Assembly Select Committee on Housing Finance and Affordability

Okay. Great. Thank you, madam chair. I know, time is of the essence tonight. So, I will just say welcome to everyone.

Thank you for being here. Happy Mother's Day to you, madam co chair, and and all the mothers here. And I look forward to the testimony and everything that we learned today. Thank you very much.

Yeah. It doesn't sound like oh, is there it is. Oh, okay. Okay. So I'm here today to talk about the welfare property tax exemption, which I call the unsung hero of affordable housing finance in terms of how it makes our projects pencil.

It's a great, tool that we have to make affordable housing projects cash flow, but it needs a lot of changes. It's a very outdated process. We do annual recertifications with binders full of papers. It takes months to put together. So I'd like to basically propose improvements to the process and to the timeline.

So usually, affordable housing has multiple funding sources, which are monitored by multiple funding agencies. So what we're suggesting is that you could statutorily conform the welfare exemption of income eligibility rules with TCAC and the low income housing tax credit program. By and large, most of our projects are funded with a low income housing tax credit program, which has a very structured monitoring process to, you know, qualify people for their on their incomes.

So we suggest that TCAC could be the, sole governing compliance monitoring agency for property tax exemptions. There are some affordable housing projects that are built without low income housing tax credits, in which case we suggest that HCD could be the monitoring agency.

It would basically just cut out the amount of agencies that are reviewing these property tax exemptions and streamline the process. The other element I'd like to bring up is that income is usually verified annually, which burdensome to both the people living in affordable housing as well as the operators. So we suggest that there could just be a one time qualification at initial occupancy. And after that, if it's a tax credit project, it's got a regulatory period or a deed restrictions.

There shouldn't be need to be annual recertifications done.

The unit's already complying with all of the requirements of housing low income people, and it's it's a process that works well for the tax credit program, the HCD programs, and other local government funding programs. If there is a unit that has an ineligible tenant, then they would just report that to the assessor who could then deny the exemption. So there would still be the ability to remedy.

The other thing I was going to bring up is that, you know, many times, low income households come into affordable housing and circumstances change. Their incomes can fluctuate up and down.

What happens if the income gets too high after a certain number of years, the low income housing operator, which is us, the nonprofit, is one who gets penalized because the property tax exemption gets taken away from us. So what we're suggesting is if we have, are operating affordable housing and in compliance with our regulatory agreements, that should suffice, and we should be able to keep the property tax exemption. So those are the the base, the basic things I wanted to bring up today.

The only other thing I wanna say is the reason that we need these exemptions so desperately is that, our property cash flows are really suffering mostly because of insurance having gone up three or 400%. So just to give you an example, I had one building that the insurance premium was 17,000 a year, and it went up to 180,000 a year.

And so our properties are starting to negatively cash flow. To tell you about the welfare property tax exemption, we own 2,000 apartments in the city of Santa Monica, and we are now losing between 2 and $500,000 a year because of incomes that are going up, but we're the ones who are getting penalized. So so those are the things I wanted to bring you to your attention. Happy to answer any questions.

Do we have any stacks of [muted]

Households.

Don't touch it. Oh, okay. Thank you. Did you have any

Thank you. I appreciate the the testimony. And just so I get the the upshot and the I think one of the main things is just the one time requirement rather than an annual. Is the annual requirement just leading to additional costs for you inefficient? What what what is the annual requirement actually result in?

So, basically, you're doing the same paperwork over and over again every year, which is both annoying and frustrating to the residents, but also to us. We usually have to hire consultants because it's so burdensome. And like I said, it's like antiquated binders with papers, and you have to get the papers from each tenant. So it's very long and burdensome process. And, yes, it does cost money.

Got it. Okay. Thank you.

Well, I definitely think it's a space that, you know, can improve. One, again, the cumbersome and automation and not having to recertify families every year and transition to a different model. So I think it's definitely a place of policy that we should explore and advocate more.

We would appreciate that.

Yeah. Thank you.

Thank you.

Thank you so much. I think this fall so we see a lot of potential in this proposal and it aligns with conflicting rules that make government more efficient and maintains you know, the rigor in the compliance and monitoring side. And so I think, collectively as a committee and, as we move forward for next year's legislation, this is definitely a place that we can add and enhance in the proposal that we we have prepared.

And we plan to have these conversation with the county assessor and continue it here in the select committee as well. The next phase we my colleague would like to add anything else, but I think we can move on to the panel two on the social housing.

Okay. Yeah. No, Jonathan.

Yeah. Thank you. So we are going to welcome up David Zisser. If he is here, acting deputy director housing policy development at HCD, Saki Bailey, who is the executive director of the San Francisco Community Land Trust. And Aaron Fenwick I'm not sure if Aaron yes.

There he is. From Beachwood Strategies. Thank you to all three of you for being here. Because of the timing, I don't know exactly how long you guys had. But if you could keep it each to five minutes, that'd be great, and then we'll have a conversation.

I know that it's going to be tough, but maybe just highlight some of the some of the main points. And it looks like, David, you will start first. Thank you.

Alright. Thank is this on? Am I good? Yep. Okay.

I will try to be snappy. So, yeah, thank you so much for having me here. I'm David Zisser, assistant deputy director in the housing policy development division at HCD. Let's see if this is working. Doesn't seem like alright.

I'm gonna keep talking. Today, I'm gonna provide a refresher on what SB 555 required. I'm gonna give some context about what thank you. About what California already does that aligns with the social housing framework, tell you where we are and where we're going, and describe the engagement we've had with residents and practitioners thus far. Substantively, the statute, which is codified in the health and safety code, requires the study to include two components, analysis and recommendations.

In terms of process, the statute covers three key elements, a final completion deadline, public engagement, and integration into the 2027 annual legislative reporting cycle. We have to complete the social housing study no later than 12/31/2026, and that and the completed study must be included in the 2027 annual report. The law also directs HCD to ensure broad participation from residents who cannot afford market rents along with public agencies and mission driven nonprofits.

Before sharing what we've been up to with the California housing social housing study, it's important to recognize that California already has elements of a social housing ecosystem in place. These building blocks span public land, financing systems, affordability mechanisms, and community controlled housing.

Exactly the components that define social housing globally and that are also outlined in 555. The goal of this comprehensive study is to understand how to expand and strengthen these building blocks in order to scale what's working and formalize a pathway for long term permanently affordable social housing. The study is our opportunity to learn from these models, analyze California's capacity and needs, and develop a road map for expanding social housing statewide. California already has a strong foundation of public led housing policy tools.

For example, local agencies must prioritize affordable housing when disposing of public land under the surplus land act.

In addition, the excess sites program allows the state to ground lease its land for affordable housing, and these systems mirror core social housing principles worldwide, public land stewardship, long term affordability, and removing land from speculative markets. California has multiple mechanisms that already guarantee long term affordability, including low income housing tax codes, fifty five year covenants, and community land trust to maintain permanent affordability. These models align directly with social housing principles like deemed commodification, community control, and stable tenure.

Resident led governance structures already exist as well, especially through community land trust and limited equity co ops where residents help set policies and steward buildings. Public housing authorities have resident advisory councils offering a model for formalized resident input and representation.

I'm actually gonna skip the next couple of slides. I think we all know we have significant public financing entities. We have the new California Housing and Homelessness Agency and the Housing Development and Finance Committee, which consolidates and streamlines funding. And I'm not gonna skip them. I'm gonna go through quickly.

The state already has mixed income programs like CalHFA's mixed income program, local inclusionary housing, state laws like density bonus law, and SB 79 that facilitate mixed income housing. And these programs demonstrate that the state has early versions of mixed income social housing ready to scale. Finally, California has some of the strongest tenant protections in the country through things like AB 1482, local rent control, as well as state laws that have protections against demolition and requirements around right to return.

We know that elements of social housing tools already exist in California, and the Turner Center conducted a review US social housing models that showed successful Social Housing Systems share a few core design principles even though they look different on the ground. Internationally, strong models like those in Vienna use public or nonprofit ownership, predictable funding streams, and tenant governance resulting in large stable mixed income housing sectors.

In The US, despite a more fragmented system, models like co ops, CLTs, resident owned communities, and public developers demonstrate viable pathways to permanent affordability, resident power, and protection from displacement. These models offer practical design elements such as public land stewardship, mixed income approaches, and mission driven man management that we can adapt as we explore social housing.

To meet the statutory requirements of five fifty five, HCS part HCD has partnered with the Turner Center and a subcontractor called Liberation and a Generation who's leading the resident engagement portion of this work. Together, they're implementing a multistage process designed to explore and advance social housing in California. The process began with a preliminary analysis that looked at the current landscape, both US and internationally, and this analysis helped us understand what opportunities exist and what constraints we might face when trying to implement social housing at scale.

There will be three rounds of engagement with California residents, affordable housing practitioners, and subject matter experts. These conversations will provide critical insights into what communities need and what practitioners see as feasible. I'm gonna try to go a little faster. An extensive component of the study involves engaging residents and affordable housing practitioners and experts to shape the models and recommendations for developing social housing at scale. The engagement is multilayered with residents, practitioners, advocates, public agencies, all contributing to the study's direction.

