AB2162 - What are your thoughts?

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AB2162 (Chiu; Planning and zoning: housing development: supportive housing), requires that proposed permanent and supportive housing developments meeting certain criteria, be granted approval by local governments within a specified time frame and be considered a “use by right” in zones used for multifamily and mixed uses as well as non-residential zones that allow for multifamily use.  Developers are required to provide the planning agency with details of a plan for on-site supportive services for residents.  In addition to this, local government is prohibited from placing any minimum parking requirements on developments whose units are occupied by supportive housing residents and located within 1/2 mile of a public transit stop.

It may be worth noting that the bill also specifies that its stipulations do not impede the ability of a developer to pursue a density bonus from the local government or alter the authority of a local government to accept or modify land use policies or regulations that promote the development of supportive housing.

The Housing and Community Development Department is interested in learning the level of understanding on the part of local governments regarding AB2162 – By Right Permanent Supportive Housing.  By taking this short survey, you can play a part in helping them learn how to best assist with implementation of this new legislation.  To take the survey, click here.

SB2 and You: What you need to be ready

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SB2 was first introduced in 2017 as one of 15 bills in the 2017 Legislative Housing Package. In it’s design to create a permanent funding source for affordable housing, the bill has led to $128 million becoming available in funding and technical assistance grants to help local governments implement activities aimed at addressing the challenges of our housing crisis, which include updates to general plans, local process improvements, updates to zoning ordinances, infrastructure financing plans, and pre-approved architectural and site plans, among many others.

With applications for Technical Assistance grants due November 30, 2019, RSG wants to make sure that you are ready to take advantage of this funding source.  Per the Housing and Community Development Department, applicants must meet all of the threshold requirements for participation in the program as provided in the grant guidelines and listed below:

  • Housing element compliance – The applicant must have a housing element that has been adopted by the jurisdiction’s governing body by the deadline specified in the NOFA and subsequently determined to be in substantial compliance with state housing element law pursuant to Gov. Code Section 65585.

  •  Annual Progress Report (APR) on the housing element - The applicant must submit the APR to the Department as required by Gov. Code section 65400 for the current or prior year by the date established in the NOFA.

  • Nexus to accelerating housing production - The applicant must propose and document plans or processes that accelerate housing production. The application must demonstrate a significant positive effect on accelerating housing production through timing, cost, approval certainty, entitlement streamlining, feasibility, infrastructure capacity, or impact on housing supply and affordability.

  • State Planning and Other Planning Priorities - Applicants must demonstrate that the locality is consistent with State Planning or Other Planning Priorities. Consistency may be demonstrated through activities (not necessarily proposed for SB 2 funding) that were completed within the last five years.

 Whether it be an inquiry as to if your project qualifies or a question about the application process, RSG is here to answer all your questions! Contact Irlanda Martinez (imartinez@webrsg.com) with any inquiries regarding SB2.

Are Density Bonuses a Solution to the Housing Crisis?

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As the housing crisis remains front and center in legislative talks at both the state and local level, the presence of density bonuses can be seen in housing bills AB1763, AB1279 and SB50.  These three bills could ultimately increase density bonuses, concessions and incentives, overall allowing for the easier development of housing and possibly enticing developers into creating more affordable housing.  Below we have provided a brief overview of how density bonuses play a role in each bill.

  • AB1763 (Chiu; Planning and zoning: density bonuses: affordable housing). This bill would require a developer be awarded additional density bonuses, incentives, concessions, and height increases if 100% of the units in the development are targeted to lower income households.  Specifically, the development would now receive 4 incentives and concessions from what used to be only 3, a density bonus that is now 80% of the number of units for lower income households of which it used to be only 35%, and height and floor area increases and elimination of maximum density for those developments within ½ mile of a major “transit stop” or “high quality transit corridor”. 

  • AB1279 (Bloom; Planning and zoning: housing development: high-resource areas). This bill would require the Housing and Community Development Department to identify, with the feedback of stakeholders, areas that are considered low inclusion areas and label them as “high resource” areas.   Development projects occurring in this “high-resource” areas would then be deemed a “use by right” making them eligible to receive increased density bonuses.  Zoning changes would also allow for the development of multi-family homes in previously single-family zoning areas and would offer density bonuses to developers who include additional affordable units in residential use projects located in prime development locations.

