Assembly Standing Committee on Judiciary

All right. Well, good morning, everyone. Okay. Good morning, everyone. Welcome to the Assembly Judiciary Committee's first meeting of the year. I do want to note that item four, AB826, Jeff Gonzalez, has been pulled from the hearing, per the Author, and Item 5, AB1359 Ahrens, has been pulled from consent. So we will hear that Bill.

In order for us to complete our agenda, allow everyone equal time. The rules for witness testimony are that each side will be allowed two main witnesses. Each witnesses will have approximately two minutes to testify in support of or opposition to the Bill. Additional witnesses should state only their names, organization, if any, and their position on the Bill.

As we proceed with witness and public comment, I want to make sure everyone understands that the Committee has rules to ensure a fair and efficient hearing in order to facilitate the goal of hearing as much from the public within the limits of our time. The rules for today's hearing include no talking or loud noises from the audience.

Public comment may be provided only at the designated time and again must be limited to your name, organization and support or opposition of a Bill before the Committee. Comments on other issues will be ruled out of order and the microphone may be disconnected.

Please know engaging in conduct that disrupts, disturbs, or otherwise impedes orderly conduct of this hearing.

I also would like to announce and congratulate Nick Litke, who is our new Chief Counsel for the Judiciary Committee, and as always, want to thank our entire Judiciary Committee staff for keeping us all prepared and ready to go as we are right now this morning. So we will begin with item one, AB 768, Assembly Member Avila Farias.

Yeah, we don't have quorum. We don't have quorum yet. We'll start as a subcommittee.

Thank you, Chair Members, here to introduce AB 668, the Mobile Home Double-dipping Bill. I would like to start by accepting the Committee amendments listed in the analysis. I would also like to thank Tom Clark and the consultant for working with us to find common ground on this Bill. It was quite challenging.

I'm proud to present AB 768 a Bill to close a loophole in rent control protections for mobile home parks and and to assure affordability for housing opportunities to all residents who need them the most. AB 768 targets a narrow but important issue. Secondary residents that take advantage of rent control mobile home spaces.

Rent control was created to help vulnerable Californians, teachers, seniors, working families. Yet the wealthy individuals who already own these primary residents are occupying rent control mobile homes for recreational purposes. As amended, the Bill exempts mobile home rent control a home that is not used, a permanent resident by homeowner or approved subtenant.

The definition of permanent housing specifically excludes seasonal vacation homes and short term rentals. This Bill does not impact full time residents or homes that are rented out to subtenants long term. In fact, to protect permanent tenants, the Bill places a burden on park management to prove that the mobile home is not being used as a permanent housing.

AB 768 restores the intent of rent control, ensures access to affordable housing goes to those who are most in need.

Thank you Mr. Chair Members. Chris Wysocki with WMA. I want to start off by thanking the author for introducing this important measure that closes a loophole that allows mobile homes used as vacation rentals and weekend homes to get the benefit of rent control.

If you can't afford a vacation home or have a short term rental, then you don't need rent control.

Removing rent control caps on the vacation homes and second homes of people who can afford multiple properties in California is the right thing to do because it discourages people from buying the home in the first place, which would free that home up for those who need the economic benefit. As currently drafted, AB 768 is a fair compromise.

While WMA still believes that any vacation or second home should be exempt from rent control since the homeowner has another place to call home, this Bill does help close a loophole in current law and allows people who can afford a vacation home or we can get away to take up a rent control space.

AB 768 is a straightforward Bill that still requires owners of the mobile home park to demonstrate a home is not occupied by the full time resident.

Tenants still retain their rights under the MRL and this Bill does is close a loophole that's used by wealthy and savvy people to take advantage of an economic benefit to which they shouldn't be entitled.

Again, I really want to thank the Committee staff, Tom, specifically for working with us on this common sense compromise and I respectfully ask for an aye vote.

Hello Mr. Chair Member, am I on here? My name is Suzanne Taylor. I'm an Executive Director of Augusta Communities and I'm here in support of AB 768 and would like to thank the bill's author for introducing it.

I appreciate it because she has put forth a Bill that focuses on the preservation of affordability for homeowners and mobile home communities. Augusta is a 501c3 nonprofit founded in 1998. We own and operate eight communities in California and we operate two communities on behalf of the City of La Habra, we must comply as a nonprofit.

We must comply with federal, state and local regulatory agreements that encumber our properties and mandate compliance with income and affordability standards. Upwards of 90% of our communities spaces are occupied by lower income households, most at affordable housing cost.

Even though we support the Bill, there is a small amendment needed to make this work for our nonprofits that's recently come to our attention. And that is because we finance our communities with tax exempt bonds which prohibits subleasing in committees in communities.

And there are a number of nonprofits in the state that work to provide affordable housing that this would impact. It's similar to the amendment that was made in AB831, which to address rental homes and mobile home parks, nonprofits must operate communities as affordable housing and not in consortium with private business interest.

And any amount of subleasing by a private party and in a public benefit project is viewed as private activity. Thank you again for supporting this Bill and look forward to working with the author and the Legislature on this Bill as it moves through the process.

Thank you. Is there anyone else here in support of AB768? Is there anyone here in opposition to AB768? All right, bring it back to the Committee for any questions or comments. We don't have a quorum yet, Madam Vice Chair. We don't have a quorum yet.

So it looks like you already have someone eager to make a motion, so that's a good sign. Would you like to close?

No, just. Thank you so much. Really appreciate the chair's thoughtfulness and sitting down. And again, it's a very niche space that is, you know, not ramped it throughout the state of California. And so I appreciate the thoughtfulness of sitting down and trying to understand this issue.

Again, you know, looping and closing that double dipper loophole that, you know, was not as obvious throughout the state unless you specifically teased out a circumstance. So thank you for that time.

Thank you. And likewise, thank you for working so closely with our Committee and ensuring we got to a place that still maintains the. The intent of the Bill and the principles of the Bill.

I think found a nice balance that, that ensures that we have true, truly affordable housing, rent control housing that's appropriate in these mobile home communities. Thank you. And when we get an opportunity, we'll, we'll vote on the Bill. Okay, thanks.

Thank you.

All right, so up next we have item 5, AB 1359. Assemblymember Aarons. All right, summer errands, whenever you're ready. Take your, take your time, please.

I wasn't anticipating to go this early.

You never know what's going to happen in Judiciary Committee. Okay.

Hi.

Thank you.

Good morning, Mr. Chair. Members. I want to start off by thanking the committee's consultants for their hard work on this bill. AB 1359 provides crucial support to senior citizens across our state, enabling individuals 80 years or older to opt out of jury service without a doctor's note.

Under current law, an individual 80 years or older may opt out of jury service for undue hardship as defined by the Judicial Council. Unfortunately, this also requires a presentation of a doctor's note. We all know how efficient and wonderful our healthcare system is working these days.

Scheduling a doctor's appointment, acquiring a note with the necessary information and presenting it to the court is burdensome and costly process. This is especially true for older individuals who may have chronic health conditions, physical limitations, or lack of technological expertise. AB 1359 will address this issue by simplifying the jury excusal process for our aging population.

Individuals 80 years and older with undue hardship are already routinely excused by courts. This bill just streamlines the process and reduces the burden of acquiring documentation. By doing this, we can make lives of older adults in California easier while maintaining a responsible and just jury selection process. Joining me today is Raylene Nunn from the California Senior Legislature.

Thank you.

Good morning, Chairs and Members. Thank you for the opportunity. Can you hear me now? Yes. To speak in support of AB 1359. AB 1359 provides a simple, compassionate fix to a very real problem facing many seniors today.

Californians age 80 and over who are no longer able to serve on jury duty are required a medical excuse to permanently be excused. That requirement itself is a hardship. And I would just say I have known people in my age and area that have had this issue.

Seniors frequently face mobility limitations, chronic conditions, transportation challenges, and especially in our rural counties, and long awaits for medical appointments. Asking them to schedule and pay for a doctor's visit solely to confirm what we already know creates an unnecessary burden and stress for them. AB35, 1359 removes that hurdle.

It allows seniors 80 and over to request a permanent excuse without a medical note while preserving individual choice and the court's oversight. No one is automatically exempt, but those who know they can no longer serve are treated with dignity and common sense. This bill also helps courts by reducing the paperwork, follow up notices and Delays.

It modernizes the jury system in a way that respects both judicial efficiency and the realities of aging. AB 1359 is but a small change with a meaningful impact. So we respectfully ask for your aye vote. Thank you.

Thank you. Is there anyone else here in support of AB 1359? Is there anyone here in opposition to AB 1359? Move the bill. Actually, that's. I was just about to establish quorum after that, so. Madam Secretary, if you can establish quorum. Please call her here.

[Roll call]

We get common and. And Senator Connolly, for the record, is here. So we have established a quorum. Senator Brian, would you like to restate your motion?

Yeah. I'd like to move this wonderful bill by our colleague from Cupertino. Is there a second?

Second. Madam Vice Chair.

Morning. Thank you, Mr. Chair. I commend the Assemblyman for this bill. We've had a. Can you hear me okay? I guess my ears are all plugged up and I appreciate the good intentions. However, just let me make a few comments.

As we all know, it's a constitutional right that all individuals have a right to a jury by one's peers. Providing a broad exemption to a large and growing part of our population such as older adults, could have the unintended consequence of diluting this right.

While this exemption is an opt in and it's commendable for reasons you have stated, many individuals may make the choice to take it and we may see a sharp decline in the number of older adults serving on juries.

