Senate Standing Committee on Revenue and Taxation

The committee on revenue and taxation will come to order. Well, I would like to establish a quorum, but I don't think I have the the members here to do that, but I will shortly. Without a quorum present, we will begin as a subcommittee and we'll establish a quorum once we have sufficient membership of the committee present. For the first author present, would Assemblymember Haney like to present your bill?

Thank you, Mister Chair and members. AB 1294 will establish a targeted pilot program to help build more workforce housing in Alameda County, Sacramento County, and the city and county of San Francisco. Three counties that are experiencing significant housing affordability challenges. California has made important investments in affordable housing for lower income families, but we have not done enough for people in the middle. Teachers, nurses, firefighters, police officers, and other essential workers are increasingly being priced out of the communities they serve.

The problem is that workforce housing often doesn't qualify for traditional affordable housing subsidies, but it also can't charge market rate rents. As a result, these projects frequently don't pencil out. AB 1294 will help close that gap by providing a limited property tax exemption for qualifying deed restricted workforce housing. Every dollar of tax relief must be reinvested to maintain affordability and reduce rents, ensuring the benefit goes directly to residents.

This is a carefully structured pilot with long term affordability requirements, strong accountability measures, and a limited duration.

It allows us to test whether targeted property tax relief can unlock housing that otherwise would not be built. If we're serious about addressing California's housing shortage, we need solutions for the missing middle, not just subsidized affordable housing and market rate housing, but homes for the workers who keep our communities running every day. Here to testify with me today are Dan Adams, director of San Francisco's Mayor's Office of Housing and Community Development, and Michael Lane, State Policy Director at SPUR.

Okay. Before we get started on the testimony, let's establish a quorum. Would the secretary please call the roll?

[Roll Call]

Alright. We have a quorum. Thank you, Senator Grayson. Thank you, Senator Gil. Alvarado-Gil.

Okay, you may proceed. Thank you.

There we go. Thank you so much. Good afternoon. I'm Dan Adams. I'm the director of the mayor's Office of Housing and Community Development in San Francisco.

I wanna appreciate Assemblymember Haney for carrying this bill. We are one of the sponsors. We're really excited about this very focused and targeted opportunity to expand the welfare tax exemption. It's an opportunity to be innovative in a way that other states have been with their property tax exemption and to stimulate production of net new units. So again, this doesn't apply.

It won't be taking existing units and recategorizing them and and and ginning up the returns for existing owners, but rather the stimulative effort to produce net new units in a state that really needs them. And as a Assembly member mentioned, for a population that really needs this house, the missing middle, moderate income households.

Included in the bill are appropriate guardrails to avoid abuse and to ensure appropriate application of the welfare tax exemption, as well as a sunset date to allow us to evaluate its impact, and decide if we wanna extend this, exemption across the state and and for a longer period of time. So this is both a prudent and innovative bill, and I respectfully act ask for your support. Thank you so much.

Mr. Chair and members, Michael Lane with SPUR, a public policy think tank in the San Francisco Bay Area. As we review annual progress reports submitted to HCD by jurisdictions across the state, it is exceedingly rare to find deed restricted moderate income housing proposed or approved. AB 1294 is a targeted and time limited measure that will allow nonprofit organizations to provide true mixed income housing communities that include units that serve moderate income households at below market rate rents.

The bill improves feasibility for such projects while ensuring the benefit of the property tax well for exemption flows to the tenants in the form of lower rents.

Planning commissioners, city council members, and county supervisors often request this type of development that will allow them to make progress toward the arena targets while serving a broader range of households and workforce. We respectfully request an aye vote.

Are there any members of the public that wish to voice their support? And please just give your name and your organization and that you support the bill or deposit.

Thank you, mister chair and members. Dylan Elliott on behalf of San Francisco Mayor Daniel Lurie. Proud sponsor, strong support.

Thank you.

Good afternoon. Stephanie Jimenez on behalf of Housing Action Coalition in support.

Thank you.

Good afternoon, mister chairman and members. Paul Bauer on behalf of LW Partners, in support of the bill.

Thank you. Is there any principal opposition? Seeing none, are there any members of the public that wish to voice their opposition? Seeing none, I will see if my colleague, Mister Grayson has a comment.

Thank you, Mister Chair. And thank you to the author for this bill that's coming forward. Just and you can address this in your close, but I understand you may be in conversations with Alameda County and glad to hear that and encourage that as well as you move the bill forward and it gets out of this committee.

I thank the senator. So remember I I do appreciate you bringing this bill forward. The committee has approved three other bills similar to this one in the past. The bill does differ by applying, as you mentioned, more targeted just to three counties, San Francisco, Sacramento, and Alameda County. I have Alameda County in my senate jurisdiction.

As you know, property tax is the most uniform tax. There are a few precedents for an exempt exemption to apply to property in one county, but not identical properties in other counties. And would you please elaborate on why you limited the bill to three counties and why these three in specific?

Absolutely. Thank you for both of those questions. So the these three counties are counties that face significant housing affordability challenges where we've had strong local interest in testing this approach. I think the city and county of San Francisco, which I represent, has attempted this, as I understand it, five times often at a statewide approach. And so we all came together and viewed this as a way to test this approach in a pilot standpoint.

This was previously offered by Senator Arreguín, who represents largely Alameda County. And so his work with stakeholders there also brought strong interest from Alameda and from Sacramento as well. I understand that there are concerns that have been brought forward, particularly from county assessors in Alameda County and and Sacramento. And so I'm planning to and committed to continuing those conversations working with them very closely over the next few days.

Ultimately, if we can work out their concerns, which I think have a lot to do with implementation, we hope that they can continue to be in in this bill, but are are very open to dialogue with, the those assessors as well as other local leaders in both of these counties as to whether it makes sense to continue to have both of these counties other counties in the bill.

I can tell you that San Francisco, of course, is very committed to this. And we hope that that there's a way to keep Alameda and Sacramento in the bill as well and address their concerns. But, again, that's those are conversations we will have very actively in the next few days and try to work those out with the assessors and with the local leadership and and and and find a way forward to keep them in the bill.

Okay. Well, thank you for that. And I I like the idea. I mean, the teachers and firefighters, public works people can't afford to live in the towns that they work in, and so this is an important idea. It'd be good to see our own our own children be able to afford homes, but we're talking about middle income here, and I think that's middle income in California is enough to buy a house in these areas.

So I appreciate the bill, and I'm happy to support this. Would you like to close?

Yes. Thank you. Again, we'll we'll be continuing those conversations, and I agree with you. These are deed restricted for workforce housing. They should get some incentives to to build this housing.

We already have a number of projects in San Francisco that we know of that I believe they'd be able to move forward if this were in place. So this will unlock really greatly needed housing particularly for middle income folks who likely won't be able to afford on on the open market, market rate housing, but also wouldn't qualify for low income housing. And so this meets a huge need that I think exists certainly in these counties and across the state.

And with that, respectfully ask for your aye vote.

If you make a motion, I'm happy to make it.

Okay. Assembly. The Senator Ashby makes the motion. Okay. Well, would the secretary call the roll?

Motion is do passed to the committee on appropriation.

[Roll Call]

Three zero.

Thank you.

Thank you. The bill is now on call. I think that all the witnesses. The committee will now go into recess.

The committee on revenue taxation is back in order, and we are closing the rule.

The bill is out. And the committee is now adjourned.