Newsletters

November 2022
ICSD News & Notes

November 2022

California Housing Legislative Recap: Governor Newsom signed nearly 40 housing-related bills into law to close out the 2022 legislative session. Among the bills signed, AB 2011 and SB 6, which offer rezoning and California Environmental Quality Act (CEQA) relief for specific housing proposals, have been among the most hyped, and touted as solutions that can help create much needed housing for low and middle income Californians and generate thousands of construction-related jobs with health benefits and good wages. Proponents of the two bills say they have the potential to result in the construction of millions of new homes. AB 2097, which prohibits jurisdictions from imposing minimum parking requirements on certain project proposals, is also viewed as a significant step in reducing housing costs related to mandatory provision of parking as well as increasing use of public transit.

On a related note, the Department of Housing and Community Development will award $1.02 billion in funding for the second round of the California Housing Accelerator, providing funding to 30 shovel-ready projects whose financing has been stalled because they have been unable to obtain tax credits. These new awards will help get construction underway for 2,755 new housing units in California.

To date, $1.9 billion in funding for the California Housing Accelerator has been awarded since 2021, supporting a total of 57 projects to produce a total of 5,071 units. The majority of these units will be for extremely low to very low-income households and unhoused residents.

Last year’s California Comeback Plan invested $10.3 billion into a comprehensive housing affordability strategy. This year’s budget invests an additional $3.3 billion for affordable housing production and homeownership opportunities.

Following is a summary of major bills passed, starting with the above-mentioned three:

SB 6 provides that a housing project is an allowable use on a parcel zoned for office, retail, or parking if specified conditions are met, including conditions pertaining to density, public noticing, project size and location, and more. Rezoning of the site to allow residential uses would not be required and project applicants could take advantage of existing housing law and ministerial processes (i.e. Housing Accountability Act and SB 35) to limit local discretion and gain project approval, if applicable. Projects invoking SB 6 must agree to prevailing wage and “skilled and trained workforce” requirements.

AB 2011 allows for by-right (ministerial and streamlined) approval, like that of SB 35, of 100% affordable housing on land zoned for office, retail, or parking and of mixed income housing in commercial corridors. Projects and sites must meet minimum requirements pertaining to site location, project affordability, and more. Projects approved under the provisions of this Bill are required to pay prevailing wages to construction workers. For projects over 50 units, an apprenticeship program must be provided and contractors must pay into health coverage for employees.

SB 2097 prohibits a public agency from imposing or enforcing minimum parking requirements on a residential, commercial, or other development project if the project is located within one-half mile of a major transit stop. "Major transit stop" means a site containing any of the following: a) An existing rail or bus rapid transit station. b) A ferry terminal served by either a bus or rail transit service. c) The intersection of two or more major bus routes with a frequency of service interval of 15 minutes or less during the morning and afternoon peak commute periods.

Other bills of interest that have been signed into law are summarized below:

AB 1445 requires fire, sea level rise, and evacuation risk to be considered in determining each city’s share of regional housing goals.

AB 2339 requires that unmet housing goals from previous planning cycles be carried over and added to goals of next planning cycle. Additionally, AB 2339 requires jurisdictions to allow homeless shelters in additional areas.

AB 2653 allows the state to reject jurisdictional housing element annual reports that fail to meet state guidelines.

SB 897 requires jurisdictions to allow 2-story ADUs up to 18' tall near transit or on a lot with multifamily housing, and also allows reduction of parking requirements in multifamily buildings where garages are converted into ADUs.

AB 916 requires cities to allow adding bedrooms without public hearings. (Previously also increased the ADU height limit to 18'.

AB 2244 allows reduction in parking requirements for sites with housing & religious buildings.

AB 682 provides density bonuses for cohousing with shared kitchens. Cohousing in this bill is defined as bedrooms with shared common areas, such as a residential hotel or dorm.

AB 1551 provides density bonus for mixed use commercial projects that include affordable housing.

AB 2334 allows unlimited density and 3 extra stories of height for affordable housing in areas with less driving (low vehicle travel areas where the driving is less than 85% of the regional or city average).

As usual, a number of housing-related bills did not make it to the Governor’s desk for consideration, as they were either killed or held in committee. These could be a precursor of what’s to come in the next cycle of housing-related legislation:

AB 1976 would allow the state to fine and rezone cities that don’t zone enough land for apartments.

AB 2430 would allow tiny houses on wheels to be used as ADUs.

SB 1067 No parking would be required for housing if at least 20% of the units are low or moderate income housing or housing for students, the elderly, or persons with disabilities, or if less than 20 units. Would apply to sites within 1/2 mile of a major transit stop.

AB 1952 would allow faster approval for projects that receive funding from the state’s Infill Infrastructure Grant Program of 2019.

AB 2218 would require people to be living within 20 miles of an infill project site to file a CEQA lawsuit against it.

AB 1056 proposed a program to invest in industrialized housing / modular housing.

AB 2063 would remove affordable housing impact fees on density bonus units.

AB 2013 would create a state plan to increase homeownership among people of color.

AB 2123 would provide housing grants for healthcare workers in areas that have a shortage of healthcare workers.

AB 2166 would set aside 30% of federal Community Development Block Grant money for helping low & moderate income homebuyers.

SCA 9 would create a right to housing.

ACA 14 would provide $10 billion/year for affordable housing and housing the homeless.

AB 411 would provide $600 million bond for veterans’ housing.

SB 1457 would provide a $25 billion affordable housing bond.

AB 1748 would provide for easier sales of surplus land zoned for low or middle density housing (up to 30 units per acre).

AB 1910 would provide grants and incentives for converting publicly owned golf courses to parks and housing.

AB 2357 would create a website for affordable housing developers to search for surplus public land, and simplifies process for declaring land surplus.

AB 2445 would make it more costly to file lawsuits opposing affordable housing.

AB 1288 would prioritize tax credits for new construction by allowing shifting of funds from the 4% tax credit program to the 9% tax credit program.

SB 1466 would provide $200–250 million a year for affordable housing.

AB 1945 would create a disaster recovery and rebuilding fund to preserve, repair, develop, or acquire affordable housing.

AB 2186 would provide grants for cities that waive fees on projects where at least 75% of units are affordable.

AB 1850 would establish rent limits on market-rate buildings converted to affordable housing.

Statewide housing forecast for 2023 released by California Association of Realtors: According to the October 2022 report released by CAR, a modest recession caused by inflation will dampen buyer demand because of higher interest rates and contribute to a weaker housing market in 2023. A few highlights from the report follow:
- Existing, single-family home sales are forecast to total 333,450 units in 2023, a decline of 7.2 percent from 2022’s projected pace of 359,220.
- California’s median home price is forecast to decline 8.8 percent to $758,600 in 2023, following a projected 5.7 percent increase to $831,460 in 2022.
- Housing affordability (the percentage of buyers able to afford a median priced home) is expected to drop to 18 percent next year from a projected 19 percent in 2022.
Riverside and San Bernardino continue to have some of the worst air quality in the U.S.: The American Lung Association has released its Annual State of the Air Report for 2022 and the results continue to be bad for the Inland Region. The two counties captured the top two spots for worst ozone in the nation, and rank 11^th and 9^th, respectively, for the nation’s worst overall year-round particulate pollution. According to the 23^rd annual report, efforts to reduce ozone levels are being undercut by climate change, which is causing more frequent stagnation events and higher temperatures. The report provides a number of recommendations for implementation by individuals, local, federal, state, territorial, and tribal governments. Local governments are encouraged to help ensure that city and county operations are zero-emission and that residents have the ability to choose zero-emission forms of transportation and electricity. These actions must benefit the communities most impacted by unhealthy air. Implementing actions include:

Adopt a climate action plan. Reduce city- and county-wide emissions by supporting walking, biking and transit and zero-emission-vehicle infrastructure, and ensuring that building and parking policies support these goals. Include measures to address the impacts of climate change on residents, including health impacts.

Purchase zero-emission fleet vehicles. Commit to purchasing zero-emission garbage and recycling trucks, transit buses, school buses and other vehicles.

Establish purchasing goals for renewable, non-combustion electricity. Power city and county operations with truly clean sources of electricity like wind, solar, geothermal or tidal.

Connected and Automated Vehicle use could make things worse in Southern California: UCLA study released in August 2022 to explore the impacts of Connected Vehicles (vehicles that can communicate with other vehicles, infrastructure and devices) and Automated Vehicles (vehicles that can operate with little to no human assistance) on the southern California transportation system found that VMT and emissions would increase by 10%, and CAVs could worsen travel equity across various income groups. According to survey results, more than half (54%) of the population is willing to adopt CAV for travel, and when CAV is available, people’s travel behaviors would change significantly. Some of the findings include:
- More flexible work arrangement is preferred - Longer home-work distance is accepted
- More business or non-mandatory trips are expected.
- Number of trips (11% to 15%), VMT (9.1%) and emissions (9% to10%) are significantly increased due to the CAV deployment.
- The reduction in congestion is limited, only speed on freeways during AM has a slight increase (5.4%).
- After deploying CAVs, the disparity across different income groups decreases with respect to mandatory activities. On the other hand, the disparity increases for non-mandatory activities.
View the PowerPoint Presentation of the study provided to SCAG.