While this may result in a lack of a jury of peers, it also deprives the value that older jurors bring to a jury. They have far more life experience, different values and perspectives that younger jurors may not have have. Having this diversity of thought and experience is invaluable to delivering nuanced decisions in court proceedings.

Finally, I do have concerns about the 80 year old age benchmark making potentially making older citizens feel as if they're not needed in our society anymore and serving an important civic duty. I know many individuals who are 80 or older that still have much to offer and want to fulfill their civic duty.

This legislation could have the unintended consequence of making our senior senior citizens feel that their perspectives, beliefs and experience are not of value in the courtroom. I'd like to offer some possible solution.

While I agree that the burden may be onerous to seek an exemption and go to a doctor, although I'm a little uncertain because I have an analysis. Unless a person is age 70 years or older, the prospective juror may be required to furnish verification. So current law, if I understand it, is over age 70, you do already.

Under current law, you do not need to seek all the doctor's appointments and verification. However, just to clarify, for those I acknowledge, for Those who are 80 years old and may be disabled, incapacitated or going on a trip, they may seek that exemption.

I would like the author to consider that it be a voluntary opt in or opt out, or maybe it's temporary. For example, an 80 year old may have a broken hip.

In six months, they recover, they're mobile, they have transportation, they'd like to resume their civic involvement, community activities, but they've already opted out and they'll never be able to receive a jury summons again.

So if the author would consider and we could talk about this after the hearing today, just to make it not permanent, make it temporary so that if someone does feel that they're incapacitated, they never want to see a jury summons again. Okay, they never have to, but they don't have to fulfill that community civic duty.

But if they want to. I know many, we know that people are living to 100 these days, for goodness sakes. 80 is a really a cutoff that I think will send a message to 80 year olds and we'll all be there someday that your service to your community is no longer valued or needed.

So just make it optional is really all I'm saying. Give the people who can't do it, fine. They've served their communities well for many years, but those who still want to continue to serve in some capacity, I would say let them. And even if somebody makes a mistake and opts out, can they get back in?

Just a little bit more variation on the choices. That's all I'm saying. Give people your overall purpose is good, but give people an option to be in or out. That's all. Thank you.

Thank you. Thank you. Submit Member Bauer-Kahan.

Thank you. Well, I decided that the people in my life who are over 80 should get to weigh in and lobby me on this bill. So last night I called my parents and my mother actually has gotten a permanent exemption.

She lives in chronic pain and decided that this wasn't something she could do and did go through the process, but did say that it was not quite as easy as she would have liked. My father, on the other hand, who just never wants to be home, wants to serve on juries more than probably he will be summons.

And so I really appreciated that the bill allows you to opt in and I have one parent who would opt in and one who would not. And so I really appreciate this bill. I think it would accommodate the needs of the people in my life who are most affected by it and they actually really love this Bill.

So with that I'm happy to support it. Thank you. Assembly Member Bryan.

Yeah, the average life expectancy of a Black man is 72 years old. If I make it to 80, I would really like this bill. And I think every day becomes very precious and I think my mother is in the hospital right now and she's not 80 years old. This is common sense.

Clearly it came from the senior Legislature. It came from the very folks who would be most impacted by it. I think the best policy is made when the people who experience the problem are the ones who come with the solution. So thank you Assemblymember for channeling that voice in this legislation.

I'd be happy to join you as a co author if you'll have me. Love that. Thank you.

Any other questions or comments? Assembly Member thank you for bringing this bill forward. Thank you, the California Senior Legislature for your continued advocacy on behalf of our seniors. As you mentioned, this is an opt in, it's a request.

And so there's no reason why anyone 80 or older shouldn't continue to participate in the jury selection jury process if they so choose and that they have the ability to do so.

And just like any other individual whose name is called up for jury selection, if you have a vacation or something of that nature, you can ask for an exemption for a temporary exemption that still applies to our seniors as well.

And so I think it's having a father I take care of who's 81, I understand that it should be up to them to decide.

And that would be the only thing I think going forward is keeping an eye on it, making sure it's the actual senior that are making the decision, maybe not the caretaker that has to drive them back and forth and makes that decision for them.

And so I'm sure our, our folks that are representing the seniors so well will keep an eye on that and make sure that the seniors are the ones that are actually making the decision for themselves.

And as mentioned by the vice chair and frankly I think the rule is going to be written up by the Judicial Council and they may have some flexibility in doing so.

But the ability once a permanent excusal, the request is submitted and granted maybe at some point in the future of retracting it if that senior can retract, maybe they they're in a certain place physically, what have you, but a couple years later they feel more up to it.

I think some ability to do that, that may be able to be done through this legislation already by the Judicial Council, but it could be something that could be clarified that at the end of the day we want this to be about the senior having self determination and so I definitely appreciate the intent and purpose legislation.

Would you like to close?

I'll just say thank you, Chair Kalra and you'll be happy to know as Assemblymember Brian mentioned, this came from our ought to be a law just from one of our constituents, Diane McKenna and I think it's really important to look at bill ideas from the community as well as advocates and respectfully ask for your aye vote.

And I'm committed to working with Assembly Member Dixon and others for input and our continued conversations about this. Thank you.

Thank you.

[Roll call]

Okay, that that bill is out. Thank you so much.

Thank you so much on behalf of CSL and an 82 year old lady. Thank you.

Do we have a motion on item one, AB 768, Ávila Farías? We have a motion. Is there a second? Okay. And second. Madam Secretary, if we can get a roll call vote on AB 768.

Motion is do pass as amended. [Roll Call]

All right, that bill is out. We'll move to item two. AB 1406. Assemblymember Ward, welcome. Whenever you're ready.

Well, thank you, Mr.

Chair, colleagues and Members of the Committee. First I want to thank the Committee staff for all the work over the fall on this issue as we explore how to make housing attainability more readily available to more Californians. I will be accepting Committee amendments which are on page six of this analysis.

And we're pleased here to present today AB 1406 which would incentivize more condominium development by increasing the existing Liquidated damages cap from 3 to 10%, which would allow California with some of the best practices from states like New York, Colorado and Nevada.

As California, you know, is embracing pro housing and environmentally responsible policies, the share of multi family housing in our state continues to grow. However, very little of this new housing type is actually available for sale. There's a lot of reasons for that, but one of those is embedded right here in the intent of this bill.

Now you know, you might know that according to research provided by the Lambda Alpha International over the last decade, only 3% of newly constructed multifamily product in this state was available for sale. The rest went out to the rental market.

And a driving factor of that, there's several, but one of those we've discovered is our state's statutory low condominium production.

That the low, the low condominium production rate is because of the state's statutory 3% cap in this case on liquidated damages, which can be used essentially as a low cost capital outlet for, for the, the development of that residential building itself.

This limit by extension would actually restrict some of the cash that developer would be able to use for land to be able to pay construction costs, which would in turn to succeed successfully build that product would require them to go to more expensive equity. Right?

You have to go to the bank, you have to go to others that are going to charge higher and higher interest rates to be able to achieve that capital. So you can make the entire cost of that development pencil.

Developers therefore are going to have to find less attractive terms than they would if funds were available from pre sold units. So let me just paint a real world example. You know that this new development 100 unit condo development is being proposed and it's bayfront and it's pristine, it's prime real estate.

And you have the opportunity to get in on a presale and you want to be able to get that unit. But our statute, our only statute for that very narrow product type actually prohibits the use of any of those funds.

Those funds are held in an escrow account doing nobody any good right now for the terms of actually producing that housing unit. So then what happens in these situations? A developer is then forced to pass a lot of any of these increased financing costs.

If they have high capital, high interest costs, those are being passed on ultimately to the buyer, driving up housing prices for those condominium units beyond what any market can stand in. And sometimes actually making that project not pencil out.

AB 1406 would address a lot of this constraint by increasing some of the damages capped from 3 to 10%, which would allow a developer to obtain more attractive financing, reducing a lot of their reliance on some of the more expensive debt and allow that then to pass some of these savings onto the would be buyers.

This change would maintain all current protections in state law, including our state's law's requirement that the money be held in an escrow as stated in your Committee analysis for witnesses. And today I have Maya Theuer, the CEO and founder of Redwood Residential Development, and Michael Lane, the state policy Director at SPUR.

Mr. Chair Members Michael Lane with SPUR, a public policy think tank in the San Francisco Bay Area. For decades, condominiums have proven to be an effective path to affordable entry level homeownership for first time buyers. Unfortunately, California has lagged far behind other states and nations in producing condominiums.

AB 1406 begins to address the structural reasons for this dirt of for sale construction.

The bill as recently amended, does this by better recognizing the true cost and risk to the projects of having buyers cancel purchase agreements and bringing California presale law in closer conformity to laws and industry practices that have been in place in other states for decades.

Presales allow home buyers to lock in a favorable price below market value by the time construction is complete and move in with equity. However, cancelled contracts put financing at risk, delay construction for other buyers and increase carrying costs. California's 3% liquidated damages functions practically more as a purchase reservation than as a construction deposit.

For decades, the industry standard in New York, for example, has been 10% for liquidated damages. And case law has upheld this amount and it qualifies it as liquidated damages and not a penalty. And in fact, in 2017, the Colorado Supreme Court allowed a 15% earnest money on construction deposit to be kept as liquidated damages.

AB 1406 will reduce risk, improve financing and ensure more condos are built for homebuyers in our state. We respectfully request an Aye vote. Thank you.