The study includes three rounds. Round one captured foundational input on the definition of social housing and residents lived experiences with affordability, stability, and tenant protections. Round two, engage residents and practitioners more deeply on ownership, governance, and public sector interventions. And round three, which is, about to begin, will reengage a subset of groups in previous rounds to validate the research team's analysis. For round one, Liberation Generation facilitated 16 sessions statewide, engaging more than 300 residents and 20 session organizers.

Participants represented diverse regions from Ukiah to San Diego, including monolingual Spanish speakers, immigrants, tenant organizers, elders, and unhoused residents. The Turner Center facilitated focus groups and interviews with 73 affordable housing practitioners representing 61 organizations across various agencies and organizations. And round two was intentionally designed to deepen insights from round one through in person group workshops, a lasting two to three hours each. We reached extremely low income renters, multi generational households, and active tenant organizers.

And the I'm gonna skip this one and just kinda wrap up here.

So where we're headed. The research team is expected to conduct the last round of public engagement with residents and practitioners in July. They will reengage a subset of the groups from previous rounds, collect feedback, and validate their analysis. We look forward to sharing what we learned from research and resident and practitioner engagement, and we're grateful to our partners and to the countless experts and people with lived experience who have taken the time to share their perspectives and stories with us.

I wanna thank you again for having me here today, and I'm glad to take questions.

Appreciate that. We'll open it up for questions after all three to go. Thank you, mister Zisser. So, miss Bailey, floor is yours.

Great. Thank you. Is this on? Yes. So I'm not gonna go through my whole presentation.

Although, can it be brought up perfect because I just don't think we have the time. It was meant to be twenty five to thirty minutes. So I'm gonna condense a lot, and I'm not gonna attempt to go through the whole thing. So what I will say is this, and excuse me because I've condensed my whole presentation if I missed so I'm I'm bringing my phone up because I have it here. Okay.

My name is Saki Bailey. I'm the executive director of San Francisco Community Land Trust. I'm also a member of the advisory committee of SB 555. So I've been through this process for about over a year. SFCLT, just a little bit about us, we create permanently affordable housing.

So we are in the community land trust model that David referenced, you know, one of the organizations that's already doing social housing. So we're one of the existing forms of social housing in California. Today, I'm here to talk about some of the assumptions underlying the SB 555 study that require legislative action in order to realize the models identified and to make the study more than a report that sits on a shelf.

I'm here to advocate for investment in the existing ecosystem of social housing, community land trust, and what it takes to help us scale. So I wanna take you to a few slides.

Okay. Some of the core assumptions of the models. All of these models, as you can see, really focus on reducing development costs. And I'm actually needing a copy of the of because I can't read. Can I get a copy of it?

I thought I'd be able to see it, but it's I can't. Okay. Thank you so much. Okay. So the models assume that social housing can be built more cheaply than conventional affordable housing.

It's also assuming that savings come from streamlined approval, simplified capital stacks, construction efficiencies, and public nonprofit ownership structures like community land trusts. These are very important things because the models won't work unless we do these things. So we do need to, try to create a capital stack that doesn't involve 10 different sources. All of the things that I think we know are are broken about our affordable housing system. You know, I think, Buffy Wicks said it really well on Friday night.

She said, you know, the the our housing hell has been paved, with good intentions. And I think that's kind of we've tried to do everything in housing. We're overregulating housing. We're requiring so much out of our every single housing projects, and they're really, really difficult to execute as a result. S0, so that's all of this is going to require these things, and it's going to require that we leverage our existing public and nonprofit ownership structures.

So I'm gonna go quickly to our next large point, which is another big assumption about all of this is that large scale public subsidy will be available. So all of the models require that ongoing public support for this program, continue or or or there will be public support for this program. And those are in the form of things like public backed debt, tax abatements.

So the earlier conversation about the welfare exemption, this is critical actually that we are going to, expand the welfare exemption for not only rental properties, but limited equity housing Cooperatives, which is one of the the models in discussion. So all of them require a 100% tax abatement.

So this is going to be a big area of discussion. They also require public equity. They require soft loans. So these are soft debt loans that would come from the state, not just depending on local jurisdictions. They depend on vouchers, tenant based vouchers, down payment assistance, and public land contributions.

So the surplus land act conversation is very live and very important because if we're able to actually, utilize public lands and, reduce the cost of land to zero, that would reduce the $150,000 per unit subsidy soft debt contribution that would need to come to to from the state to $79,000. And, of course, these figures are changing. You know, as the model is changing, we're not the report isn't finished. But it's important to know what a huge game changer that additional, reduction of land cost could be.

And it also assumes that these, public entities can sustain the programs and scale over time.

So really my big point is that all of this is going to require that we get the middle class to actually invest themselves or see themselves as part of this project. And I think that's actually one of the most radical parts of the social housing proposition is that it just it isn't just about permanent affordability and resident control because there are other organizations that do exactly that work.

But the radical proposition is that we're going to involve mixed income, middle class people and give them affordable housing and that they can see themselves as benefiting from this program.

Because if we can do that, if we can raise the our area median income that benefits from these types of programs from the typical 80% or a 100% area median income out all the way to a 150%, that's going to be a big game changer in how people see themselves as really benefiting from this program in the middle class.

And if we can get the middle class involved, that's how I see us sustaining long public support for this type of program or even initial public support for this program.

So that's really what I wanna say is that we really should think about the missing middle piece of this. And especially in the future years where we know there's going to be huge budget cuts, locally and at the state level, it's going to be critical, actually, that we get the middle class to support these programs because they are going to be doing it in the face of a very difficult economic time where a lot of them are actually going to be looking for affordable housing.

So the last point that I wanna make is about the last assumption is land and tax costs can be reduced or eliminated. So this is what I was referencing about utilizing the surplus land act because, really, all of the models improve when we're able to take away the cost of land. It also references the use of donated land, so that is something that community land trusts, really, excel at.

Strangely enough in San Francisco, there are a a whole there's a whole generation of elders who are about to, leave the earth, who want to, donate their properties to the land trust because they don't have any children. So this is this is really something actually in in San Francisco and in Los Angeles that we've seen a lot of.

And what's difficult about this is that in a lot of these projects where people want to donate land to me, I still can't make the numbers work because of the complexity of the funding sources and the lack of local funding sources and the fact that a lot of the funding sources at the state level are not made for small developers. And so this is another big point.

If we wanna think about how we're going to change the system and leverage the existing small developers like community land trust, it's critical that we allow the those programs to be more accessible for those small developers so that they can actually be competitive, for those funding sources.

So the housing crisis, in my view is no longer only a crisis for the low income Californians. For the lowest income Californians, it's really a moderate and middle income household crisis as well. And I really believe the traditional American dream of home homeownership is changing. Many younger Californians no longer believe homeownership is actually attainable. And even those who do buy homes face increasing instability due to insurance costs, caregiving responsibilities, the change of jobs, and economic volatility.

I recently served on San Francisco's Inclusionary Housing Technical Assistance Committee, which advises the Board of Supervisors on affordable housing policy, and we were told something absolutely devastating by the comptroller's office, which was that even if the land costs were zero and Inclusion House housing requirements were reduced to zero, Current market conditions in San Francisco are such that it is so difficult to create, a new market rate housing that there's the expectation is that there will be none even under those conditions in the next three years.

This means our housing system is not simply under pressure. It is fundamentally broken. Of course, we need every existing tool in the toolbox, market rate production, preservation, deeply subsidized, subsidized affordable housing and strong tenant protections. But we also need a bold new direction.

And that, I believe, is what social housing offers us. At its core, social housing means housing that is permanently affordable, like David said, meaningfully resident controlled and inclusive of middle class and mixed incomes. One of the most powerful lessons from places like Vienna is not simply the financing structure. It is that affordable housing receives broad political support and living in it carries no stigma. People of different incomes live together in high quality, beautiful, stable housing integrated into thriving neighborhoods.

Community land trusts already embody many of these principles. A community land trust, as I said, or maybe David said, is a nonprofit organization that permanently owns land for community benefit while ensuring long term affordability and democratic governance. And residents are not passive recipients of the housing. They are decision makers. One third of the CLT board is made up of

residents. California already has an existing ecosystem for community ownership. However, one of the biggest barriers facing us, the land trust, is scale. This is why San Francisco Community Land Trust is developing a hub spoke model where a central hub, and I'm not gonna explain all of that. It's in your slides, provides technical assistance like development, financing, compliance, asset management, while local organizations are able to remain focused on organizing stewardship and community leadership.

This allows small community based organizations to stay deeply rooted locally while accessing the technical infrastructure necessary to scale this model. And California already has the beginnings of this ecosystem, and us, San Francisco Community Land Trust, is investing $20,000,000 it received from Mackenzie Scott in 2023 to realize this vision.

It was recently we were also recently given a government contract from the county of Marin to realize the vision there, and this is one of the most difficult counties to create affordable housing in the nine Bay Area counties. The opportunity before us now is whether we're willing to invest in the existing systems, partnerships, and public support necessary to bring this model to scale. Thank you so much.

Thank you very much for that. And then we will conclude, Mister Fanwock.

Thank you to the Chairs. I'm Aaron Fanwock, a housing policy consultant and principal of Beachwood Strategies. By way of background, I previously led intergovernmental relations and property tax legislation for the Los Angeles County

Assessor's Office and the California Assessor's Association under Assessor Jeff Prank. With that background in mind, let me start where the math lives. California's property tax framework and the structural role of property tax exemption plays in one of the most promising production tools we have for the missing middle.

