California Legislature Approved 4 New Bills to Support Building Millions of Units of Affordable Housing in Commercial Corridors

California, like many states, suffers from a lack of affordable housing. According to the California Department of Finance, the median price of a single-family home in May 2022 in California was $898,980, up a significant 1.6% over the previous month and an increase of nearly 10% over the same time last year.

AB 2097, amounts to a statewide boost to residential and commercial development near public transit. The bill prohibits local municipalities from imposing any minimum car parking requirements for projects located within a half mile of metro, bus, or other transportation centers.

AB 2221, incentivizes ADU(Accessible Dwelling Unit) construction by clarifying rules around “granny flats”. Under existing law, developers are allowed to add the units only to existing multifamily buildings. AB 2221 extends that allowance to proposed projects. It also clarifies local agencies’ timelines for approving ADU, or accessory dwelling units, projects and raises certain height limits, and other changes.

Smartly, California is turning to the sometimes underutilized commercial space to convert it into residential living space. The bills are incentivizing affordable housing construction in area’s not traditionally thought of as residential living spaces. To qualify, 100 percent affordable projects must be located in areas currently primarily used for office, retail and parking, and mixed-income projects must be located in “commercial corridors” – local roads typically used for strip malls and parking lots. With the move to more remote workforces post-covid, more spaces like this have opened up providing the potential for more residential inventory. AB 2011 and SB 6, are companion bills that incentivize affordable housing construction in commercial areas. Under the AB 2011 bill, a developer can build housing “by right” — which means skipping lengthy and costly local review processes, including the cumbersome California Environmental Quality Act, or CEQA — as long as they pay workers union-level wages and offer health care benefits, among other requirements.

The legislation is intended to “expand the potential sites where housing can be developed, while directing development away from existing residential neighborhoods — in particular, existing single-family neighborhoods,” according to a bill analysis.

These 4 bills come on the back of California’s SB 9 bill signed on January 1^st which permits development of up to four residential units on single-family lots across California.

Proponents believe it will allow homeowners to ease the state’s housing shortage and protect renters from ever-increasing rents in more expensive areas. They say it creates a path for homeowners to establish multi-generational equity, while creating new housing locations for residents normally priced out of the market. Many cities across California, however, are suing over SB 9, stating that it strips zoning authority from local municipalities where it has traditionally been placed.

According to California state housing analysts, California must build 2.5 million homes by 2030 to address the current housing shortage. Of those, nearly half – or at least 1 million, authorities say, need to be affordable to low-income households to maintain the state’s economy.  Opponents to the bill say while the intent is to reduce a significant housing shortfall, it does not provide funding to address the traffic, health, school, safety, or infrastructure needed when additional housing density is delivered.  Opponents also believe SB 9 will raise home and land values in urban areas, making it harder for first-time homebuyers.

Most importantly, the SB 9 bill does not require the newly created homes or lots to have any affordability covenants, or to be restricted to moderate- or lower-income households, therefore not accomplishing the most important goal of the legislation.

The bills are currently in the hands of Governor Gavin Newsom for signature.

Programs similar to these bills are also in place in New York. In his 2022 budget, former Governor Andrew Cuomo included measures for adaptive reuse of commercial and hotel properties to create permanent affordable housing. Proposed measures would relax light and air requirements for Class B and C commercial spaces in Midtown (defined here as the area between Ninth and Park avenues from 14th to 60th streets), and for hotels through most of the city, for conversion to either supportive housing or at least 20% affordable housing over the coming five years.