Hello, I'm Maya Theuer. I'm the CEO of Redwood Residential Development. I build the smallest 50 at the largest 500 units at once. And right now I only build for rent out of necessity. So my nearest project to here is actually two miles up the road in the Woodlake neighborhood in Sacramento.

I grew up in San Diego, I went to school in Northern California. I'm born and raised and I went into development here for the sake of premature aging I suppose. But it is a passion of mine. I care very deeply about it and I have. As it stands currently, I'm a market rate developer.

I have A capital stack of which is equity and debt. And that capital stack, the equity and the debt are discretionary and investment is a choice. And in California it only makes sense to build for rent strictly because that capital stack has risk adjusted demand on returns.

So to build for sale 1406 would be a humongous boon to not only what I do, but folks like me who are building multifamily out of necessity.

Because if we could say okay, if there's a project that is a 100,000,000 dollar project and you can take 10% of deposits, it's mutually beneficial because your capital stack is lessened and you can use less expensive dollars than the folks in New York who are private equity and looking exclusively as an asset but versus the in addition to the consumer who is buying into something that is an appreciating asset.

It's a home. In California. You know, I'm, I'm a young developer. I just bought my first home last year and I'm in my 30s. I know the age now is 40. It's an absurd barrier to entry to get into something that is a wealth generation for families since the beginning of time really.

And so I'm a huge advocate of this. I think it would help us, us being the development community writ large as well as the homeowners both existing and aspiring in California because it is such a critical part of a capital stack that right now is infeasible.

Thank you. Is there anyone else here in support of AB 1406? Hold on one second. Let's get the microphone ready there. I think there's, there might be some folks outside coming in to speak on this as well.

Holly Fraumeni de Jesus with Lighthouse Public affairs on behalf of Abundant Housing Los Angeles, Circulate San Diego, The 200 and Fieldstead Howard Omisen Jr. Philanthropist from Orange County all in support.

Thank you. And we'll wait a couple minutes for folks to come in from outside.

Good morning. Tim lynch on behalf of related California and more support of the Bill. Thank you.

Good morning. Audrey Retajczyk from Cruise Strategies on behalf of San Jose Mayor Matt Mahan in support. Thank you.

Thank you. Good morning Mr. Chair and Members. Karim Driesy on behalf of the California. Building Industry association and support and appreciate the author's leadership. Thank you. Thank you. Good morning.

Chair Members of the Committee Jordan Panana Carbajal on behalf of California Yimby and strong support. Thank you. Thank you so much.

Thank you. Is there anyone here in opposition to AB 1406?

Yes. Anna Buck on behalf of the California association of Realtors. First, I'd like to make a point that we've been throwing around the state of New York. New York City is the only area of New York that I understand where 10. Oh, sorry. Thank you. Right, got it.

New York City, to my understanding, is the only area of New York where a 10% deposit is now commonplace. So Mr. Chair Members, this Bill does not fix housing production.

It gives developers a new weapon to extract tens of thousands of dollars from ordinary Californians who are already in the position of signing one sided take it or leave it contracts. Buyers of new construction condos are not negotiating equals.

These contracts are drafted by developers, presented on a non negotiable basis and typically signed by buyers with no legal representation or realtor. This Bill would allow these contracts to impose what would be a $75,000 forfeiture on a $750,000 condominium home, even if that unit is sold, resold with little or no actual loss.

Liquidated damages are supposed to estimate likely harm, not punish people for trying to buy a home.

Raising the cap from 3% to 10% turns what is supposed to be a consumer protection confirmed by the California courts to be so into a penalty regime that overwhelmingly benefits the party with all the leverage in this situation, this doesn't stabilize transactions, it drives litigation at 3%. Buyers generally will walk away at 10%.

They have to fight because no rational person forfeits 70 to $100,000 without hiring a lawyer. That means more lawsuits, more clogged courts and more pressure to settle regardless of the merits of the case. It also has the effect of undermining condo construction. Developers, as you heard, rely on these pre sale transactions to get financing.

But buyers will not sign early contracts if doing so exposes them to catastrophic losses for things they cannot control, like financing failures to no fault of the buyer or appraisal gaps which are unfortunately commonplace. This means fewer pre sales, tighter lending and fewer homes being built. We've already seen where this leads.

Washington State recently pushed this similar kind of risk on buyers and new construction collapsed there. New York's 10% deposit system in New York City has produced some of the most expensive and exclusionary condo markets in the country. This is not a model for middle class homeownership.

This Committee exists to protect Californians from being forced into this type of one sided financial risk. This Bill does the opposite. It shifts risk off of sophisticated developers onto unrepresented buyers, increases litigation and makes homeownership more dangerous without having the effect of producing a single additional home.

Before I close, I would just like to ask you how you will defend your vote today to a first responder family who is in the position of losing a life changing sum of money when their loan falls through at the last minute. So today I have to urge a no vote.

Thank you. Is there anyone else here in opposition? AB 1406.

Good morning, Mr. Chair and Members. Aaron Norwood, on behalf of the California. Land Title Association, also in respectful opposition. Thank you.

Thank you. All right, we'll bring it back to Committee Assembly Member Bauer-Kahan.

I want to start by thanking the author who has been a champion for housing both as chair of the Committee, but just in his capacity probably. I didn't know you when you were on City Council, but I imagine also during that time, chair of that Committee. There you go.

And I know this is absolutely something you care deeply about and frankly, it is driving our affordability crisis. And so we as Californians need to have more housing. And frankly that I know is something that all of you agree on. There's no question the realtors also want more housing in California for California home buyers.

I am really struggling here because liquidated damages are intended to make whole a party for whom there's a breach. Right. When you enter into a contract, the parties assume that the contract is in good faith. When one party walks away, there are damages to the party to whom you've breached. That is a fact.

That is why there are 3% liquidated damages, because money and time has gone into creating that contract. I guess what I'm struggling with most here. Well, two things. One is this doesn't seem like it's liquidated damages. It doesn't seem like we're increasing it to 10% because there's an argument that there is increased harm, triple the harm.

Just so we're clear to the breached party, which would justify arguably doing this. So if you have such an argument to make, I invite you to make it because it's I think the only justification for this Bill. Because we're doing this in liquidated damages.

And secondly, so then if that's not the justification, then we're doing it for the financing stack, which I understand and is incredibly important. We need to make financing possible for housing.

So I want to say that I feel incredibly uncomfortable that we're proposing doing that on the back of California home buyers and in most cases I would imagine condo buyers or first time home buyers.

I will tell you, when I walked out of my law firm at the time as an attorney to buy my first home, my partner said to me, don't read it, you won't understand it anyways. Right.

I'm a lawyer, so I know that when people go into these, I mean, for anyone who's bought a home, the stack of papers that you're signing is excessive. They don't know what they're signing.

And so for us to say that now the seller can keep 10% of the deposit when there's no evidence, as far as I've seen, that the harm is such to make your financing stack work feels frankly unfair to me. I don't think it's right for the consumer.

And I want to center the consumer both by creating more housing, but also by protecting them in the transaction. And so I've had conversations with the author about this.

Frankly, what it sounds like is needed in order to make the financing work, and I want you to have the opportunity to answer this, is for there to be certainty that you can hold on to 10% of that, that deposit in order to finance off of it.

The author has contended that there would be an opportunity to give the buyer the 7%. So the part that isn't actual isn't damages at the time of completion of the project. I actually think that's not what's happening here. Because the reason you want it to be liquidated damages is so you can keep it in the bank forever.

Which is why the financing entity would be happy about it because it's guaranteed for perpetuity once it's liquidated damages. So if you could give it back at the time of completion, I don't see why you couldn't contract for that. Well, you couldn't just put in the contract, you're going to put a deposit of $100,000 down.

3% is liquidated damages. But we're going to keep $20,000 until the time of completion, at which time you'll get that back whether you walk away or not. I think that that I don't see why that wouldn't be allowed under contract law. And somebody here, correct me if I'm wrong, I don't think that's what you want.

I think what you want is to keep it in perpetuity under liquidated damages, which I frankly have an issue with. So I want to invite you to talk about that.

Thank you. And you are a very good lawyer. I appreciate our conversations because you're able to really dig into both the nuance of the language and the law that we're proposing here, but also how this translates into a real world experience, you know, amorphous, that is, for even like the smartest among us.

I would say a couple of things that I want to, with the chair's permission, to maybe kind of like set a broader discussion here for purposes of our conversation with Committee.

I'll hit on the head just a couple of things that opposition had raised as well, that somehow this is going to undermine the ability to have any kind of condo conversions.

And I would just offer, if that were the case, why do some of our strongest advocates that are in the housing development space, particularly the multifamily housing space, recognize this as something that is both consistent with what other states are doing, but also would be able to help to marginally improve the importance the development of more housing?

So if that is what housing development advocates are saying, and this will lead to a net gain in housing production, I find that argument not true.

It was also raised that somehow that there are pressures, for example, in Washington state, where we are seeing a collapse in the market, indeed nationwide, we are seeing a lot of struggles here to be able to build more housing developments, more multifamily or single family alike.

And in fact, a 2024 study by the Turner center has elucidated that because of some of the improvements that Washington has made, 28% of their for their multifamily housing stock is available for sale. You recall that I said 3% in California is available for sale.

There are many barriers to why that is, and you're nodding your head, but Washington state actually is doing a lot more in the space, has done more in this space, notwithstanding many of the overall market and national pressures that all housing development is facing.

And finally, I am open to any considerations that we are going to have to be able to enhance consumer protections. That's part of the discussion that we're on here today.

