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August 8, 2024

While the Capitol was quiet on the surface during the summer recess, a lot was going on behind closed doors. Now that the Legislature is back those negotiations are coming into the open as legislators mobilize to get their bills to the Governor’s desk by August 31. 

 

CAL-ALHFA joins CHC in supporting AB1789, AB2430, and SB937 (all of which are described in the pending legislation section of this Update) as well as SB1374, and two-year bills SB225, AB1053, and SB440. 

 

We will be back in the Capitol on August 7, working hard to get our supported bills off the Senate and Assembly Appropriations Suspense files and back into active consideration.

BUDGET AND BOND UPDATE

Thanks to LeSar Development Consultant for providing the following summary of the California 2024–2025 Budget.


The Governor signed the 2024-2025 budget on June 27, which saw an overall reduction in spending on housing and an approximately neutral spending on homelessness. The $297.9 billion spending plan relies on reserves and pauses some business tax credits to address a remaining revenue gap estimated at $56 billion over the next two years.


For housing programs, the funding picture is mixed: the budget deal restores $500 million in Low-Income Housing Tax Credits (LIHTC), which have been included in the budget since 2019, as well as nearly the entire amount of Regional Early Action Planning Grants (REAP) 2.0 funds but other housing programs were entirely eliminated or had significant cuts. Some of these cuts could be supplemented through funding from the recently approved Proposition 1 bond measure; however, funding for that measure typically focuses on a subset of people who need affordable housing: those experiencing homelessness who have mental health or substance abuse challenges. Homelessness programs included $1.25 billion in new funding for programs but saw reductions in funding of approximately the same amount.

Housing Programs: $1.1 billion in reductions.

 

  • Multifamily Housing Program: Reduction of $10 million for this program, leaving $315 million in 2023–2024 but no funding for 2024-2025.  This $315 million will be part of the next MHP NOFA.
  • Infill Infrastructure Program: Elimination of the $225 million program.
  • Adaptive Reuse Program: Elimination of the $127.5 million program.
  • Veterans Housing and Homeless Prevention Program: Elimination of the $50 million program, consistent with Governor’s January proposal.
  • Foreclosure Intervention Housing Preservation Program: Reduction of $484 million, leaving $16 million in the program.
  • Regional Early Action Planning Grants 2.0 (REAP 2.0):  Retention of $560 million from a total of $600 million authorized through the 2021-2022 budget.
  • CalHome Program:  Reduction of $152.5 million in 2023-2024, consistent with the January proposal.
  • Low-Income Housing Tax Credit:  Restores previously eliminated $500 million in state LIHTC allocation.

 

Homelessness Programs:  approximately net neutral.

 

  • Homeless Housing, Assistance, and Prevention (HHAP): Provides $1 billion in additional funding for a sixth round of HHAP grants and retains $740 million in funding for Round 5.  The budget also includes language requiring more frequent reporting by grantees, corrective action plans, and requires localities to have a compliant Housing Element to receive the second half of their HHAP Round 6 award.
  • Behavioral Health Continuum Infrastructure Program (BHCIP): Eliminates $450.7 million in one-time funds from the last round of the program.  BHCIP will be receiving $4.4 billion in bond funds through Proposition 1, which was approved in March 2024.  Funding applications for $3.3 billion of BHCIP funding for Launch Ready projects will open on August 9, with applications due in December and awards announced in mid-2025.  These funds will focus on unhoused Californians with mental health challenges.
  • Behavioral Health Bridge Housing Program: Reduces $250 million and a shift of $90 million to the Mental Health Services Fund.  The Budget maintains $1.25 billion for this program.
  • Bringing Families Home:  A delay of $80 million to 2025–2027.
  • Housing & Disability Advocacy:  Reduction of $50 million for people with disabilities.
  • Encampment Resolution Program: $250 million for additional rounds of ERF grants — $150 million in 2024–2025 and $100 million in 2025-2026.

Housing and homelessness are multisectoral issues, and previous budget years had included funding to address the crisis through work in other sectors, such as student housing and decarbonization. Unfortunately, this year’s budget proposed suspensions and reductions to those programs.