Local Councils of Government to implement regional energy efficiency plan: Three agencies in the Inland Region have been awarded $65 million to implement a regional energy network plan over the next five years. The Inland Regional Energy Network (I-REN) is a consortium of the Western Riverside Council of Governments, Coachella Valley Association of Governments, and San Bernardino Council of Governments that serve the counties of San Bernardino and Riverside. These entities have developed a Business Plan in order to establish locally administered, designed, and delivered energy efficiency programs in Riverside and San Bernardino Counties. The (I-REN) mission will be to participate in California’s Clean Energy initiatives and build a stronger clean energy economy and community. I-REN’s vision is to connect residents, businesses, and local governments to a wide range of energy efficiency resources to increase energy savings and equitable access throughout San Bernardino and Riverside counties.

I-REN will strive to achieve the following objectives:
- build capacity and knowledge to enable local governments to effectively leverage energy efficiency services and to demonstrate best practices,
- ensure there is a trained workforce to support and realize energy efficiency savings goals across sectors, and work closely with local building departments and the building industry to support, train, and
- enable long-term streamlining of energy code compliance
Together, I-REN represents 52 cities, 78 unincorporated county areas, 17 tribes and 11% of the population of California.

Read the I-REN Business Plan here
August 2022
Less than 1/3 of Inland Empire households can afford to buy a home here: According to a report released by the UC Riverside School of Business Center for Economic Forecasting and Development, fewer than one-third of Inland Empire households can afford to buy a home in one of Southern California’s ‘most affordable’ housing markets. Housing affordability in the Inland Counties continues to lessen as a result of increasing mortgage rates, elevated demand, and high prices. According to the analysis, only 31% of local households can afford to purchase a median-priced home in the Inland Counties, a decrease from 39% in the first quarter of 2021. In California, just 24% of households can afford a median-priced home. Nationally, the figure stands at 45%.

The analysis notes that as of April 2022, there were only 1.7 months of housing supply available for purchase in Riverside County and 2.2 months in San Bernardino County (a balanced market typically has 6 to 7 months of supply). Additionally, demand for apartments intensified in the Inland Empire over the last year as vacancy rates are around 3%, while average rent prices have spiked by more than 20% to an average of $1807 per month. Rents in the IE continue to be more affordable than in Los Angeles ($2,236), Orange ($2,335), and San Diego ($2,226) Counties.

A new S&P Global ratings report forecasts that 60% of U.S. households will be priced out by the end of 2025. Low affordability has already cut the bottom 40% of households out of the market for starter homes. The report gauged affordability as topping out when mortgage payments reach 25% of a household’s income, a figure that has long put homeownership out of reach for many in the lowest income brackets in America. The bottom one-fifth bracket, or households making up to about $27,000 a year, would need to spend at least 100% of their income to afford a monthly mortgage payment. For middle-income borrowers, mortgage payments already topped 26.7% of income in the first quarter, and are expected to climb to 31.4% in the fourth quarter, “leaving 60% of U.S. households out of the market.”
S&P’s report pointed to the roughly 20% annual rise in home prices and a more “hawkish” Federal Reserve as key culprits of the housing “affordability crunch,” with the central bank’s inflation-fighting policies pushing 30-year mortgage rates to 5.18% in the second quarter, a 13-year high. Read more here.

Report discusses climate change and future housing in California: A report issued by the California Legislative Analyst’s Office (LAO) in April 2022 discusses climate change and how it could affect the housing sector, along with key issues the California Legislature faces in responding to these issues. The report contains three primary sections: (1) the major ways climate hazards impact housing, (2) significant existing state-level efforts underway to address climate change impacts on the housing sector, and (3) key questions for the Legislature to consider in response to these impacts. The report does not contain explicit policy recommendations, but is intended “as a framing document to help the Legislature adopt a climate lens across the housing area.”

Of particular interest to Inland County leaders might be the following comments in the report: “In recent years, much of the new housing construction in the state has occurred in areas that are at significant risk of the effects of climate change. During the last ten years six out of ten of the state’s fastest growing counties have been in the Central Valley and Inland Empire, which are regions that are a comparatively high risk of excessive heat and are anticipated to become hotter in the future. Historically, climate change has not been a major consideration in locating new housing. Increasingly, however, this will need to change, and the risks posed by a changing climate will need to be considered as a more significant factor when building new housing. Given that large parts of the state are at risk of one or more effects of climate change and increased housing development is critical to addressing the lack of affordable housing in the state, avoiding construction of new housing in all at-risk areas is likely not feasible. However, those areas that are at highest risk may no longer be suitable for new development absent sufficient planning and mitigation.”

Other major takeaways from the report:
- Climate change will have a number of serious impacts on California, including public health risks, damage to property and infrastructure, life-threatening events, and impaired natural resources.
- Some existing homes and communities will need to adapt to ensure they are adequately protected from growing climate change-driven hazards.
- Climate change is likely to put upward pressure on residential property insurance and housing costs, and to disproportionately impact low-income residents who tend to live in geographic areas and housing types (such as older housing units) that are more vulnerable to the effects of climate change. To respond to these impacts, the Legislature may want to consider whether the state should take additional actions to influence where and how housing should be constructed and modified. For example, few states require homeowners to fireproof their homes.
- Encouraging community-level mitigations, keeping the residential property insurance market healthy, and mitigating the disproportionate risks faced by low-income residents are areas where the Legislature could consider additional actions.
- While climate change can and will negatively impact housing in some locations, curbing housing development overall is untenable given the state’s housing shortage. Instead, an increased focus on where and how new housing is built will be necessary to mitigate and adapt to the current and growing impacts of climate change.
- If dense housing is placed strategically, it can enable the state to build more housing without having to resort to building in locations that are at the highest risk for climate change impacts such as wildfires and extreme heat.
California housing legislative update: Housing remains a high priority for the legislature during this year’s session. Following are a few of the proposals that remain alive that might be of interest to the Inland Region:

General Plan Housing Elements: (Housing elements provide policy guidance on the potential number and location of future housing in a city or county. Elements are a required part of a local jurisdictional general plan.)
- AB 2339 (Bloom) Unmet housing goals from previous planning cycles are carried over and added to the goals of the next planning cycle. Also requires cities to allow homeless shelters in more areas where currently not allowed in zoning.
- AB 2653 (Wicks) Allows state to reject cities’ housing element annual reports that don’t meet state guidelines.
Accessory Dwelling Units: (Easing restrictions on ADU construction is viewed by many as a “low-hanging fruit” solution to increasing housing production.)
- AB 916 (Salas) Requires cities to allow 2-story ADUs up to 18' tall, and also allows for the addition of bedrooms without public hearings.
Parking: (Excessive parking requirements are often criticized as being unnecessary and costly, and are associated with contributing to higher housing costs.)
- SB 1067 (Portantino) No parking required for housing if at least 20% of the units are low or moderate income housing or housing for students, the elderly, or persons with disabilities, or if less than 20 units. Applies to sites within 1/2 mile of a major transit stop.
- AB 2097 (Friedman) No parking needed for housing, businesses, or other development within 1/2 mile of a major transit stop or high quality transit corridor.
- AB 2244 (Wicks) Reduction in parking requirements for sites with housing & religious buildings.
Zoning (Zoning regulations and restrictions are used by municipalities to control and direct the development of property within their borders.)
- AB 2011 (Wicks) Streamlined approval for housing with at least 15% affordable units and prevailing wage, located in commercial zones. Projects with 50 or more units also to provide apprenticeships and healthcare benefits for workers.
- AB 1551 (Santiago) Density bonus for mixed use commercial projects that include affordable housing.
Affordable Housing Production (These proposals are intended to spur construction of housing for lower income families.)
- AB 2334 (Wicks) Unlimited density and 3 extra stories of height allowed for affordable housing in areas with less driving (low vehicle travel areas where the driving is less than 85% of the regional or city average). Makes a few other changes to relax zoning restrictions for affordable housing.
- AB 2186 (Grayson) Grants for cities that waive fees on projects where at least 75% of units are affordable.
Homeownership: (These bills are focused on limiting investor purchase of homes.)
- AB 1837 (Mia Bonta) Helps occupants and nonprofits buy foreclosed homes; limits investor buying.
- AB 2170 (Grayson) Gives current and future occupants and nonprofits priority in buying foreclosed 1–4 unit buildings.
Regional Affordable Housing Agencies in Southern California: (Affordable housing special beneficiary districts such as the ones being pursued in the proposals below strive to increase the supply of affordable housing by providing for significantly enhanced funding and technical assistance at a regional level for renter protections, affordable housing preservation, and new affordable housing production.)
- SB 679 (Kamlager) Los Angeles County.
- SB 1105 (Hueso) San Diego County.
- SB 1177 (Portantino) Burbank, Glendale, Pasadena.
Ballot Measures
- SCA 2 (Allen) Eliminates requirement that public housing be approved by ballot measure.
- AB 411 (Irwin) $600 million bond for veterans’ housing.
- SB 1457 (Hertzberg) $25 billion for an affordable housing bond.

