Real Estate

CALIFORNIA LEGISLATURE PASSES BILLS DESIGNED TO COMBAT AFFORDABLE HOUSING CRISIS

More than a dozen bills designed to help communities in California combat an affordable housing crisis were approved by the California Legislature on Friday, September 15, 2017 and sent to the Governor for his approval.  This past year marks the Legislature’s “Year of Housing,” wherein more than one hundred housing proposals were introduced and debated in order to provide for assistance in funding for affordable housing development, streamlining local government approval of housing projects, restoring authority to impose inclusionary housing requirements on private housing developers, and creating more state-wide Anti-NIMBY laws.  Governor Brown is expected to sign at least three major bills in the package:  SB 2, SB 3 and SB 35.

SB 2, by Sen. Toni Atkins, D-San Diego, would provide for a “permanent source” of funds for affordable housing development through the creation of a $75 fee on most recorded documents (except for home sales).  This fee is expected to generate $200-300 million per year that can be used for affordable housing development.  Half of the funds generated in 2018 would be made available to local governments for updating planning documents and zoning ordinances in order to streamline housing production, and the other half would go to the state for homeless assistance programs.  Beginning in 2019, 70% of the funds would be directly allocated to local governments for a variety of affordable housing programs, and the other 30% would be used by the state for mixed income multifamily housing, farmworker housing and other programs.

SB 3, by Sen. Jim Beall, D-Campbell, would place a $4 billion statewide housing bond on the November 2018 state ballot, with bond proceeds to be used to fund a number of existing housing programs:  $1.5 billion of the funds would go to the state’s Multifamily Housing Program for affordable housing development loans, $1 billion of the funds would go to the state’s CalVet veteran’s home loan program, with the remainder of the funds allocated for the CalHome down payment, farmworker housing, transit-oriented development, mortgage assistance programs and infrastructure supporting infill housing. 

SB 35, by Sen. Scott Wiener, D-San Francisco, creates a streamlined approval process for housing developments in communities that have not approved enough housing to keep up with regional fair share housing goals.  Eligible projects do not need to obtain conditional use permits and can take advantage of lower state-mandated parking standards.  To take advantage of this process, the proposed development must be on an urban infill site, the development must not be in the coastal zone, agricultural land or other sensitive areas.  Furthermore, the developer taking advantage of this streamlined process (an optional right for the developer) must pay prevailing wages and, in some cases, certify that it will use a “skilled and trained workforce” to complete the project.  Critics of SB 35 believe that it will impose extraordinary costs on affordable housing construction, thus hindering the legislature’s ultimate goal.

Governor Jerry Brown has until October 15, 2017 to sign or veto these bills.  Do you think these bills will adequately fix housing issues in your local community?  What are your local communities doing to address these issues, and how do these actions align or conflict with these proposed bills?  We would love to hear your thoughts.  Please share them with tmatthews@webrsg.com.

This blog was Co-Authored by Millay Kogan, RSG Analyst and Tara Matthews, RSG Partner

Proposed Affordable Housing Bills

The affordable housing crisis in California is a well-known fact and over 130 bills have been proposed by State lawmakers to address and hopefully improve one of the State’s most urgent needs.  The link below to a recent Los Angeles Times article provides a brief and basic summary of all proposed bills:
http://www.latimes.com/politics/la-pol-sac-housing-bills-taxes-affordable-20170319-story.html
 

RSG Principal Hitta Mosesman Featured Speaker at Housing CA Conference (Sacramento) - March 2017

Housing California is the State’s leading housing organization with a mission to educate lawmakers and others on stabilizing housing, creating more housing opportunities, and implementing proven solutions that reduce the number of homeless men, women, and children in communities. The focus of Housing California is Land Use, Budget and Funding, and Homelessness.  The annual 2017 Housing CA conference, with over 1,400 in attendance, was “Block by Block – Improving Neighborhood Health.”   Workshops focused on all aspects of housing and homelessness, including financing, funding sources, policy, advocacy and new and emerging affordable housing solutions.

Hitta Mosesman, partner and principal with nearly 20 years of consulting experience in affordable housing, finance, real estate and community development, was a featured panel speaker on Community Land Trusts (CLTs) as an innovative method of ensuring affordable housing for generations.  The panel included Mark Asturias, Executive Director of the Irvine Community Land Trust (and City of Irvine’s Housing Manager), Jean Diaz, Executive Director of the San Diego Land Trust and Stephen King, Executive Director of the Oakland Land Trust.  The panel’s joint presentation focused on explaining CLT structures and benefits, as well as the different CLT models (home ownership, rental and co-op).  A link to the presentation is provided below.

https://media.wix.com/ugd/209952_d643b5c0976d49508c0e70fc98150613.pdf

 

Build It, and They Will Prosper?