When this Bill originated last year, we had ongoing conversation through the summer and the fall recess that we're going to be able to Try to make sure that for me as an author, anything that we were doing was going to be able to uphold the interests of consumers above all else.

And while it was tricky in its original form because getting that language right is important, one thing that was offered was well, to move this issue forward, why don't we just mirror what some of these other states are successfully doing and as another tool in their toolbox to be able to produce, whether it's in New York City or Denver or other metropolitan areas, more for sale condominium units.

It is a tool in the toolbox. And so that is what is before us today. Here is to try to reflect what we see as a national best standard and is working in other spaces. Now about that standard, two things. One, from the relationship of the buyer and the developer.

That is something that is negotiated up front and is an absolute ceiling, but is not necessarily the absolute case. So just because a law might be changed to something that is a high of 10% does not mean that for a successful transaction to occur, something couldn't happen at the 5% level or even at 3% level.

Indeed, you see from your Committee analysis Today, with a 3% statutory cap, many of these projects are actually built with an agreement below 3% that is negotiated between that developer and the buyer. So this allows that flexibility that for some product is going to make a project pencil out a little bit more certainty.

And to your point, yes, is all about lower interest capital stack that's going to make this project pencil out and actually work. What does that do for the totality of what we have for housing production here in the state? Assume, and again I think the Committee analysis was correct.

This is going to be affecting or hopefully positively affecting a subset of housing product that is going to be available to more upper market income housing. And that's important.

If you do believe like I do in the theory of compression that if we're able to have a little bit more of this housing stock over here, that would be buyer that otherwise wants that penthouse on the bayfront, if that's not developed, then they're going to go to the next thing down the housing ladder which is going to compress down to your upper middle income.

And your middle income housing would be would be home buyers and just make things more expensive on those rungs, but also more competitive.

And so we're trying to be able to use best practices industry standards that are going to be able to help that kind of a product work, which creates a little bit of a relief valve which I would argue is Actually going to increase the total supply of new development and also more homes for sale for our realtors that are out there in our communities.

I'm open to any other ideas that could be used because there are other ideas about how we could structure this in a way that further guarantees consumer protections.

For example, we've been talking with our sponsors about an opportunity because one thing that reflects current best industry practices that actually already exist today, whether it's 3% or 10% in other states, is that if a sale happens and the buyer ends up, the original buyer ends up backing out, there are ways, and again, reflecting other areas of California law, that that money can be recouped when that project is completed after a certain time point, after it's completed and or when that project is subsequently sold.

Right. You don't want to have allow. You don't want the law to allow that developer to keep two people's money for the exact same project. Now that we believe is an industry best practice.

She's nodding her head, but we can codify that into this Bill to provide that guarantee and hopefully that we'd all agree would take the issue off the table. Another thing we can look at is another source of money, which is again, the original intent of the Bill, which I actually would like to keep doing.

Because if there's enough additional capacity this year to be able to further improve beyond the 10% standard, with consumer protections enshrined above all else, that would be great. But I think this is where we're at here today to be able to move this issue forward because it's an important tool in our toolbox.

So yes, and maybe you're the right person to answer this. I don't know. Maybe the astounding Member knows. So you're nodding your head about the best standard when he said that's the industry standard.

So if the industry standard is to give back some percentage and you can, if you want to tell us what the industry standard is more precisely, that might be helpful. Why can't you just contract for that? Why are you asking us to change the liquidated damages cap? I don't understand that.

I think it's an imperative part of actually putting a project together in General. Because for condominiums, as opposed to single family homes, which have disparate foundations and can be built in a singular, hey, I'm going to build this, I'm going to sell you this, a condo. For me, I build three story, two story, four story housing.

So not high rises, but more kind of the middle market style. I can't even build a building if I don't have 100% of the monies available to do so. So in that sense, I think the ability to protect a consumer and doubling up deposits is just fraud. That's just, I think, a total non starter.

But you can't even construct a building to its completion point without 100% of the dollars in the bank. And that is both equity and debt. So I can't put a shovel in the ground until the my loan documents are signed and the folks that I go to as a fiduciary are like, yes, this makes sense.

We're choosing to invest in you. You got this. And so in order to build 50 units on one foundation and complete those and deliver one of those 50, 100% of the dollars have to be available. At which point perhaps someone at the mid project level, okay, all the framing is up.

You know, I got a new job, I got to move to Milwaukee. Okay, that's totally fine. Let's sell this unit. Let's get you your deposit back in some capacity. I think that is the time to recoup as opposed to, hey, stop the project. You've got 98% of the dollars now, not 100.

And you can't deliver any of these 50 units because one person reneged. And so I think that is the point at which you discuss a recoup of deposit. And you know, maybe I sold it to that person for $300,000 and upon delivery the unit's worth 350.

Maybe there's a split there as well because you as the initial depositor took the risk. Hey, I really want to live here. I love this neighborhood. I like the projects you put up. I'm bullish on this, my new job, you know. So I think that is a point at which you're able to get back a deposit.

Because to your point, it's not perpetuity. Like, ha ha, well, you sign on the line, you lose. I don't think that's right at all. I think it's right to construct the housing because on the back end we know the demand is very robust. So should that person have to renege for any reason?

I think on the back end, when the building exists is when that conversation ought to be had or codified in some capacity because you can't even build the should you renege. Day two and I don't have 100% of the dollars. I can't go.

So how do you do that now? So, I mean, clearly you only have 3% liquidated damages today. And you are in a situation where you can say to someone, okay, you'll get your deposit back once I can sell this to a second person. Is my understanding of what you just said, right? That is correct.

Okay, so how do you do that?

Now? I can't convince my investors to do it. So I build off for rent. So I have that conversation at the beginning of projects. Hey, you know, the house next door just sold in a day. This is a market where people really want to live. There's. I alluded to earlier.

I have a project in the Woodlake neighborhood for those who are familiar with the Sacramento area. And it's literally right next door to Woodlake Elementary. And homes in the neighborhood sell for. There's one on the market for $975,000. That is a hot cake.

And I'm building 270 apartments that I cannot afford to sell to people because the capital stack is so. It so precludes that because of the risk associated with a 3% as opposed to a 10%.

So I mean, I hear you and you, first of all, thank you for doing this. It sounds like you're building important housing and we need more people who are going to look out for the people who are coming to live in it, which it sounds like you very much are. And I know a lot of developers are.

I know people in your industry who I trust like any industry. And I'll put lawyers amongst this. There are people who are not looking out for California consumers as much as you are.

And so I just, I stand by this issue of if we just codify into law what's in this Bill, those other folks can walk away with the 10% like the law says. That was your liquidated damages. It is yours to keep. And I understand what the Assembly Member is saying.

I just like the question that is before us is like, who it's really a liquidated damages question is who should bear the burden if the harm to you or to a different developer is over 3%, you can get it. You can get actual damages. There is nothing to stop that.

But by saying it's liquidated damages, it is gone for the consumer. And that is something I'm just really struggling with. And so I needed to hear that there is a solution outside of liquidated damages. Really, frankly, I am more comfortable in the contract space. We're like, yes, negotiate for this. Say I in order to make.

Look, you and I are making. We just shook hands. We're making a deal. And I am telling you today that I need to keep this money until completion or my stack falls apart. So you can't get this part of your deposit back period until I complete. That would make me comfortable enough to do this.

But putting it in liquidated damages, where I think most developers are going to walk away and say, Great, I got 10%, and the next person comes in, you call it fraud. Under the law that we're passing today, it will not be fraud. It will be the right of the developer to keep the 10%.

And that is just like I feel like we are trying to solve a financing problem on the back of consumers. And I just, I'm really struggling with that. So.

Thank you, Madam Vice Chair.

All good questions. I'm not a lawyer, so I can't articulate that. No, no, no, no. I'm glad you did. As from a layperson's point of view, I see both sides clearly. The developer needs the financing, needs to complete all that. The numbers are what get to me. But I do have a fundamental structural question.

Are we talking new construction or resale?

New construction.

Does maybe. I missed that in the Bill. Does that specify that in the Bill?

That is part of the committee's amendments. Oh, on page six. Yeah.

Well, I think that's important. Significantly, because it was just a resale, then why should that the buyer be burdened with a 10%. So they won't have that liquidated damages. Correct.

And I have to underscore that this is elective. Right. This is something that, for that new project out there that a lot of people are going to want. We know the demand overall is very high, but maybe for that premier unit or premier premier structure, it's even going to be like more. More of interest. Right.

You can choose or not choose to be able to go ahead and work with the developer and say these are going to be the terms and you have to, like, understand what those terms are kind of going into it. So this is not something that's going to affect housing product writ large across. Across the entire state.

I think it's going to be a very narrow subset, but an important one that's going to relieve housing demand on the rest of the stock that otherwise those same buyers would be after.

Well, and I sympathize with what you're trying to do. I do appreciate actually having a debate on housing and trying to make it work so the developer can work. I mean, that's just. That's fundamental to how we create housing. I have looked into the issue similar to what you said, Assembly Member, about the.

Out of the 3.3 million housing requirements that the Governor announced three or four or five years ago. Now it's all rental. I feel it's so fundamental to get people into owning property in the state of California for all the obvious reasons to create generational wealth, et cetera, et cetera. I've looked into this issue of condominiums.

Why aren't there more condominium projects? I've not heard this issue from the developer's standpoint. I've heard other. Another issue and it's for another conversation, another Bill. But it relates to the liability insurance of a new unit.