 

The State will require previously committed Higher Education Student Housing Grants to either be reverted to the General fund or to be debt-financed.

 

The May Revise proposed additional reductions and shifts to the state’s Greenhouse Gas Reduction Fund for the California Energy Commission’s Equitable Building Decarbonization Program, reducing the initial program amount from $922 million to $525.5 million.  The Equitable Building Decarbonization Program provides decarbonization retrofits to low- and moderate-income households and incentivizes increased adoption of low-carbon technologies.  While such funding could be supplemented by Federal Inflation Reduction Act (IRA) funds, these reductions risk the State missing out on leveraging IRA funding to create even greater impact

BALLOT MEASURES

The loss of housing resources in the State Budget makes propositions on the state ballot even more important than ever this year. Thanks to Housing California for providing this summary of statewide ballot issues.

 

Proposition 5. Proposition 5, formerly ACA 1 (Aguiar-Curry).  This measure would lower the voter threshold for passing local bonds from two-thirds to 55% (the same threshold as for local school bonds), making it easier for local governments to fund affordable housing and other infrastructure. This measure is long overdue – local housing and infrastructure bonds often receive well over 55% voter approval, yet still fall short of the required two-thirds threshold. This measure would ensure that a minority of voters do not determine what gets approved and empower local governments to borrow money for much-needed affordable housing projects. 

 

Business Roundtable Measure. The California Business Roundtable Initiative (CBRT) was struck down by the California Supreme Court. The proposed initiative would have made it harder to raise taxes in California by mandating that a supermajority approve any local taxes.


ACA13. ACA13 was approved for the November 2026 ballot and would prevent a future initiative similar to the CBRT measure by requiring any statewide initiative seeking to increase a voter threshold.

 

AB1657 (Wicks) - Statewide affordable housing bond. There will not be a statewide affordable housing bond on this year’s ballot, despite strong polling, and a broad multi-sector coalition of supporters. Three bonds — housing, climate, and education – competed for a limited amount of bonding authority, and the housing bond faced the additional challenge of being considered right after the Governor’s Proposition 1 ballot measure passed in March, which will fund supportive housing for people with behavioral health challenges. It is expected that Assemblymember Wicks will reintroduce an Affordable Housing Bond Act on the November 2026 ballot.

 

SCA2/Article 34. Housing advocates have worked for years to remove Article 34 from the California Constitution, a racist provision enacted in 1950 to keep communities exclusionary by requiring local voters to approve affordable housing projects. The effort to remove Article 34 will not continue on this year’s ballot because of the crowded nature of the ballot and the need for substantial voter education before running this campaign. Although legislation has removed much of the damage Article 34 has done to affordable housing development, advocates are determined to remove Article 34 from the constitution in 2026.

FINAL LIST OF BALLOT MEASURES ON NOVEMBER BALLOT

After months of signature gathering, litigating and legislative wrangling, the final list of measures on the November 5 ballot is set. The Legislature directed the Secretary of State’s office to assign numbers to several, and the office set the others.  (Reminder: Proposition 1 was Newsom’s mental health measure that narrowly passed in March.)

  

Proposition 2:  Borrow $10 billion to build schools. Legislative Democrats put on the ballot a bond issue to give $8.5 billion to K-12 schools and $1.5 billion to community colleges for construction and modernization.

  

Proposition 3:  Reaffirm the right of same-sex couples to marry. This constitutional amendment from the Legislature would remove outdated language from Proposition 8, passed by voters in 2008, that characterizes marriage as being between a man and a woman.


Proposition 4:  Borrow $10 billion for climate programs. Legislative Democrats also placed a bond issue on the ballot that includes $3.8 billion for drinking water and groundwater, $1.5 billion for wildfire and forest programs, and $1.2 billion for sea level rise. In part, the money would offset some budget cuts.

  

Proposition 5:  Lower voter approval requirements for local housing and infrastructure bonds. This constitutional amendment from the Legislature would make it easier for local governments to borrow money for affordable housing and other infrastructure.  To avoid opposition from the influential real estate industry, supporters agreed to block bond money from being used to buy single-family homes.

