Californians are in for a healthy dose of housing policy déjà vu this legislative session.

With so many high-profile housing bills in the pipeline, lawmakers slated 2020 to be a banner year for affordable housing legislation. But that ambition fell flat; the major housing production bills aimed at increasing density and easing environmental restrictions all met their demise in 2020.

In 2021, California lawmakers are bringing back their greatest hits. This time around, they are focusing on bills that lower regulatory barriers to greater housing density, direct more money into affordable housing programs and encourage local governments to keep up with state housing goals.

firsttuesday has singled out four key housing bills for real estate professionals to watch in 2021.

Duplexes, triplexes and fourplexes

In 2020, California Senator Scott Wiener was the driving force behind the ill-fated Senate Bill 50 (SB 50), which had the potential to increase housing density by allowing four-to-five-story apartment buildings and up to fourplexes near mass transit stops and job centers. While the bill failed, its legacy continues to fuel new legislation.

California Senator Toni Atkins’s Senate Bill 9 (SB 9), also known as the California Housing Opportunity & More Efficiency Act, is a spiritual successor to SB 50. The bill aims to streamline the process for a homeowner to create a duplex or subdivide an existing residential lot into up to four units. This change stands to benefit Californians by providing a potential income source for homeowners and adding affordable housing stock to the market.

Just as with SB 50, SB 9 draws the ire of vocal not-in-my-backyard (NIMBY) activists who fear such legislation will trigger overdevelopment in their neighborhoods. But SB 9 seeks to build on the successful approach of previous increased density programs — much like that of legislation supporting accessory dwelling units (ADUs).

A homeowner splitting a single residential lot into two duplexes is a far cry from the luxury high-rise apartment supercomplexes NIMBY activists warn of — reasonably maintaining the all-important “character” of affected neighborhoods. More importantly, the bill empowers individual California homeowners to increase housing density on their own terms. SB 9’s strategy presents a workable solution to the Golden State’s affordable housing shortage.

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Transit- and jobs-oriented density

Similar to SB 9, Senate Bill 10 (SB 10) focuses on increasing density, specifically near transit- and jobs-rich areas. The bill, which Senator Wiener introduced, will give local governments the power to override zoning restrictions and establish zones allowing up to 10 residential units per lot near transit, jobs or urban infill sites on a voluntary basis.

The difference between Wiener’s approach in 2020 and 2021 is the word “voluntary.” Cities will not be obligated to approve 10-unit housing developments in single lots under SB 10; they merely have the option to. This lighter touch is designed to appease critics who saw heavy-handed big government intrusion in SB 50.

Despite the new approach, opponents are lobbing familiar criticisms. By overriding local zoning restrictions, detractors warn SB 10 will silence local citizen initiatives. This is despite the bill’s requirement for a local legislative body to pass a resolution adopting the plan. More salient still is the warning that even if a city can zone for naturally lower-cost dwellings under SB 10, the housing produced will be quickly consumed by high earners.

Nevertheless, zoning for low- and moderate-income earners in high opportunity neighborhoods nets momentum for real estate professionals as well. Today’s reduced inventory leads to decreased turnover in both rentals and home sales, a serious issue for real estate agents who rely on transaction fees to make a living.

Regional housing accountability

California sets out regional housing needs about once every decade. This is the amount of new housing each region of the state needs to build to meet local residents’ needs. But with few enforcement options, cities often abandon these goals as quickly as they are set.

Introduced by Assemblymember David Chiu of San Francisco, Assembly Bill 215 (AB 215) adds teeth to California’s regional housing needs assessments by creating a checkpoint halfway through a region’s housing plan to assess its progress. Cities that fall short of the regional average by more than 10 percentage points will be required to adopt policies that encourage housing planning and production.

This bill is critical as California families and licensees are directly affected by their local government’s housing plans. Homebuilders often rely on funding from state and federal housing programs to produce new housing. In some cases, this funding is only accessible (or more accessible) when the jurisdiction in which a builder is building has a compliant housing plan — meaning it adequately addresses housing needs for its residents according to the state’s requirements.

While opponents of the bill cast it as an unnecessary intrusion into local government (are you sensing a theme here?), proponents tout it as a flexible way to make cities accountable for the housing plans they set out. With single family residential starts 26% below one year earlier in the six-month phase ending March 2021, it’s clear that California’s current housing production policies are sorely lagging. Ultimately, this leaves fewer new homes for agents to sell and slows turnover of current inventory.

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Upholding zoning for smaller-scale developments

Builders in California are plagued by a gamut of restrictions and regulations when developing housing, some of which are contradictory.

For example, consider the current ratio restrictions for floor areas to minimum lot size requirements. Often, floor area ratio restrictions are set too low to build multi-family housing on a parcel already zoned for it.

Minimum lot size requirements also have a dampening effect on construction. These are requirements that identify the smallest parcel that can be created in a local jurisdiction. Jurisdictions with large minimum lot size requirements discourage building when the minimum is much larger than needed for the actual building.

Senate Bill 478 (SB 478), also introduced by Senator Wiener, looks to secure these loopholes that have frustrated smaller-scale housing developments in California. It establishes a 1.5 floor area ratio standard for land zoned for between two and 10 homes. It also sets a minimum lot size for two-to-four-home parcels and another for five-to-10-home parcels.

Unlike floor area ratios, minimum lot size requirements are commonly cited standards for residential housing development. The Terner Center for Housing Innovation found that an overwhelming majority of cities require minimum lot sizes greater than 2,500 square feet for single-family and multi-family developments.

Proponents argue that adjusting these standards will prevent local governments from employing underhanded practices that block multi-family housing development. More important still is the flexibility smaller-scale developers gain from modernizing these outdated restrictions.

Stay tuned to the firsttuesday Journal’s Legislative Gossip page for continued coverage on these bills’ progress — and visit our Change the Law feature, which outlines our legislative proposals for the state (including proposals enacted by the California Legislature).

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