And that takes 10 as a 10 year burden on the developer for there to be a challenge on a warranty or whatever. I'd like to look at that at some other point because I think that's inhibiting it. But I think.

And also if you're targeting the market rate upper, middle to upper income where they could just say oh, I don't care about $75,000. There's a unique subgroup of people, I guess that would think that way. But I think for the average first time home buyer that's a heck of a lot of money.

I just think back into the days when our first home cost $100,000 and our parents thought that was horrendous in 1978 and every penny counted. And that's the investment. The money you save or you save from putting down into your mortgage. You're buying furniture, you're remodeling, you're putting in new tile floors or the bathrooms.

And to tie that money into that penalty, I think is. Is very difficult if somebody walk away with $75,000 less to buy something else. So I'm concerned. I don't know why the jump from 3% to 10% seems so easy. Isn't there a middle market to meet your needs? I support your needs.

I support the building industry, but I also support the home buyer. And isn't there something, a middle road at 5%, something that to make your financial projections pencil out and make sure that those projects get built. But let's not make it so onerous to the first time home buyer. So in a way I sympathize.

I align with Assembly Member but Bauer-Kahan. But I just wish there was a little bit more adjustment. I want to support you. Your intentions are good. It just seems very onerous to me.

Yeah. And again, I can only really stand on a few things. One, that this is something that is trying to align California away from our most restrictive.

I guess if that's the right word statutory requirements to something that's a little bit more aligned with other case studies for states with high urban densities that have the 10% threshold, sometimes more. But we want to try to align that as well as a relief valve that we have on this issue.

The other thing that I would point out is that maybe one thing that hasn't been really like fully appreciated.

You go to sort of pre sell the unit or lay down that kind of deposit and we talk about these numbers out there, whether it's $1 million or $750,000, and then we're quickly doing a math on 10% of that.

But that doesn't necessarily mean that's actually what a developer is going to ask and negotiate as a part of that. 100% of the cost of a unit needs to be laid down up front and put into. That's not always the case.

You could have a 25% requirement to be able to lay that down so that you can put your marker on that penthouse unit. But only 10% of that 25% would be subject to the law.

So we're talking about sort of a upper, very upper theoretical limit here for something that in practice is, you know, more rare and rare. It's on a case by case basis for some development types that are out there.

Let me just ask one other question. That's a fact. That could be a fact. It is a factor in the development of building homes. You don't talk about regulations that are the cost of doing business in the home building industry, CEQA and all those requirements. That's adding to your costs.

Maybe there are lawsuits that are contributing to that whole process of getting permits and getting the land approved and entitlements and all of that that you're trying to recover and put into the capitalization of your project.

And so you're burdening the buyer again all over California, but in this particular instance, you're burdening the buyer with the costs that you have absorbed just trying to get this product to put your first shovel in. Isn't there a way we can help you mitigate those costs as a state?

Yeah, I would just say we're talking about burdening a buyer, but this is only the case where there's a default and the purchase agreement is not being lived up to by the buyer and they're pulling out of a deal. It's not on the developer side.

They still need to deliver that unit for a buyer who's continuing with the contract.

Yeah, but the cost of that whole project is based on the Costs that have been incurred in the development process.

So what I would say is that 10%, the reason that reflects the true risk and cost is because if buyers back out and you have less than 50% of those units sold to owner occupants, you can't get Fannie Mae financing, for example, with better terms. And then you do have to go to more expensive.

Is that a current interest rates, with interest rates coming down and projected to.

Come down, that would help interest rates.

Is that a factor? Maybe this is too soon.

Interest rates, cost of construction time. And California is one of the most expensive places in the world to build. So we know that. But.

So it's not about just trying to use these funds for financing, is to demonstrate the credibility of the project and the integrity of it to the lenders when they're looking at that and buyers who are serious about going forward and honoring their contract, if they do pull out, then you have carrying costs for that land.

You may not be able to deliver the product which you've guaranteed to other home buyers who are honoring their contract, because typically it's 18 to 36 months. You have to deliver those units and it's the whole building. It's not just one.

Stan, I know that they're probably more existential. This is more existential, I suppose, but the risk factor of even developing in California is significant. And Fannie Mae, a federal organization, I mean, they're looking at California in comparison to Washington state or New York state. California is not the same.

And it is more costly to develop, to build anything in California. And the current interest rate environment is exacerbating that situation. So you're trying to solve a problem that maybe there are external factors that are driving it at the present time. I want you to be successful.

I think it's marvelous to see a young person, young woman in the home building development business. I think that that's fantastic. I want you to be successful and I want to help you in a way. But I'm also hearing in my mind that that 10% just sounds usurious.

And if there's a way we can find a way to. I want you to get the financing you need. You're not responsible for the problems that drive up cost of doing business in California. So I don't want you to be burdened by that. But I don't want the consumer either, so. And the purchaser.

So I would look forward to some kind of meeting of the minds.

We are, we're working on that actively.

Pappin.

Thank you, Mr. Chair. So, you know I'm going, I'm struggling with this Bill, so. And as I thank you for the author who spent some time with me on it, and I, like you, come out of local government. And I left local government. Where are we now? 26. So I left at the end of 22.

I've been here for three years and in that time the 3,000 units plus that we had approved at the city council have not been built. A lot of times local government gets a rap like it's their fault that housing isn't getting built. I take a different tact given my experiences.

And much of what has not been built is because of the difficulty with financing. And so this Bill has an attraction for me, as we talked about, because financing interest rates have been a real impediment to actually putting shovels in the ground, if you will. But I also have the same concerns.

And as a lawyer, you learn that liquidated damages are an attempt to quantify damages when damages are difficult to quantify. So the parties entering into a contract want to give it some sort of understanding. And it does raise the question, though, what is it about the developer's damages other than you want a better interest rate?

And I get that, that, I get that all day long. And that ultimately helps housing, which is what we're all trying to do and makes housing more affordable. And I guess that's why the Bill appeals to me.

But I, I do feel like this argument about it, are you doing it on the back of the, the poor guy that. Or gal that stands up and goes, here's my 10%. I've scrimped, I've scraped, I've done everything I possibly can. And I, and I reached out to your office to make sure that there's still contingencies.

For example, if my financing falls through, you don't get to keep the 10%. If I can't, if I do have another unit, I'm selling and I can't sell it. You don't get to keep. All the parties are still free to contract. You're shaking your head. Come, I'll come to you in a second. Let me finish.

I thought all these contingencies could still be out there. So the parties contract as they so desire, but you can make it up to 10%. But I guess there must be some more rational relation. And maybe 10% is pretty high, you know, maybe it should be something lower, I don't know.

And then I do like the idea if you would consider amending the Bill that says, hey, when the developers financing is no longer an issue. That is, it's complete or they've made some interim on the carrying costs, you know, whatever it may be. And that's up to the developer.

I mean, you're not totally on parity when you're seeking your money. I get that too. You know, we're all trying to cut the best deal we can. And dealing with lenders is I would not call equal bargaining, let's just put it that way.

So I'm wondering if there are ways to tweak the Bill and I'm just going to throw that out to you because I am struggling with it and there is some concern that, you know, the guy that walks in or the gal that walks in is only doing it so you get better financing, which may reduce it.

But if things, the moon and the stars aren't aligned and they lose that 10%, holy moly. You know, it wasn't a very articulate question, but I think was there a question there consternation that I am having. And I think the opposition had 1.0 they want to do on the contingencies. Right.

But go ahead and we'll let the author, if you don't mind first.

So a couple things I can hit in brief to respond to some of those points. Okay. First of all, let's appreciate, although I'm not defending that this is going to be the end all be all of this Bill here, that our costs across the board have risen.

And so the idea that, let's say what some fear here is that a lucrative developer is going to take that 10% and just like hold you hostage and walk away with it and basically snooker the would be buyer from that money, you know, and is that 3% or 10%? Is that, you know, is that appropriate?

And what did they actually do right. That like would require? I think I talked with the somebody Member Bauer-Kahan about this at length last night.

You know, the need to be able to recover those damages because you had a contractual agreement, you entered it together and as a seller under certain terms, you decide you're just going to pull out. But meanwhile, all this expense, all this time, all this effort has gone over here. And should that be 3% or 10%?

Well, again, if we're ballparking numbers here, is it $30,000 or $100,000?

Think about the fact that soft costs that have to go into a project and that is all of the professional talent that helps the architects, you know, everybody else that is like sort of at the table, not actually providing a building material, providing the land Providing everything but providing the support needed to be able to get that project permitted and ready to go.

Well, those are already encumbered. Right. So the developer has actually consumed with your agreement to date, a lot of those additional costs and everything. So I would argue on its face that there have been a significant amount of damages that have been spent. You buyer broke the contract.

And so I just want to appreciate that a little bit more with kind of real world experience that, that this is why 3% is a little bit risky, I guess in some of these transactions aren't able to happen.

That said, that is my commitment as both an author and a colleague of a, as a legislator to make sure that consumer protections are available so that when that person does want to buy out that to my earlier response, there's no double banking of this money. That to your point. Yes.

Assemblymember Papan, if there is a sale of those units, right. Their construction is completed.

The, the, the you decide you need to back out because you moved to Wisconsin and somebody else wants to come in and get that penthouse on the bay, well, then you should get all of your money back because somebody else is actually able to backfill that and subsume the terms of that contract and move forward and the project will move forward.

Right. And everybody's happy. So we can codify that because that's exactly what happens today in a number of cases. And that is my intent for this Bill is to take this kind of concept and make sure that those industry best practices could be baked into this kind of a Bill for consumer protection purposes.

