Regulatory Bills Affecting New and Existing Housing

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On April 5 your Association leadership joined with leaders of other independent California NAA affiliates to meet with their legislators in Sacramento to discuss several important bills of special interest to owners and managers of residential rental housing. The largely unspoken underlying theme, of course, is what legislative action may be taken to address the obvious and growing California “housing crisis”—too few homes for too many people with too few private or public resources to address current needs as well as a gigantic backlog of unmet need. The repeal of the redevelopment law—both cursed and praised—left a huge billion dollar hole in tax pro ceeds dedicated to construct and improve low and moderate income housing. The disappearance of that sustainable source of funding has fostered a number of proposals for replacement, some modest and others bold. It also has generated a call from some quarters for more and severe regulation of ren tal housing. It is with that backdrop that your leader ship approached this year’s Lobby Day in Sacramento.

Legislators and their staff members were very cordial in making limited time available to address these important issues both in generality and specificity. We grouped to oppose several regulatory bills affecting both new and existing housing in juxtaposition with funding measures deserving of support notwithstanding their effect on taxes—a tough sell! As one might expect, we received mixed signals on the tax issue but largely favorable reactions on bills that we opposed.

At the top of bills to oppose was AB 1506 (Bloom), which would repeal the Costa-Hawkins Act, a significant 22-year old housing measure that excluded from rent control single-family homes and all developments built after 1995 (or earlier if a rent control ordinance exempted new construction from a specific point in time), while giving owners of existing housing stock in rent controlled communities the right to establish initial and subsequent rental rates. That 1995 Act was approved by the Legislature to put the brakes on local governments’ overreaching and strict rent control ordinances that were spreading throughout the State and negatively impacting the economy and the housing industry. Its repeal would usher in a new wave of local ordinances adopting the strictest forms of price and rent controls. The result would be catastrophic.

Following a similar regulatory trend are measures that would require inclusionary housing for moderate, low and very low income levels in all new develop ments. These include in varying degrees of specificity and detail: AB 1505 (Bloom), AB 915 (Ting) and SB 277 (Bradford). In many respects, the in clusionary housing requirements imposed on new construction are more onerous than a typical rent control ordinance because they require deed restricted occupancies based on income for up to 55 years or more.

In total, the regulatory approach to the housing shortage by keeping rental rates artificially below market necessarily reduces the income stream for improvements, maintenance and repair of existing units while, at the same time, negatively affecting the investment and development of much needed rental housing.

Money, money, money. Where to get the funds necessary to address all of California’s many needs? State funding priorities are like shifting sands in the desert.

Thanks to Proposition 98 and the education community, K-12 education funding takes the lion’s share right off the top of each year’s state budget. Everything else scrambles for second- or third-fiddle with barely more than a half of a loaf left. At this writing, the Senate is poised to vote and send to the Assembly a multi-billion dollar transportation mea sure to “fix” degraded highways and roadways through out the State. It constitutes a huge funding boost on top of an already very expensive State Department of Transportation. Where does housing fit in?

Without question, California needs more housing.

According to a recent report from the Assembly Housing and Community Development Committee, California has a housing shortage—we simply are not building enough homes to keep up with the high demand. This is particularly true for low-income rental units while middle-income households are priced out of buying homes. Over regulation, high development and permitting costs and a lack of consistent public funding have contributed to California’s housing shortage.

SB 3 and ACA 11 will help address California’s housing problems.

SB 3 (Beall) would authorize issuance of bonds in the amount of $3 billion to finance various existing housing programs. Bonds add more debt and are costly one-time affairs, not long-term sustainable, but certainly satisfy a near-term need.

ACA 11 (Caballero) would impose a 0.25 percent tax on all retailers to be placed in a newly created “California Middle Class Affordable Housing and Homeless Shelter Account” in the State General Fund for the support of local and state programs that assist in the development or acquisition of housing.

We support these bills not only because their passage will lead to a much needed boon in housing development, but also because these bills focus on building homes through bond and sales tax money instead of targeting the rental housing industry for regulation such as rent control and just cause for tenancy.

The State must continue to address the housing shortage problem through investing in affordable home development and rehabilitation, rental and homeownership assistance and community development. Targeting our industry with more regulations and eliminating rental property owner rights and protections such as under the Costa-Hawkins Act and Ellis Act will serve to drive up costs, force rental property owners out of business and reduce incentives to build, maintain and invest in more badly needed housing.

Our industry representatives did an outstanding job presenting compelling reasons to oppose AB 1506 and AB 1505 (Bloom), AB 915 (Ting) and SB 277 (Bradford) and support SB 3 (Beall) and ACA 11 (Caballero).

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