This policy brief was authored by Alex Schafran (Schafran Strategies) and Julie Aguilar (California Community Builders). We welcome feedback on our publications and invite readers to reach out to Adam Briones (abriones@ccbuilders.org) to share your perspective.
It’s June in California, which means a few things: The state budget gets adopted, legislation switches houses, and CCB releases Part 1 of our annual two-part analysis of homeownership legislation!
Last year, we noted two important things. One, California’s homeownership rates remained persistently low. Only 54.2% of Californians owned their homes in 2021, a rate similar to what we saw during the worst year following the foreclosure crisis or when interest rates were persistently high during the 1980s. Two, the 2021-22 session generally saw a significant uptick in the quantity, scope and ambition of homeownership-related legislation than was introduced in the two previous sessions. California legislators were beginning to take the homeownership crisis seriously, especially because of its disparate impact on BIPOC families and communities.
So, how are we doing in 2023?
The numbers haven’t changed significantly. The 2022 homeownership rate is slightly better than it was in 2021: 55.3%. While we are a glass-half-full organization, the current (very, very high) interest rate environment makes it impossible to feel like this uptick is the beginning of a rebound — barring major policy changes. The massive racial and ethnic homeownership gap in California persists: As of 2021, the Black homeownership rate was 36%, the Latino rate was 46%, Indigenous and Pacific Islander rates were 45%, while the non-Hispanic white homeownership rate sat at 65%, the highest of any demographic group. Homeownership remains persistently out of reach for too many Californians, especially in communities of color.
Despite these challenging numbers on the ground, we remain very hopeful on the legislative side.[i] While this is a down budget year, which means you can’t expect the same level of ambition as last year, legislators have put forth significant legislation that is important to homeownership. Important land use legislation includes homeownership options as possibilities, as do the key housing finance bills being considered, something which has not always been the case. Some bills that address specific problems for homeownership, including bills like AB 572, which focuses on runaway Homeowner Association (HOA) fees. This bill is one of many that touch on important facets of Multifamily Homeownership (MHO), one of CCBs top housing priorities. Legislators are also continue to consider study bills and reporting bills that could direct more attention to this critical piece of our housing crisis.
The budget, unfortunately, remains the sore spot for this session. Key homeownership programs -- the new California Dream for All shared equity homeownership program and other down payment assistance programs — took the brunt of the housing-related budget cuts. All told, $350 million was cut from homeownership in the budget, and it appears that these cuts have remained during final negotiations between the governor and the legislature.[ii]
Land Use Reform
Reforming California’s land use regulations -- both what is allowed to be built, and the process for doing building — is an important piece of the housing puzzle. One new program being proposed this session comes from us: SB684 would enable small lot subdivisions in certain parcels in order to create new, more affordable homeownership opportunities.
This session also has a handful of important proposals to strengthen existing land use streamlining programs: SB35, SB9 and the Density Bonus. All include homeownership as eligible tenures or impact homeownership development in important ways.
SB423 would extend 2017’s SB35 program beyond the current sunset date in 2026. SB35 helps streamline housing in jurisdictions that have not met their Regional Housing Needs Assessments (RHNA) targets, and has been an important source of affordable housing since its inception, especially in places like San Francisco. SB4 focuses on streamlining 100% affordable housing developments on faith-owned land. It creates ‘by-right’ or ministerial approvals for eligible projects, requiring cities to automatically allow projects automatically that meet the stated criteria. Owner-occupied housing is an eligible use in both SB4 and SB423.
SB9 was passed in 2021 to facilitate duplexes, lot splits and other developments that help turn single-family homes into housing opportunities for more families. While the law has promise, research has shown that more work remains to be done in order to reach its potential. SB450 makes the law clearer — and supports enforcement when jurisdictions try to block it.
The state’s Density Bonus program is another key land use strategy, offering additional density as a carrot in exchange for increased affordability of the proposed units. AB1287 would add some additional carrots to the Density Bonus program, while preserving affordable homeownership tenures as eligible types of uses.
Major Funding bills
In a down budget year, major funding bills generally mean either bonds, bonds on the ballot, or creating enabling legislation that allows funding programs to be built (without actually funding them). This year has all of these, and they all include homeownership as an eligible tenure. AB1657, the Affordable Housing Bond Act of 2024, would place a $10 billion bond on the March 2024 ballot. These monies would be distributed across a range of state housing finance programs, many of which support homeownership. SB834, the California Family Home Construction and Homeownership Bond Act of 2023, would authorize $25 billionB in general obligation bonds to finance downpayment assistance programs and infrastructure finance programs.
On the enabling side, SB440 would enable all regions in the state to follow the Bay Area and Los Angeles’ lead and create regional housing finance agencies. These agencies can do many things, from helping smooth out the housing pipeline to building housing portals to financing housing - especially if they are able to raise local monies. This proposed enabling legislation includes owner-occupied housing as an eligible category.
Finally, there is one important spending program in the main legislative session (as opposed to in a budget trailer bill). SB255, the Community Anti-Displacement and Preservation Program (CAPP) would create a new program aimed at helping public and non-profit sector organizations buy certain types of rental buildings and convert them into more stable housing tenures. Community land trusts and limited equity housing cooperatives, two of the ‘Affordable’ MHO tenures we feature in our recent report, are eligible uses.
Bills Supporting Multifamily Homeownership (MHO)
One important aspect of having the above land use reform bills include homeownership is that each of them works to bring more multifamily housing to California - one of CCBs central goals. This combination of multifamily and homeownership means more opportunities for multifamily homeownership, whether on the smaller scale through SB9 or through larger developments via SB35, SB4 and the density bonus.
