The Pandemic Hasn’t Killed California’s Big Housing Plans — But They Have Mutated

By Matt Levin, CalMatters

Toni Atkins stood on the state Senate floor in January and vowed, come hell or high water, that 2020 would see the state pass a bill to build more homes in California.

Even her wrangling as Senate pro tem wasn’t enough to save Senate Bill 50, a zoning reform proposal pushing for more apartment buildings around California, from a third straight year of failure. The wonky bill had provoked the kind of polemical discourse typically reserved for Supreme Court nominations or Reddit threads on single-payer healthcare.

“I want to personally commit to each and every one of you, and to the people of California, that a housing production bill to alleviate our housing crisis will happen this year,” said Atkins, Democrat from San Diego, imploring her colleagues to bring productive ideas to the table to solve California’s most vexing issue —making it cheaper to live here.

While neither hell nor high water materialized, a pandemic did.

Nevertheless, this week, Atkins and Senate Democratic leaders unveiled a suite of compromise legislation aimed at making it easier to build more housing. While no individual bill is as sweeping as SB 50, developers and housing experts say collectively the six proposals could make a meaningful dent in California’s housing shortage should they become law.

But while championing the art of the possible, Atkins admits that California’s new coronavirus-normal limited what the state could realistically pull off.

“Things have altered and we had to pivot a bit because the world looks very different today,” she said.

Here’s what you need to know about California lawmakers’ latest plans to create more housing, and how COVID-19 has changed them.

The house next door could be a duplex soon

Atkins’ suite of bills retains one of the more controversial provisions of Senate Bill 50, the “upzoning” proposal from Sen. Scott Wiener, Democrat from San Francisco: the elimination of single-family-only zoning throughout California.

Wide swaths of cities around the state currently prohibit any type of housing more dense than a single-family home. A new jointly-authored bill from Atkins and Wiener would force cities to allow homeowners and developers to convert single family homes into duplexes or even fourplexes, if the property is big enough. Those conversions would not have to be reviewed for environmental impacts by local governments, an often lengthy and expensive process.

“There are hundreds of thousands of two-car garages that are just jammed with crap. And it’s ready for a builder to come in and demo the garage and scrape it and drop in a new home ,” said Ben Metcalf, managing director at the UC Berkeley Terner Center for Housing Innovation and former head of the state housing department. “There’s lots of potential here.”

While technically California ended single-family-only zoning with the passage of a 2019 law that allows homeowners to build accessory dwelling units —granny flats —in their backyard, the prospect of duplexes, triplexes and fourplexes popping up next door is sure to engender more pushback from homeowner groups resistant to more visible changes to their neighborhoods.

“I would not like to see fourplexes going up here,” said Susan Kirsch, an anti-development activist in Marin County who founded a statewide lobbying group to help defeat Wiener’s earlier proposals. “These streets are very narrow, it’s going to increase traffic, it’ll hurt parking.”

Kirsch cautioned that if local governments wanted to pursue denser development, they should be allowed to. But she chafes at the idea of the state issuing a top-down edict.

“As a state law, I think it’s an intrusion on community rights, pushed by developers with huge pots of money,” she said.

The idea of loosening local zoning rules has gained traction in national progressive circles, with Democratic lawmakers in Minneapolis and Oregon prohibiting single-family-only zoning last year. Local ordinances prohibiting denser development have historically been associated with excluding renters, who skew lower income and non-white, from more affluent communities.

Atkins says she doesn’t think single-family-only zoning is inherently bad policy, and cautions that the option of converting a home into a fourplex won’t erode neighborhood character.

“I love my neighborhood, I live in a neighborhood that is single-family and has some multi-family spread throughout and it works,” said Atkins. “I wouldn’t call this the death knull of single family neighborhoods. I would think that’s a mischaracterization.”

What the pandemic took off the table

Eliminating single-family-only zoning has a new allure for lawmakers in a post-coronavirus world: It doesn’t cost the state any money.

Conspicuously absent from Senate Democrats’ housing package is any proposal that would devote new state dollars to building low-income housing or allow cities to beef up infrastructure to accommodate it. Confronting a recession-induced budget deficit the Newsom administration has pegged at $54 billion, Atkins said proposals that might have been possible in January simply aren’t feasible right now.

“In the moment we have to be strategic and focused, but it doesn’t mean all those things go by the wayside,” said Atkins.

Instead, Atkins’ package tries to incentivize market-rate developers to include more low-income units in their projects. A bill from Sen. Nancy Skinner, Democrat from Berkeley, would enhance an existing state “density bonus program” that allows developers to build taller and denser if they charge below market-rates for some of their units.

But while low-income housing advocates say they are pleased Senate Democrats are still addressing housing issues, they want a stronger focus on helping those who were already struggling before the novel coronavirus threatened their livelihoods.

“My sense is that there’s a real desire to see the market help fix our problems, and I think that’s kind of fundamentally at odds with our perspective,” said Chione Flegal, managing director at PolicyLink, an organization that advocates for greater equity in housing policy.“Although there’s certainly a role for the market, the last two decades have shown that the market is not working to build supply for people at the bottom of the income spectrum —and it’s never worked for communities of color.”

