only play in different spaces throughout the State of California, but also creates new developers. Because the market also has a huge shortage of affordable housing developers or even fair market rate.

It's the same players that don't necessarily play throughout the State of California. California. So we also have to look at how can the state pivot of developing that bench of a very specialized field and a very high risk space as well. People don't understand there's nothing affordable about affordable housing development.

It costs the same as fair market rate. It's just terminology. So again, tackling the finance area from estate bond to working with our lenders to offset the risk for them wanting to, you know, play in this space. And then the hardest market to house is obviously our most vulnerable.

And where the lending gets even more complicated and does not make these developments affordable at all because someone has to subsidize it. And with the Department of Housing and Urban Development and the next four years are going to be really unsettling in that space.

They're going to cut into the very, very low, low income in all the State of California, which is our project based Section 8, our subsidized developments, that money is going to dwindle even more and further exasperate what's going on in the State of California because that has already decreased in the last decade.

And so I think we need to really look at it from fair market rate to the middle class to the very Low income that have fixed incomes that need that subsidy and figure out the calculation of where this bond's going to play, where redevelopment is going to play and where our public interest and, you know, our community reinvestment is going to be for private lenders.

Well said. Well, I think we are going to wrap it up here. I want to thank all of you for being here with us and for your work. And I know that we want to continue the conversation with each and every one of you around how to address many of the issues that we talked about today.

We certainly have a very long list and a lot to do. Luckily this is our first hearing, not our last hearing. So this is just the beginning and we look forward to working with you. Thank you.

Thank you very much.

Thank you.

I want to now see if there is anyone here for public comment before we close. If there's anybody who would like to provide public comment. If you could please line up at the mic there. If you could still please state your name and organization and we will give you up to one minute.

Good morning. Marina Espinosa here with the California Housing Consortium. Really appreciate the discussion here today and the work that the Legislature has done in recent years to streamlined housing production. I really want to emphasize the comments made around the need for meaningful investments in affordable housing programs.

And we are prepared to work with the Legislature to ensure that those programs can be funded in the state budget this year. Thank you.

Good morning, Chair and Members. Karen Stout here on behalf of Power California Action, UWC US as well as California YIMBY.

Just wanted to thank you for putting together this hearing, especially for your acknowledgment of the need to decide decrease barriers to permitting as well as increase homeownership, specifically in the affordable middle income, especially that missing middle we're seeing right now.

This is not only a critical piece for meeting our state's production equity goals, but also for incentivizing the development of communities of color, which is a particular focus of Unidos. Right now we're looking at 15.6 million Latinos here in this. Here in this state with 40% of the total population being made up people of Latin descent.

That's a really significant portion that we want to make sure gets into more homeownership opportunities. So to further that goal, UNIDIS will be co sponsoring legislation with the Community Builders, California YIMBY, and a number of equity partners with Assembly Member Juan Carrillo that would be specifically incentivizing the production of these program of these types of homes through a homeownership tax credit program.

Current tax credit programs, including Li Tech, have been proven successful, but they're only applying to rental projects. This would apply those similar credits to homeownership programs, and it will help build both generational wealth and parity for those existing programs. Thank you very much for your time.

All right, public comment is closed. This is my first time as chair doing an official public comment. It's very different than San Francisco, I have to tell you. Nobody's singing or yelling or everybody has their clothes on. It's. It's refreshing.

But I do just want to thank all of our panelists and participants and presenters for their work and the work of the Committee staff. I think this was a great way for us to start the year to really lay out what has been done, what is happening, and the work ahead of us.

We wanted to do this hearing before the Bill deadline. So this is also an invitation to all of the folks who were here and who were listening that we welcome legislative proposals that will solve many of the problems that we identified here today. This will really guide the work of this Committee.

So we hope to see legislative proposals from Members of this Committee, from other Members of the Legislature, from folks who are advocates, to bring those forward and partner with us. It certainly will inform my legislative package as we are making some final decisions around that.

And we want to see, really, proposals that will solve problems that will actually get housing built, that will fill those gaps that in many cases we are not talking about enough or still need to be addressed.

And I know that we have a lot of very serious, committed, thoughtful legislators and advocates who are ready to get that done. And even though there was some bad news today and some challenges, that gives me hope. Thanks again. And this meeting is adjourned.

All right.