In its May 2024 study, modeling the levers most likely to make middle income housing financially feasible, the Turner Center concluded that one that of the policy changes we modeled, property tax exemptions appear to make them the largest impact on feasibility in all the scenarios, not zoning, not parking, not fee reductions, property tax exemptions. The reason is mechanical.

Property tax is paid before debt service. Every dollar owed is a dollar of net operating income that can't serve up that can't service a mortgage or a bond. Removing it is the most powerful single policy lever California has in a housing finance. There are two doors into that removal. The first is the welfare exemption for property owned by a qualifying nonprofit and rented to households at or below 80% of area median income.

There's the hard ceiling of that level. The second is the government ownership exemption, Article 13, section three of the California constitution. Any property owned by the state or a political subdivision, a city, a county, a joint powers authority, or a JPA is exempt. No income cap. No nonprofit requirement.

This is the only door California has into the missing middle, the the 80 to a 120% AMI band. Without the exemption, these deals do not pencil, the bonds do not get issued, construction does not happen, and rent reductions never reach tenants. And this arithmetic is not specific to the government ownership model. It applies to any mixed income workforce housing model in California, whether under an expanded welfare exemption, a future social housing structure, or new public private vehicles California has yet to build.

Above 80% of I am AMI, no production model works at scale without the exemption.

Today, 52% of California renters are housing burden. They spend more than 35% of their monthly income on housing, and the ripple effects of that shortfall reach well beyond housing itself. California needs to encourage housing of every type. As others have stated to your committee, producing new housing in the state is extremely difficult. And the highly competitive nature of affordable housing tax credits and private activity bond allocations are real obstacles, and they compound upon each other.

I'd like to highlight three areas where this body has already moved meaningfully and where continued focus is, in my view, where the most missing middle production will come from. First, continuing to increase the availability of financing. This legislature has already signaled that the existing toolkit doesn't reach far enough into the missing middle. With the push to extend the welfare exemption into moderate income territory, the move to open it to mixed income properties, and recent fixes to the welfare to welfare exemption administration.

The welfare exemption stops at 80% of AMI.

VITEC tops out at 60, and the state's bond cap caps at 80. California needs more financing available, public and private, without taking dollars from deeper affordability programs that should be fully funded in their own right. Governmental revenue bonds paired with the constitutional government ownership exemption are one of the few ways to bring new financing into the 80 to a 120% band. Second, continuing to streamline regulation and financing. On the regulatory side, this legislature's streamlining record of the last several sessions speaks for itself.

The same instinct now needs to apply on the financing and administrative side. Public private partnerships built around governmental revenue bonds, which don't compete for the private activity bond cap, are one of the few ways to add capacity without take without enlarging that bottleneck. The technical know how and the capacity for cities to deploy bond financing should should be a priority as well. And downstream, existing property tax administrators and the rules they apply should be consistent with the law and the intention of the legislature.

Third, continuing to lean into integrated public private partnerships.

Social housing or government owned housing is clearly where the next push is heading. But the way it delivers at scale is is as an integrated public private partnership, government on title, private capital, and operators on production and management. Continued focus on the integrated model is in my view where social housing will excel. The leading working example today is the Joint Powers Authority Mixed Income Housing Program.

JPA has issued tax exempt revenue bonds, partnered with cities to acquire apartment communities, deed restrict units to households at 80 to a 120% of AMI, and offer rent discounts to qualify tenants, and revert the property to the host city when the bonds are repaid.

More than 14,000 units are in service today across more than a dozen participating cities. This is the constitutional government ownership exemption operationalized at scale. No lie tech, no bond cap allocation, no state appropriation. I'd like to flag for the committee a regulatory issue that has cast a meaningful shadow over this model.

A subset of county assessors, Orange County most prominently, San Diego in parallel, have asserted that even though the property is government owned and exempt under Article 13 Section three, the private firm administering the program on behalf of the JPA has a separate possessory interest subject to property tax.

The Orange County Assessment Appeals Board and the San Diego County Assessment Appeals Board have ruled against these specific assessors' theories. In the San Diego matter alone, a 107,000,000 supplemental possessory interest assessments were canceled. None of those rulings, however, is appellate precedent. Litigation continues, and there are statewide tooling agreements with multiple counties and many assessment appeals applications frozen under controlling litigation at the Orange County assessor's request. I raise this not to litigate it from the dias.

I raise it because the committee should be aware that one of the most promising production tools California has for the missing middle and the one with the most realistic path to delivering newly constructed mixed income units at scale is today frozen on a tax question that that has already been answered. To bring this all together, California has a housing crisis that reaches well beyond housing itself. We need to encourage investment of every type, and we need to keep streamlining regulation and financing.

We need to lean into integrated public private partnerships, recognizing, as the Turner Center has documented, that the property tax exemption is the single most impactful policy lever for missing middle feasibility and the structural piece that makes all these partnerships work. Thank you for the committee's attention.

Appreciate that. And appreciate all three of you just doing such a a great job of be being very efficient. Apologize again for making you do that, but bravo to to each of you, and I thought that that was very helpful. Madam chair, do you mind if I ask a question too? And then yeah.

So I, I think that all of you were addressing, you know, the the big issue which is and my co-chair called it out at the beginning is how do we make these things pencil? I think it's startling to hear from miss Bailey that even when the land is free, it still doesn't pencil. And that's hard to fathom. It seems totally irrational.

Like, how

Market rate production.

Yep.

Yeah. Market rate. And I think where we are now is you have affordable you have market rate developers and you have non profit developers, all of all of whom we talk to saying the same thing. It doesn't pencil, it doesn't pencil, it doesn't pencil.

And so I think the social housing question or solution is something in this all of the above strategy where where we're trying to figure out, you know, how do we approach this and make things pencil when the two common avenues are both struggling to see anything actually move in a material way to address the housing crisis that we're in.

And none of us think this that social housing is the panacea, but we think it is a very good tool that is underutilized in this country, definitely underutilized in this state. And so I'm going to just kind of ask a very simple question and you each can can give us your answer. How do we best do this? I have a feeling I know what your answer is gonna be. Public private partnerships and, and unlocking government revenue bonds.

Maybe I'm putting words in your mouth, but that seems as though what your testimony is going to say. But how do we, for example, better utilize the surplus land act? I mean, I, it seems as though we're not really utilizing surplus government land or surplus land whatsoever. And so how do we do this better? What is the one thing that government at the state level can do that would actually unlock social housing as a solution?

I think there's a lot of social stigma. I think that's a big thing here culturally. I mean, obviously, this was a model that the country was utilizing and then because of a lot of different reasons, abandoned it almost wholesale. So what do we do at the state level?

Well, first, since you asked about surplus land and and state excess land, so two programs that are administered and, and or enforced through the housing policy development division that that I'm in at HCD. I think there's some, first of all, some helpful data that I, I didn't share in my talking points. The surplus land act, through dispositions of exempt surplus land and surplus land have actually created a pipeline of over 30,000 units and, and much of that affordable housing.

Excess the state excess sites program, which utilizes state owned land for affordable housing, has created

a pipeline of about 5,000 units. So, obviously, that's nowhere near where we need to be, but it is one critical part, of the puzzle, and, and I think it demonstrates real potential of both the surplus land act and state excess sites. Now, the surplus land act does not require local agencies to sell their land below market value. So they they can go through the surplus land act and, and expect and not settle for less than market value for their land.

So it, it doesn't guarantee disposing of land in a way that helps facilitate affordable housing in that way.

It does give first essentially, a first right of refusal for affordable housing developers and sort of evens out the playing field in that regard. Excess land, the excess size program works works differently at a state owned land. So generally, the the the cost of land is subsidized, so to speak. So but so we are doing some version of that, and there's a lot of opportunity, I think, to to grow both those things. So I just wanted to share that information.

I don't know if that directly answers your question. Helpful. Yeah.

No. I think that's extremely helpful. And so if we're thinking about, like, a social housing pilot, which I think is probably the beginning after the report is concluded, it, I, it, it really is necessary, in fact, to have at least one of those experiments involve where the land value is free.

So that would probably not be the surplus land act because we it might be that you're intervening at market rate, which is so crazy that we use public dollars to buy land from cities and counties at market rate. I mean, we do this in San Francisco too, and I find it so, so crazy.

But, yes, I think maybe a a social housing pilot on excess land where the land value is yours. As I said earlier, in the models, state from a 150,000 per unit to 79,000 per unit. So that's that's that's a big game changer. And I think it's it's it's really upon us to at least, authorize a pilot. I think it's really imperative upon us to authorize a pilot whereby we try out this mixed income model.

Because in the mixed income model, as I would have said in my presentation, it means that two market rate units are subsidizing one affordable unit. We ought to try out that cross subsidization model, especially in a constrained economic environment. And, you know, the the the numbers do depend on some of the things that I said earlier. The property tax abatement, you know, reducing and streamlining various types of the capital stack authorizations, all all of that is dependent.

So, but I, I think it's a worthwhile thing to do.

You said it very well, Chair.

Yeah. I meant Yeah.

Go ahead. No. But to to piggyback off, on a in a different, arena, I was working for a a with a with a client who was responding to an RFP who was building on a on a school district land, and they had originally tried to or provide land swaps as part of their RFP to build housing, to build teacher housing.