Baked in this Bill. Not. Oh, like you would consider, if the risk goes away, then the money could be refunded. Correct. Interesting. Okay, I got you what you wanted to say.

Thank you so much.

Yeah, that's fine.

With regard to contingencies in a standard real estate contract, there are several very specific contingencies that run for a very short period of time in a real estate contract. For example, in our car contract, that period is generally 17 days, in which period you can perform any inspections you would like to on the property.

Your appraisal takes place and you have to release your loan contingency after that point in time. The seller or the builder in this case is entitled to keep the full deposit amount, regardless of the reason for the breach.

Thank you, Assembly Member Zbur.

So first of all, I want to thank the author who I have immense respect for and obviously recognize that this is attempting to address a real issue that developers are facing in terms of the financing of condo projects. I want to align my comments with Assembly Member Bauer Kahan.

To me, I just have a lot of heartburn over increasing the liquidated damages provision beyond 3% when I bought property and I've seen it in the car reform, I never checked that liquidated damages box because I don't actually think that especially in a seller's market that there are real damages that someone can occur because you can go out and sell that unit to someone else in that kind of market.

Now I know we're in a different position where it's new construction obviously, so I recognize that. But in terms of where the consumer sits, it's not in a different place. And so when I look at the reason why this is there is because at least some developers want to actually have 10% liquidated damages in their contract.

They often don't use the car forms and so they have their own forms that they're drafting which I think are generally there to try to lock people into buying the house. So there will be different things in a, in a contract that is, that is created by this, by the developer, they have control over that contract.

I don't think the consumer is in is that is as sophisticated. And so often, you know, they're basically being told by the sales office, this is the form, if you want to buy this, this is what you have to do.

And if they want to buy the condo, they're going to be signing that, not necessarily understanding the risk that they're bearing.

And so, you know, having someone, you know, and we're talking about condominiums, probably first time buyers have the potential risk of losing their entire down payment to me is just something that while I think the issues you're raising are very legitimate, I just don't see it being appropriate to look to the consumer to be part of how you address financing issues.

So, you know, and I look at someone like, you know, a first time buyer who goes in basically decides they want to buy this condo. They end up getting a, you know, it's, it's taking a while to get the condominium built. They get the letter from their bank, they satisfy the finance contingency.

They may have looked past, you know, have checked the box, that they've done whatever physical inspection you can do on something that's not built yet. And they've waived all of their, they've waived everything and then something happens in their life.

And now we're dealing with the fact that even though there may not necessarily have been real damages to the developer, someone has lost 10% of their life saving or 10% of the purchase price, which could be all their down payments.

So for me, just, you know, the 3% for me is a consumer protection provision, and that's why it's there. And you know, I really appreciate the authors and the Bill sponsors' focus on a very real problem.

And you know, I think we do need to do more to try to help with these, the financing issues that developers are facing on new construction. I just don't think that we should be looking to consumers and customers of these projects to satisfy that. So I'll unfortunately be laying off the Bill today. Thank you.

Any other questions or comments? Yeah, Assemblymember Connolly.

Yeah, appreciate the work and also thank you for taking the time to speak with me as well. I think my colleagues have stated it well. The two issues I have really are the amount, the 10% kind of the why behind that. I think we have more explanation around that right now.

But frankly I find myself agreeing that is it appropriate to kind of bolster the financing stack overall for a project based on, based on individual buyers. So I'm at least concerned with what is the right balance in terms of the amount of the percent versus the go in mind.

The big point though is, and we talked about this, fleshing out what consumer protections are going to remain here. I think the example was given by the opposition of, shall we say, a firefighter even looking to purchase their first condo.

The process is going forward, contract is being negotiated, but then you have like an emergency or disaster situation. I'd like further assurances whether it's kind of crafting particular protections around this situation.

And I like that you're open to that, but also making sure that at least existing protections, if you will, from the consumer side in these kind of transactions are incorporated into this.

So in other words, it's not a situation where we're creating the possibility of, let's say there's a legitimate reason to walk away, you're still going to get stuck with 10% loss from the consumer side. That seems pretty unacceptable.

So I guess to the extent this is able to move forward today and totally get the goal, looking for real assurances that those kind of issues are going to be addressed more fully.

Thank you, Assemblymember. Yeah and if I haven't been clear in response to others as well too. Let me say to you and everybody that we are very aligned on the codification of some of these guarantees that will ensure that should this Bill become law, that the maximum practical, I guess withholding would be at the level of 3%.

But even then, existing law that's out there upon sale or upon completion of the projects and everything should allow mechanisms for individuals recoup it. Again, back to sort of, you know, the original points.

This is about access to capital that is essentially no interest, but has a shared stake for would be buyers who want to make sure that this project does get built for their benefit.

And this is an opportunity then to be able to modify our own restrictive laws to be able to allow that shared risk, shared opportunity transaction to be able to happen.

Any other questions or comments? Assembly Member Stefani

Thank you, Chair. I just want to say my colleagues have raised some very good issues today and I know you and I had a brief discussion about this and I will be voting for today to move this forward, hoping that these issues can be addressed because I think the consumer protection issues are worthy of a further look. So thanks.

Thank you for reiterating that.

Any questions or comments? I want to thank everyone for the vibrant conversation. This does have a do pass amended recommendation from the Chair for a couple reasons. One, the author has worked very closely with the Committee on this during the interim and many of the contingency provisions were placed back into the Bill to protect consumers.

And the author has expressed a willingness to continue to work on this and take into account concerns not only raised by opposition from the realtors and others, but as well as concerns from Members.

This is in the House origin, given the pattern that the author has shown already on this Bill to move it in a in a direction that takes into account those concerns. I want to give him the opportunity to continue to work on this.

I think he's heard loud and clear that even those that might be voting for it still want some work to be done on it. And he's proven himself to be someone that will keep his door open to continue to listen to concerns. And so with that, what would you like to close?

Thank you, Mr. Chair. I really agree much in your closing statements and appreciate your confidence in that. We'll continue to be able to work with all interested Committee Members, Members as well as staff to make sure that the iterations and the improvements upon this Bill reflect exactly what we are talking here today.

Because I would never send anything to the governor's desk that was going to be not rock solid from the perspective of making of a consumer's protection. And with that, I would respectfully ask for your aye vote.

Thank you. We do need a motion. We have a motion and a second. Thank you.

[Roll Call]

Okay, so it needs one more vote. We'll keep the roll open. Thank you. Okay, so we have a special order of business at 10:30. The timing, I think, worked out relatively well. I just want to, for the record, also just for scheduling purposes, if we go through to noonish, we will take a break for caucus and if necessary return at 1:30. If we do return at 1:30, it'll be in Room 127.

So make sure you take your belongings with you whether you're in the audience or up here on the dais. We will not be returning to this room if it's necessary for us to come back at 1:30. Before we... Before we do that, let's go ahead and just do all the add ons. If you would like to do add ons, we can do it right now. And to make sure that that's all completed. Item one, AB 768, Ávila Farías.

[Roll Call]

Okay, item... You already voted. Item 5, AB 1359, Ahrens.

[Roll Call]

And I think that's it for now. Yeah.

All right. Are we ready? Assembly Bill 1157, Assembly Member Kalra. Chairman Kalra.

Move the bill.

All right. Please proceed.

Well, thank you very much to my colleagues moving the bill and Madam Vice Chair. Madam Chair, I'd like to start by thanking my colleagues for their time and consideration on this bill. We've had many conversations and heard concerns about extending the protections under the Tenant Protection Act to a single family home renters.

While I believe access to these protections should not be determined by the type of rental someone lives in, whether that be a duplex, apartment, or a house, I understand the concern that this issue requires more conversation before we expand the TPA.

And so I'm committed to taking amendments, and they're actually already in print, that restore the single family home exemption should this bill pass out of committee today. That's one third of the bill that I'm proactively striking before we even get started.

With that said, millions of Californians are still struggling with the high cost of rent, and we must do something to address the fact that the current law is not enough for many renters.

AB 1157, the Affordable Rent Act, will help stabilize the rental market and protect tenants from rent gouging by lowering the annual rent increase percentage and making these protections permanent. While the passing of the TPA was an important step in addressing rising housing costs, the allowable rent increase cap remains unsustainable for many renters.

Tenants who have oftentimes been hit hardest by the COVID 19 pandemic, which occurred, by the way, after the original TPA was passed, job losses, and devastating natural disasters are still forced to make an impossible choice between keeping a roof over their head in the face of growing rental rates, paying utilities, health care insurance, groceries, and other needs.

Areas that were once considered more affordable like Fresno, Merced, and Bakersfield are no longer affordable to working class residents. Since 2020, these areas have seen rent increases of close to 40% percent. In 2023, Bakersfield saw an increase of 39.4%, Merced 35.3%, and Fresno 38%. No place in California is considered affordable anymore.

But the reality is California is facing a housing crisis that has been a result of decades of neglect from housing affordability, homelessness, and housing supply, and we cannot continue to ignore our people's struggles and the calls for this Legislature to do something about the rising cost of rent.

Under existing law, landlords are permitted to raise the rent every year, which is capped at 10%. But these increases are averaging $100 to $200 or more per month. For many renters, this puts further financial strain on them that is unsustainable.

AB 1157, the Affordable Rent Act, will lower the cap to CPI plus 2% or 5% max, whichever is lower, and make this a permanent solution. By stabilizing rent, we keep people in their homes and make housing affordable to allow families to thrive.