    Density bonuses along with other incentives or concessions would also be granted for development projects in which some of the units offered were at an affordable housing cost, or affordable rent accessible to lower income and very low-income households based on the area median income.  This bill would also render the “use by right” development projects exempt from required CEQA approval.

  • SB50 (Wiener; Planning and Zoning: housing development incentives).  This bill will require local governments to grant “equitable communities incentives,” which reduce local zoning standards in jobs-rich and transit rich areas, if the development meets certain requirements including the residential development is either a jobs-rich housing project or transit rich housing project, located on a site that is zoned to allow “housing as an underlying use” in the zone, complies with all applicable labor, construction, employment, and wage standards as well as complies with all architectural design, demolition, impact fee, and community benefit standards, requirements, and/or prohibitions imposed by the local government, and remains affordable for 55 years for rental units and 45 years for units offered for sale, or abides by local inclusionary ordinances.

    Depending on whether a development is jobs rich or transit rich, the “equitable communities incentives” offered could include density waivers from maximum controls on density, minimum parking requirements greater than .5 parking spaces per unit, maximum height requirements less than 55 feet, maximum floor area ratio requirements less than 3.25, and up to three incentives and concessions under density bonus law. 

While SB50, AB1279 and AB1763 all aim to address the undeniable housing crisis through the use of density bonuses, some cities and counties may be wondering at what cost.  These bills are still moving through the legislative process.  If you’d like more information or to provide feedback to the legislature, please contact RSG Principal, Tara Matthews (tmatthews@webrsg.com).

Housing is a Hot Topic at the California Capitol

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In its February 2018 Statewide Housing Assessment, the California Housing and Community Development Department stated that 180,000 homes would need to be produced annually between 2015-2025 to keep up with projected population and household growth. This is a goal that will likely go unmet, as California has only built an average of 80,000 homes per year over the last 10 years. As a result, California legislators have introduced multiple housing bills, many of which are aimed at streamlining housing production, increasing the state’s ability to control land use at the local level, and developing financing tools to fund increased housing production. A few of these bills, most notably ACA 1, SCA 1, AB 68, and SB 9 will significantly impact the state’s ability to meet its housing target. Here is a brief summary of these bills:

·         ACA 1 is focused on providing an additional funding source to enable construction of affordable housing and infrastructure. The additional funding would be available at a local level and would be focused on "workforce housing" (up to 150% AMI), thereby including the “missing middle” that is often neglected in housing legislation.  ACA 1 accomplishes this by reducing the local vote threshold (from a two-thirds vote to a 55-percent majority) for approval of an ad valorem tax to service bond indebtedness incurred to fund the construction, reconstruction, rehabilitation, or replacement of public infrastructure or affordable housing.

ACA 1 also includes provisions requiring that annual performance audits be made available to the public and a citizens’ oversight committee be formed, allowing the public to track progress and hold the issuer accountable for expenditures related to applicable projects. However, lawmakers should consider the administrative burden that these accountability provisions may create, as operation expenses will not be a cost covered by debt issuance. Link to bill.

·         SCA 1 would streamline the approval process for affordable housing developers and municipalities. SCA 1 would repeal Article 34 of the California Constitution, which was enacted in 1950 and prohibits the development, construction, or acquisition of a low-rent housing project by any state public body until electors of the public body approve the project with a majority vote. By requiring voter approval, Article 34 has slowed the approval process and increased the cost of affordable housing drastically. Link to bill.

·         AB 68 seeks to increase residential housing density in California by requiring that streamlined approval be given to permit applications for the development of Accessory Dwelling Units (ADUs) and Junior Accessory Dwelling Units (JADUs). This bill also prohibits a local ordinance from imposing minimum lot size, lot coverage, or floor area ratio requirement on ADUs.  Link to bill.

·         SB 9 is a financing tool that seeks to incentivize investment in affordable housing development. This bill authorizes a developer that is awarded a low-income housing tax credit to sell that credit to investors for each taxable year the credit is allowed indefinitely, thereby removing a January 1, 2020 sunset provision in existing law. Therefore, this change spurs investment in affordable housing projects for a longer, indefinite period of time than current law allows. Link to bill.

Senate Bill 2 Planning Grants Available Now!

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Does your community need funding to come up with a local solution to the housing crisis? Good news, Senate Bill 2 (“SB2”) might be the answer to your needs! With the passage of SB2, $123 million have become available to assist local governments with the implementation of planning activities to accelerate housing production.