May 2022

According to the Zillow estimates, the rent for a typical rental house in the Inland Empire was $2,469 in December 2021, representing a 28 percent rise from $1,931 in March 2020. Similarly, the value of a typical owner-occupied house in this region rose from $388,404 in March 2020 to $534,393 in December 2021, a 37.6 percent increase.

Inland housing sales remain strong, sales listings slowing a bit: The Inland Valley Association of Realtors most recent housing report shows that the median home sales price in the two combined counties for April 2022 stands at $610,000, 17.5% higher than the same time from last year ($519,000). Homes are being sold in an average of just 8 days (compared to 6 days a year ago), demonstrating continued strong demand and lack of supply in the market. For the two counties, homes in La Verne had the highest average sold price ($1,000,000) and homes in Banning had the lowest average sold price ($385,475). The City of Riverside (population 325,000) had the most homes listed (280) followed by Hemet (population, 85,000, 230 homes listed) and Menifee (population 93,000, 195 homes listed).

California housing affordability slows in first-quarter 2022 as home prices set record highs and interest rates rise: According to the California Association of Realtors, the number of Californians able to purchase a median-priced home continues to shrink.

Just 24% of California households could afford to purchase the $797,000 median-priced home in the first quarter of 2022, down from 25% in fourth-quarter 2021 and down from 27% in first-quarter 2021.
A minimum annual income of $158,000 was needed to make monthly payments of $3,950, including principal, interest, and taxes on a 30-year fixed-rate mortgage at a 3.97% interest rate. 32% of home buyers were able to purchase the $640,000 median-priced condo or townhome.
A minimum annual income of $126,800 was required to make a monthly payment of $3,170.
For the Inland Counties, a minimum qualifying income of $111,200 is needed to make the monthly payment ($2,780) needed to purchase a median-priced home ($560,000).
By racial and ethnic groups, more than one-third of White California households, and less than one in five Black and Latino California households could afford the same median-priced home, while 40% of Asians could buy a median-priced home.

According to the Census Bureau’s American Community Survey, the 2020 homeownership rate for all Californians was 56%, 64% for Whites, 61% for Asians, 46% for Hispanics/Latinos, and 37% for Blacks. Homeownership rates for Black households were highest in San Bernardino (41%), Riverside (37%), and Kern counties (37%), while San Bernardino (49%), Fresno, and Solano (both at 40 %) had the highest ownership rates for Hispanics/Latinos.

Housing affordability gaps across ethnicities remain significant in Inland Counties: While overall housing affordability in the Inland Counties is higher compared to other areas in southern California, significant gaps in affordability across races and ethnicities exist.

% Overall affordability for median-priced home (Source: CA Asso. of Realtors )

Ethnicity	Riverside (%)	San Bernardino (%)
All Ethnicities	34	45
White/Non-Hispanic	44	52
Asian	49	58
Hispanic/Latino	33	49
Black	37	41

Here’s a twist: Realtors suing six California cities for failing to plan for housing. While several southern California cities have sued the California Department of Housing and Community Development over what they claim are erroneously high regional housing needs assessment allocations, the California Association of Realtors in April has sued six cities (Bradbury, La Habra Heights, Laguna Hills, Manhattan Beach, South Pasadena and Vernon) for failing to adequately plan for needed housing in their communities.

The litigation aims to enforce the requirements of California’s RHNA (Regional Housing Needs Allocation) and housing element laws. Under the RHNA system, the state and local governments work together to identify regional housing needs and distribute them among a region’s cities and counties. Each city and county must then develop a “housing element” — a component of the city’s general plan that identifies sites available for future housing development sufficient to meet the city’s RHNA allocation. If the city cannot identify adequate sites, it must change its zoning to allow additional housing development. According to CAR, The organization’s lawsuits against Bradbury, La Habra Heights, Laguna Hills, South Pasadena and Vernon fault those cities for failing to adopt updated housing elements by the state mandated deadline. These cities were chosen for being far behind their peers in the housing element process, having demonstrated a hostility toward adequate housing planning or both. Read more here.

White House Housing Initiative Includes Zoning Reform Incentives: The Biden administration has released a housing supply action plan that promises to “help close the housing supply gap” in five years, according to a White House press release. The press release also describes the plan as the “most comprehensive all of government effort to close the housing supply shortfall in history.” The plan includes legislative and administrative actions with a new policy that ties federal competitive grant funding for transportation to zoning and land use - jurisdictions with less exclusive zoning practices will get higher scores in competitive grant programs. The action essentially creates more influence for the federal government in setting zoning and land use regulations – a role that traditionally is local.

The new plan also promises to create new financing mechanisms to build and preserve housing units where financing gaps exist, while also expanding funding for existing programs. The former requires Congressional action to pass the Neighborhood Homes Investment Act in addition to Housing Supply Fund financing proposed in the administration's draft budget.

According to the press release the Plan also aims to reform the Low Income Housing Tax Credit (LIHTC), which provides credits to private investors developing affordable rental housing, and the HOME Investment Partnerships Program (HOME), which provides grants to states and localities that communities use to fund a wide range of housing activities.

Finally, the plan promises to work with the private sector toward the goal of finishing construction on more homes in 2022 than any year since 2006.

Under the Plan, the Administration will:

Reward jurisdictions that have reformed zoning and land-use policies with higher scores in certain federal grant processes, for the first time at scale.
Deploy new financing mechanisms to build and preserve more housing where financing gaps currently exist.
Expand and improve existing forms of federal financing, including for affordable multifamily development and preservation. This includes making Construction to Permanent loans (where one loan finances the construction but is also a long-term mortgage) more widely available by exploring the feasibility of Fannie Mae purchase of these loans; promoting the use of state, local, and Tribal government COVID-19 recovery funds to expand affordable housing supply; and announcing reforms to the Low Income Housing Tax Credit (LIHTC), which provides credits to private investors developing affordable rental housing, and the HOME Investment Partnerships Program (HOME), which provides grants to states and localities that communities use to fund a wide range of housing activities.
Ensure that more government-owned supply of homes and other housing goes to owners who will live in them – or non-profits who will rehab them – not large institutional investors.
Work with the private sector to address supply chain challenges and improve building techniques to finish construction in 2022 on the most new homes in any year since 2006. Read more on the Administration’s action here.

Report examines how CEQA has contributed to the housing crisis and how to fix it: A recently published review (March 2022) of CEQA by the Pepperdine Law Review takes an in-depth look at the state’s now 50-year old environmental act, zeroes in on how CEQA has worsened the housing crisis, and provides some recommended fixes. The report notes that CEQA can and has been manipulated to be a formidable tool of obstruction against development, particularly against proposed projects that will increase housing density. The review also cites other research efforts concluding that new housing projects have been the most frequent target of CEQA lawsuits, and that the percentage of CEQA lawsuits against new housing units has been on the increase in recent years. Among the report’s recommended fixes:

California should consider scrapping the RHNA allocation tool and implement a more objective form of measurement for how jurisdictions should address housing needs by looking at Massachusetts’ success with Chapter 40B. Massachusetts General Laws Chapter 40B is designed to facilitate construction of affordable housing in communities where less than 10 percent of its housing stock is affordable (accessible to low and moderate income levels). Under Chapter 40B, developers are able to bypass certain local zoning laws, including specifically the allowable density, as long as 20 to 25 percent of the units being built meet the state’s definition of affordable. The law provides only limited opportunity for Town officials to alter the developer’s plans.
California should pass legislation that exempts a city’s general plan amendments from CEQA review, which would then allow cities to amend their general plans and end single-family zoning as Minnesota has done.
Similar to New York, California should not allow anonymous CEQA lawsuits and should instead rely on its anti-SLAPP laws to protect CEQA filers.
California should increase its standing requirement to file a CEQA claim by exercising a narrow judicial exception from Save the Plastic Bag Coalition v. City of Manhattan Beach and allow major California cities to adopt their own procedural codes for dealing with CEQA.
Lastly, California should expand future reforms to all forms of housing and not just low- to mid-income housing.
The report concludes that “Overall, a successful course correction will not result from any single solution but instead will come from a collage of smaller piecemeal efforts that originate from past legislative efforts, other states’ reforms, and untried innovative solutions. Together, these reforms will paint a brighter future for California’s environment and its people.”

47-point Central Valley plan zeroes in on housing shortage and provides priority solutions: Over the span of the pandemic, Fresno became one of the hottest housing markets in the country – leaving many households unable to keep up with the cost of the historically affordable city.

The One Fresno Housing Strategy includes 47 priority policies which focus on building more affordable housing and easing restrictions for developers to build more market-rate housing as well. The plan offers 24 additional policies to address homelessness. A report called Here to Stay states that the City of Fresno has over-built the number of single-family homes by over 28,000 houses, adding that the City needs:

21,001 homes for renters who cannot afford more than $500 a month in order to not be cost burdened.
7,139 additional homes that serve renters who can afford $500 to $1,000 a month.
More than 2,500 additional emergency shelter beds.
An additional 2,500 micro-homes to meet the needs of the unsheltered community.

