2 new housing bills just became law. Are they the answer to SLO County’s housing crisis?
Two California housing bills recently signed into law could lead to the construction of an estimated 2 million new homes across the state. Will they help ease San Luis Obispo County’s housing crisis?
Gov. Gavin Newson signed Assembly Bill 2011, also known as the Affordable Housing and High Road Jobs Act of 2022, and Senate Bill 6, also known as the Middle Class Housing Act of 2022, on Sept. 28.
The two bills, Newsom said in a statement, open up commercial property for residential home development, giving cities access to land that was previously off-limits.
Officials say SLO County may feel the impacts of AB 2011 and SB 6 less than other parts of the state because of local policies already put in place.
How will new laws change housing construction in California?
The new housing laws, which go into effect July 1, 2023, share a few similarities.
Both require developers building residential homes on commercially-zoned property to pay their workers a “prevailing wage” — the wage set by collective bargaining agreements.
They also ensure that homes covered by these laws will be built on former office, retail or parking land, and that nearby commercial tenants be given notice of those new housing developments.
From there, the laws diverge.
AB 2011, which is geared toward building affordable multifamily homes, creates a ministerial process for building on commercial land that provides exemptions to the California Environmental Quality Act (CEQA).
According to SLO County Yes In My Back Yard (YIMBY) organizer Kevin Buchanan, CEQA is often used by opponents of housing development as a means of denying new housing development, even though infill housing has a limited environmental impact.
“Building dense housing in (urbanized areas) is one of the more environmentally-friendly things we can do at this point, which is going to obviously provide homes for people,” said Buchanan, whose group advocates for housing development. “It’s going to prevent sprawl into green space, which has wildfire risk.”
This unique form of residential development comes with some caveats, as these homes built on commercial land can follow two separate tracks.
Under AB 2011, if a development is being built as 100% affordable housing in a commercial zone, the units must be sold below market rate (BMR).
Conversely, if the development will consist of mixed-income homes, 8% of the rental homes must be priced at a rate affordable to very low income buyers, with an additional 5% priced for extremely low income buyers.
Developers can ignore those price requirements by pricing 15% of the homes for buyers at lower income levels.
Owner-occupied homes in these mixed-use developments must also follow a specific guidelines, as 30% of these homes must either be priced at a rate affordable to moderate income buyers, or 15% priced for lower income buyers.
SB 6 similarly exempts residential developments on commercial land from California Environmental Quality Act requirements, but forgoes the below-market-rate unit requirements and the ministerial pathway for developers.
SB 6 has a more stringent labor requirement for developers who choose not to build affordable housing, requiring them to hire a “skilled and trained workforce” in addition to paying those workers the prevailing wage.
Will SLO County see more housing as result of bills?
Together, Buchanan said AB 2011 and SB 6 could increase housing near the largest commercial areas of several cities in SLO County.
“We could potentially see a lot of great (commercial) corridors” such as downtown San Luis Obispo and Grand Avenue in Arroyo Grand and Grover Beach become places where it’s “easier to build mixed-income, mixed-use spaces,” he said. “(That) would be great to see.”
San Luis Obispo community development director Michael Codron said SLO may see less of a benefit from the new laws than its neighbors.
Codron said the city of SLO already has provisions for mixed-use development in its building codes, though there are some differences from the new laws.
He said the city began to include mixed-use development policies in its housing policy as early as 2001, and the city’s 2020 housing element removed some of the zoning regulations on housing developments on commercial and manufacturing zones.
Codron said SB 6 would increase the number of dwelling units per acre in commercial zones in SLO from 12 to 15 units.
“In order to be efficient with the land that we’ve allocated for growth, we need to allow for a combination of commercial and residential uses,” Codron said.
Between local zoning policies and the new laws, Codron said the city of SLO is still on track to grow its housing stock enough to meet projected residential growth. The city expects to need enough housing for 57,200 people by 2060.
“I do not see AB 2011 or SB 6 enabling developments that we don’t anticipate or that would otherwise like tip us out of balance in terms of what our projections for housing units and population would provide for,” Codron said.
Aaryn Abbot, vice president of San Luis Obispo building firm Abbot Reed Builders, said that while the new laws will free up plenty of land for housing development, local builders may choose not to take advantage of the newly available land because of the costs associated with paying prevailing wages.
Demand for housing is always high in Californina, Abbot said, and finding land that is zoned for residential housing is always a challenge.
That doesn’t make the new laws the right way to address the housing shortage, he added.
In larger metropolitan areas in southern California and the Bay Area, Abbot said, unions are more common, and paying prevailing wages could be more feasible.
On the Central Coast, Abbot said, that requirement could increase the cost of development by 20% to 35%, which “eliminates your ability to develop the project.”
Building on the Central Coast requires operating on tight margins, Abbot said, which can easily lead to losses even without paying prevailing wages.
“We develop in an area where sometimes land residuals actually are negative,” he said, meaning that building housing is so expensive and risky that it’s sometimes not worth tackling the project.
Removing CEQA requirements helps expedite the building process, and can protect developments from being shut down by people who don’t want a development to be built, Abott said.
In many large developments, he said, CEQA holdups will add one to two years of delays and around $1 million in consultant costs, but these savings are still offset by the prevailing wage requirements in the new laws.
Abbot said this tradeoff between CEQA exemptions and prevailing wages was made in the “meat grinder” of politics, where he said unions have influence.
“The politically expedient thing to do is to put all of that costs onto housing developers because housing development is unfortunately, politically not very popular,” Abbot said. “We need the affordable housing and market rate-driven developers do have a role to play that significantly can help, especially on the entitlements side, but we don’t have to put all of the burden on them.”
While SLO County’s YIMBY chapter did not directly contribute to the lobbying that supported the new laws, and the impact could be limited locally, Buchanan said the overall increase in housing could help alleviate California’s housing shortage.
“It’s exciting to see that California is making progress here,” Buchanan said. “Steadily, each year now, we’re seeing more of these housing bills come up, so it helps us keep the momentum going.”
This story was originally published October 21, 2022 at 8:00 AM.