Our first look at SB2 was in 2017 when it was one of the 15 bills in the 2017 Legislative Housing Package. We learned then that it establishes a permanent funding source for affordable housing and is designed to help local governments tackle the challenges of our housing crisis. This will be done by providing funding and technical assistance for the implementation of qualifying activities. Such activities include, but are not limited to, updates to general plans, local process improvements, updates to zoning ordinances, infrastructure financing plans, and pre-approved architectural and site plans, among many others. Can any of these address the needs of your community?

If your jurisdiction is currently considering the implementation of planning activities to increase housing production, SB2 Technical Assistance grants may provide the necessary financial assistance to implement such actions. Still confused, or wondering if your project qualifies? RSG is here to answer all your questions! Contact Irlanda Martinez (imartinez@webrsg.com) with any inquiries regarding SB2. Awards range from a minimum of $25,000, to a maximum of $625,000, depending on population size. Applications are due November 30, 2019 but RSG is here to help now!

Housing California Conference April 15-17 at the Sacramento Convention Center

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RSG employees Tara (Principal), Greg (Senior Associate) and Irlanda (Analyst) will be traveling from our headquarters in Irvine to Sacramento, CA to attend the Housing California conference next week! We are so excited to chat with all of you about new legislation, shifts in trends and the progression of housing in California. Currently we are very focused on SB 35 and would also love your insight on how cities can increase their housing supply to fit the needs of their residents. We will have on display some tools and interesting compliance facts pertaining to SB 35. If you will be attending the conference this year, feel free to stop by booth 50 to see some friendly RSG faces!

SB 128

Enhanced Infrastructure Finance Districts, commonly known as EIFDs, were revamped by SB 628 in 2014 and AB 313 in 2015 and are being revamped again in 2019 through SB 128. EIFDs became legislatively popular as a “replacement” for redevelopment in the wake of dissolution, as they allow for multiple cities, counties, or agencies to form Joint Powers Agreements (JPAs) in which each cooperating entity pledges a portion of its share of tax increment to issue debt and fund infrastructure projects that will have widespread community benefit. Examples include  West Sacramento's Bridge District Specific Plan and the Los Angeles River Revitalization.

SB 128 is a useful piece of legislation because while EIFDs currently require no voter approval in formation, there is a 55% voter approval requirement to authorize bonds. Because Tax Increment Financing (TIF) is not approving a new tax, simply an alternate use of existing tax revenues (usually with direct benefits to taxpayers), voter approval becomes an extra burden when EIFDs attempt to issue debt. There is a public hearing process for EIFD formation that allows taxpayers to involve themselves early in the progression of the EIFD, which this legislation does not remove.  

SB 128 is a simple change to existing law, but one that should create an easier more streamlined process that will hopefully increase the use of EIFDs to fund infrastructure projects and economic development throughout the state.

Maximizing the Opportunity of Opportunity Zones

Opportunity Zones are designated census tracts that offer investors special tax incentives. The program was created by the Tax Cuts and Jobs Act of 2017 (i.e., the federal tax reform bill), and the zones have been designated by each state around the country. California designated 879 census tracts throughout the state, ranging from parts of Downtown Los Angeles and Oakland to Death Valley National Park and Modoc National Forest. By nature of the variation of the designated tracts, some Opportunity Zones will be more suitable and attractive for investment than others.

A few California cities have already gotten ahead of the Opportunity Zone curve, including Berkeley, which discussed how to utilize this new tool at its most recent City Council meeting. Some Californians see the law as something that only benefits the wealthy, who will get federal tax breaks by investing their capital gains in these zones, but in Berkeley, the City Council is combatting this by seeking to implement policies that take advantage of this tool to generate affordable housing. 

For those cities who haven’t begun formal processes yet, an inter-agency workgroup from the State has prepared an Opportunity Zone Portal with a lot of great information, and CALED has its own page with recommendations and resources for communities seeking to understand Opportunity Zones better. It’s important to keep in mind that Opportunity Zones are not a source of “free” money. Investors will only consider projects with a reasonable return for their equity investment. Opportunity zones are simply meant to tilt the scales to increase the expected return by reducing the tax liability of any gains.