And I believe they were unable to set up the committee or the correct type of committee to actually participate in that land swap to to offer it up as the within the RFP. And I, I'm just throwing it out there.

I think they wanted to do it, and they were unable to because I believe they needed a seven member committee to dispose of the land or something in in that arena.

I think they wanted to do it, and they were unable to because I believe they needed a seven member committee to dispose of the land or something in in that arena.

Interesting. I'm gonna hand it back over to my co-chair. I will just say this is extremely valuable and helpful, even if brief here today. I had introduced AB 2094 as a pilot program for social housing. That bill got significantly changed in committee and is now a bill that would appoint a social housing coordinator at HCD, which I think is still very important.

It's not a full pilot, but I think it's something that will hopefully lead to more of these solutions. And this is coming from someone that, you know, came in as a pro-housing legislator trying to figure out the best ways as a former local elected that saw just how hard it was, and I think even between the co-chairs, we have differing opinions on exactly what is the best solution, but I think we agree that we just need more solutions, and I think this is something that the state really needs to put its money where its mouth is.

Because we say-- all of us say, we need to put more money into housing, we need to build more of the missing middle, and we just-- we're not very good at doing either of those, putting more money where it needs to be, and we're not building the missing middle. And maybe social housing, community land trusts being kind of the main players here, are a way forward. And I think that, you know, I wanna do more to try to promote that, and there's other legislators here that are trying, but I do think that there's the stigma.

I mean, I do think even amongst staff, amongst agencies, I don't think that there's full buy-in that it can actually work or that it works here in California for all these different reasons, and so, you know, I think we need to move ahead and try to to make it work, but I think it's gonna be hard.

Like, I-- and you've lived it. Everyone here has seen it. But this committee-- and I think what we're going to try to produce will hopefully be helpful. So, more conversations to come and just wanna thank my co-chair for being in this journey together, so.

Thank you. Well, thank you all. I really appreciate the comments. So I have a few questions. One, would a housing bond create the CAP Program, and are you familiar with it? And would it help a land trust, you know, with acquisition and rehab funding, is one of my first questions.

Absolutely, yeah. So the CAP Program, I'm glad that it's back on because it was-- you know, I think it was two, three years ago that it already came together. It was specifically funding that was focused on preservation, which really doesn't exist, right, at the state level. So that is one of the biggest hurdles for community land trusts is that a lot of the state programs-- you know, the HOME Program, you know, we're concerned about whether it's going to be continued.

But there are streams that benefit homeownership, but very few or they're underutilized. Like, ASEC, for example, has a homeownership track, but is completely underutilized. So, yes, a program like CAP that was focused on preservation and specifically acq/rehab would be a game-changer. That is just speaking, though, specifically to preservation, right?

So it's not within a social housing frame. It could be cast in a social housing frame. You know, that I would find interesting is, like, let's merge the concept that, you know, community land trusts doing preservation that actually benefit from a program like CAP are doing social housing. That could enable a social housing pilot if there's a lack of, you know, some dedicated funding for funding a program on social housing.

It could be a way to kind of get that is through something like a CAP Program. I mean, unfortunately, we just haven't seen these measures pass, like there was also-- I think it was a year ago, the Foreclosure Intervention Housing Preservation Program. That would have also assisted us as land trusts to be able to utilize state funding sources. I think that was basically cut by Governor Newsom at the very, kind of like, nth hour, right?

It was passed and it was to accompany legislation, which is SB 1079, that it allows nonprofits and community land trusts to intervene in foreclosures, which is another really great way to actually get access to cheaper properties, right? So we're talking about reducing the cost of land, land donations. Intervening in foreclosures is another way that you can also gain access to a pipeline, potentially of cheaper acquisition developments.

Gotcha. I wanted to go back to an earlier comment that you made in regards to social housing and just getting buy-in from the middle-class or working-- the workforce. I kinda wanted to understand that more, what-- is it a stigma or what-- can you tease that out a little bit more? So just kinda curious beyond the name, right; maybe just people trying to assume what it is or not understanding really what it is.

Assuming what is--

When you said so-- that, you know, a part of your presentation was about the social housing or the model, right, and getting buy-in from the middle-class. So I didn't really understand, like, what-- so what are you encountering and what is it? A stigma? My mind went to, is there some stigma of doing multi-income in developments or the name of it? So I wanted to use that--

Okay, just flesh out this issue of a stigma.

Yeah. I think Assemblyman Harabedian really like-- I think you are honing in on this issue, which is that, you know, there-- in America, there is a stigma around living in affordable housing. The middle-class, I think, doesn't see themselves as recipients of social benefits, and there is a stigma to that in the American ethos.

Yeah.

You know, the American ethos is one of, you pull yourself up by the bootstraps and, you know, you earn your way and you, you know, own your own home and the-- sort of like the whole ethos of America, I feel like, is this merge between that, you know, pick yourself up by the bootstraps and the homeownership dream, you know?

And I feel like the middle-class-- to get the middle-class to delink, you know, themselves from that dream, I think, is a challenge. I do think it is the time to do it, and here's why because we know that-- you know, half of the marriages fail in this country. We know that one out of five people have to move somewhere to be caregivers for someone in their family. We know that people change jobs 12 times.

We know that, like, 22% of people under 40 actually have given up on homeownership altogether in metropolitan areas. We know that something like 32% of millennials don't actually even see themselves ever owning a home and don't have that as part of their plan. So I do think it's the future. We're just on the precipice of that future. I do think in metropolitan areas, you're going to have a better, easier sell of the idea that, hey, this is like Vienna social housing.

Why does Vienna social housing work? Sixty percent of people in Vienna live in social housing. So when you have the majority of the people living in social housing, of course there's no stigma. The other piece of it is that it's beautiful and it's, you know, integrated into thriving neighborhoods. So they're not segregated developments that are somehow on the peripheries of cities or in bad areas.

I can also speak as someone who actually lived in Swedish social housing when I became a single mother at 25 and found myself wanting to still pursue a professional life and get a PhD. So I actually got into a PhD program in Sweden, and while I was able to write my dissertation, I would look out the window and watch my young child play because of the way they designed the housing.

They actually designed the housing with an inner garden where a young mother could-- who was a, you know, becoming a professional could watch her child play. You know, this is the vision of social housing, and I do think there is a market for it. I do think there is a middle-class that sees themselves as, I don't want to be dependent on a home that costs $10,000 for me to sustain. We know that most people in the Bay Area who have bought their homes in the last 10 years, 50% of them will never own it.

They will never be able to retire in the communities in which they own their home. That is not the American Dream. Do you know what I'm saying? Like, I do think we're on the precipice of a change that people no longer see homeownership as a way to grow wealth or a sure way to grow wealth and that something has to change. But, yes, does that speak to the stigma issue?

Yeah, it does. And I think people are more open. I think the housing industry in general-- I mean, going to an earlier point that you also said is, like, we need a revamp. We need a revamp of the vision.

We need a revamp of what-- you know, we need, like, a blank canvas because I don't think what we're doing now is working and many of us in different phases of our life have been a recipient of some form without realizing whether you bought your first home with a mortgage tax credit, or first-time home buyer, down payment assistance; didn't really know the bigger picture.

So I think number one is really redefining what the new homeownership and rental market and what I like to call-- my own made up term is the housing economic ladder that the California housing model should be. You know, what is the entry point, right, from homeless-- I'm gonna go all the way to homelessness, right?

In the different types of homeless housing that we need and the pool that can move up to transitional housing and then the transitional housing into permanent affordable rental housing, and then they break off-- you know, there's many forks in the road as you're going up the housing economic ladder that I call. And then once you get to that rental opportunity, very few, right, are able to move on to affordable homeownership.

So it's redefining that collectively as Californians and as legislators that we need to revamp it, and we need to revamp it because of what you said earlier of what players can play in the sandbox. I've had the opportunity that my career has allowed me to practice in San Francisco County as a housing practitioner in Alameda County, in Contra Costa, and then serving at the California Housing Finance Agency Board where I learned all about the state in different geographic areas.

And there's disadvantage that I can say today that my 30-year career, we did not have the affordable-- the biggest boom that happened in the Bay Area was in East County where is my district, right? People fleeing Oakland, fleeing San Francisco, and creating other housing market problems for us that were unaddressed because we weren't ahead of the curve on affordability.

So I think we also need to redefine that. Who gets to play in the sandbox, right, where the money goes, and where it equitably goes as we think of reform in financing and programs. I also think leaning on social program is not a space we want-- a term we wanna be using, because what I hear throughout California is, well, I'm gonna go back. I had a recent graduate come to my office and say, there's something wrong here. I came out of poverty.

I'm first-gen everything. First-gen to go to college, first-gen to to work, and here I am, you know, did all what we call the right things to break a cycle of poverty, and I can't afford a home. And so I think there's more of us that identify that we-- the middle-class is struggling.

And so as we're thinking of this model, I really think we shouldn't use the word social program because it offends people who have either come-- you know, had at one point were-- what we consider in the industry low-income and made it to middle-class, but they still don't feel like they are in the middle-class category because of all the economic pressures happening that we can't afford a home.

We can't afford the down payment because the cost of energy, our education, all of the reasons that you all know that I don't need to lecture on. And so I think changing that name, in my humble opinion, is going to bring more people together, and what I would like to say is more generational housing, right? We have a different model now. It's no longer the two-income households.