The Plan’s goal is to build, preserve or rehabilitate nearly 7,000 affordable homes and encourage the development of 4,110 market-rate homes over the next three years. The Plan also includes elements that “encourage the transition of 8,000 single family home rentals into affordable homeownership options.” The housing plan breaks the 47 policies into four categories – preserving housing, producing housing, preventing displacement and promoting equity. The strategy relies heavily on incentivizing the production and rehabilitation of affordable housing – through grants, loans, or easing restrictions on building all types of housing, rather than firm regulations such as rent control – to achieve desired housing production and affordability goals. Read more about the Plan here.

February 2022

According to the Zillow estimates, the rent for a typical rental house in the Inland Empire was $2,469 in December 2021, representing a 28 percent rise from $1,931 in March 2020. Similarly, the value of a typical owner-occupied house in this region rose from $388,404 in March 2020 to $534,393 in December 2021, a 37.6 percent increase.

Inland housing sales remain strong: The Inland Valley Association of Realtors most recent housing report shows that the median home sales price in the two combined counties for November stands at $530,000, about 20% higher than November 2020 ($440,000). Homes are being sold in an average of just 7 days (compared to 12 days a year ago). For the two counties, homes in Chino Hills had the highest average sold price ($864,000) and homes in Banning had the lowest average sold price ($375,000). Other median sales prices include Riverside ($582,000), San Bernardino ($425,000), Ontario ($582,500) and Temecula ($669,000).

SCAG’s Preliminary Growth Forecasts depict aging population and smaller household size: The Southern California Association of Governments (SCAG) long term regional transportation plan (called Connect SoCal 2024) depicts a region that will grow more slowly than was anticipated in the previous plan. The Agency’s 2020 forecast called for the six-county region to grow to nearly 23 million people; Connect SoCal 2024 preliminary projections are for year 2050 growth to reach from 19.5 million to 21.9 million. As the region’s population grows, it will also be aging, which will result in anticipated household sizes to be considerably smaller (projections are from 2.64 to 2.69 persons per dwelling in 2050 compared to 2.95 today). Riverside and San Bernardino Counties currently comprise about 24% of the region’s housing stock, but have been producing about 30% of the region’s new units since 2017.

Sales of existing single-family homes in California are expected to drop 5.2 percent in 2022. According to the California Association of Realtors, California’s median home price will increase 5.2 percent next year, to $834,400, the association predicted in its 2022 housing forecast, which it released Thursday. To put the median price forecast in perspective, one year ago the Los Angeles-based trade group was predicting a 20.3 percent increase. Also, housing affordability in California is expected to drop to 23 percent next year from a projected 26 percent increase one year ago. “A slight decline next year from the torrid sales pace of the past year-and-a-half will be a welcome relief to potential homebuyers who have been pushed out of the market due to high market competition and an extremely low level of homes available for sale,” said the association President Dave Walsh. “Homeownership aspirations remain strong and motivated buyers will have more inventory to choose from. They will also benefit from a favorable lending environment, with the average 30-year fixed rate mortgage remaining below 3.5 percent for most of next year.” The association also predicts 4.1 percent growth next year for the U.S. gross domestic product, and California’s unemployment rate to fall to 5.8 percent.

Governor's budget incentivizes development away from fire-prone areas. A $2-billion package of grants and tax credits proposed in the budget would incentivize development in urban cores and steer housing construction away from areas facing high fire risks. The governor called it an effort to move development away from the "urban-wildland interface" where communities are increasingly affected by destructive fires. The proposal would build on the $10.3 billion state officials allotted last year to bolster mixed- and low-income housing in California; it also specifically supports infill housing in already developed areas. The plan would reduce the encroachment of residential development into fire-prone areas and ease pressures on the state's mounting housing crisis by providing more incentives for dense, transit-oriented, affordable housing development.

Proposed bill would have eased conversion of public golf courses to housing in California. Assembly Bill 672, proposed by California Assemblymember Cristina Garcia (D-Bell Gardens), would exempt municipal golf courses in high-density, park-poor areas from the Public Park Preservation Act and the California Environmental Quality Act, making it easier to rezone those areas into housing developments. Rezoned golf properties would be required to include 25 percent affordable units and 15 percent open-space, according to the text of the bill. The bill died in committee in April 2021 before being reborn as a two-year bill for the current legislative session. It died again in committee last week. Speculation was that most of the homes could be built as “FORE!plexes.”

Much ADU about nothing: How much new housing construction will SB9 actually bring to California? SB 9 was approved last year and requires, with a few exceptions, ministerial approval for certain housing development projects containing up to two duplexes (i.e. up to four total units) on existing residential parcels. After SB 9 was signed by the Governor, the Terner Center for Housing Innovation at UC Berkeley prepared an analysis of the potential impacts of SB 9. The study is available at https://ternercenter.berkeley.edu/blog/duplexes-lot-split-sb-9/ Terner’s study addresses both physical constraints – the size and/or suitable unbuilt area on parcels – and financial constraints – the market-based likelihood that the sale or rent price of a new unit would offset the cost to develop it. The study found that development would be realistic in only about 410,000 parcels in California at most, or 5.4% of land now occupied by single-family houses. That could add a total of 700,000 new units across California, if every single homeowner for whom the change made sense chose to develop.

Correspondingly, the study’s data indicated that approximately 300,000 new homes would be feasible in the SCAG region’s six counties (roughly 1 new unit for every 10 single-family parcels); however, due to data limitations related to city size, jurisdiction-level estimates from the original study were only available in 129 of the SCAG region’s 197 jurisdictions. While the above estimate indicates that SB 9 could result in a very small share of the region’s parcels becoming financially feasible to develop, the potential supply increase could fill a substantial share of the region’s housing need and is significant when compared to recent housing production.

SCAG previously collaborated with researchers at California State Polytechnic University at Pomona to analyze the physical constraints to ADU development following state legislation passed during 2016-2019. This study, available at https://scag.ca.gov/post/accessory-dwelling-unit-adu-potential-scag-region indicated that between 2.4 and 3 million parcels in the SCAG region could physically accommodate a detached ADU.

A group calling itself Californians for Community Planning Initiative has filed a proposed constitutional amendment for the November 2022 ballot to reassert local control over zoning and land-use decisions in opposition to the passage of bills such as SB9 and SB 10 which strip local jurisdiction of discretionary control over certain housing proposals And in January, SCAG’s Regional Council voted to support the initiative. By a vote of 32 to 12 (with 3 members abstaining), SCAG moved to officially support the “Our Neighborhood Voices Initiative”, which needs to collect nearly one million valid signatures to qualify for the November ballot. If the initiative qualifies for the ballot and voters approve it, local governments could overturn new state housing laws, including SB 9, and SB 10 that allow for more housing in areas once reserved for single-family homes. Opponents to SCAG’s position said the initiative would threaten to undo state tenant protections, fair housing goals and progress toward getting the State out if the housing crisis.

Interestingly, the breadth of the ballot measure's language could also prevent the enforcement of state laws that often limit the development of new housing, including CEQA, which requires jurisdictions to study and mitigate the impacts of a new development before approving it. CEQA often empowers third parties to sue if they believe a new development has not been thoroughly vetted, and activists and special interests frequently use it to stop or reduce the size of new projects. The ballot initiative—by overriding state laws when they conflict with local zoning codes—could therefore override local activists' ability to use CEQA to slow up development.

Real Estate Trends for 2022: Real estate experts and industry observers at the recent National Association of Real Estate Editors conference made a number of observations about what real estate trends might take over the headlines in 2022. Highlights include:

Trend 1: buyers are evolving. Buyers are real estate companies that allow consumers to basically buy and sell on demand. They buy your home for a price that their algorithms say is correct, allowing the freedom of making a non-contingent or cash-like offer at will.

Trend 2: Interest rates are rising. In 2010, 30-year mortgage interest rates were around 4.69 percent but fell to the mid-3 percent range by 2012, according to Rocket Mortgage, and mostly stayed there. At the end of 2018 and the beginning of 2019, mortgage rates increased to over 5 percent. They quickly declined, and in January 2020, mortgage rates were back at around 3.7 percent. When COVID hit, the Federal Reserve Bank lowered the federal funds rate to between 0 and 0.25 percent, and mortgage interest rates dropped below 3 percent.

Lawrence Yun, the chief economist of the National Association of Realtors, and Mike Fratantoni, the chief economist of the Mortgage Bankers Association, agree that interest rates will rise. It also appears that the Federal Reserve will look to raise the federal funds rate three times in 2022, while phasing out its bond-buying program, which makes it likely that mortgage rates will rise.

Trend 3: Millennial and Gen Z home buyers may find buying is unaffordable. If interest rates rise, millennials and Gen Z home buyers will find it increasingly unaffordable to purchase first homes. And millennials account for the majority of home buyers at the moment. U.S. home values appreciated at an annual rate of 18 percent in October, according to CoreLogic, which was the highest level recorded in the 45-year history of the index. For those looking to buy a single-family house, those appreciated at a rate of 19.5 percent.