   

Proposition 6:  Limit forced labor in state prisons. Lawmakers added this one late — a constitutional amendment to end indentured servitude in state prisons, considered one of the last remnants of slavery.  The California Black Legislative Caucus included the amendment in its reparations bill package.

 

Proposition 32:  Raise the state minimum wage to $18 per hourThis initiative seemed a much bigger deal when it was first proposed in 2021.  But under existing law, the overall minimum wage has risen to $16 an hour and lower-paid workers in two huge industries are getting more: Fast food workers received a $20 an hour minimum on April 1 and health care workers will eventually get $25, though the start date has been pushed back to at least October 15.

 

Proposition 33:  Allow local governments to impose rent controls. This is the latest attempt to roll back a state law that generally prevents cities and counties from limiting rents in properties first occupied after February 1, 1995.


Proposition 34: Require certain health providers to use nearly all revenue from a federal prescription drug program on patient care. Sponsored by the trade group for California’s landlords, this measure is squarely aimed at knee-capping the AIDS Healthcare Foundation, which has been active in funding ballot measures (see Proposition 33).

 

Proposition 35:  Make permanent a tax on managed health care insurance plansThis initiative is sponsored by California’s health care industry to raise more money for Medi-Cal and block lawmakers from using the cash to avoid cuts to other programs. The measure would hold Newsom to a promise to permanently secure that tax money for health care for low-income patients.


Proposition 36: Increase penalties for theft and drug trafficking. This initiative may be the most contentious on the ballot.  It would partly roll back Proposition 47, approved by voters in 2014.

PENDING LEGISLATION

The following is a summary of the bills CAL-ALHFA is watching this year, with status updates current as of August 5. The bills are divided into several categories.

HOUSING PROGRAM

AB1893Wicks. For cities without compliant bousing elements, this bill creates a pathway for abundant and streamlined affordable housing development and economically feasible market-rate projects in a manner that affirmatively furthers fair housing. It amends existing state law, commonly known as the “builder’s remedy,” that currently allows builders to downsize projects and not include any affordable units.

Status: Senate Appropriations.


AB2005Ward. Establishes the California State University (CSU) Faculty and Employee Housing Act of 2024. The Act would allow tax credits to be used for CSU employees and faculty exclusively on lands owned by the CSU.

Status: Senate Appropriations. Suspense.


AB2243Wicks. Updates, expands, and clarifies AB2001, passed in 2022. The bill expands the areas in which by-right development can be used and adds additional labor standards.

Status:  Senate Appropriations.


AB2728Gabriel. Written as a follow-up to SB4, passed last year, which allows by-right development on religious and higher education institution owned land, this bill requires cities and counties to develop a plan to incentivize and promote the production of affordable using SB4, and to include data around utilization in their Annual Plan. These data would be used develop useful information for prospective developers and landowners.

Status: Senate Appropriations. Recommended for Consent File.


AB2881Lee. Creates the California Housing Authority to develop social housing - mixed-income housing that is affordable and financially self-sustaining. Modeled after social housing programs in other countries.

Status: Died in committee May 16, 2024.


SB1211Skinner. Allows more detached ADUs on properties with multifamily housing, space permitting. If a carport was replaced with an ADU, the parking space would not have to be replaced.

Status: Assembly Appropriations. 

HOUSING PRESERVATION

AB1789.  Quirk-Silva.  Expands HCD’s Portfolio Reinvestment Program by authorizing the provision of loans and grants for rehabilitating projects that are at least 15 years old and have insufficient access to private/public resources to complete the necessary rehabs.  Priority will be given to projects that have expired or nearly expired covenants that are most at risk of conversion to market rate units.

Status:  Senate Appropriations.  Suspense.

 

AB2926.  Kalra.  Requires that a project with an expiring affordability covenant must sell to a qualified preservation buyer.

Status:  Senate Appropriations.  Consent.


SB225.  Caballero.  Establishes the Community Anti-Displacement and Preservation Program (CAPP), a program to provide revolving short-term acquisition capital and long-term public subsidy to acquire unsubsidized affordable homes and preserve them as permanently affordable units.

Status:  Two-year bill.  Hearing will be scheduled later in the year.


SB1032.  Padilla.  Authorizes HCD to approve the forgiveness of a department loan made to specified affordable housing programs funded or monitored by HCD.

