California Housing Bills Cheat Sheet

An unprecedented number of housing bills were passed during the recent legislative session.  The review of all of these bills can be daunting with everyone’s busy schedule.  Here’s a breakdown of what you need to know about each major bill with a link to the legislative summary for more detailed information.  Enjoy!

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From Hurricanes to The Solar Eclipse - the Economic Impacts of Nature

With the onslaught of hurricanes in the southeastern states and Caribbean, safety is the number one things that comes to people’s minds. After the initial rescue and relief are provided, what about the longer-term need for recovery and rebuilding? Think tanks are providing suggestions, like how to coordinate federal assistance efficiently and how to rebuild in a more resilient way to minimize damage from similar future events.

Estimated total recovery costs for the communities hit by Hurricanes Harvey, Irma and Maria are nearly $300, including direct impacts (like property damage) and secondary impacts (like economic disruption). There is an economic silver lining. Recoveries usually provide a small economic boost as rebuilding efforts create jobs and circulate earnings.

On the positive side - not all natural events are economic disasters. The solar eclipse in August of this year is one such natural event.  I had the opportunity and pleasure to see the total solar eclipse from a little community in Idaho. Small towns located in the eclipse’s path of totality from Oregon to South Carolina prepared for years ahead of time for the tenfold population increases generated by visitors. I witnessed the economic impact of the event as restaurants were packed and even ran out of food and as local entrepreneurs catered to visitors’ needs and desire for memorabilia.

With appropriate planning and coordination, we can maximize the benefits resulting from positive events while minimizing the impacts of disasters.

Written by Dima Galkin, an Associate at RSG

Cannabis –Unfunded Pension Liabilities Solution?

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The passage of the Adult Use Marijuana Act in 2016 has opened the door to what is expected to be a multi-billion-dollar industry in California - increasing economic output and generate jobs as well as generating revenue for services. Local jurisdictions can now choose to allow cannabis sales, cultivation, manufacturing and other activities and can levy excise taxes.  Most cities that initiated ballot measures (with most passing the 2/3 vote) projected millions of dollars in excise taxes annually (after January 1, 2018) that would go toward General Fund budget deficits and liabilities, including unfunded pension liabilities.  This is unfortunately a time when few new sources of expanded revenue sources exist for cities, and this revenue source is piquing the interest of many communities throughout the State.

But cannabis is a relatively new phenomenon in the State and is a sensitive subject that causes concern for residents, businesses and city officials. What will communities look like with dispensaries and other cannabis businesses?  How will public safety be impacted? How can jurisdictions start a conversation about cannabis and determine whether it is an option that should be evaluated?

Many of our current city clients have reached out to us to discuss the implications of cannabis in recent months – on both the pros and cons.  During these conversations, clients have indicated that because of legalization on a State level, even those communities who prohibit cannabis businesses will likely be affected by the legal usage (similar to alcohol usage).  Some clients, like the City of Bellflower, have decided to evaluate the fiscal and economic impacts to conservatively and accurately predict the net revenues potentially generated, new jobs created and economic stimulus to the community. A summary of this analysis can be found at the City's  website.

Attendance at two local cannabis conferences in September made it clear that the cannabis industry has a large number of consultants, attorneys, accountants and advisors on their side.  Cities should similarly have professionals that understand the industry (but are independent and neutral parties) to provide information to make informed decisions regarding cannabis, if that is what they choose.  Just as cities will bring in experts to help negotiate development agreements or conduct real estate analysis for a potential project, cities can make confident, well-informed decisions when armed with their own reliable data.  In addition, a third-party review of developer agreements and/or permits for cannabis businesses is also advisable to ensure that the terms, conditions and agreements are beneficial to the city.  For more information, please contact Hitta Mosesman, Principal, at RSG at hmosesman@webrsg.com or (714)316-2137.

Written by Hitta Mosesman, a Principal at RSG

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

RDA Development and Disposition Deadline

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Warning! Your deadline may be just around the corner. Successor agencies have five years to develop land transferred from the former RDA. For many, this deadline is quickly approaching. Not only is it time to file for the five-year extension allowable by law, but it is also time to create a development and disposition plan for the remaining assets.

For example, the City of Pinole recently hired RSG to outline for them various funding options for their remaining former RDA housing assets. The City has over $1.0 million[DC1] , in addition to other real estate assets designated for affordable housing. Like most cities in California, Pinole is in need of additional affordable housing units, as well as upgrades to the existing affordable housing stock.

