2024 Legislative Preview: Housing and Homelessness Legislation Amid New Leadership and Budgetary Challenges

Author: Muhammad Alameldin

The 2024 California legislative session is in full swing. The Terner Center has tracked the introduction of over 215 housing bills, which comprise roughly 10 percent of the total bills proposed during this legislative session. Of those, 80 are “spot” bills which are expected to undergo substantial amendments over the next few weeks. In addition, as we are entering the second year of this two-year legislative cycle, four carryover bills from 2023 await further decisions (as we discussed in our 2023 legislative session recap). This commentary lays out several key themes that are likely to dominate discussions in Sacramento and highlights bills to watch in the 2024 California legislative landscape. For a full list of housing-related bills,¹ as of March 8th, 2024, click here.

A New Era of State Leadership for California Housing

This year’s legislative agenda has been shaped by significant changes in legislative leadership. Assemblymember (Asm.) Robert Rivas assumed the Speakership of the Assembly last July, making 2024 his first full session as leader. In February, the Senate also saw its own transition, with State Senator (Sen.) Mike McGuire assuming the role of Senate President pro Tempore. The Assembly Speaker and the Senate President pro Tempore have the power to appoint members to committees and assign committee chairs, roles which have key votes in determining the outcomes for housing legislation. Previous chairs of the Assembly and Senate Housing committees, Asm. Buffy Wicks and Sen. Scott Wiener, are now the chairs of the Assembly Appropriations and Senate Budget committees, respectively. In their place, Sen. Nancy Skinner and Asm. Chris Ward are the new housing chairs in their respective chambers. Both Sen. Skinner and Asm. Ward have substantial track records of authoring housing bills. Additionally, Asm. Juan Carrillo, a former urban planner, and Sen. Maria Elena Durazo now lead the local government committees in each house; these committees have historically determined the fate of major land use reform legislation.

Budgetary Shortfall and Proposed Budget

California legislators hoping to address housing issues this year will have to contend with a significant budgetary shortfall. The Legislative Analyst’s Office projects a budget deficit of $73 billion while the Department of Finance forecasts the figure to be closer to $38 billion. Ultimately this shortfall will significantly constrain any funding plans or legislation with a high price tag.

The Governor’s proposed budget, which was released in January, preserves some affordable housing programs but makes significant cuts to others. Notably, for the upcoming budget year, the Governor is proposing to reduce the budget of the Multifamily Housing Program from $250 million to $75 million, and the Foreclosure Intervention Housing Preservation Program could see cuts amounting to $85 million.² The Infill Infrastructure Grant Program could face a $200 million cut, leaving only $25 million remaining for the upcoming year. The Governor also proposed to cut $152.5 million in support to the CalHome Program. In addition, the Governor’s Budget does not include the additional $500 million that the state provides to supplement federal Low-Income Housing Tax Credits (LIHTC), which have served as a key funding source in the last few years for affordable housing development.

It remains to be seen if these proposed cuts will be negotiated down through the legislative process, which is in full swing now as the legislature works through its proposed budget priorities. We will have a better picture of the state’s financial well-being in May, once tax revenues roll in. At that point, the Governor will release his May Revise, ahead of the final budget approval by June 15th.

Tenant Protections and Affordable Housing

California legislators have introduced a series of bills to bolster affordable housing production and to expand tenant protections to keep existing renters housed. AB 2353 (Ward) would waive interest and penalties on delinquent taxes for property owners or developers of  housing serving low-income households during the period that their application for a partial welfare tax exemption is being reviewed. SB 1032 (Padilla) would forgive certain multifamily housing loans administered by California’s Department of Housing and Community Development (HCD), under the condition that the projects allocate a majority of their units to lower-income households.

AB 846 (Bonta) would extend the state’s existing anti-gouging rent cap (AB 1482, passed in 2019) to affordable housing units built utilizing the LIHTC program and AB 2278 (Wendy Carrillo) would mandate that HCD publish annual maximum allowable rent increases under AB 1482 by local jurisdiction. AB 3086 (Santiago) would require cities and counties to include in their annual housing reports to HCD the number of housing units that have seen the expiration of long-term affordable covenants or restrictions, as well as the count of units previously subjected to local rent or price controls but were subsequently withdrawn from the rental market.

SB 924 (Bradford) would continue a state law that allows tenants to have their rent payments reported to credit agencies, thereby boosting their credit scores, a practice that the Terner Housing Venture Labs cohort alumni Esusu has played a role in promoting. AB 2785 (Wilson) would institute new rules to safeguard tenant security deposits by requiring the landlord to deposit them at an  interest-earning financial institution and to set limits on application fees. Finally, AB 2801 (Friedman) revisits security deposit regulations, tightening the criteria for landlords’ claims to justify not returning a deposit and emphasizing the need for landlord transparency with photographic evidence of repairs or cleanings that justify use of a deposit.