Flegal and other advocates say more density must also be accompanied by stronger protections for communities sensitive to gentrification and displacement pressures.

Some of the precious dollars cities and low-income housing advocates are seeking have instead found their way into another part of Atkins’ housing proposal: a $300 million to $500 million annual plan to help renters and landlords impacted by coronavirus.

Unveiled last week but included in this package of housing bills, the program would give renters 10 years to pay back rent bills missed because of COVID-19 directly to the state. Landlords would be compensated with tax credits they could sell on secondary markets for cash.

Beyond Atkins’ package, other proposals for affordable housing dollars are still circulating in the Legislature. But the pandemic-induced budget deficit has made the road ahead for those bills daunting.

A proposal that would have eliminated the mortgage interest deductions on vacation homes to fund homeless housing died earlier this week. Two remaining high-profile bills that would spend billions annually on low-income housing have not identified a new revenue source, meaning cuts would have to come from elsewhere in the budget to offset their cost.

Cash-strapped local governments are especially dismayed at how the pandemic has reshaped state housing proposals. Before coronavirus struck, they had hoped to see portions of a January budget surplus devoted to low-income housing, infrastructure grants and local planning departments.

That hope has dimmed significantly. And while Gov. Gavin Newsom’s post-pandemic budget proposal preserves funding for an important tax credit program for low-income developers, it claws back some money cities had hoped they could tap for housing-related programs.

A spokesperson for the League of California Cities, which represents municipalities across the state, said it was still reviewing Atkins’ proposals and not yet taken a position on the package.

Cities did score one housing-related victory because of the pandemic: A slew of bills aimed at reducing the “impact fees” local governments could charge developers on new projects has been shelved as cities cling to any source of revenue they can get their hands on.

A pandemic opportunity? Converting retail real estate to housing

The economic downturn caused by the novel coronavirus could contain a silver lining for California: When that big box retailer or shopping mall goes out of business, all that real estate could be converted to new housing.

The new Senate housing plan tries to seize on that opportunity. A bill from Sen. Anna Caballero, Democrat from Salinas,would make more land zoned for office parks or retail outlets eligible for housing development and streamline the approval process for developers who want to build on that land.

“There is real interest in combining housing and retail,” said Dan Dunmoyer, president of the California Building Industry Association, the primary developer lobbying group in the capital. “Some of the national home builders and regional builders are looking at these sites.”

While homebuilders may be bullish on converting retail to housing, they are less enthusiastic about incentivizing construction in denser, urban environments near public transit.

A bill from Sen. Wiener included in the Senate housing package would give cities the option to speedily approve smaller-scale housing developments in transit-rich areas and urban infill sites.

Although outbreaks of novel coronavirus have been more associated with overcrowded housing than density, Dunmoyer says that the pandemic could be reshaping where Californians want to live.

“If you’re going to be forced to shelter in place, do you want a two-bed, two-bath condo in a city or do you want a three-bed, two-bath home with a backyard?” said Dunmoyer.

For his part, Wiener doesn’t believe demand for living in urban environments close to jobs will be all that affected by the pandemic.

“People have a lot of different reactions to the virus, but anyone who is really looking at the facts knows that the whole notion that housing density fuels COVID is simply false,” he said.

Will these bills actually become law?

Key to any housing bills moving forward in the state Legislature is the support of the State Building and Construction Trades Council, the construction workers’ union that donates heavily to state Democratic lawmakers.

Asked if he supported Atkins’ housing package, council president Robbie Hunter said that while he’s still reviewing all the proposals, overall the package works for his members.

“She’s made an effort to make sure that workers that work in construction, particularly affordable housing, are paid a fair wage,” said Hunter. “You can’t address poverty in housing by driving construction workers into poverty to build it.”

Both Caballero’s retail-to-housing bill and a separate Atkins proposal to grant larger housing projects the same speedy environmental reviews as sports stadiums contain provisions guaranteeing that union-level wages be paid to construction workers.

But labor backing doesn’t guarantee a housing bill becomes law. Wiener’s SB 50 was blessed by labor, and even with Atkins’ support couldn’t make it past a Senate floor vote.

So what makes this time different?

While still controversial, none of the individual proposals in this housing package are as aggressive as SB 50. That allowed Atkins to build support for the package from a variety of lawmakers, including those who opposed Wiener’s previous measures.

“Obviously I spent years trying to pass SB 50 and we were swinging for the rafters and it didn’t cross the finish line,” said Wiener.“But (Atkins) handled this very wisely. She decided the way to do this was to convene a working group of senators who haven’t been quite vocal, senators who were on both sides of SB 50.”

If it passes the Senate, the new housing package will have to get through the state Assembly —a body filled with the types of moderate suburban lawmakers and veterans of city government typically opposed to encroachments on local control.

Atkins said she had briefed the governor’s staff on the housing package, and is hoping the governor will support the legislation.

“We would love to have his support obviously, as soon as he would like to give it, it would be helpful,” said Atkins. “But the Legislature has its own process and I’m optimistic about our chances with this package.”

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