Estimates are that the United States is about 5.24 million homes short (rentals, townhouses, condos and single-family detached houses) of actual need nationwide.

The housing affordability crisis; how high can prices go? In May 2021, the cost of housing in the United States grew 15.4%, according to data from CoreLogic. In the same month housing prices rose by 30.3% in Idaho, 23.4% in Arizona and 20.4% in Utah. According to the Fannie Mae Home Purchase Sentiment Index (HPSI), the public expects the housing market to soften this year. The National Association of Realtors expects new construction and higher interest rates to help normalize the market.

A growing share of Americans say affordable housing is a major problem where they live. Almost half of Americans responding to a Pew Research Center survey in October 2021 say finding affordable housing in their community is a "major problem," An additional 36 percent call affordable housing a "minor problem," while only 14 percent don't think it's a problem at all. People in the western states expressed the highest level of concern, with 69 percent calling affordable housing a major problem. Rural residents showed less concern than urban residents: 40 percent of rural respondents called housing a major problem. 63 percent of urban dwellers worry about affordability. The results also show partisan differences: 59 percent of left-leaning respondents called affordable housing a major problem, while only 36 percent of right-leaning respondents felt the same.

Can 3D-Printing Can Make Housing More Affordable? Habitat for Humanity is seeking help of 3D-printing companies to address the growing housing crisis and build more homes faster and more affordably. According to this report, high costs and material shortages have led developers to look for innovative solutions for producing low-cost housing to meet growing demand. According to the article, a 3D-printed home built from concrete can save up to 15 percent on construction costs while still providing a "safe, affordable place to live" and the opportunity to own a home for low-income families.

According to Kirk Andersen of 3D-printing company SQ4D, the minimal need for on-site supervision also prevents injuries and saves builders money. And while traditional homebuilding takes six to 12 months, a 3D-printed home takes under six months to erect.

How COVID and high prices have contributed to more sprawl. Patrick Sisson, in an article presented in Bloomberg CityLab (https://www.bloomberg.com/news/features/2022-01-05/a-supernova-of-suburban-sprawl-fueled-by-covid) explores how the pandemic has accelerate the movement of urban households to suburbs and beyond reduced Americans' appetite for public transit. To meet rising demand for new homes, the author asserts that developers are building on suburban fringes rather than urban infill properties that often carry more difficult permitting processes. The writer states that “Indeed, the ascendance of sprawl is a source of dismay for historic foes of this land- and energy-intensive development pattern, which bakes-in car-centric lifestyles and strains resources like water." While certain jurisdictions are putting zoning reforms and pro-density policies in place to increase affordability and fight climate change, "those factors are not nearly enough to offset the magnetic pull of cheap land" the article asserts.

November 2021

It’s a wrap! The 2021 Legislative Session saw some significant housing bills pass. Here is a summary of the bills that ICSD followed:

Enacted Bills:

SB 7 builds on a 2011 law that eased CEQA regulations for housing, clean energy and manufacturing projects greater than $100 million. The proposal reduce that requirement to $15 million, as long as 15% of each housing project built is for affordable housing.
SB 8 extends the Housing Crisis Act of 2019, a law that prevents the reduction of housing density.
SB 9 attempts to increase housing supply by making it easier for homeowners to build duplexes on their property.
SB10 allows governments to streamline the zoning process of multi-family units near public transportation.
SB 478 sets minimum standards on floor area ratios (FAR) and minimum lot sizes for land zoned for missing middle housing (from duplexes to ten unit buildings). This prohibits extreme FAR requirements that prevent multi-family housing units to be built on land it is zoned for.
AB 215 establishes a process for a mid-cycle housing element consultation between the state Department of Housing and Community Development (HCD) and any jurisdiction it deems to have not made sufficient progress toward its regional housing needs allocation (RHNA), including a requirement for the jurisdiction to obtain a pro-housing designation.
AB 571 prohibits affordable housing or inclusionary zoning fees on the bonus units of a project using the state density bonus.
AB 787 authorizes cities and counties to receive credit toward their lower income regional housing needs allocation (RHNA) for market rate units that are converted to deed-restricted housing affordable to very low-, low-, or moderate income households, as specified.
AB 816 requires the creation of a statewide plan for addressing homelessness and allows for legal action against jurisdictions that do not make progress towards meeting plan goals.

Stalled Bills:

SB 5 would have provided for a statewide housing bond measure to be sent to the voters, likely in 2022. Affordable housing advocates desire more funds to support creating more deed-restricted affordable homes, and current bond funds from 2016’s Proposition 1 and 2 will likely be spent next summer.
SB 6 would have allowed residential development in commercially zoned areas.
SB 15 would have created incentives for localities to rezone commercial land for residential development.
SB 477 would have mandated local governments to study the impacts of laws intended to alleviate the housing crisis.
AB 115 would have allowed residential development in commercially zoned areas.
AB 244 would have required the California Housing Finance Agency and others to conduct an affordable housing cost study across all state funded housing projects.
AB 387 would have established the California Housing Authority to develop affordable and mixed-income housing.
AB 561 would have required the Office of the Treasurer to work with CalHFA and HCD to create an Accessory Dwelling Unit financing product to assist homeowners in the creation of ADUs.
AB 617 would have allowed cities and counties the option of paying other jurisdictions to transfer all or a portion of their Regional Housing Needs Assessment allocation.
AB 916 would have prohibited public hearings for proposed room additions for single family homes, and would have expanded allowable ADU height to 20 feet.
AB 1401 would have prohibited the enforcement of parking requirements on new housing projects near transit or in low vehicle miles traveled (VMT) areas.
SCA 2 would have repealed Article 34 in the California Constitution that requires a vote to approve public housing projects. Article 34 is at times blamed for the paucity of public housing in the state.

Inland housing market remains stable. The median sales price in September for the Inland Counties was $547,000. Comparatively, the median sales price in August of this year was $550,000. In September, there was a slight decrease in new listings (-2.3%) when compared to September 2020, but the median sales price and sales volume have increased by almost 20% since last year. The highest and lowest median home prices were located in La Verne and Homeland for $818,000 and $300,000, respectively. Moreno Valley saw a 30% increase in new listings in a 1-year period (September 2020 - September 2021). On the other hand, Claremont saw a 40% decrease in new listings.

Housing inventory decreased for most of Southern California compared to one year ago. Although the housing stock in Southern California is 13% lower in September, San Bernardino County’s housing stock increased by 21.6%. Riverside County’s inventory decreased by 19.1%. Supply in Ventura, Los Angeles, San Diego, and Orange counties decreased compared to last year. All counties in Southern California experienced an increase in price, with Riverside and San Bernardino having the largest percent change at 20.7% and 11.1%, respectively.

More than 50 California cities and counties pass ordinances to phase out gas-powered buildings. Motivated by the effects of climate change, Santa Clara became the 51st city on October 25th, 2021 to adopt building codes that are more stringent than statewide building codes. The California Energy Commission updates building codes every three years to help the state meet its target of relying on 100% clean energy by 2045. The ordinances vary in strictness and scope and only apply to newly constructed buildings. Here are some examples of city codes. More can be found here. No cities in the Inland Region have regulations that go beyond the statewide code in place.

Fairfax: All buildings constructed starting on March 1, 2222 will be required to be fully electric with the exception of commercial kitchens.

Petaluma: Does not allow for new gas stations to be created in the city. Requires all new buildings to be fully electric.

Healdsburg: Most appliances are required to be electric but gas cooking and fireplaces may be exempt.

Milpitas: Gas infrastructure will be limited on city-owned property.

Carlsbad: requires use of heat pump for water heaters or allow for solar thermal heating for buildings under four stories.

Windsor: All single-family homes, low-rise multifamily homes, and accessory dwelling units (ADUs) are required to be fully electric.

The National Low Income Housing Coalition’s (NLIHC) 2021Out of Reach report finds inequitable wage growth between 1979 to 2019. Lowest-wage workers saw an inflation-adjusted hourly increase of 6.5%, median-wage workers experienced an 8.8% wage growth, but these statistics are in stark contrast to the significant wage increase seen by high-wage workers, who had a 41.3% gain. Low wages contributes to the widening wealth gap between socioeconomic groups. Unaffordable rental rates make low-income households rent-burdened,and are more likely to be housing insecure when emergencies strike because of the inability to save.

California has one of the highest disparities between the average renter’s salary, and the fair market rent they can afford for a two-bedroom home. The slow wage growth, combined with the housing affordability crisis makes California’s low-income residents the most vulnerable and at risk of homelessness.

Funding for California housing increased in Southern California, but vulnerability among low-income households remains high. According to data gathered by California Housing Partnership, most of Southern California’s counties received increased state or federal funding for housing production and preservation, but most extremely-low income households are still cost-burdened.

