State housing bill are costly hogwash

October 12, 2017

OPINION by MIKE F. BROWN

After four decades of calculated indifference, Governor Jerry Brown and the Democratic State Legislators admitted earlier this year that there is a statewide housing crisis. The underlying cause of this sudden epiphany is not clear. We suspect that large Democratic donors in the high-tech sector and public employee labor unions, not to mention millions of Democratic voters paying $2,500 or more per month to live in decaying 50s and 60s era two bedroom apartments, are beginning to complain.

Heretofore, the Democratic Legislators have catered, on land use matters, to those who created the housing crisis in the first place. That is the wealthy coastal NIMBY elites, the no-growth environmentalists, and the more insidious global warmest/ social equity movement.

That latter group, having had to abandon Marx’s dialectic of the inevitable self-destruction of capitalism, has pushed a proactive worldwide, national, and local agenda proclaiming that a socialist dictatorship is necessary to save the planet and humankind from the coming cataclysm created by industrial civilization. A part of their program requires that people be forced out of their private cars and that they be required to live in dense, multi-story housing. The single-family freestanding house is regarded as a danger to the environment.

Resultantly and since the late 1970’s, 120,000 fewer homes have been constructed throughout the state each year than are than are needed. In effect the decade over decade accumulative state and local land use, fee, and environmental policies, along with attempts to fund countervailing subsidies, have created a system of government rationing of land and homes.

Symbolically and in an effort to appear to be reforming policy, on Sept. 29 the Governor signed 15 bills designed to begin to “remedy” the State’s housing crisis. These include new tax, fee, and debt measures as well as a not so subtle attempt by the state officials to shift blame to city councils and county boards of supervisors. Some examples include:

Senate Bill 2, by Sen. Toni Atkins, D-San Diego, will create a permanent source of funding for affordable housing, imposing fees of up to $225 on certain real-estate transactions, such as mortgage refinancing. (Home purchases would not be subject to the fee.) It will collect $1.2 billion over the next five years — and would raise a total of $5.8 billion during that time, including federal, local and private matching fund, according to committee estimates. Half of the money it raises in the first year would go to programs to address homelessness.

If a permanent source of funding is needed, why not shift some of the natural growth of the income and sales taxes to set up the new fund? Why is the answer always a new tax?

Senate Bill 3, by Sen. Jim Beall, D-Campbell, will place a $4 billion statewide housing bond on the November 2018 ballot. Like SB 2, it would pay for existing affordable-housing programs in California that used to be supported by funds from the state’s redevelopment agencies, a giant source of money that was slashed in the wake of the Great Recession and never replaced.

Of course issuing more debt will simply aggravate budget problems and divert funds from education and public safety. Again, why not prioritize?

Senate Bill 35, by Sen. Scott Wiener, D-San Francisco, will try to tackle the state’s housing-supply shortage. Currently, cities are told every eight years how many units they need to build to meet their share of regional demand — but they are not required to build them. This bill aims to make it harder to ignore those goals. It targets cities that fall short, requiring them to approve more housing developments that fit the bill’s criteria until they are back on track.

This bill is simply hypocritical. The state has legislated so many barriers to housing production that it is absurd to blame the cities and counties. CEQA, the Coastal Act (and its rogue commission), greenhouse gas reduction requirements, groundwater restrictions, open space requirements, fish and wild life restrictions, and others have tipped the balance so far on the prohibition side that even if cities and counties wanted to lighten up, they would be sued to death by a host of interveners.

Senate Bill 167, by Sen. Nancy Skinner, D-Oakland, strengthens the state’s 35-year-old Housing Accountability Act, known colloquially as the “anti-NIMBY (Not in My Backyard) Act.” Cities that don’t comply with a court order to allow development would be hit with automatic fines of $10,000 per housing unit.

This one is even more hypocritical. Skinner, a former Berkeley councilwoman, represents not only Oakland, but Berkeley as well. In 1991, ABAG (Association of Bay Area Governments – their equivalent of SLOCOG) assigned Berkeley a regional housing need of about 1600 units. Skinner and the rest of the town went bonkers. The city was already totally built out. The only place to go was up.

Skinner and other council members (it was an all-female council) shucked their Sandinista khakis and combat boots, put on their dresses and pearls, and protested righteously at ABAG headquarters as if they were from the tonier wilds of Marin or San Mateo County.

Senate Bill 540, by Sen. Richard Roth, D-Riverside, allows cities to determine where housing needs to be built and to create a specific plan for development in that zone, including public hearings and environmental reviews. This is intended to speed up the approval and construction process.