It might be now that you graduate with your high school or your college friends and say, you know, let's lump our money together. How can we buy a home? What lending products are out there that allow us to buy a home that we're building equity? The theme has to be of how do we build generational wealth that's not the traditional model and getting away from terminology that is triggers for people that says, wait a minute.

That sounds-- social programs sound like the very, very low-income and not the middle-class, and I'm tired of supporting social programs when I'm struggling myself. So that to me, that term already and not knowing in-depth of it is already-- like, would turn off my ears even as a housing practitioner. So I think we should look at it from that-- a different lens.

Again, you know, generational housing and that missing middle is the workforce, right, that I think we could get more buy-in on a program. And then thinking big versus small, the big players and a vision that allows-- you know, like, the Central Valley constantly gets left out of the housing, you know?

And our needs are so different from Northern to Central to Southern California, and I don't think there's a united goal and vision. And then certain cities, you know, the bigger cities, we-- the suburbs and the Central Valley get gobbled up by, you know, Southern California or even in the Bay Area, San Francisco. And so it's hard to get people engaged in this dialogue in reimagining what housing programs can look like when we haven't been beneficiaries to it.

And I can speak that for the East Bay and the Bay Area that San Francisco has benefited and is struggling, and even being the recipient in front and center of the advocacy, it has been at the expense of the Greater Bay Area.

And so, I mean, I think it's exciting work, but I think there's a lot more to tease out on this where it's going to bring more of that missing middle and the middle-class to want to embark on a, you know, multigenerational-- and it's a different term. I don't even wanna say social housing because I think it's a big trigger for people who-- the majority are struggling now, and when we don't see them the way we need to see them, we're not gonna get buy-in. But that's just my humble opinion in that space.

I think you're totally right. I think you're totally correct. All the polls will agree with you too in terms of, like, how social housing as a concept polls. I think you're right. Probably needs a rebrand, you know? It is a rebrand, and it is also telling stories in a way that people can connect about the people who could benefit from a program like this. I think it's important to cast the story of, like, the divorcee who doesn't want to move into a rental apartment but would like to have a home that she owns.

It's, you know, someone like me, you know, who found herself with a child very young and, you know, still needed to figure out how to, you know, become a professional and make my career work and at the same time get childcare built into my home because I was able to watch my child play with kids in a safe space in front of me. These are the stories that I feel like we have-- we do need to re-craft or rebrand of the concept.

I-- and I think this is what this dialogue is for, right? It's like, we need a rebrand. I mean, we-- I'm glad to-- you know, I didn't see you there, but I was there as well at the housing summit this weekend or last week. I don't even know what day we were in, but--

On Friday night.

On Friday. Thank you. And, you know, my colleague, Assembly Member Wicks, her story of-- you know, I think most people didn't even realize her housing journey, right, which really colors of how she feels. You know, and my story that I always like to tell people is that someone like myself with, you know, that came from a migrant family that never-- it took three generations before I became a homeowner, right?

That should-- that's not very much different from where we are today. It's not-- that it's taking that long and that-- as your story, I grew up in a single-parent household, right, in affordable housing. And breaking those cycles of poverty requires a different kind of lens because it's not just creating the housing; it's how are we breaking these cycles of poverty to uplift communities, especially communities of color throughout the State of California?

And when you are the first gen that there is so many other obstacles that even when you do get your housing, how to protect that wealth that you're not over-leveraging yourself when everyday you have predatory lending happening to you. Just say, hey, this is a great idea to pull equity out of your home, and then you're dealing with the foreclosure problem, right? It's not just getting people into homes. It's maintaining people there so that they can age in space.

And then the reverse end of the housing affordability on the spectrum of seniors that maybe they did pay off their home and freeing up so much inventory. We don't have anywhere to move our aging parents, even if there was an opportunity, right, to free up the bigger single-family homes like the suburbs that I live in. That is huge housing inventory. We don't have rehabilitation loans, right?

A lot of these homes now, like in the East Bay where I live, and I'm sure my colleague probably has the-- you know, were built at the boom of the infrastructure booms of housing are now nearing 50 or 60 years old. Or if not, people don't have the money to rehabilitate the homes, right? So now we're ending with more substandard housing on the market because there isn't products. Lenders don't wanna lend.

And where are we as a State of California not forcing lenders to create products that we can back to, you know, renovate these units so they don't become substandard and the people don't get their housing units condemned because the city then does enforcement? Like, the whole model just needs revamping in general and this is what the Housing Select Committee is about is giving solid recommendations, changing the narrative to meet today's needs of everyone, right?

The fact that today, my story of growing up in a single-parent household, a parent, a grandparents who would never, never achieved homeownership is still very present in California. The 30% of California families are single-parent households. There is no way--

That's right.

--they are going to be able to afford the mortgages that command the sale prices that are here, so-- and our model's different, that we have longer commute times. Nobody-- I would never buy-- you know, if I had to advise myself 20 years ago, I wouldn't have bought the land that I have now in my-- as much as I love it because of the commute, the time factor of maintenance, right? Our lifestyles are different.

We don't need these big homes on, you know, acreage anymore. The model has changed for people when you have two-hour commutes and even our building community needs to change that. And I still see that. Like, why are we not going up in more density? We're still creating these big homes when-- who can afford this? It's a very select few.

And so I think collectively-- and I hope again, you know, with my colleague that we are able to do this and communicate this as we roll out our recommendations, and working with you all and our staff. We need a rebranding, we need a bigger picture, and collectively, why we were very successful last year in housing bills, we should be running 2,000 bills a year, right? And we should be more surgical, I guess, if for a lack of a better term--

Yeah.

--on what kind of bills we're gonna run that is actually gonna have a multi-pronged approach to deal with all these housing pressures and deal with the various-- we have to protect at this moment the middle-class and reengineer outward. It can't be the other way how programs and even the social programs have been to take care of the-- we have to take care of them, right?

But if our middle-class who have the bulk of the economic burden aren't being taken care of, there's not gonna be political will to pass housing bonds statewide or at the county level. And so I really hope that we all can collectively work and revamp. It sounds like we're in alignment of we need a revamp of this and have a different image of how more inclusive this can be to really inject the enthusiasm of what the multigenerational housing model and the new housing model is gonna look like for Californians to achieve homeownership and affordable rental markets.

That is very-- and I think there's no argument that our aging population deserve to age with dignity and grace and that we all don't have a problem. I would hope to say that all Californians feel we need to create the funding mechanism to make sure that every senior in the State of California can age in dignity, whether they wanna age at home or have the supportive housing environments that they can do that.

And then back on the front end that, you know, any young adult professional coming out of college that they can aspire and dream to be able to have a homeownership in the not-so-district. And right now, both of those possibilities are simply gone that we arrive to middle age with no asset or wealth building, and so, I think there's a lot of space to work in here. So thank you for that.

I really agree. I'm really inspired. I think you're totally right. I think it has to be addressed in this vein of generationally and thinking about, you know, the problem through the lens of people and not just technical fixes, you know, and not piecemeal. I mean, there's a million things that are going right now around the insurance problem, which is a huge problem, and I agree. But we're tackling all the problems in this piecemeal fashion when really there is a bigger picture that we need to understand from elders all the way to young people.

I just wanna pause to thank my colleague. Thank you so much. I appreciate it.

Thank you so much. Thank you.

Yeah, and I think from that lens that, you know, when we become practitioners, it's really easy to get in the weeds and lose sight that you-- I mean, I've done it, right? Like, I've worked at redevelopment agencies and different housing and community development, and it's a space that we're all conditioned and trained that it's supposed to produce this outcome.

It's broken, it doesn't work anymore, and we all fight for a piece of the pie for funding, and I think we all have to come with the lens now that this whole model needs a reset model-- you know, reset. And it's no longer just fighting for dollars at a regional approach because that's also been catastrophic to the overall revamping, right?

Because, you know, different counties-- and not to pick on San Francisco, but, you know, that's a space that I practiced for, you know, over a decade, and I know it well when redevelopment was there and worked in the Housing and Community Development that you can see the inequities because of the organization being able to-- and the sophistication that San Francisco moved.

And then you can look on just on the other side of the state, whether north or south or to the east, and the inequity that we don't have the housing developers out in the Central Valley, right? And so I think when we start to reengineer this from an equitability perspective and bringing our community lenders-- I was recently meeting with lenders in the space of the smaller lending space, and they're like, we're interested in the space.

Like, we can't compete with the Wells Fargo, you know, the credit unions. Where is a market that we can occupy to be the lenders? And so, we have people that want to play in that space, and I think it's just finding them and recreating everyone being excited. And I think--not to be political, but everything is political--I think this is going to also be colored of who our next governor is going to be that we need leadership.

And we need a Legislature that is gonna be precise and collectively work together on what-- whether you're a housing practitioner or not, and I sit on the Housing Committee, is that we get a lot of sponsored bills and we get a lot of housing bills, but we're all-- I think we're just throwing things at the canvas and not being strategic of what reforms we really need, and we're doing tweaks.

And I think with this select committee, my colleague, our goal is to set a new foundation and do a hard pivot in the housing, in the finance, and redefining who we are and who we're trying to house, and it's a multigenerational housing lens of going up that housing economic ladder.