County	% of Extremely Low-Income Households that are Cost-Burdened	Number of Low-income Renter Households	Minimum Wage needed per Hour to Afford the fair market rent (FMR) of a 2-bedroom home	% change in State Funding from FY 2018-2019 and 2019-2020	% change in Federal Funding from FY 2018-2019 to 2019-2020
Riverside	80%	51,451	$28.19	65%	157%
San Bernardino	79%	59,882	$26.69	110%	- 47%
Los Angeles	78%	499,430	$38.23	108%	48%
Orange	82%	118,405	$39.48	84%	- 52%
Imperial	57%	4,628	$15.68	270%	- 2%
Ventura	74%	23,895	$38.50	196%	596%

What can we learn from Oregon’s 2019 zoning reform? In 2019, lawmakers in Oregon passed HB 2001, which allowed duplexes, triplexes, and fourplexes to be built on parcels containing single-family homes. Sandra Wood, Portland’s principal planner from the Bureau of Planning and Sustainability, reflects on their successes and challenges that they encountered. This panel discussion hosted by the Terner Center for Housing Innovation provides insight for California’s local jurisdictions.

Federal initiative called “House America” takes aim at addressing homelessness. President Biden plans to partner with local officials to provide stable housing to people experiencing homelessness and increase the supply of affordable housing units. As part of the program local governments will receive financial support and technical assistance from the federal government to prioritize permanent housing over temporary fixes such as shelters.

Department within the California Department of Housing and Community Development (HCD) is formed. The newly established Housing Accountability Unit (HAU) will be working with local governments to assist with fulfilling housing requirements. The new unit provides resources and technical assistance to help jurisdictions comply with state housing laws. Unlike past years, the unit will enforce housing laws and will be able to revoke housing elements if necessary.

The housing crisis is a global problem. The U.S. is not alone in the housing crisis—the world is experiencing it too. Worldwide, house price to income ratios have grown significantly since the 1990’s, rent increases are pushing people farther away from cities, and the low housing stock is contributing to a lack of affordability. Sweden, for example, has seen a 100.2% increase in house price to income ratios from 1995 – 2020. The U.S. saw a 2.7% increase during the same time period.

Did you know that…

9 out of 10 Californians believe that housing affordability is a serious problem?
The median cost of a home in California costs 7 times more than the average household income? This is comparatively higher than during the 1960s, when California homes were roughly 3 times higher than the average household income.
In 2020, the average national price-to-income ratio was 4.4, the highest since 2006?

Elon Musk announces that Tesla headquarters will be moving to Texas due to high housing costs. Musk stated that “It’s tough for people to afford houses, and people have to come in from far away...There’s a limit to how big you can scale in the Bay Area...I believe we need more tools in the toolbox. Driving Silicon Valley’s capacity for innovation are our amazingly talented people. If they have nowhere to live, it doesn’t just cost us a Tesla headquarters today, it costs us the companies that grow from Tesla alumni tomorrow,” he stated.Jim Wunderman, the CEO of the Bay Area Council, also commented on the state’s housing crisis.: “Mr. Musk’s announcement highlights yet again the urgency for California to address our housing affordability crisis and the many other challenges that make it so difficult for companies to grow here.”

Boomers looking to down-size can't find starter homes. Inventory of starter homes (defined as having1400 sq. ft. or smaller) is at its lowest in 50 years. Supply of starter homes have always been modest; in 1980, they made up 40% of new construction, but in recent years, only 7% of new construction were starter homes. Builders have shifted their focus on upper-tier homes, which are typically worth $500,000 or more.

Extreme housing shortage of starter homes are exacerbating housing affordability. As Boomers prepare for retirement and look for smaller homes, Millennials, who are at the prime age of becoming first-time owners, are also competing with them for the same housing stock.

August 2021
ICSD year-end report released: The UCR Inland Center for Sustainable Development (ICSD) has just released its "2021 Report: Regional Challenges and Opportunities for Housing Development in Inland Southern California"

The report is a culmination of more than a year of work and contributes to and expands on the ongoing conversation and research about the Inland Region’s main housing issues including, regional affordability, the jobs-housing imbalance, and rising unattainability. A profile of the Region’s housing stock is given, housing construction and statewide policies are examined, and challenges and opportunities for development are presented. Some of the Region’s most salient issues are discussed, and policy recommendations are provided on each examined topic.

Read the report: ICSD Final Report.pdf (ucr.edu)

Visit the UCR ICSD website: Inland Center for Sustainable Development | (ucr.edu)

Inland housing sales remain strong: The Inland Valley Association of Realtors most recent housing report shows that the median home sales price in the two combined counties for July stands at $550,000, about 22% higher than July 2020 ($449,900). Homes are being sold in an average of just 7 days (compared to 13 days a year ago). For the two counties, homes in Chino Hills had the highest average sold price ($831,000) and homes in Banning had the lowest average sold price ($350,000).

Inland Counties lag in housing production, but not as much as neighboring counties: The National Association of Realtors Housing Shortage Tracker computes how many permits are issued for every new job in 178 metropolitan counties. Based on historical averages, one permit is issued for every two jobs. 2019 data for the San Bernardino/Riverside area, according to the tracker, shows a ratio of one permit for every four jobs. In the L.A./Orange County areas, the tracker indicates a ratio of one permit for every eight jobs.

Billions included in California Housing and Homelessness Funding Package: In July Governor Gavin Newsom signed the largest funding and reform package for housing and homelessness in California history as part of the $100 billion California Comeback Plan. The package includes $10.3 billion for affordable housing and $12 billion over two years towards tackling the homelessness crisis.

$10.3 billion is provided for affordable housing including:
- $850 million incentivizing infill development and smart growth
- $800 million to preserve the state’s affordable housing stock
- $100 million promoting affordable homeownership
- Additional funding to scale up the state’s efforts to create more Accessory Dwelling Units, build more housing on state-owned excess land and invest in farmworker housing
$12 billion is provided over two years to confront homelessness including:
- $5.8 billion for Homekey over two years, creating more than 42,000 new homeless housing units
  - $2.75 billion for the Department of Housing and Community Development
  - $3 billion for the Health and Human Services Agency to create clinically enriched behavioral health housing and funding for the renovation and acquisition of Board and Care Facilities and Residential Care Facilities for the Elderly.
- $2 billion in HHAP grants over two years with strong, new accountability requirements for local governments
- $1.75 billion to unlock up to 7,200 units of housing in the pipeline for extremely low-income families and people exiting homelessness
- $150 million to stabilize participants in Project Roomkey hotels
- $50.6 million for encampment resolution efforts
- $45 million for services and housing for homeless veterans
Who’s leaving California? Who’s coming in? A May 2021 post from the Public Policy Institute of California unpacks some of what’s behind the 2020 census results. Of note: people who move to California are different from those who move out. In general, those who move here are more likely to be working age, to be employed, and to earn high wages—and are less likely to be in poverty—than those who move away.

Those moving in tend to have higher education levels than those who move out. California has been losing lower- and middle-income residents to other states for some time while continuing to gain higher-income adults. In the past five years the flow of middle-income residents out of the state has accelerated. Most people who move across state lines do so for economic or family reasons. The vast majority of adults who left California in the 2010s cited jobs (49%), housing (23%), or family (20%) as the primary reason. A recent PPIC Statewide Survey finds that one-third of Californians have seriously considered leaving the state because of housing costs.

From the report: “Highly educated, high-income workers are certainly helpful to the state’s bottom line: they contribute to state tax revenue and use relatively few social services. But the larger picture painted by these trends illustrates the economic challenges faced by many lower- and middle-income Californians. The state’s high cost of living, driven almost solely by comparatively high housing costs, remains an ongoing public policy challenge—one that needs resolution if the state is to be a place of opportunity for all of its residents.”

Fannie Mae's Home Purchasing Sentiment Index for August worsens: 66 percent of respondents said it’s a bad time to buy a home, up from 64 percent last month; while on the sell-side, 75 percent of respondents said it’s a good time to sell, down slightly from 77 percent last month. Consumer sentiment toward home buying hit yet another survey low in July, continuing the downward trend established in March. The percentage of respondents citing high home prices as the top reason for it being a ‘bad time to buy’ also reached an all-time high. Doug Duncan, Fannie Mae Senior Vice President and Chief Economist, added that “While all surveyed consumer segments have reported increased pessimism toward home buying conditions over the past several months, two of the segments perhaps best positioned to purchase -- consumers aged 35-44 and those with middle-to-higher income levels – have indicated even more pessimism than other groups.”

Lumber prices are down, but other building costs are skyrocketing: Even with recent declines in the costs of lumber, building material prices have increased 19.4% over the past 12 months, according to a report issued by the National Association of Home Builders. Buyers are seeing the results in the prices of new homes. The median sales price for a new home (nationally) was $361,800 in June, up 6% compared to a year earlier. The NAHB says that higher costs for softwood lumber and other building materials based on declining availability are driving up the price of new homes. Some builders are even halting new orders because of the difficulty of pricing projects. Read more: Flooded With New Orders, Builders Limit Sales

Studies find link between COVID-19 deaths and overcrowded housing: In the greater Houston, Texas area COVID-19 killed Black and Brown people at a far higher rate than white or Asian people. In The Kinder Institute's 2021 State of Housing in Houston and Harris County Report it is suggested that home overcrowding and labor conditions played a role. According to the report, the overcrowding problem, caused by an increase in cost-burdened households which was in part exacerbated by the pandemic, would have made it hard for a large share of Houstonians to quarantine. In Harris County, Hispanic-headed households are about 10 times more likely to be overcrowded than white non-Hispanic-headed households (10.9% vs. 1.2%). Black- and Asian-headed households are in the middle (4.3% and 4.9%, respectively). Hispanic Houstonians were also the ethnic/racial group with the most outsized death share from COVID-19.