Huh? We thought this was the land use element (of the plan of development). Every city and county already has one. As the planners will gloatingly tell you, the Plan and the zoning don’t really mean anything. You still must get expensive conditional use permits, pay expensive processing fees, pay myriad experts to help you process your application, and contribute huge exaction fees to help make up for the lack of capital investment by your local government, and even then, your project can be turned down. In effect all the zoning means is that you will be allowed to roll the dice – at a huge cost.

Assembly Bill 73, by Assemblyman David Chiu, D-San Francisco, will give local governments cash incentives to create high-density “Housing Sustainability Districts” near transit with some affordable housing.

AB 73 would allow cities and counties to set up housing “sustainability” districts which would make it easier for developers to receive permits. The State would provide grants to those jurisdictions that complied with provisions of the bill. The bill also contains a sentence stating:

The bill would also require that prevailing wages be paid, and a skilled workforce employed, in connection with all projects within the housing sustainability district, as provided.

Here the state slips in a clause making projects within the housing sustainability districts much more expensive to build. Was this one a labor bill masking as a housing bill?

Assembly Bill 1505, by Assemblyman Richard Bloom, D-Santa Monica, restores the ability of local governments to require developers to include affordable rental units. A 2009 appellate court decision weakened the tool, which cities and counties had used for decades. The governor had vetoed similar legislation by Atkins in 2013, arguing that it could make it harder for a city to attract development, but while negotiating the package of bills with lawmakers, Brown agreed to sign it.

The bill reaffirms the inclusionary housing enabling legislation, which allows cities and counties to require that 20 percent of the homes in a particular development be sold or rented under applicable affordability standards.

In the end, the new state legislation doesn’t do anything to make the permitting process easier and the costs lower, or to help cover the costs of mitigating offside impacts such as the need for expanded drainage, roads, schools, and parks. Instead it adds taxes, fees, and bureaucratic structures, and even adds costs as in AB 73 above.

In addition to reform of the permitting process, there are a number of ways for the county (and the cities) to make it easier to produce housing without adding new taxes. Here are a few examples.

1. Accumulative Capital Reserve Fund Plan: One way to provide the funding and not impact existing programs would be for the County (or any jurisdiction including the State for that matter) to adopt a budget policy that allocates a percentage of natural general fund revenue growth (property tax, sales tax, and hotel tax) to a capital reserve fund each year. This allocation would be base building.

Thus, if these taxes grew $9 million in FY 2016-17 and the policy were to allocate 18 percent, $1.6 million would be placed in the fund. The next year the board would allocate a new $1.6 million plus 18 percent of whatever the new natural growth in the general fund revenues provided.

For example, if the growth were $7 million, 18 percent x $7,000,000 would provide a new $1.26 million. Accordingly, $1.6 million + $1.6 million + $1.2 million would total $4.46 million by the end of the 2nd year. The process would be repeated every year accumulatively. In years with no natural growth or negative growth, the program would be suspended so as not to impact ongoing service levels.

2. Time Payments for Apartment Houses: In the past, the county allowed deferral of fee payments until the project was approved for final occupancy instead of when the permits were issued. For whatever reason that program has not been used.

To really have an impact, why not allow apartment projects to make time payments over some stipulated period – perhaps seven to 10 years. The county does not build the entire new attributable infrastructure in the first year, so why collect all the money in the first year? The receivable could be booked, and the county would have recourse against the property if for some reason the payments ceased.

3. Other Agency Participation: The school districts and public utilities, which generate a much larger proportion of the fee costs for facilities, should be approached to determine if they would adopt programs in cooperation with the county. After all, the school districts are giving housing subsidies to their $200,000 per year superintendents.

4. Temporary Tax Abatements: The State of California made the large solar farms almost totally exempt from the property tax on the theory that green energy will reduce greenhouse gases. In SLO County tens of millions of property taxes are forgone each year. The exemptions are forever.

If such tax deals are good for large out-of-state national utility corporations, why not obtain state legislation that would allow the Board of Supervisors to negotiate phased tax fixing agreements for seven to 10 years on apartment houses and affordable developments (those that are not tax exempt already because they are owned by a government agency). The property tax payment would start out at a low rate the first year and would build up over 10 years to the full value payment.

None of these solutions require new taxes or fees and none divert existing funding from ongoing programs.

The new State legislation is costly deceptive hogwash. As noted above, the SLO County Board of Supervisor and even the State Legislature could implement real programs which do not raise taxes, fees, and regulatory barriers and which would actually assist the production of housing.

Mike Brown is the Government Affairs Director of the Coalition of Labor Agriculture and Business (COLAB of San Luis Obispo County. He had a 42-year career as a city manager and county executive officer in four states including California. He can be reached at mike@colabslo.org.