Housing Supply and Streamlining

This session has seen a substantial number of bills aiming to facilitate new housing construction by eliminating red tape. AB 3242 (Luz Rivas) would create a Commission on Cutting Red Tape, which would report annually on how the Legislature could streamline administrative processes, including processes pertaining to state housing policy. Seeking to catalyze office-to-residential conversions, AB 3068 (Haney) would deem “adaptive reuse” projects as permissible uses in all zones and provide a streamlined review process. The bill also proposes an adaptive reuse investment incentive program.

AB 2934 (Ward) would require HCD to review the impact of building standards on construction costs, with the goal of reducing construction costs by 30 percent. Our forthcoming evaluation of the costs to build missing middle housing finds that about 10 percent of the cost to build per unit could be reduced by aligning missing middle housing building code requirements (3-10 units) to align more closely to residential building code standards (1-2 units).

In an effort to ensure the timely execution of housing projects, SB 937 (Wiener) introduced an extension to the housing entitlement validity period, offering an additional 18 months to entitlements³ that were due to expire by the end of 2025. This extension would be helpful to projects that have received their entitlements but have not yet secured financing due to current market conditions. The bill would also delay local housing impact fees making them due by certificate of occupancy issuance rather than at the time of building permit issuance, which could help to reduce development financing costs. This bill as well as  AB 1820(Schiavo), which would streamline the fee assessment process, represent critical steps towards reducing the local administrative and financial hurdles that often delay development projects as examined in our impact fee work. AB 2553 (Friedman) would further limit local impact fees by extending the definition of what constitutes housing near transit, which would allow more housing developments to pay lower local vehicular traffic impact fees, reflecting lower rates of car trips from those buildings.

Several bills make an effort to enhance local transparency and accountability to comply with  housing law. AB 2144 (Grayson) would mandate the inclusion of comprehensive housing data, like up-to-date fee schedules, affordability requirements, zoning ordinances, development standards, annual fee reports, and more in annual progress reports submitted to HCD. AB 2597 (Ward) would require cities to include post-entitlement phase permits information in annual progress reports. Both bills would assist in identifying and addressing bottlenecks in the local permit approval process.

AB 1893 (Wicks) amends the Housing Accountability Act to ensure that developers using the Builder’s Remedy to bypass local zoning⁴ must still comply with certain objective standards. The bill also revises the affordability criteria for housing that qualifies for the Builder’s Remedy, lowering the required percentage of affordable units⁵ from 20 percent to 10 percent.⁶

The proposed California Private Permitting Review and Inspection Act (AB 2433, Quirk-Silva) would mandate that local building departments publish a fee schedule and allow developers to hire 3rd party professionals to conduct plan checks and inspections. Aiming to address the delay of utility hookups, SB 1210 (Skinner) proposes a cap on utility charges for new housing and orders public utilities to prioritize new housing projects.

SB 1470 (Glazer) would amend construction defect liability law to limit developer responsibility. The change would limit defects to those large enough to make the home uninhabitable or those resulting from a failure to employ basic industry standards. The bill would also establish the option to have a 3rd party inspector check and approve repairs, would allow builders to resolve building defect litigation if they fix the problem, and would require the local government to approve repair plans within 30 days. SB 1462 (Glazer) aims to change the rules for buyer’s deposits for new condominium buildings. It would allow developers, under certain circumstances, to use the deposits to help pay for construction costs. Lastly, AB 2996 (Alvarez) would authorize the California FAIR Plan Association to provide basic property insurance policies for common interest development associations⁷ and existing multifamily properties.

Housing in the Coastal Zone

Coastal zones have historically been exempt from major state housing legislation due to concerns about the environmental impact to the coast from new housing construction. While a sizable portion of the coastal zone is open space accessible to all Californians, some portions of the coastal zone run through urban areas. AB 2560 (Alvarez) reinforces the application of the state’s Density Bonus Law, affirming that entitlements to density bonuses, concessions, incentives, waivers, and reductions of development standards and parking ratios apply within the coastal zone. The legislative effort to expand the development of accessory dwelling units (ADUs) also extends into the coastal zone with SB 1077 (Blakespear), which would remove coastal development permit requirements for ADUs  on lots in the coastal zone that have an existing residential structure, subject to some exceptions.

SB 1234 (Allen) would make it easier for city and county governments to make changes to their coastal area plans and rules as recommended by the California Coastal Commission, including updates to land use plans, local laws, zoning maps, and other actions. The bill allows these changes to receive streamlined, ministerial approval by a planning director or a similar local official. Finally, SB 951 (Wiener) would remove privately-owned urban land along San Francisco’s western edge from the oversight of the California Coastal Commission. These parcels make up about 5 percent of the coastal zone in San Francisco.