I like the rebranding. I'm gonna start using it. Thank you. Thank you so much.

Did you guys have any further questions? But I think-- I mean, this was really helpful, and I think this is a space we definitely need to tease out on the rebranding and getting more people on board and fired up on housing in a different way than the traditional model has happened in the last several decades.

I totally agree, and I do believe the study has a lot of really great findings and models that we can use towards the multigenerational model.

Yeah, and I-- you know, we'll take a deep dive. I think our staff will do that and figure out what we can tease out and, you know, follow-up with a, you know, a next steps on that, but I do feel that you are on path, but I think we are at a crossroads of a rebranding for sure. So thank you.

Thank you. Thank you. I look forward to following it. Thank you.

Thank you, Chair.

Yeah. Thank you.

Let's see here. So we have my third panel, which is plan checks. Okay. I like this space. So based on the successful model from the Vancouver, Canada, I understand we're gonna be-- we're-- it was developed a creative proposal to speed up plan checks and building inspections and using state-certified private professionals. So I'm really excited to hear about this.

So, thank you. Thank you, Chair. Thank you for inviting me back to have this conversation today and to present the concept. So my name is Meea Kang, and I am the Chair of the Council of Infill Builders. We're gonna-- we're an organization of housing practitioners focused on the infill space, so trying to build up and not out in existing communities, which is really important.

Where there is-- let me just say that's because the conversation clouded some of my thoughts and that infrastructure is key, you know? What-- one of the reason why housing costs so much is the lack of infrastructure investment that we're seeing in existing spaces that now, you know, merit the kind of SB 79 streamlining that we're seeing. So part of-- we can't divorce housing from the infrastructure space because--

But that's not what we're here to talk about today. What I'd like to talk about is a certified professional program, and this is a proposal to improve, housing permitting and construction certainty. So over the last twenty five years, I've worked in the affordable housing development space in California, including affordable housing, mixed income housing, supportive housing, and increasingly difficult infill projects in some of our most constrained jurisdictions. And I've pretty much worked on almost 3,000 units of housing in my career.

So I've experienced, interesting cycles, real estate cycles, and and sort of, you know, the fact that we're here today.

You know, and so what we've seen as you've cited, you know, tremendous amount of streamlining bills and, you know, all these priority projects that are being streamlined now. And and, so we're seeing projects that are streamlined, entitled quickly.

We're we're finding projects that are environmentally cleared through CEQA quickly and politically supported, yet these projects are still delayed by fragmented plan check processes, inconsistent interpretation, staffing shortages, repeated technical reviews, long inspection timelines, and frankly, infrastructure challenges around what needs to happen in order to bring this new housing, frankly, into this generation. And a lot of these delays around permitting and plan checks absolutely translates into higher housing cost and unpredictable timelines and risks.

So with every month of delay, we have increased carrying costs, financing exposures, higher insurance risks, higher construction, consulting costs, and ultimately, this affects the overall feasibility of the project whether or not it pencils.

Ultimately, if if it's a mixed income deal resulting in higher rents, higher sales prices, and it's really it's it's really a difficult situation when you're streamlining upfront only to run into a brick wall when it comes to the actual, getting your permits after you're entitled. And this certified professional program, which, started in British Columbia, offers a practical and proven model to address this.

The program would allow state certified architects and engineers operating under strict state oversight and professional liability standards to conduct qualified plan check and code compliance functions in coordination with local jurisdictions. In other words, when a developer submits their first set of plans to a local jurisdiction, they can elect a certified program for third parties to plan check it. You would have then the same firm that looks at your initial civil drawings through all

the way through your building and whatnot, building permits and building plan check, as well as they're the same inspectors that would inspect during construction. So the very same engineers that were evaluating its civil design and structural design are the same firm that's evaluating the construction itself, as well as providing final approvals and sign off for occupancy in a very streamlined fashion with time clocks and shot clocks to deliver performance at a very measured scale in coordination with local jurisdictions.

And this is not about eliminating local control. It's really about cities would still retain authority over zoning, design review, planning approval fees, occupancy, and enforcement. But the goal is really to supplement local capacities and not to replace it.

So in British Columbia, the successful model we're we're operating or excuse me, modeling under has a program called the certified professional system for decades, many decades, particularly in complex urban markets like Vancouver, where it has helped create, thousands and thousands of new units with greater predictability, accelerated delivery times, while maintaining really high end safety standards. So already, California relies heavily on licensed professionals. This is this is being done all over the place. But we don't it's not really institutionalized.

And so this program could institutionalize, frankly, let's call it a highway to building permits, something a streamlined process to get to, yes, to get to construction start.

So that would would include, the types of processes that, Canada has where you have, engineering stamps, you have special inspections, all of it's coordinated along with their energy compliance and green building compliance, all under one division that would sign off on on drawings and sign off on construction inspections and and eventually on, certificate of occupancy. I can't tell you the number of projects I have worked on where your project is completely done.

You've done everything, and you're still waiting for the jurisdiction to give you your certificate of occupancy because you've been operating for two years under a temporary certificate of occupancy. Because many jurisdictions, either they don't have the staffing or they want one more thing out of the developer. Oh, by the way, fix this.

Oh, do that ramp differently. So, you know, it really sets up for a very difficult and unpredictable and expensive process heavy entitlement excuse me, permitting system that we have today. So we really need to move from uncertainty towards a performance based accountability and predictability system. You know, and we already know many local governments are struggling with staff shortages, recruitment challenges, and increasingly complex building codes, and constant, you know, building code changes.

The certified professional pathway creates an additional optional tool that can reduce bottlenecks while allowing public agencies to focus resources where they're most needed, maybe on infrastructure investment.

And this would also include a a certified professional that could be potentially a go between between PG&E and the developers try to get the the the street energized or get power. We know that's a long standing problem with PG&E and other electrical companies where housing sit vacant waiting for, you know, PG&E to turn on the power. And so being able to have a third party that can facilitate completion of these tasks would really help move the needle.

And over time, we can California can also explore things like certified pathways for repeatable project types, like modular buildings. Like, if you're repeating the same exact design and it's a modular building, you shouldn't have to go through the same permitting process that might take six months if they've just issued the same building for for the exact same building.

So we need to find ways to scale and to not literally rake every single development over the coals in ways that frankly, are not leading to more housing, but leading to more complication. And so, you know, all of this is sort of baked in with accountability and strong oversight.

And the proposal is also intended to be cost neutral, sort of setting up a regime, a program so that the state would not be necessarily investing in this program, but they're allowing this third party plan checker process to exist, and it would be paid for through developer fees. Developer would pay for the fees for the third party plan checkers to be performing their their roles, and that that would be a closed loop, frankly. And it's not a state investment to expedite it.

So it'd be a, frankly, low cost or no cost to the state to be able to expedite permits. And we've already seen it with what's called certified buildings. Like, in Los Angeles, people dreamed about, especially after the fires. Let me build my house. I'm the owner.

I'm gonna certify that. It's fine because we're doing everything to the building codes, but we don't we don't allow that. And I'll I'll say this plainly. I think part of the challenges we see at the local government level is inspectors and plan checkers are afraid of being sued.

And so the the the the fear of litigation from outside parties suing for someone not doing something right in many respects makes the plan checker even more ardent to make sure that they are, you know, analyzing and and and requiring a tremendous amount of things in the documents that don't necessarily make for a better building.

Let me tell you, it's things like missing signatures on pieces of paper that make you go back three or four times through the process because someone missed a signature. These are things that are not getting us to housing quicker. So it's you know, and we believe that, you know, by streamlining the building permit process, we are gonna see more infill housing. We're gonna start to see more small unit developments, the the SB 10s of the world.

If we can start moving the building code and allowing for residential buildings, building code to be used for that, third building or third unit.

So we know after after the third, unit, you have to go into the commercial building code rather than the residential building code. You know, there there are ways, hopefully, we can start expediting small lot development where we can see more ADUs or smaller lots or even condominiums.

We we I believe that with with some of the work in the legislature this year, we're gonna start to see movement in for sale condominium construction with the reduction of construction defect liability as well as the promise of possibly deposit reform. So we are moving in the direction, but we need to pair it up with what Canada is doing, Move buildings that are fully entitled through the permitting process quicker with more certainty and predictability so we can get to construction faster.

And with all of that, you know, we've we've already seen the the SB 79s, the modular construction.

All these things are lining up for speed, so they don't need roadblocks. We need more permission to be able to move quickly quicker through the process that will cost, developers less money. We'll add certainty, create good buildings. And we're not here to solve the affordability crisis solely through rezoning or subsidies. So if actual construction delivery process remains slow, uncertain fragmented, it'll be difficult to finance.

If housing affordability is also about predictability, timeline, reducing unnecessary friction in the production process. We are gonna get to lower cost for housing and better predictability. And so the certified professional program is just one practical piece of that larger conversation, and we thank you, chair and this committee, for your thoughtful, opportunity to be thinking about these and having these dialogues. So thank you.

Thank you. So I'm just gonna ask the obvious. So this clearly this Vancouver, Canada, which I know very well of traveling. I mean, not not of the program, but I I know the the development and have seen it in the last decade and a half. So I can attest to that part.

Right? Because just even in one year, I would come back and, you know, the landscape was different, because of all the building. So this best practice, why would this be so hard to bring to California beyond the local control fight?

