CA Legislature - Bill to Watch - SB 679
SB 679 (The L.A. County Affordable Housing Solutions Agency) sits on the suspense file in the State Assembly appropriations committee. The committee will determine on August 11 whether the bill will be sent to the assembly floor.
The goal of the bill is to increase the supply of affordable housing in LA County through significantly enhanced public and private funding; support land use reform technical assistance across all 88 cities; acquire and preserve existing affordable housing; provide emergency rental assistance and fund services for renters at risk of losing their homes. Many of these functions are comparable to the disbanded Community Redevelopment Agencies.
History of the bill. It was born from conversations LA Coalition members had with the LA County State Democratic Caucus a couple of years back to spur on the production of more housing in LA for all income levels.
The lead author of the bill, and chair of the caucus, State Senator Sydney Kamlager, has been working very closely with the lead developer of the bill, the United Way of Greater LA, for the past three years and their work is based on similar legislation passed on 2019 that created the Bay Area Finance Authority. Other co-authors can be found here.
The eligible target populations of the bill are people with the lowest incomes, up to 80% of the median income across L.A. County.
The Capital funding may be part of the capital stack for a building with rents affordable to moderate incomes.
Revenue is Needed to Support the Agency:
The agency is given taxing authority for a parcel tax, documentary transfer tax, business gross receipts tax, and general obligation bond—all of which require voter approval to move forward. The supporters goal is to ask voters to approve a local measure in 2024 to fund the agency’s initiatives since it’s too late for advocates to collect the signatures needed to place it on the November ballot.
The agency can apply for federal and state grants and Senator Kamlager is trying to get an allocation of $20 million in the state budget for the agency, which she says could help with rental subsidies, preservation of existing affordable housing and some new construction. The philanthropic community is also preparing to support the standing up and early planning processes of the Agency.
The agency does not need voter approval to issue bonds against its revenues.
List of Supporters and Opposition can be found here. Key labor unions support the bill after prevailing wages were placed into the bill.
Opposition is concerned about the creation of another layer of government that is supported by an increase in taxes and its potential to inhibit the introduction of innovative solutions to housing development, which drive down building costs.
Further Background on SB 679
To help bring attention to this bill and provide further insights on what is does and does not do I presented its chief architect Tommy Newman, who is with the United Way of Greater LA, with some questions and please find below his answers.
JJJ’s prevailing wage requirement limited production, correct? Why will this bill’s adherence to PV and the City of LA Wage agreements be any different? Are developers on record with supporting this new piece to the capital stack?
We have roughly 10 affordable developers supporting the bill. No disputing that increased wage requirements add cost. Three solutions in the bill for this 1) The goal is for the agency to simplify financing and become a single source of financing—the U.C. Berkeley Terner Center found that each loan on an affordable housing deal adds 5% to cost, so we see this as a cost reduction strategy 2) The agency can acquire existing housing—both leased up and empty—there are no wage requirements for housing/buildings that it purchases 3) The agency can provide non-construction capital support, like a capitalized operating reserve, which can allow a developer to finance the building with a private construction loan (LA Family Housing is doing this).
Has the Bay Area Housing Authority experienced any wins or hiccups that you have worked to avoid or leverage?
The pandemic torpedoed efforts for the Bay Area Financing Authority to put a bond measure on the 2022 ballot, so right now they are running pilot projects using $20M in one time state funds. They are preparing for a 2024 bond measure. They have also raised philanthropic dollars to support their initial business plan.
Have you put a figure on how many new homes you expect built by 2025 or beyond? In the City of LA and/or other LA based cities? If the initiative to keep local control passes does this impact the number of possible builds?
Should we be successful in passing the bill, the Agency comes in to existence on January 1, 2023 and the next step will be using 2023 to create a strategic plan and business plan for the Agency (philanthropic organizations, including UWGLA, are ready to fund this) that will lay out operating structures for the Agency, revenue modeling, unit modeling—the idea is to clearly lay out all options, supported by research and best practices, and use that to inform broader negotiations around revenue needs for the agency. Engaging with the business community, and more specifically the real estate financing community, will be a critical component of creating the agency’s business plan.
We have not modeled units because it is a lot of work, time, expense and very hypothetical. We’ve instead focused on understanding the best set of tools we could provide the agency, and then navigating political waters to figure out how to make as many of those happen as possible.
The agency will be able to take advantage of the many streamlining laws passed by the legislature over the last few years. For example, SB35 makes 100% affordable housing by-right in nearly every city in L.A. County, regardless of local laws (because the cities have not hit their RHNA goals). The current re-zoning efforts happening will also open up considerable amounts of buildable land. Finally, the Agency will have a robust technical assistance component to help small cities with small planning departments update their local land use laws. This will include the Agency creating model ordinances—for example, transit oriented land use ordinances—that a small city can customize and adopt. Currently, cities often pay consultants to do this work, resulting in duplication and increased costs.
LADWP, Building and Safety and the Fire Marshall in LA in the City of LA continue to hold up developments. And the housing element is still vulnerable to CEQA, correct? Any promises from Garcetti, who supports this bill, do fix any of this?
100% true and no commits (although most people think housing element will be fine).
A good hook that the agency has is being able to attach funding conditions to the dollars it provides. We have language in the bill that explicitly says that the Agency can set requirements on the cities that receive funding, and they must follow them. We’ve envisioned this as focusing on financing streamlining, but I don’t see why it couldn’t apply to other permitting/approvals. This is the good example of the potential benefits of having a regional agency that sits above the cities.
The Gross Receipts Tax was brought up as a revenue solution and so many business leaders spent years trying to eliminate it, why did this have to be in the bill?
From a tax perspective, there are not a ton of local taxes that can be levied. No income taxes locally, very limited property tax tools (parcel tax being the only one), and sales tax in L.A. County is already basically 10%. So it’s in the bill because certain supporters wanted to preserve the option. I’d say it’s highly unlikely- or improbable- that a countywide campaign could be funded and win on a GRT. United Way would certainly not support such a measure, and we’d be playing a key role in sorting out the measure and campaign.
Rent control has not been a good policy for many reasons, and the tenant protection programs in place during COVID have negatively disrupted how the market should clear. Is the opposition’s fear of this agency pushing the boundaries of these types of policies legitimate?
State law is clear on how rent control gets put in place, and the agency doesn’t touch any of those laws in any way. The agency’s authorities are clear- they are focused on supporting low income renters, not imposing policies on property owners. I think the apartment association is opposed because they don’t want renters to have access to emergency rental assistance or legal counsel—they want maximal control, which might make sense if housing was affordable and abundant and tenants could easily move from place to place, but there’s a real market advantage for property owners when supply is so artificially constrained… and it’s not unreasonable to think renters should have access to services and supports, when so many of them are looking at homelessness as the consequence of losing their unit.
Anything I am missing?
Great questions! I’m sure there’s more. One comparison point I regularly make—this is an attempt to replace a lot of what we lost when redevelopment agencies went away 10 years ago—with key differences being this is a single countywide approach and this has taxing authority. We’re still trying to figure out how to do property tax increment for the agency—it’s messy, but possible. So that could be a non-tax solution.
If you have any further questions on this topic please feel free to reach out to me; and likewise, if you would like to support the bill.