Homelessness

Homelessness continues to be a major focus of legislative attention, particularly as California’s homelessness rates remain elevated. The 2023 point-in-time (PIT) count found that 181,399 people were experiencing homelessness in California, a 6 percent increase from the previous year. Homelessness has also expanded into areas that did not previously have high levels of homelessness, including suburban and rural areas. SB 1395 (Becker) would extend exemptions under the California Environmental Quality Act (CEQA) for homeless shelters and Low-Barrier Navigation Centers, which are streamlined access points designed to reduce obstacles for unhoused individuals seeking shelter and services. The bill would also broaden the scope of state programs under Housing First policies to include emergency shelter or interim housing services. SB 7 (Blakespear) would require cities and counties to report on housing for extremely low-income households in annual progress reports, in order to highlight efforts to expand the supply of housing for households most vulnerable to homelessness. AB 2056 (Wallis) would require the creation of a public online portal to track state expenditures on homelessness to foster accountability and public engagement in how the state is using funding to combat homelessness.

Student Housing

Addressing the specific housing needs of students, AB 3116 (Garcia) would modify the definition of state Density Bonus Law to apply to student housing bedspace density, providing a more tailored approach to increasing student housing supply. AB 1835 (Muratsuchi) would enable housing development as an “allowable use” on lands owned by local educational agencies. The bill eliminates the need for local government’s discretionary review of such proposed housing, which would otherwise trigger CEQA review. AB 2530 (Lee) aims to increase the overall technical expertise of local educational agencies by creating the Office of the State Architect, which would be tasked with assisting public school districts with housing construction.

ADU Expansion

In a bid to further capitalize on the success of accessory dwelling units (ADUs), legislators introduced a suite of bills aimed at streamlining their construction and statewide prevalence. SB 1164 (Newman) would defer the reassessment of property taxes for newly constructed ADUs for up to 15 years or until ownership changes, in order to encourage more homeowners to consider adding an ADU to their property. SB 1211 (Skinner) would eliminate requirements for residential replacement parking when the carport or other parking space is demolished in order to build an ADU. In addition, the bill would ​​allow additional ADUs on properties that have an existing multifamily building, with up to  25 percent of the total housing units to be added as an ADU (either attached or detached). This bill reflects a strategy identified in our research on San Diego’s ADU bonus program to add more missing middle housing. Finally, AB 2533 (Juan Carrillo) would create an amnesty program for unpermitted ADUs, allowing them to be brought up to housing code standards and legalization without significant penalty, a practice supported by research by the Terner Center here on strategies to break down barriers to greater racial and economic equity in ADU development.

Preventing Institutional Acquisitions of Single Family Housing

Several bills seek to curtail large-scale acquisitions of single-family homes by institutional investors and promote broader access to homeownership. AB 1333 (Ward) aims to address the practice of bundling property sales and would prohibit owners of residential properties with one to four units from selling multiple properties in a single transaction to institutional investors that have a portfolio of over 1,000 units. AB 2584 (Lee) would impose restrictions and penalties on business entities that own more than 1,000 single-family residential properties from acquiring additional homes for the purpose of renting them out. SB 1212 (Skinner) proposes an outright ban on real estate investment entities from purchasing or leasing single-family homes or duplexes.

Alternative Housing Financing Models

In a push towards advancing alternative housing financing models, AB 2881 (Lee) re-introduces the previously vetoed Social Housing Act, which would establish the California Housing Authority to produce and manage social housing. Finally, AB 2897 (Connolly) focuses on enhancing the operational viability and impact of community land trusts through modifications to the property tax welfare exemption and by simplifying lease requirements and expanding the definition of community land trusts.

 

As always, the Terner Center will continue to monitor legislative activity and provide data and analysis to inform the conversation. Here is a full list of housing-related bills we are watching. With feedback or comments on this summary, please contact Policy Associate Muhammad Alameldin at muhammadalameldin@berkeley.edu.

 

Endnotes

1. Spot bills are not included in this list.
2. The proposed reduction of $247.5 million General Fund for the Foreclosure Intervention Housing Preservation Program would take place over the next three years ($85 million in 2024-25, $100 million in 2025-26, and $62.5 million in 2026-27).
3. Building entitlements are the “official permissions” that developers need before they can start constructing a property. These permissions come from local government agencies and confirm that a project meets all the required zoning laws, environmental regulations, and other local development standards. They typically have an expiration date and if they expire, the developer might have to go through the whole approval process again, which could take years.
4. The Builder’s Remedy in California is a legal provision that allows developers to bypass local zoning laws to build housing projects, provided these projects include a certain percentage of low-income housing. This mechanism was created as part of the Housing Accountability Act, amended in 1990, to address housing shortages and encourage the construction of affordable housing in areas where local governments were not meeting state housing development goals. If a local municipality is not in compliance with these goals, developers are authorized to proceed with housing developments that might not adhere to local zoning, as long as the new development includes at least 20 percent low-income housing or is entirely composed of middle-income housing.
5. Low income: 30 percent to 60 percent of area median income with adjustments for household size established by HCD pursuant to Section 50093 of the Health and Safety Code.
6.  Moderate income: does not exceed 30 percent of 100 percent of area median income with adjustments for household size.
7.  Common Interest Development Associations (CIDAs) encompass homeowners’ associations (HOAs) and similar entities for condos and planned communities. They manage shared spaces and enforce community rules. CIDAs are integral in residential developments for maintaining common areas, setting standards, and potentially impacting property values.