A New York University Furman Center research project into that city’s COVID-19 spread found that it wasn’t necessarily population density but housing crowding that accelerated the virus’s contagion.

Of note: New Geography in 2021 identifies the Riverside/San Bernardino metropolitan area as the third most overcrowded region in the entire United States (overcrowding defined as more than one person per room for a household).

San Diego Housing Initiative hopes to result in delivery of more housing and affordable housing: The City’s planning department is crafting a package of initiatives intended to place the city's housing, mobility and climate goals at the forefront of the community planning process. It also will strive to streamline the Community Plan update process, shortening plan completion dates from four to five years to two to three years. Other initiatives included in the “Housing for All of Us” effort include plans to develop housing on city-owned land and at dormant industrial sites and a push to develop affordable housing options in all parts of the city.

New solar requirements for California buildings approved: The California Energy Commission on Wednesday voted to require builders to include solar power and battery storage in many new commercial structures as well as high-rise residential projects. It is the latest initiative in the state’s vigorous efforts to hasten a transition from fossil fuels to alternative energy sources,

The energy plan, which would go into effect on Jan. 1, 2023, also calls for new homes to be wired in ways that ease and even encourage conversion of natural-gas heating and appliances to electric sources." Because "[h]omes and businesses use nearly 70 percent of California’s electricity and are responsible for a quarter of its greenhouse gas emissions," It is estimated that the proposals approved in August would reduce emissions over 30 years as much as if nearly 2.2 million cars were taken off the road for a year.

Can the housing crisis be addressed separately from the climate crisis? Author Dana Bourland argues in her new book Gray to Green Communities: A Call to Action on the Housing and Climate Crises that climate change and affordable housing crises are inextricably linked. The nation’s housing stock is a significant contributor to climate change, as residential buildings account for 20 percent of greenhouse gas emissions. The book makes the case for green housing, presenting ideas for transitioning to affordable, green housing in a way that not only reduces carbon emissions and promotes resource efficiency, but also recognizes the centrality of housing and racial justice.

California Legislative Update: Below is a summary of some of the housing-related legislative proposals being monitored by ICSD. Bills that have been chaptered, suspended, or have become 2-year bills are noted.

SB 5 would provide for a statewide housing bond measure to be sent to the voters, likely in 2022. Affordable housing advocates desire more funds to support creating more deed-restricted affordable homes, and current bond funds from 2016’s Proposition 1 and 2 will likely be spent next summer.

SB 6 would allow housing development projects in office or retail zones, converting empty retail malls and “big box” stores to land zoned as residential, with provisions to make some of that affordable housing.

SB 7 builds on a 2011 law that eased CEQA regulations for housing, clean energy and manufacturing projects greater than $100 million. The proposal would reduce that requirement to $15 million, as long as 15% of each housing project built is for affordable housing. (CHAPTERED)

SB 8 In response to the state’s ongoing housing crisis, the Legislature enacted the Housing Crisis Act of 2019. The purpose of the HCA is to facilitate the construction of affordable housing by restricting, for a period of five years, actions by cities and counties that reduce the production of housing. SB 8 makes several changes to the provisions of the HCA to ensure the HCA functions as intended. Most notably, this bill extends the HCA’s sunset by five years, to January 1, 2030.

SB 9 Requires ministerial approval of duplexes and urban lot splits, as specified, and allows the life of subdivision maps to be extended by one year. Among its provisions, this bill requires a city or county, including a charter city or county to provide ministerial approval, not subject to CEQA, of a proposed housing development within a single-family residential zone containing no more than two residential units (a duplex), that meets specified criteria. It also requires jurisdictions to provide ministerial approval, not subject to CEQA review, of a parcel map or tentative and final map dividing a lot into two approximately equal parts of not less than 1,200 square feet each for residential use (an urban lot split) that meets specified criteria.

SB 10 Authorizes a city or county to pass an ordinance that is not subject to the CEQA to upzone any parcel for up to ten units of residential density if the parcel is located in a transit-rich area or an urban infill site. Authorizes a city or county to pass an ordinance to zone any parcel for up to ten units of residential density, notwithstanding any local or voter-mandated restrictions on zoning ordinances, as long as the parcel meets the following geographic parameters:

SB 15 creates incentives for localities to rezone commercial land for residential development.

SB 478 limits the floor area ratio and minimum lot sizes that cities can impose on projects with ten or fewer units.

Senate Constitutional Amendment 2 would repeal Article 34 in the California Constitution that requires a vote to approve public housing projects. Article 34 is at times blamed for the paucity of public housing in the state. If passed by the Legislature, SCA 2 would go to the ballot for a statewide vote. (PLACED ON SUSPENSE FILE)

AB 215 establishes a process for a mid-cycle housing element consultation between the state Department of Housing and Community Development (HCD) and any jurisdiction it deems to have not made sufficient progress toward its regional housing needs allocation (RHNA), including a requirement for the jurisdiction to obtain a pro-housing designation.

AB 244 requires the California Housing Finance Agency and others to conduct an affordable housing cost study across all state funded housing projects.

AB 387 establishes the California Housing Authority to develop affordable and mixed-income housing

AB 561 requires the Office of the Treasurer to work with CalHFA and HCD to create an Accessory Dwelling Unit financing product to assist homeowners in the creation of ADUs. (PLACED ON SUSPENSE FILE)

AB 571 prohibits affordable housing or inclusionary zoning fees on the bonus units of a project using the state density bonus

AB 617 allows cities and counties the option of paying other jurisdictions to transfer all or a portion of their Regional Housing Needs Assessment allocation.

AB 787 would authorize cities and counties to receive credit toward their lower income regional housing needs allocation (RHNA) for market rate units that are converted to deed-restricted housing affordable to very low-, low-, or moderate income households, as specified

AB 816 requires the creation of a statewide plan for addressing homelessness and allows for legal action against jurisdictions that do not make progress towards meeting plan goals.

AB 916 prohibits public hearings for proposed room additions for single family homes, and expands allowable ADU height to 20 feet.

AB 1068 requires the Department of Housing and Community Development to create a plan for the use of alternative forms of housing, including modular housing, for the purpose of achieving housing cost reductions.

AB 1322 creates a process for the governing body of a city or county to seek judicial validation that a local measure approved by the voters is in conflict with state housing law. It allows a local government to adopt a resolution declaring that a provision of the charter, general plan, or local ordinance approved by voters conflicts with state law pertaining to housing and therefore the city or county does not have a duty to defend or enforce the measure in whole or in part.

AB1401 Would prohibit the enforcement of parking requirements on new housing projects near transit or in low vehicle miles traveled (VMT) areas. (PLACED ON SUSPENSE FILE)

2021 Legislation
June 2021
Lumber prices skyrocket: According to a recent analysis by the National Association of Home Builders, soaring lumber prices that have tripled over the past 12 months have caused the price of an average new single-family home to increase by $35,872 (although lumber prices have recently began to drop again). This lumber price hike has also added nearly $13,000 to the market value of an average new multifamily home, which translates into households paying $119 a month more to rent a new apartment. Further adding to housing affordability woes, other building material prices have been steadily rising since 2020 and, like lumber, are in short supply as well.

CA production declines: A new report released by the Construction Industry Research Board (CIRB) shows that California housing production was down by nearly 9% in 2020, with 100,550 new building permits issued. This is the second straight year of decline. Multifamily construction was down by 17%, with 2020 marking the lowest number of units built since 2012.

Median home price hits all-time high in California: The California Association of Realtors reports that California’s median home price set a new record in April as the statewide median price surged more than 34% from a year ago. The statewide median home price climbed 7.2% on a month-to-month basis to $813,980 in April, up from March's $758,990 and up 34.2 percent from the $606,410 recorded last April. The year-over-year price gain was the highest ever recorded, and it was the first time since June 2013 that the state recorded an annual increase of over 30%. In April, the median sell price of existing single family homes in the Inland Counties was $500,000 ($545,000 in Riverside and $405,000 in San Bernardino).

What type of housing do millennials want? The National Association of Realtors reported that millennial buyers now make up the largest share of homebuyers at 37%.

Home listings don’t last: The median number of days it took to sell a California single-family home hit another record low of 7 days in April 2021, down from 13 days in April 2020.

What $1 million will get you in 2030, if not sooner: The average home in California is expected to be valued at more than $1 million by 2030, according to research by RenoFi, an online company that specializes in home loans for renovation projects.

In case you missed it, May was National Affordable Housing Month.

A new development in Valencia, CA will have a zero carbon footprint with over 21,000 homes on 15,000 acres and will be the nation's largest net-zero development.