 Copyright 2016 Kelly Wilson, Creative Commons License This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Copyright 2016 Kelly Wilson, Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Do sports stadiums generate net economic benefits for the community? 

The consensus is generally no. Economists say that sports teams spur little new spending in the community. 

While stadiums are limited in use, politicians and developers claim that a stadium is a win for local communities. Proponents say that sports facilities improve the local economy by creating construction jobs, generating new spending, attracting tourism and multiplying local income and job creation. Advocates argue that new stadiums spur so much economic growth that subsidies are offset by revenues from ticket taxes, sales taxes, and property tax increases.

These arguments may overstate the benefits of stadiums. Economic growth takes place when a community’s resources become more productive. Increased productivity can arise from economically beneficial specialization by the community or from local value added. Building a stadium is good for the local economy only if it is the most productive way to make capital investments and use its workers.

Still, there are non-economic benefits, such as community pride and cultural activity. Some projects, such as the NFL Rams’ return to Los Angeles, which occurred with limited financial obligations for Los Angeles taxpayers, provide a valuable lesson in how to attract sports teams and new stadiums based on a market’s strength rather than subsidies.

Calculating the economic and fiscal impacts of a development is crucial when deciding on whether or not a project should break ground. RSG has extensive experience in projecting tax revenue from projects and can help determine if a sports stadium or other large municipal investment would be a good idea in your community!

Written by Jeff Khau, a Senior Analyst at RSG

A Deep Dive into Property Taxes

Joan Youngman, senior fellow and chair of the Lincoln Institute of Land Policy’s Department of Valuation and Taxation, recently wrote a book covering property taxes in depth. In A Good Tax: Legal and Policy Issues for the Property Tax in the United States, Youngman defends property taxes as a more powerful revenue source than the federal income tax (generating $472 million and $297 million, respectively, from 2005 to 2015) and a vital support for independent local government.

Youngman argues that property taxes should be stable, efficient, fair, and transparent to maintain their status as a “good” tax. Limits on property tax assessment, such as the limit created by Proposition 13, generate problematic consequences, like rewarding longtime property owners at the expense of recent purchasers.

Proposed changes for Proposition 13 are at least being discussed. One source with good ideas is the Better Institutions blog. Will the ideas of Youngman and Better Institutions find open ears in Sacramento?

RSG can help you to analyze the impact of new legislation. Contact us for more details.

Written by Dima Galkin, an Associate at RSG

 

Could Now Be the Time for a CRIA?

 Copyright American Planning Association Creative Commons License This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Copyright American Planning Association
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

AB 2492 extends Community Revitalization and Investment Areas to wealthier regions of the state, without much change to financial benefits of these tax increment financing (TIF) districts.

Last month, RSG discussed the limited financial benefits of Enhanced Infrastructure Financing Districts, one of several newer tax increment financing tools that provide limited benefits similar to redevelopment financing. Community Revitalization and Investment Authorities (CRIAs) are similarly structured and provide these tools AND opportunities for other community development tools. These characteristics have attracted some of our clients to evaluate their benefit. As it turned out, most of California could not benefit from a CRIA given the narrow socioeconomic requirements. 

However, just this week, the Governor signed Assembly Bill (AB) 2492 (Alejo) into law that makes changes to CRIAs, so we took a hard look at these changes and how they affect cities looking for help on community development projects. As it turns out, AB 2492 primarily expands the net on eligibility for CRIAs, but fails to provide much needed new capital to communities.

Here are the main changes:

  • More communities qualify – a greater number of lower income neighborhoods qualify because AB 2492 allows wealthier areas of the state to identify CRIAs in areas that have a median income less than 80 percent of the city or county median income, not just the state;
  • More flexibility - Added flexibility in measuring what parts of communities qualify by allowing the use of census tracts and/or block groups;
  • Any California Environmental Protection Agency-designated “disadvantaged community” automatically qualifies for CRIA - this certainly helps some very low and low income neighborhoods that would otherwise not qualify under the old law; and
  • Some added financial benefit – in addition to tax increment generated by the CRIA, special districts may now have the authority to allocate funds from certain tax and assessment revenues to the CRIA.  Cities and counties already had this ability.