Status:   Appropriations.


SB1212.  Skinner.  Increases homeownership opportunities by barring hedge funds and other corporate investment entities from buying single-family homes, defined as comprising one or two units in California starting in 2025.

Status:  April 30 hearing cancelled at request of author.  Died. 

FINANCE

AB1053.  Reduces the cost of affordable rental housing by allowing developers to receive HCD funds during the construction period, saving hundreds of thousands of dollars in construction period interest expenses.

Status:  Two-year bill.  Hearing will be scheduled later in the year.


AB1932.  Ward.  Eliminates the Mortgage Interest Deduction for second, redirects funding to MHP, Homeownership, and housing navigation for voucher holders.  Variations of this bill have been introduced many times before, but this appears to have more support.

Status:  Died.

 

AB2945.  Alvarez.  Authorizes the formation of Reconnecting Communities Investment Agencies (RCIAs) to help local communities reconnect neighborhoods that were divided by the construction of highways.

Status:  Hold under submission.  Further work.


AB3160.  Gabriel.  Funds the $500 million State Housing Tax Credit for five years.

Status:  Senate Appropriations.  Tied to AB3190.  Ongoing negotiations regarding labor standards and potentially establishing a residential wage rate for housing construction.


SB440.  Skinner.  Enables local government to join forces to create regional housing finance agencies to address the unique affordable housing need in their communities.

Status:  Two-year bill.  Hearing will be scheduled at end of legislative session.

IMPACT FEES, UTILITY FEES, PROPERTY TAX EXEMPTIONS

AB1820.  Schiavo.  Authorizes a development proponent submitting a preliminary application to request an estimation of fees and exactions from the local agency within 20 days of submitting the preliminary application.

Status:  Senate Appropriations.


AB2353.  Ward.  Ensures non-profit affordable rental housing developers can access the existing welfare property tax exemption without floating unnecessary tax payments while their application is under review, reducing the cost of constructing affordable housing.

Status:  Senate Appropriations.


AB2430.  Alvarez.  Prohibits local agencies from charging monitoring fees to developers on density bonus law compliance if monitoring is done by another entity, i.e., HCD and TCAC.  Amendments accepted for certain locally funded projects.

Status:  Senate Appropriations.  Consent.


AB2663.  Grayson.  Requires local agencies to post certain information regarding affordable housing impact fees on their websites.

Status:  In Assembly.  Concurrence in Senate.  Amendments pending.  May be considered on/after August 2.  Assembly Rule 77.


AB2729.  Patterson.  Removes the requirement on local agencies that fees much be paid prior to the date of final inspection or issuance of the certificate of occupancy, whichever comes first.

Status:  Passed Assembly Housing as amended; July 3, 2024.

 

SB937.  Wiener.  Delays the payment of development fees imposed by a local government until the certificate of occupancy is used.  Additionally, local governments may not charge interest on any deferred fees.  Extends housing entitlements issued prior to January 1,2024 and set to expire on or before December 31, 2025, by 18 months.  The bill attempts to adequately balance the benefits to developers with the cost to local agencies.

Status:  Assembly Appropriations.

 

SB1037.  Wiener.  Enhances the Attorney General’s ability to seek civil penalties against local governments that violate state housing law.  Currently local agencies have no incentive to follow the law because they can wait for the state to sue, lose in court, and only then remedy their violation to avoid penalties.  This bill would allow the Attorney General to seek penalties from the date the housing law violation began.

Status:  Assembly Appropriations.  Third reading.

 

SB1210.  Skinner.  Prohibits new housing connection fees and capacity charges from exceeding 1% of the reporting building permit value; requires public utilities to spread fees over ten years from the date of occupancy; and requires public utilities to prioritize new housing construction connections over other service connections.

Status:  Assembly Appropriations.

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Mary Ellen Shay, ED, CAL-ALHFA

916.444.0288 - office

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CAL-ALHFA was established in 1989 to represent local housing professionals and agencies in the California State legislature and State housing programs. We also work on housing issues at the federal level. CAL-ALHFA is a non-profit organization with a broad based membership including public and private agencies which develop, finance, and administer programs to create affordable housing in California.