Californians need immediate tenant protections while our state continues to build more housing, which does take time. And much of that housing, by the way, is market rate housing anyway. This is not an either or situation.

We must do everything to help Californians that are struggling, and we must recognize that this crisis cannot be solved in a ten year time frame. And without the Affordable Rent Act, without extending these protections to all renters or lowering this cap, we risk displacing even more families, preventing workers from living near their jobs, and exacerbating the homelessness crisis.

I would like to take this time to address one concern that's been raised that this will stifle development. The original TPA of 2019 exempts new developments for their first 15 years of their occupancy. This continues under this bill.

Furthermore, according to a report published in 2018 by the USC Dornsife Program for Environmental and Regional Equity, rent regulations have minimal negative impact on new construction, do not increase the rent on non-regulated units, keep housing affordable, and may deter gentrification. Simply put, tenants need a permanent solution, not a temporary fix.

I truly believe that housing is a human right, and we must do what we can to help keep people in their homes. I know this Legislature. Each and every one of you here has shown a commitment to expedite and streamline housing production.

You have shown a commitment to help fund local jurisdictions and their abilities to attack homelessness and get our unhoused off the streets. But if we don't, if we don't act with urgency to help our tenants in crisis, we are going to continue to contribute to the risk of homelessness.

We're going to continue to be chasing this endeavor of building and building more homes while more and more folks are living in their cars or living paycheck to paycheck, not knowing that the home that they live in will be there the next month.

With me today to provide supporting testimony are Lydia Hernandez, a tenant and a teacher from Claremont, and Leonor Godinez, a small landlord. Also with me is Brian Augusta with Public Interest Advocates on behalf of the sponsor coalition to be available for any technical questions.

Okay. I'm Lydia Hernandez. I live in LA County in Claremont, where my husband and I both work as public school teachers. I'm a member of Claremont Tenants United and Tenants Together.

In the early 2000s, my husband and I repeatedly put in bids trying to purchase a small condo in any of the neighboring towns but kept losing out to all cash offers. So we settled in an apartment where we could start our family and wait for better market conditions. That was 23 years ago.

We now have three children in this apartment. We watched and waited as the cost of buying a home skyrocketed along with the everyday cost of living and raising children. For now, it's meant taking more than $500 from my monthly budget that I used to spend in small businesses in town and instead give that to my landlord.

We've given up the dream of owning our own place and now worry instead how long will we be able to afford the nearly double digit increases that we are receiving every year in rent. The housing crisis does not discriminate on an educational level.

I was proud to be the first person from either side of my family tree to go to college and even earned a graduate degree. But the ironic thing is I'll also be the first person in my family who won't be able to afford a home.

Worse, I worry that eventually we will not be able to afford our apartment with the devastating effect of compounding rent increases. Over the past five years, our rent increases from our landlord, which are legal under AB 1482, have compounded to over 52% increased rent.

My past five rent increases have been 10%, 10%, 8.9, 8.8, and 8% in just the last two years. That means 17% increase. While my teacher salary, my husband's teacher salary got a cumulative 1%. This is how hardworking people slowly become rent burdened.

Paying 30%, then 40, 50, and upwards percent of our income on housing until finally we can't. On Wednesday, I was on the way to school when I noticed an unhoused senior woman I had never seen in town before.

And I started to tear up because I could see myself in her and see a future where I could spend my retirement years living an unsheltered life, no longer able to afford my rent. Renters need relief. I'm urging you to vote aye on AB 1157 today. It's extremely reasonable and fair to landlords and is the least you can do if you're serious about keeping Californians housed. Vote aye and do the right thing.

Thank you very much. Do we have another witness please?

My name is Leonor Godinez. I was born and raised in Oakland, California and have lived in California all my life, primarily in the Bay Area. I own a duplex in Oakland, which I originally occupied as my home and now hold as a rental with both units currently occupied.

The City of Oakland has had a rent adjustment program for over 40 years with the primary goal of keeping people in their homes. The program limits the percentage by which the rent can be increased. For at least the last 10 years, the allowed increase has hovered around 3%.

While this may sound low, it provides for a potential rental increase of $60 per month or $700 per year increased revenue to the landlord on the average cost of a one bedroom apartment. This ensures a manageable revenue for the landlord, a manageable rent increase for the tenant, while providing increased revenue for the landlord.

Of late, I find myself asking, how much is enough? How much increase in the rental income is enough to satisfy a landlord? How many tenants need to be displaced to satisfy the greed of landlords?

These laws wouldn't be necessary if we had just landlords, not only looking out for themselves, but looking out for their tenants and looking out for their community. Last year, in fact actually the last two years, when one of my units was eligible for an increase, I didn't apply it.

I looked at what the market was holding as far as comparable rents in the area, and since rents had actually dropped a little, I didn't give an increase. I wanted... I wanted... I didn't think an increase was warranted and let alone fair. The 5% increase cap.

The 5% rent cap being requested in AB 1157 is a necessary step to providing the housing stability and rental cost relief so needed by many people in our state. I urge you to say vote yay on 1157 and make it law. Thank you.

We have any additional witnesses in support? If you'd like to come to the microphone, please state your name and position.

All right, so we're going to public comment right now. Everyone stay seated, please. We're going to go row by row, okay? After you're done, if you want to come sit back in your seats, you're more than welcome to. If you'd like to leave, you can move right out that door. Okay. Start with this row right here, please.

Good morning to all. My name is Maria Briones. I'm from Los Angeles, California and I'm a member of ACCE and I'm in support. Thank you.

I'm Eddie Gums, representing ACCE Antioch and BOBSA, Black Owned Beauty Supply Association, and I'm in favor of this.

Hi. My name is Ken. I'm with APEN Action and Housing Now. I live in Westminster and strongly support the bill.

My name is Howard Thurman. I live in Sacramento. I'm in support of... I'm with ACCE and I support the legislation.

Vu Nguyen with the California Healthy Nail Salon Collaborative and Orange County Asian Pacific Islander Community Alliance, and I support AB 1157.

Mike Lok representing Asian Americans and Pacific Islanders for Civic Empowerment, also Viet Voices. I am a pop landlord in San Francisco in Assembly Member Stefani's district in support.

Good morning. Maddie Ribble here representing the 16 members of the California Community Land Trust Network in support.

Hi. My name is Nina Long. I'm a constituent of Assembly Member Zbur and I'm here representing Pilipino Workers Center as well as LEAD Filipino in support.

Reverend Millie Phillips, Faith Outreach Organizer for Contra Costa County for the East Bay Alliance for Sustainable Economy, and we support AB 1157.

Hello. My name is Markell Decatur representing Sacramento ACCE Action, and I am in support.

My name is Linda Miles. I live in National City, California, and I support AB 1157, and I thank you in advance for passing AB 57. PS, in San Diego alone, we've had over 180...

Thank you.

Hello, everyone. My name is Marcus. I'm coming from Oakland, California, and I'm here with ACCE Oakland, and I need you to support this bill.

My name is Ray Johnson and I'm from Oakland, California, and I support this bill.

Hello. My name is Jasmine. I'm an organizer with ACCE Oakland, and I support AB 1157.

[Translated] My name is Edgar Valenzuela. I'm from San Pablo, and I'm here in support of AB 1157.

[Translated] Good morning. I am Ana Maria Reveles. I am a resident of National City, California, and I belong to the organization ACCE, and I am here to support AB 1157.

[Translated] My name is Nancy Villanueva, and I'm here to ask everyone to support AB 1157.

That's it. That's all. That's all. Thank you very much. Thank you. Thank you very much.

I support 1167. 57 actually. Not only that...

Thank you very much. Thank you.

[Translated] Hello. My name is Blanca Retano. I am from ACCE Richmond, and I'm here to support AB 1157. Thank you very much.

Good morning. My name is Gloria Avalos. I came from Richmond. I support ACCE, and I support AB 1157. Thank you.

[Translated] Good afternoon. My name is Ana Romero. I'm from Contra Costa County with ACCE, and I support AB 1157. Thank you.

[Translated] My name is Ramiro. I'm with ACCE, and I support AB 1157.

Hi. My name is Raul Vasquez, and I'm an ACCE organizer. I'm in support of 1157.

[Translated] My name is Alma Gutierrez. I'm from Richmond, and I'm here in support of AB 1157 with ACCE.

Hi, my name is Gladys Martinez. I'm here with ACCE and I'm here to support AB 1157.

My name is Sydney Loggins. I'm a native of Oakland, California, 49 years. And I'm here to support AB 1157, and I would love...

Let me go. Okay. Thank you. Hello. My name is Claudia Reynolds. I'm with ACCE from San Pablo. I support AB 1157. Please. Thank you.

Hi. My name is Tammy Alvarado. I'm from San Diego County, Chula Vista. I'm here in support of AB 1157. My rent...

Thank you very much. Thank you.

Hi. My name is Sergio. Hi. My name is Sergio Maldonado. I am from Sacramento, California with ACCE, and I'm in full support of AB 1157.

[Translated] Hi. My name is Cristina Campos. I'm from LA, and I come with ACCE. Please support AB 1157 because I don't want to end up being homeless.

Good morning. My name is Jesus Figueroa Cacho. I'm here in support 1157.

Abdul Muhammad. I'm with LA ACCE, and I support 1157. If we could do it in LA, we could do it in the state of California.

Good morning. Sorry, my voice is gone. I am Michelle Krug with the Alliance of Californians for Community Empowerment, as well as California Alliance of Retired Americans. Both organizations strong support for AB 1157. And I'm really sad you took out the single...