I think it is all about the local control fight. Okay. To be quite honest, part of it is, you know, guardrails. You know, I think there's fear. There's always a fear, and I hate to say it.

I mean, on one hand, developers are heralded for being doing these tough projects, and on the other hand, they're seen as, you know, somehow doing something nefarious until they can tell you that you're not. I think there is an inherent mistrust to some degree, you know, when someone comes in with a project. It isn't you know, you go to certain areas.

I was just chatting with a friend of mine who just finished a project in Chicago, and they said the city bends over backwards because every new project means new jobs and new housing. And so it's a, yes, let me serve you, let me help you rather than, you

know, do it again, you know. I'll tell you when you get when you get it right. 25 time I mean, I've had projects where I've resubmitted 25 times during the plan check process. Yeah. And each time it's a new thing that they find.

So in this moment that you know of, it does not exist in any community, any county of California. You have not seen it deployed by

Correct. We have a we have a version of it, the ward bill that passed last year. I forgot the bill number, Mark. Do you remember that bill number? There was a bill there was a where where if you're really stuck, you can say, please let me hire a third party to do the plan check, but it's only for the plan check.

I think the unique thing about Canada is its construction also.

Right.

And so let me tell you, the recent project I completed, I think I had five inspectors for the same civil scope because we had five different inspectors. People left, people were temps, people this, people that are coming in with without the knowledge of the building and they're coming in cold. And we accept that. You know? It's managed care like you're in a hospital, and you've got the new nurse who's just like, what?

You just had a heart attack?

Oh, you know, like, it's you know, that consistency matters. And I think we tend to overcomplicate it sometimes for for the right sort of belts and suspenders.

But what we've done then is that we've moved away from just, please, let you know, as long as you've met code, you've, you know, you've detailed everything correctly, you should be able to build. But it also becomes an opportunity to say, oh, what do what do we need? Oh, a new sewer main. Build a new sewer main.

Yeah.

Oh, and a manhole. Oh, and the fire the the fire thickness of the of the the the pipe in the ground is too small, so replace it. You know? Unfortunately, with new development, there is the opportunity and the common practice for local governments to look and see what's deficient and to find a reason to say, oh, nexus study says you're gonna create these impacts, therefore you, first guy out of the gate, has to fix all the problems.

Right. And I think, you know, we I encountered that with, you know, bills that I try to run, this past year as well. I think this space also is a beneficiary of the dialogue we had on the previous panel of we we have to think of this space differently, right, than what we have done. And, again, the region that I'm from and just even up and down the state of California is, incoming as someone that came off the city council and came off a planning commission.

I think there's multi pronged pieces.

Right? That, depending what planning commission you have and what city council you have, that's how your planning department is going to react. Right? And so there has to be a degree of separation from that process to get rid of the unknown there.

And because I I I saw it in my years of practicing and building that it influenced. Right? Whether you could pick up your your code, your plan, do a plan check, and it met all the criteria, the politics would always interfere and delay a project. And we have to figure out, it seems like this would be a space adopting something like that for California and having the the municipalities understand that, it's a game changer. We have to change, small cities.

Like, for example, I use my own little city. At 36,000, most of our stuff were built out in infill, but a lot of infill opportunity, rezoning, upsizing lots, but only three planners. Right? And even for a city that is not so little. Right?

And and one planning director. And, you know, timing is everything that if whether it's an Apex or, you know, 50 units, It's all about the timing how quick you can get out of a plan check. And then I think communities like mine are traumatized because, when the guardrails weren't there, developers did abuse, especially, you know, in the further East County that you go on where it was more ag and open space, there were a lot of abuses that happened.

And so now people between urban limit lines and really keeping keeping tight control of local control is because there were generations that got traumatized with developments that weren't sensitive to the community or integrated into and brought you know, they came and developed and left monstrosities that did not fit in the community. But I think we're past that.

Right? Like, we've learned so much in land use. We've learned so much in community engagement, and we can't be shy about it's time to, you know, recalibrate and change how our planning activities happening at the municipality. And we have to come down with a heavy hammer now with the cities and saying, this isn't okay, right, that an aplex takes two years to get entitled. This isn't okay that markets change quarterly, if not, you know, monthly.

In a builder, it's all about the financing. And so I think creating a framework of what we think is reasonable for a land use development and entitlement process is not unreasonable for us to move into a model like, you know, British Columbia has done, and we should champion that.

And I also think the state should provide resources whether, you know, it's through this model and to help cities, and and we also have to explore different ways that infrastructure should not be on the backs of developers, period. And that is an outdated model. And so how are we gonna change?

Because that's the first as a you know, as a former elected on the city council is, like, we can't let all this development happen. How are we gonna pay for this? How are we gonna so let's you know, I have an example where we did a small infill, and that infill was going in a blighted area, an industrial transitioning area of my community.

And we forced the developer to do the sewage piping from that development to, you know, Timbuktu, you know, which was, like, you know, $200,000 to the city that didn't make a big deal. But to that small developer, that was a big deal.

Right? And so I can cite endless projects where infrastructure almost made developers walk away or barely cash flowed, you know, to get through their construction loan. And we have to stop doing that. It should not be we are in the business to build housing. It's a fundamental need.

It's a human right. And it should not be at the expense of those practitioners who decide to be developers, and we have villainized that industry that they are responsible for the full infrastructure improvement of our cities versus reengineering how do we finance infrastructure.

Because that is the public infrastructure. And I think the challenge you've got all your PG&Es, your SMUDs, your water companies, and I'm like, we can't charge existing rate payers for these improvements, but we can charge you. So the system is dialed in to make sure that it's the last guy in is gonna foot the bill for the dinner.

And so I think, you know, the the Vancouver model is something that we should tease out more through the select committee and elevate it. And I'm happy to work with my colleague. I think, you know, he will most likely watch this and will convene, and I think we should find a path forward.

I also think this is an opportunity to go very bold and start talking because as the naysayers come out, if they see that we're talking about infrastructure, that this is not the way on the backs of developers, whether you're big or small, irrelevant making a profit, not that's all irrelevant. Right?

We as legislators have a responsibility to build up the housing stock in California and to house you know, socially be responsible in housing all income groups of California. And our current system is simply not working and producing the outcomes, and we have to mitigate the uncertainty in this space. And there's a lot of uncertainty that starts at step one of pulling your permit and trying to go through that process.

So, I think there is space, and we also have to bring the subject matter experts of how do we flow an infrastructure bond to deal with communities who are gonna simply look at this and oppose it from that lens that they're not gonna have the resources and funds, for the infrastructure. So

Which of course goes back to tax increment potentially and the future of saying yes to new housing because it means more incremental taxes.

Correct.

So then you have the virtual cycle set up to receive additional tax, you know, increased tax, incremental taxes to reinvest.

Because part of the challenge too is that, you know, really, the cost of infrastructure and by the way, a friend of mine is in does social housing in Europe, and I asked once, I said, do do you have to pay for all the infrastructure every time you do a project? And I'm like, no.

That's what the government does.

Yeah.

The government makes sure that all those pipes are where they need to be, sized the way they need to be. It's not off the backs of the developers. They just built the housing. They get to plug into something that actually works.

And I think too that I think this select committee is, again, it's starting with a new housing canvas and redefining these terms. Right? Because we can't legislate I you know, I'm just in my year and a half, and I already feel that it's very fragmented. Right? Like, we all care about it because we've all legislated around it, you know, whether you've been here one year or ten years.

And so what I'm calling for is that this select committee create a unified, multipronged approach of really getting to the crux and meat and potatoes of what are the barriers. And infrastructure is a problem. The streamline permitting is a problem. And stakeholders at the local level to get buy in in that. And I think this is what this vehicle is for, is to have a path, and, I I'm really excited.

I had no idea. It makes all sense as much as I visited Vancouver. That explains a lot, you know, of what we have seen there in the last decade. So I think that's something we should definitely continue to dialogue and figure out how we put it in as part of a recommendation from the select committee and and try to get traction on that. So I'm really excited about that opportunity to be able to do that and collaborate in that way with you.

Thank you. Well, we're happy to be a resource and bring others to the table. Thank you for making the time today.

Thank you.

Let's see here. And next, we have panel four on HCD and dispersing loan funds during construction. And I'll have you interest just to say time, I'll have you both introduce yourselves for the record.

Yes. Hi. Good evening. My name is Tiyesha Watts. I am with the California Housing Partnership.

Parker Evans with Mutual Housing California.

Great. Well, I'm gonna let you go ahead and do your presentation, and we'll do question and answer at the end.

Okay. Perfect. Okay. So I have been afforded the opportunity to talk about the importance of construction lending and how it is a useful financial tool for us to be able to address our housing crisis. So construction lending is the engine that makes a development possible.

So before we are able to attend the groundbreakings, before we're able to see the benefit of having affordable housing and seeing that family finally having a roof over their head, it starts with a developer being able to find how they're able going to, fund fund the, building and that is through securing a construction loan. So think of construction lending as the first domino. When a construction loan is secured, it sets everything else in motion.

The tax credits come in, public loans deploy, and the rest of the funding needed to complete a developer's capital stack falls into place. So all funding sources are really are are all funding sources rely on you be having the ability to have a construction loan.