Other notable bills that make strides to support MHO in different ways. Two of the most important address significant MHO issues: AB572 would restrict the ability of Homeowners Associations to excessively raise HOA fees, a major issue for MHO homeowners, especially low- or moderate-income households and people on a fixed income. Curbing the rapid rise of HOA fees is a key piece of the larger support network we need to build to better support MHO, and we are pleased to see this issue get some attention.
AB1033 would allow accessory dwelling units to be sold separately from the main house, a right that is currently very limited in California. This is the kind of seemingly small thing that can make homeownership in general and MHO, specifically, more feasible. Smaller households and entry-level homebuyers will now be able to buy ADUs, which may be an ideal short- or long-term solution for their homeownership needs. This, in turn, can help homeowners in the larger house maintain their housing. It can also make intergenerational housing and other forms of shared homeownership easier. We highlight AB1033 in our report for this reason.
Community Land Trusts (CLTs) are an important form of MHO, and the state legislature is beginning to give them more attention and support. AB430 helps open up some of the benefits of the welfare tax exemption -- a key housing law which exempts certain forms of affordable housing from property taxes — to CLTs. AB84 helps CLTs stay qualified for this exemption even as conditions for their resident-owners change. AB671 makes sure that CLTs are eligible for CalHome programs to help them buy buildings. AB312, which would help create a new state portal for finding affordable housing — including MHO — didn’t make it out of the Assembly and into the Senate, but represents an important future piece of the housing data infrastructure needed to really make affordable MHO more widespread. It doesn’t help to have the units if folks can’t find them.
AB469 would exempt MHO tenures from one of the worst pieces of California housing law — Article 34. Passed in 1950, Article 34 is a racist piece of the State Constitution passed in 1950 which requires a public vote for any public subsidies of ‘low-rent’ housing. The state has been chipping away at it ever since, and we will likely vote on a repeal in 2024, but this proposal would clarify that affordable MHO tenures do not need a public vote.
There were two notable MHO-facing bills that didn’t make it out of their original legislative house. AB312, would have helped create a new statewide online portal for finding affordable housing — including MHO. As we flagged in our MHO report, a portal of this kind represents an important future piece of the housing data infrastructure needed to really make affordable MHO more widespread — it doesn’t help to have the units if folks can’t find them.[iii] AB919 would have given tenants and community organizations the right to make an offer on multifamily buildings that are put up for sale, a statewide version of what’s often known as Tenant/ Community Opportunity to Purchase Acts (TOPA/COPA). Many MHO providers like CLTs see TOPA/COPA as an important provision that helps convert at-risk rentals into affordable MHO opportunities.
Finally, lawmakers got into the weeds on AB288, a bill which would help co-op owners transfer their homes to their heirs without going through probate or having a trust. It’s one of those little things that are so critical for building generational wealth and are key to making MHO equal to single-family homeownership.
Social Housing, Tribal Housing, Homeownership plans and more
This final set of bills varies widely — a good sign, since homeownership is a complicated system that has a lot of moving parts. Social housing, a system for creating a stronger public role in housing development based on successful examples in Europe and Asia, is gaining steam in California. Both social sousing bills this session — AB309, which would create a public developer in California, and SB555, which is a social housing study bill -- include homeownership tenures as eligible types of housing. This follows the success of similar type programs in Vienna and Singapore.
California is also working to advance Tribal Housing opportunities for California’s 109 federally recognized tribes and connected communities. SB18 is one of two tribal housing bills this session, and includes homeownership as an eligible use. The bill would establish a housing fund to construct and rehabilitate homes for sale. This is a critical piece can help ensure 21st century homeownership reaches indigenous communities in ways that the tribes themselves can craft as they see fit.
Finally, SB1508 — a CCB co-sponsored bill with The Two Hundred for Homeownership — would further the presence of homeownership as a priority in the state housing plan. AB394 would require some additional reporting on homeownership from state agencies. And SB726 would extend some of the property tax exemptions we discussed earlier to veterans with disabilities and their families, creating a more sustainable homeownership for a group that really needs it.
Conclusion
All told, we remain upbeat about the legislative prospects for homeownership -- and for addressing the racial wealth gap -- despite a difficult budget year. There remains room for significant improvement, and we hope that our 2024 Analysis shows next-step ambition, especially around supporting MHO effectively with both financing and smart regulation. We also need to address the budget issue: Programs like California Dream for All, which CCB helped design, can only be effective in the long term if we can sustainably fund them in a stable fashion and give them time to become more fiscally independent. We’re committed to building a vision of state housing finance that doesn’t pit prospective and existing BIPOC homeowners against renters, the unhoused or anyone else in our communities. This will mean some bold action and new thinking on budget and policy, and CCB is committed to being a partner with anyone who feels similarly.
**********
[i] This analysis focuses primarily on bills that made it through their first house and are technically alive at the time of publication. This is not a hard and fast rule, and we do mention some bills that did not survive the first house. We also focus on bills that do include some connection to homeownership, rather than bills that could or should include it but do not. If you feel we missed an important bill that matters to homeownership, let us know.
[ii] We will do a more thorough job examining the budget in our Part 2 analysis in the fall.
[iii] Future versions of AB312 should include more explicit references to affordable MHO tenures like BMR condos and CLTs. Building a more functional market for these units is essential to their development - and to their appeal to homeowners looking for a less risky form of homeownership.