We would love to see more done to make these districts more attractive by:

  • increasing the amount of tax increment revenues,
  • lowering the costs for startup, and
  • providing some other efficiencies like those RSG outlined in last month’s article for EIFDs. 

It’s important to note -  qualifying alone does not mean this tool is right for you.  It’s important to look at the financial feasibility carefully before jumping ahead.

Written by Jim Simon, a Principal at RSG

Seeking Greater Housing Affordability

 Copyright American Planning Association Creative Commons License This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Copyright American Planning Association
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

A recent Urban Land Institute Terwilliger Center for Housing article emphasizes the scope of the US housing shortage. According to the article, new residential construction is below its historic average and even Great Recession-era levels.

Currently, much new apartment development aims for the high end of the market to make the financials work for developers. Rising land and labor costs, local regulations and NIMBYism make it even more difficult and expensive to build new housing. 

Many cities are spending precious funds to subsidize rent-restricted units, proving that we as a society care about housing affordability. Maybe we should consider the maxim of “first, do no harm.” How can cities reduce barriers to encourage more housing development, both market-rate and rent-restricted? How can we get community stakeholders to recognize that some development and change is needed to accommodate new residents and maintain affordability for renters? 

We passionately discuss topics like this affecting cities and towns at the RSG office, in search of solutions. Contact us today if you’re looking for such solutions.

Written by Dima Galkin, an Associate at RSG

Investment Capital in Economic and Real Estate Development

 Image courtesy of George Entis, CBRE

Image courtesy of George Entis, CBRE

A recent CBRE study shows that the Los Angeles market has led all US metropolitan areas in foreign investment in real estate so far in 2016. Investment capital spurs economic development by supporting business growth. It boosts real estate development by funding acquisition and new development.

According to Investopedia, the average return on investment for commercial real estate has been about 9.5% in the past 20 years. While the real estate sector has outperformed the S&P 500 index during that time, it can vary greatly based on the type of real estate, the geographic market, and the investor’s acceptable risk level.

Capital investment in real estate is often misunderstood. For example, investors’ returns are based on capital market conditions and cannot be lowered to close a development feasibility gap. Contact RSG to learn more about investment capital’s role in economic and real estate development and how it can help your community.

Written by Dima Galkin, an Associate at RSG

San Carlos Breaks Ground on a Landmark Hotel

 

The City of San Carlos recently broke ground on a new four-story, upscale, extended-stay Landmark Hotel. The hotel will include 204 guest rooms with individual kitchens, outdoor patio areas with a pool and sport court, fitness and laundry center, and a meeting room.

 

 

The hotel will be located near the City’s gateway entrance off the 101 freeway. It will provide much needed transient occupancy tax revenue to diversify the city’s tax base and increase revenues to fund services for the community. All buildings previously on the site have been demolished, and the entire project is expected to be completed in August 2017

RSG was involved in every step along the way from site assembly and acquisition, drafting purchase and sale agreements, relocating existing businesses, developer negotiations and agreements, and obtaining approval from local agencies. Call us to find out how we can facilitate your next project.

Written by Suzy Kim, a Senior Associate at RSG

Are CRIAs or EIFDs Right for You?

Community Revitalization and Investment Authorities (CRIA) and Enhanced Infrastructure Financing Districts (EIFD) are receiving a lot of hype as the “new” redevelopment options. While they offer many valuable tools, they have many restrictions. CRIAs and EIFDs are not one-size-fits-all solutions and may not work for every community.  

The major benefit is the ability to collect tax increment revenues and issue bonds to fund projects such as infrastructure and building improvements, environmental remediation, business assistance, and affordable housing. Unlike EIFDs, CRIAs allow the use of eminent domain, but they also mandate a 25% set-aside for affordable housing.  A big hurdle is that either your agency’s share of property tax must be large enough to fund desired projects or other taxing agencies must agree to contribute. Lastly, CRIAs can be challenged by a protest vote, and EIFDs require voter approval to issue bonds

The main questions to consider are:

•    Do CRIAs or EIFDs fund the projects we need?
•    Are the proposed boundaries eligible?  
•    Will my agency’s share of property tax revenue be enough to fund projects, or will there be enough support from other taxing agencies to share the cost?
•    Will elected leaders and the community support a new CRIA or EIFD?

RSG can help you determine which tool is best, based on your area’s eligibility and needs.  Call us to learn more.

Written by Suzy Kim, a Senior Associate at RSG