Houses will have solar, electric vehicle chargers, and designs that reduce the need for air conditioning, heating, and ventilation. Additional initiatives like a methane capture program at a dairy farm and rooftop solar installations in disadvantaged neighborhoods will assist in extra carbon credits to reach net-zero. Learn more or watch.

When in drought, is housing out? The Marin Municipal Water District is considering banning new water service hookups to homes in response to worsening drought conditions there. County officials have declared a local drought emergency in light of a “grim and deteriorating” water situation. The National Drought Mitigation Center’s drought monitor recently placed most of the Bay Area as extreme drought zones for the first time since 2015. In Utah, the small town of Oakley has stopped issuing new building permits for projects that require new water connections. U.S. Drought Monitor maps show that almost all of Arizona, California, Nevada, New Mexico, North Dakota and Utah are in a drought. Drought severity is ranked from moderate to exceptional and large areas of those states are considered severe or exceptional. Colorado, Idaho, Montana, South Dakota, southwestern Texas and Washington are also in various stages of drought. Water availability is sometimes used as an argument to stop or curtail growth and could intensify as drought conditions expand and worsen. ICSD will keep an eye on this situation and inform members if/when water conservation measures extend to curtailments on housing permits.

Eliminating parking requirements is gaining momentum throughout the nation; is California next?: AB 1401 would ban local governments from imposing parking requirements on new housing projects near transit or in low vehicle miles traveled (VMT) areas. Proponents indicate that passage would do away with parking requirements that add to the cost of housing. Research from the Terner Center at UC Berkeley found that a parking space can add an extra $35,000 per unit on affordable housing projects. According to a report published in the Journal of the American Planning Association, 14 percent of LA County's incorporated land is devoted to parking. More space in LA is devoted to parked cars than driven cars; the report estimates that parking infrastructure takes up about 200 square miles of land in LA County. The estimated 18.6 million spaces amounts to an average 3.3 parking spaces for each one of the 5.6 million cars in the county. More recent research examines the combined size of all the surface-level parking lots in the LA area. In just the city of Los Angeles, the study finds, these lots take up 27 square miles of space, larger than the entire city of Pasadena. Research indicates that countywide, another 3.7 million people could be accommodated if parking lots gave way to housing. Several cities across the country have removed parking requirements, including Minneapolis, Buffalo, San Diego, and San Francisco. Other cities nationwide are at various stages of the process of removing some or all parking requirements, including Berkeley, Dallas, Seattle, and Raleigh, among others.

Ninety percent of Californians are concerned about housing prices, according to a recent Public Policy Institute of California report, and 33% are considering moving to states with more affordable housing.

Funding proposed for housing in State Budget: After announcing a $76 billion surplus in May, Governor Newsom’s budget proposal includes $9.3 billion for housing and homelessness solutions. $1.75 billion is set aside for affordable housing projects, $100 million to help first-time homeowners make down payments and $3.5 billion to convert hotels and other buildings into homes for those experiencing or teetering on the edge of homelessness.

LA City planning staff have proposed strategies to spread future affordable housing throughout the City. The report provides recommendations for how ongoing updates to the city's 35 community plans and its housing element can establish "fair share" distribution of affordable housing, while also helping Los Angeles meet its obligation to zone for 456,643 new housing units under its regional housing needs allocation. The report suggests exploring expansions to the city's adaptive reuse policy, relaxing restrictions on micro-unit apartments, and expanding protections for tenants and vulnerable communities. Also included is a proposal to explore a citywide inclusionary housing policy, in which developers would be required to set aside a portion of new units in multifamily projects for lower-income households. The report also calls for eliminating barriers to affordable housing developments in high resource communities, and recommends leveraging existing resources like public land or seeking partnership with other public and private entities.

National housing shortage growing, and homes for “starters” declines further. A Mac report found in 2018 that the housing shortage was at 2.5 million homes; in 2020, that number increased to 3.8 million. Entry-level homes make up an increasingly small share of new construction. Starter homes dropped from 40 percent of newly built houses in the early 1980s to just 7 percent in 2019.

The craziness of buying a home in one short tik tok video.

Residential zoning reforms are gaining traction nationwide: The latest Zillow Home Price Expectations Survey (May 2021) suggests that relaxing zoning rules to allow for more and/or more efficient new home construction would be the most effective way to increase supply in a housing market currently near historic inventory lows.In Tacoma, Washington, officials are considering a comprehensive plan that would eliminate single-family zones in the city in both name and regulation. Single-family areas would be redesignated and rezoned to Low-Scale Residential or Mid-Scale Residential zoning types, which would permit a mix of housing types like duplexes, rowhouses, and apartments. Low-Density Multifamily areas would also get a boost to Mid-Scale Residential, a more intensive land use designation than the current one. California SB 9, would allow homeowners to put a duplex on single-family lots or split them without requiring a hearing or approval from the local government. Affordable housing and rental properties would be exempt from the changes. Sacramento’s City Council approved a draft plan in January that would allow multi-family units in any residential area. SB 10 would allow cities to rezone transit centers and job hubs to allow as many as 10 units per parcel. And SB 478 addresses local ordinances that limit the construction of housing based on lot size, which effectively eliminates any chance of building small apartment buildings on land that is already zoned for multi-family housing. It would allow a building to be at least 1.5 times the size of the lot, which generally means allowing multi-story units instead of just a single-family home.

Can the housing crisis be addressed separately from the climate crisis? Author Dana Bourland argues in her new book Gray to Green Communities: A Call to Action on the Housing and Climate Crises that climate change and affordable housing crises are inextricably linked. The nation’s housing stock is a significant contributor to climate change, as residential buildings account for 20% of greenhouse gas emissions. The book makes the case for green housing, presenting ideas for transitioning to affordable, green housing in a way that not only reduces carbon emissions and promotes resource efficiency, but also recognizes the centrality of housing and racial justice.

California Legislative Update: Below is a summary of some of the housing-related legislative proposals being monitored by ICSD.
- SB 5 would provide for a statewide housing bond measure to be sent to the voters, likely in 2022. Affordable housing advocates desire more funds to support creating more deed-restricted affordable homes, and current bond funds from 2016’s Proposition 1 and 2 will likely be spent next summer.
- SB 6 would allow housing development projects in office or retail zones, converting empty retail malls and “big box” stores to land zoned as residential, with provisions to make some of that affordable housing.
- SB 7 builds on a 2011 law that eased CEQA regulations for housing, clean energy and manufacturing projects greater than $100 million. The proposal would reduce that requirement to $15 million, as long as 15% of each housing project built is for affordable housing.
- SB 15 creates incentives for localities to rezone commercial land for residential development.
- SB 478 limits the floor area ratio and minimum lot sizes that cities can impose on projects with ten or fewer units.
- Senate Constitutional Amendment 2 would repeal Article 34 in the California Constitution that requires a vote to approve public housing projects. Article 34 is at times blamed for the paucity of public housing in the state. If passed by the Legislature, SCA 2 would go to the ballot for a statewide vote.
- AB 244 requires the California Housing Finance Agency and others to conduct an affordable housing cost study across all state funded housing projects.
- AB 387 establishes the California Housing Authority to develop affordable and mixed-income housing.
- AB 561 requires the Office of the Treasurer to work with CalHFA and HCD to create an Accessory Dwelling Unit financing product to assist homeowners in the creation of ADUs.
- AB 571 prohibits affordable housing or inclusionary zoning fees on the bonus units of a project using the state density bonus.
- AB 617 allows cities and counties the option of paying other jurisdictions to transfer all or a portion of their Regional Housing Needs Assessment allocation.
- AB 816 requires the creation of a statewide plan for addressing homelessness and allows for legal action against jurisdictions that do not make progress towards meeting plan goals.
- AB 916 prohibits public hearings for proposed room additions for single family homes, and expands allowable ADU height to 20 feet.
- AB 1068 requires the Department of Housing and Community Development to create a plan for the use of alternative forms of housing, including modular housing, for the purpose of achieving housing cost reductions.
- AB1401discussed in more detail above, would prohibit the enforcement of parking requirements on new housing projects near transit or in low vehicle miles traveled (VMT) areas. Donald Shoup provides this excellent analysis on issues related to AB 1401.
Governor Newsom has proposed the creation of a new enforcement unit at the Department of Housing and Community Development (HCD), to have responsibility for monitoring local governments’ compliance with state housing laws. This new Agency could enable HCD to increase oversight

Finally, read ICSD's new Issue Brief, titled: What Are the Impacts of COVID-19 on Small Businesses in the U.S.? Early Evidence based on the 50 Largest MSAs. The full article was published in New Geography in June 2021. Small businesses have been particularly affected by the COVID-19 pandemic. In this study, we model the spatiotemporal impacts of COVID-19 on small businesses across the 50 most populous U.S. metropolitan areas. The results suggest that while the infection and death incidents directly impacted business operations, the social, economic, and demographic vulnerability and public policies were additionally critical to our understanding of these patterns. Our work provides rich implications for practices and public policymaking.