For communities that have an Opportunity Zone, the State developed a step-by-step “Get Ready” guide. Steps include:

  • designating a point person to direct overall efforts,

  • creating a local story to leverage local strengths and stand out from other areas,

  • building a list of potential projects,

  • hiring a “deal jockey” to coordinate investment,

  • being proactive by reaching out to developers and investors,

  • seeking partners who can spur investment without displacement,

  • revisiting regulations and other incentives affecting development in Opportunity Zones, and

  • engaging with the State and Statewide agencies and organizations.

One form that this preparation can take is a prospectus, which delineates the purpose for which a community seeks investment, provides investors with the community’s profile, and even identifies investment opportunities. This can be useful if there are strong opportunities to publicize. There are also other steps to take. Even if a locality has strong investment attraction without taking any action, it should get ready to process increased development applications to ensure a smooth investment process.

The City of Stockton has already created an investment prospectus, its marketing strategy and economic development policy that indicates to investors the City’s goals. This is another way to combat the use of Opportunity Zones as tools for gentrification and displacement, and garner needed investments in these areas.  The City of Long Beach is also marketing their opportunity zones, and it has created an online mapping application to show the locations, zoning, and where certain entitlements would be allowed, letting developers know ahead of time what could be built there.

Even for communities without an Opportunity Zone, many of these same steps are still valuable to attract investment. A local champion can help to drive projects forward that target established community goals. It’s still important to understand a locality’s strengths when seeking investment. Similarly, being proactive in seeking opportunities, reviewing regulations and incentives, and engaging with public and private partners are key to any economic development effort.

For most communities, Opportunity Zones are one more tool to attract development. Like CRIAs, EIFDs, density bonuses, overlay zoning, Community Facilities Districts, and infrastructure investment, —a fundamental understanding of how communities can leverage and package these tools is the most important need today.

There’s still a big question about Opportunity Zones. The IRS has yet to publish the final rules governing Opportunity Zone investment and tax benefits. Interim guidance publicized in October 2018 offers some direction, but many investors, especially those interested in bolder projects, are waiting for the detailed clarity of final rules, including how the program will interact with other tax incentive programs. Once the final rules are released, analysts expect most Opportunity Zone investments to occur in 2019, to maximize the potential tax benefits. It’s important for jurisdictions to prepare now, so that they can target investment where they have an Opportunity Zone and build the foundation to attract investment where they don’t.

CALED “State of California Economic Development”

With changes in resources and economic trends, the approach to economic development efforts in California have changed significantly in recent years. Prior to 2012, cities could rely on tax increment funding from Redevelopment Agencies (RDAs) to fund economic development. With Redevelopment dissolution, cities now must get more creative with limited funding sources. These trends have made this a challenge for local authorities. Economic development efforts have become more concentrated, shifting the focus from programs to projects. Furthermore, cities rely more heavily on regional economic development efforts or even developing multi-city strategies to market an area. Additionally, multiple partners, investors, and stakeholders, have increased transparency, which can lead to more complexity to getting a project done.

Nevertheless, local governments can do a lot to support economic growth in their jurisdictions, the following are some examples:

  • When selling city owned property, officials should aim to leverage those assets for the greatest economic impact, rather than just seeking the highest sale price.

  • With assets they continue to hold, local governments should also evaluate opportunities to leverage them for greater economic benefit.

  • Cities need to understand what it means to be “business friendly” and seek process improvements in order to attract more businesses to locate in their city.

  • Cities should embrace housing projects at all income levels. Recognizing the role that housing affordability plays in attracting and retaining a talented workforce, not to mention helping people improve their quality of life, some cities have started to warm up to housing developments, but many are still slow to react.

  • Cities should be aware of legislation at the state level that may affect resources and opportunities, and make their voices heard in order to inspire legislators to add tools for local economic development.

CALED 2019 Training Conference

RSG is counting down the days until the California Association for Local Economic Development’s (CALED) 2019 training conference on March 27-29! This year, the conference will be held in Anaheim, and the theme is “Make It Happen.” With four general sessions and 24 breakout sessions, the conference will focus on how economic developers are improving California communities by building meaningful relationships, crafting and executing strategic plans, and connecting to key resources.

 RSG is proud to be a part of the CALED community. Principal and President Jim Simon is on CALED’s Advisory Board Committee and co-chairs the Economic Development, Finance, and Real Estate (EDFRE) Committee. Senior Associate Suzy Kim serves as a member of the EDFRE Committee. Associate Dominique Clark is on the 2019 CALED Conference Steering Committee and manages CALED’s Local Economic Advisory Program (LEAP) in Southern California.