Ana Ramos, organizer with the Alliance of Californians for Community Empowerment. And we are here from San Diego in strong support of AB 1157.

Hi. My name's... Sorry. There we go. Hi, my name is Erik Bracken. I am a member of the steering committee of the Oakland chapter of ACCE and urging you to, respectfully urging you to vote aye on AB 1157. Thank you very much.

[Translated] Good morning. My name is Irma Martinez. I'm from Los Angeles, and I'm in support of AB 1157.

[Translated] My name is Sophia Mendoza. I'm here from LA ACCE, and I am in support of AB 1157. And I wanted also to tell Pacheco if she can remember us when she needed the vote, so please remember your constituents now. Thank you.

[Translated] Good morning, everyone. My name is Dominga Solorzano, and I'm from Los Angeles, California to ask you to support AB 1157. I am a person of limited means and I have young children...

[Translated] Good morning. My name is Carmen Ortega. I'm from Los Angeles with the organization ACCE, and I'm supporting AB 1157. I ask you for your support please. She really needs the support right now. She's actually already homeless.

[Translated] Good morning. My name is Victoria Enríquez. I am a member of ACCE, and I support AB 1157. I am asking for your help. I am a senior citizen. I am a street vendor, and what I earn is not possible...

Okay, thank you very much. Thank you very much. Thank you. Thank you.

Victoria Enríquez. She's obviously, she says she's a senior. She's a street vendor and it's not enough.

Thank you. All right. Thank you. Thank you. Just the name of your... Just your name. Please state your name and your organization.

[Translated] Hello. My name is Maria Osorio. I'm from Los Angeles. I'm a member of ACCE. I'm here to ask you, please, as you have all heard the testimonies, it is very necessary that you leave that 5% rent cap because...

Please state your name and your organization only. Thank you very much. Thank you. Thank you. Thank you. Thank you.

[Translated] Good morning. I am Alejandro Villegas Vasquez. I am from ACCE. I support AB 1157. Thank you.

Please just use your name and organization only. All right. Thank you. All right. Thank you. Just your... Please, your name and organization only.

Melvin Willis from Contra Costa ACCE, based out in Richmond. Please support AB 1157.

Thank you very much.

Cristian Fuentes Hernandez, ACCE, from San Diego. We support this bill.

Thank you very much.

[Translated] My name is Maria Guadalupe Torres. I am here supporting AB 1157. Please help us.

[Translated] Hello. My name is Maria Campos. I'm here to support AB 1157, and I hope you can help us. Thank you.

My name is Leticia Kibero. I'm from San Ysidro. I'm here to support AB 1157. Thank you.

Assemblyman, I am Los Angeles native. I'm imploring you and you to pass AB 1157 today. This is a life or death reasonable request.

Hi. My name is Magdalena. I come from Los Angeles. I am from here now. I need help you, 1157 please. This level we have, we have. We ask every influence.

My name is Johnny Vicente, and I'm born and raised from National City and I support AB 1157. Thank you.

Hello. My name is Aly Trevino and I support AB 1157 from San Diego, California.

[Translated] Good morning. My name is Margarita Gonzalez. I'm from Los Angeles. I'm a member of ACCE. And I ask that you please put your hand on your heart and support...

You have to let her finish at least in support of 1157. Okay? I mean, at least have a little bit of respect for our Spanish folk. Thank you.

No, I thought I heard 1157. Okay.

Yeah. Good morning. My name is Guadalupe Gonzalez. I'm from Los Angeles and in support AB 1157.

My name is Beverly Roberts and I'm from Los Angeles, and I'm 89 years old. I will be. I might not be back here to see you get this bill 1157 pass. Please.

I know you have a time for saying this one to us, but do you feel these people 1157 is supporting us, but you are shutting down these people who saying to you to approve it. You keep on saying to us only the name, organization. How you going to be seeing? How are you going to be listening to us?

Thank you. Thank you very much. Thank you.

Matthew Carson, ACCE, from Los Angeles supporting AB 1157.

Anthony Azul with Students of Housing Justice at City College and San Diego ACCE in support of AB 1157.

Joseph Wilson from Sacramento for the Disability Organizing Group For Initiating Total Equality, also known as DOGFITE. Please support 1157.

Good morning. David Sharples with the community group Contra Costa County ACCE in support of AB 1157.

Hi, good morning. My name is Lydia Morales, and I'm a San Diego ACCE member. Respectfully, I beg you, support AB 1157. This is a life and death or death issue for my family.

My name is Gilbert Moncada and I'm San Diego, California. I'm from San Diego... I'm coming from San Diego, California. Respectfully support AB 1157. I beg you.

Thank you, folks, for being here. Hi, my name is Alonso Landeros with ACCE and I support AB 1157. Thank you.

[Translated] Eloisa from Los Angeles. It's time for you all to put tenants over millionaires.

Thank you. But please, we have so many. We want everyone to be heard. Just name an organization. Thank you.

My name is Eric Martinez. I'm from ACCE in San Diego, and I support AB 1157.

Hello, my name is Angel Duran. I'm with ACCE Institute, and I'm in support of AB 1157.

Hello, everyone. Jose Lopez. I'm with the Alliance of Californians for Community Empowerment. I'm here to show and urge support for AB 1157, the Affordable Rent Act. Thank you, guys.

Good morning. My name is Michael Dunigan. I'm with the National City chapter of ACCE, and I am in support of AB 1157. Thank you.

Hi, everyone. Hi, I'm Gemma Reese. I'm ACCE member and also an AFSCME 3299 member. And I'm here in support of AB 1157 out of National City, California. Thank you.

Hello, everybody. I'm Wendy Barrientos from San Ysidro, California. I'm with ACCE and I support 1157. Thank you. Thank you.

[Translated] Good afternoon. My name is Magdalena Alvarez, and I'm from San Diego County to support AB 1157. We come with all our legs.

Hello. My name is Damaris. I'm with City Heights Defense Committee from San Diego. I support AB 1157. Please ask you to support the people. Thank you.

Good morning. My name is Omar. I'm from San Diego, and I'm with the ACCE Action chapter down in San Diego. I'm here to ask for your support for AB 1157. Thank you.

Hi. My name is Donna Lopez-Landers, and I'm here for ACCE San Diego, and I'm here to support for AB 1157. Thank you.

Hi. My name is Donna Lopez Sr, and I'm in support and here to ask you for support in AB 1157.

I think I'll go next before I sit down. If you guys need another translator, I'm here. But my name is Patricia Mendoza. I am in big support of AB 1157. Please support it. $900 is too much. Thank you.

Good morning. Alexis Rodriguez with PICO California in strong support.

Any more speakers in opposition-- in support? Excuse me. Speakers in support, please come forward.

Okay.

Just your name and your organization, please. Thank you.

Hi. I'm Cynthia Centeno. I'm 14, and missing school for this. I am with Housing Now and ACCE. I am from Los Angeles, California. I was in the bus for six hours, trying to make the world a better place. Please vote yes on AB 1157. Thank you very much.

Good morning, Madam Chair and members of the committee. My name is Tasia Stevens. I'm with UDW and AFSCME Local 3930, representing 25,000 providers across the state, in support of AB 1157. Thank you.

Thank you very much.

Eric Paredes with the California Faculty Association, on behalf of our 29,000 members who work in the CSU system. We are in strong support. Thank you.

Thank you.

Monica Madrid, Invitation Homes tenant. Also with the Coalition for Humane Immigrant Rights and the California Democratic Party Renters Council, in strong support.

Thank you.

Hi. My name is Grace Victoria Rojas-Jimenez. My pronouns are she/they/ella, and I support this AB 1157. I'm from ACCE San Diego, National City co-chair, and I support this bill and all--

Thank you.

--power to the people.

Thank you very much.

Good morning. Joseph Crawford. I'm the chair of National City Chapter of ACCE, and I support AB 1147.

Thank you.

57.

Good. Thank you very much.

[Foreign language].

Okay. Ladies and gentlemen, can we please have silence? Everybody needs the same respect.

Thank you very much.

[Foreign language].

<unintelligible> from LA ACCE. I'm in support of AB 1157.

Thank you very much.

Hello, everyone. My name is Simon Andres, and I'm a member of ACCE from the San Diego County and I also support 1157. Thanks.

Thank you.

Hello, my name is Isadora McGaughey. I am a member of ACCE. We rode 11 hours on the bus from San Diego yesterday to be here to say we strongly support AB 1157.

Thank you.

Hello. My name is Lorena Davies. I'm from ACCE San Diego, and I support AB 1157. Thank you.

Thank you.

Ed MaCauley, San Diego, and we support 1157.

Thank you.

I'm Carolina Rena Flores. I'm Director of Communications for Benito Juarez Foundation, Sacramento, and I want to support 1157. We need it now.

Thank you.

Hi. My name is Ryan Bell. On behalf of the 60 member organizations of Tenants Together, I'm here in strong support of AB 1157. Thank you.

Thank you.

Hello. My name is Deepa Varma, and on behalf of the 60 member organizations of Tenants Together and my neighbors in San Francisco, I'm here on support of 1157 and I hope you vote yes.

Thank you.

Good morning. I'm Katherine Chu with Asian Pacific Environmental Network. I'm a resident of San Francisco, and I strongly support AB 1157. Thank you.

Thank you.

Good morning. My name is Jose Lopez Aquino, and I am with ACCE San Diego. I'm also a trustee for the South Bay Union School District, and I am in strong support of AB 1157.

Thank you.