RSG presented seven options to Pinole that fit the community’s character and need. With the significant disparity between affordable and market rate rents, purchasing affordable housing covenants for 55 years would cost about $400,000 per unit! Thus, the $1.0 million could result in as little as three affordable units, making this option the least cost efficient of the seven options. The most cost effective option would be creating an affordable rehab program for seniors, as this would net the most affordable units[DC2] . This strategy would also address the need to upgrade the existing housing stock and help the City’s aging population. However, the option that leverages the City’s housing assets to the fullest extent is to combine the housing funds with an existing housing property. RSG is working with the City to explore this option further and potentially help them select a developer to build affordable housing units. 

Written by Greg Smith, an Associate at RSG, Inc.

TCAC Round 2 of 2017

A total of 91 proposed affordable housing projects are hoping to win 9% federal tax credits in California according to second round data from the California Tax Credit Allocation Committee (TCAC). In September, TCAC will announce the selected projects to receive financing from the largest source of affordable housing subsidies available in California.

Awards are typically provided based on tiebreaker scoring and allocations to certain targeted categories (or “buckets”), including rural and at-risk projects.   A senior project in the city of San Diego had the highest tiebreaker score at 76.166%. A senior project in the city of Placerville had the lowest tiebreaker score at 4.978%. This project competes in the rural bucket. The average score for the rural bucket is 25.175%. The rural set-aside has the lowest average score of all set-asides. The at-risk set-aside has the highest tiebreaker score at 60.300%.

Projects that do not win tax credits in set-aside buckets compete in geographic buckets. Of all geographic buckets, the South and West Bay Region was the most competitive. The average score in this bucket is 68.412%. The city of Los Angeles is the geographic bucket with the lowest score at 38.265%. This round the San Francisco County region had only one submission, despite being an area with great demand for affordable housing. On the other hand, the Central Valley Region had ten applications (the most of geographic buckets).

The largest development that was submitted is 180-units, and the smallest was 10-units. Seventy-six of the projects are new construction, and 12 are acquisition rehab. Most applications are spread throughout the geographic regions. However, several cities had more developments than others Los Angeles had 5 submissions, 4 in San Diego, and 3 in Santa Ana.

Although 91 projects submitted for tax credits this round, only a small portion will be funded this year. This does not seem like a lot given the serious need for housing and California’s significant low-income population. Hopefully, we will have greater success with State and Federal Legislatures doing more to provide subsidies and other incentives to build additional units.

Written by Greg Smith, a Senior Associate at RSG, Inc.

RSG Well Deserved Fun Day

RSG’s commitment to its clients, employees, and local communities is evident daily. The 2016/2017 period has been especially challenging for RSG, given the current difficulties facing California cities and recent changes in legislation, just to name a few. Yet, without skipping a beat, staff continued to hunker down and produce top notch work; meeting deadlines, finding creative solutions for our clients and forging new relationships and service avenues. This dedication did not go unnoticed by the firm’s Partners!   

Recognizing the huge effort by staff to overcome the challenges over the past year, the Partners decided to scrap the already scheduled June All-Company meeting. Instead they treated us to a day of fun on a Duffy Boat out of Newport Harbor, followed by a yummy lunch from The Cannery in Lido Village. Very tre-chic for this group, but that was the best part about it!

Call it a re-boot for the mind, body, and soul, these types of events are relished, cherished, and appreciated! For those of us who joined the work force before the invasion of the “creative work space demanding millennials,” events like this were held only on rare occasions to commemorate extraordinary achievements by companies. However, the owners at RSG are in the trenches every day with us, working alongside us, jumping every obstacle with us. So, it is not a surprise that they felt the need to say thank you in a BIG WAY!

And for this, I personally want to express my gratitude, and let them know that I am thankful every day that I work with such committed and passionate leaders. Leaders who always strive to celebrate and appreciate more than the bottom line. They choose to celebrate and appreciate staff and all their accomplishments-because it is each of these individual accomplishments melded together that make up the RSG Family!  

Written by Business Office Coordinator, Erin Woodmas7.19.17

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
 

What is the Return on Investment for Infrastructure Improvements?

Infrastructure improvements are a sizable investment of public funds - it makes sense that evaluating the return on investment is a good first step in determining how communities prioritize these funds.   RSG recently completed an economic study assessing the impacts resulting from different rail improvement options along the Carlsbad portion of the Los Angeles-San Diego-San Luis Obispo (LOSSAN) corridor.  This study calculated the economic/fiscal effects of the different options on regional economic output including:

•    Jobs created
•    New development
•    Property values/taxes
•    Sales taxes
•    Value of lives saved/accidents avoided
•    Value of reductions in noise and traffic

RSG’s study is part of an overall Feasibility Study prepared by the San Diego Association of Governments (SANDAG).  A link to the City of Carlsbad website that provides an overview of the Study (as well as links to the actual reports) is provided below:
http://www.carlsbadca.gov/news/displaynews.asp?NewsID=1321&TargetID=61
 

Written by Hitta Mosesman
 

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