So looking at the current structure of our housing finance system, when an affordable housing developer is looking for funding sources, they commonly turn to HCD. However, when HCD awards, funding for being able to propel for with their development, it is on the contingency that you secure a construction loan. So this is because HCD loans are structured as permanent financing long term loans, meaning the money doesn't flow until after the building is complete.

This leaves developers with the funding gap that they have to fill by being forced to borrow the full amount of their construction costs from a private lender at market interest rates. In today's high interest rate environment, these added costs make it extremely difficult and in some cases impossible for developers to complete projects without seeking additional subsidies, which only adds more time and cost to developments that are already difficult to get across the finish line.

We can combat this problem by allowing developers to receive HD loans during the construction period of developments rather than after. This will result in significant cost savings. For every $1,000,000 of HD funds that state makes available during construction, we can expect over a $100,000 in interest savings. At an HED loan of $1,000,000, that is a $100,000 back into the development. At $11,000,000, which is around the average HED loan, that is approximately $1,200,000 in savings per development.

And at the largest loan amount of $35,000,000, that is nearly $3,800,000 in savings per development. Just by having this access to a construction loan will result in significant cost savings. The California Housing Partnership also calculated that this change alone will result in a construction of an additional 500 affordable homes over the next ten years with existing funding. The impact will be even greater at higher levels of state investments, which could lead to hundreds of millions and dollars in additional resources.

Because each unit of housing requires considerable subsidy, and every dollar saved in interest is a dollar that can go towards building more homes.

Given developers the discretion to request either a construction loan, permanent financing, or a combination of both will create the financial feasibility developers are seeking. Construction loans are the cornerstone for building multifamily developments that contributes to the supply of affordable and workforce housing in our communities. These cover the essential construction expenses that turn a commitment on paper into housing in the ground, ensuring developers have the financial support necessary to carry out their developments. Therefore, it is imperative that we allow HCD loans to be available during construction.

The state has the resources, the farm the framework, and the ability to do this through the implementation of AB 1053, which was authored by Assemblymember Gabriel.

So now it's just upholding that commitment. Thank you for your time, and I'm here to answer any questions, and we'll turn it over to my colleague from Mutual Housing.

Good evening, madam chair. My name is Parker Evans. I'm the acquisitions manager for Mutual Housing California. We're a non profit affordable housing developer based here in Sacramento. We're talking about funds that have already been awarded to housing projects.

And right now, most HCD programs require that money to come in after the project is built. If HCD were able to contribute those funds during construction, it would result in very significant cost savings. I think the main thing here to understand is that the the ostensible reason for the state to delay its contribution, is to reduce the risk to the state.

But the truth is that these affordable housing projects with tax credits are some of the most heavily scrutinized, underwritten projects you're gonna find anywhere in the country. These projects are underwritten by the developer, by the local government, by HCD who has made the award, by TCAC, by CDLAC, by the lender, by the investor, and by any other funding source.

Everyone has looked at and scrutinized these projects. Once they start construction, the risk to the project is extremely, extremely low given the the amount of underwriting that's gone in. There is real savings. Mutual housing right now is a project under construction on an excess land site just a few blocks away at 8th And R. That's our Monarch project, the largest affordable housing project in the city of Sacramento's history.

That project has a $10,000,000 HCD award through one of the very few programs that HCD has that does allow contribution during during construction. That's a $10,000,000 award, and we are saving the project over $1,000,000 in construction interest. It is important to note that $1,000,000 in construction interest, if we had to pay that to the bank, it goes to the bank. It does not go to make the project better. It does not go to enhance the resident the resident experience.

It does not go towards decreasing, or towards deepening the affordability targets. That is construction interest. That is just making the lender more money. We can avoid that with HCD contributing the funds, earlier and reducing the overall project cost. It's also worth noting that the timing for these this construction period matters.

Right now, we're told that HCD, even when they're able to make funds available during construction, it's about thirty to forty five days for them to complete a construction draw. In the world of construction, that doesn't work out very well when our contractors need to get paid on on at least a monthly basis. And so there are a couple of different ways to get around this hurdle.

One would be to have the commitment be to turn around the the funds available during construction faster or, the ability to just draw on those funds early on during construction. So it might be if there's a $10,000,000 award, the first $10,000,000 of construction get paid through the construction loan.

But after we hit that $10,000,000, we could submit to the state for reimbursement and use that $10,000,000 to pay down the construction loan and save the construction interest. Yeah. Happy to answer any questions.

Great. Thank you. Well, I know that I definitely signed on with other colleagues, to support, you know, this. We did a letter from my office. And, you know, the whole theme of all these panels today is, again, we we have to the the the model is broken.

It does not work. It's outdated. Right? Overregulating and not streamlining even this process Is becoming a hindrance and not allowing developments to enter into the construction phase with that financial stability that we all know is so critical upfront.

And so I think this is also, you know, to paint, you know, this picture of this space as well that this committee should also be leaning into reforms in that space with HCD and supporting how to streamline it and make applications a lot stronger and the financial viability of these developments as well.

Because, again, upfront, you know, that a lot of people forget that it's not just securing the loan, it's getting you know, or even being there at the groundbreaking. It's that stabilization to making sure that you enter into your construction draw downs with that stability, not knowing, oh my gosh. I gotta do step one, two, and three before I'm able to tap into these other funds.

And so removing that uncertainty in the financial market, I think, is really critical in a space that I think this committee can definitely lean into. And, again, it it kinda bleeds into the previous panels that how we're doing business is not functional, it's not efficient, and it's outdated.

Couldn't have summed it up better. Literally, my job. I think as you hear over time and time, we consistently say that the system is fragmented, that it's broken. We need to be able to streamline. We need to ensure that we are investing resources, but also really practicing preventative measures.

Looking at how do we first start with ensuring that we are setting up developers for success so that we can get the ultimate benefit of having those units affordable, available, and ready to go for those families in need.

And it and it goes also to a previous panel discussion when we try to get smaller developers to play. They can't play in the space because they can't finance that and carry that. So we're you know, and we have a lot of infill projects. Right? They get squeezed out of that competitive space.

And so the name of the game is having multiple solutions, multiple players delivering different various housing solutions. Right? Whether it's multifamily, multi generational housing Whatever the vibe is going to be on the housing products. That we need to have an environment that allows people to play in these different environments, and our lending is the old traditional model from back in the thirties. Right?

Like so I think when we start talking from that lens that we're trying to fix things in an outdated model where we had different incomes, when we had different market forces, and, it's all a new game. And I think, looking and approaching these problems in this lens of trying to reform and revamping, is gonna put this committee, the select committee, to be putting more solid recommendations in that space. So you you don't have any disagreement with me that that does not work. Right?

I I sat on CalHFA for over a decade.

Right? And even we get robotic. Right? This is step one to get to second base, to third. And as you you become complacent and no one questions, this isn't working for today's needs.

And we are all contributors to that space as well because we have confirmed that this is how we as the state have set this up. And so I think it all needs to be revisited of, you know again, the sandbox needs to be cleared out, and we need to bring new toys into the sandbox to to deliver, you know, housing products and financing And the deliverables, which is creating the housing opportunities for Californian.

So, you know, I look forward to beyond the letter to continuing to support in that space and You know, collaborate, as we prepare our recommendations moving forward.

Yes. Absolutely. We'd love to be a thought partner in continuing this in this space to see this forward. So thank you for the opportunity to talk.

Now we're gonna turn out and vibe on that. We got Mark here, and so we you know, and in my absence, we're gonna, you know, we're gonna do this because this isn't just a hearing to, you know, address the obvious. This is a a committee that we are committed, the speakers committed To delivering results and and and being comfortable of saying, this model is not working. We're beyond just throwing tools at it. It's this model is simply broken.

We need to start fresh and and and bring new tools to the sandbox. So, I mean, that's where I'm at with this committee, and I know my colleague is

as well.

So thank you for being here, and I I hope this is the first of many more interactions we have today to to rethink this.

Absolutely. You can't get rid

of me.

Thank you. Thank you.

Well, we're gonna close our committee. I just want to thank everyone. One, I I appreciate the, flexibility and accommodation that you all lended in the grace. The session lasted longer than we anticipated. You know, the people's business sometimes is really unpredictable, but today, you know, we also had continued people's business here.

And so I'm very grateful that you took the time to show up and be part of this dialogue and to really support and encourage, thoughtful, policy dialogue and reform that needs to happen around housing opportunities for California and all the players involved from the developers to our city partners, to the financial institutions and and obviously the constituents that we serve that we are here to solve a very complex problem of clearing up the pipeline and, you know, moving people through the housing economic ladder, whatever entry point, you know, maybe, for people in California.

So I'm really excited. We're going on a year that we've been working on the select committee and have had various panels. I think this is one of the most engaging that brought actually brought us a lot of different solutions to incorporate into our report. So I think the next phase is we have a few more public hearings that we will continue and I wanna assure you that your time today is going to result in a well documented report that we actually execute on some plans.

And you may regret that we end up calling you and saying we we need community partners to and the subject matter experts to move this forward and shepherd it. But I'm very hopeful between my colleague and myself to move forward with the speaker and leadership to deliver some tangible outcomes and and and recarving a new path. Right? Like, this path is not working, and it's time to to pave a new road. And this is what the select committee is here to do.

So thank you all for your time today and your testimony, and we look forward to continue to work with you. And we are adjourned.