California Housing Bills Face Crucial Hearing Today

Bills designed to allow more starter homes and apartments near transit face an uncertain future in the state Senate's housing committee.

Happy Tuesday, and welcome to another edition of Rent Free. This week's newsletter takes a look at two important pieces of California legislation and the crucial committee hearings that they face today.

---

Getting the YIMBY Revolution Working

Over the past half-decade or so, the California Legislature has passed dozens of bills that peel back state and local restrictions on home construction.

Despite this flurry of new legislation, actual home construction in the Golden State has continued to stagnate. As a report from YIMBY Law detailed back in February, developers have been slow to make use of laws that are designed to make their jobs easier.

The conclusion of that report, and a consensus among the state's housing supply advocates, is that reforms have been hopelessly compromised by legislative mandates and politically convenient carve-outs to powerful interest groups.

Builders are allowed to bypass local zoning rules to build homes on commercial corridors and church land, provided they include affordable housing, pay union wages, build to exacting environmental standards, and more. Local governments, often none too keen on new housing, have proven remarkably creative at designing roadblocks to stop housing projects that benefit from state-level streamlining.

"Everybody wants a piece," said YIMBY Law's Sonja Trauss to CalMatters back in February. "The pieces taken out during the process wind up derailing the initial concept."

This year, the Legislature is considering a number of bills to limit some of these mandates and overcome local obstructionism.

Among the 13 housing bills scheduled for a hearing in the Senate Housing Committee today are Senate Bill 677 and Senate Bill 79.

The former would add many additional protections to lot splits and duplex projects that were legalized on paper in 2021 via that year's Senate Bill 9. The latter would allow more apartments near transit stops.

Proponents of the bills say they'll go a long way toward getting the state's YIMBY revolution working. But late-breaking opposition from many of the same groups that demanded compromising carve-outs in the first place, and a supply-skeptical Housing Committee chair, could derail these efforts.

Fixing Missing Middle

Perhaps the most underperforming California YIMBY bill is S.B. 9. Passed in 2021 and implemented in 2022, the bill allowed property owners to construct duplexes on single-family-zoned lots and divide single-family lots into two properties.

Analyses of early versions of the law suggested that it could result in hundreds of thousands of new units in the state's most expensive neighborhoods.

Instead, as white papers and media investigations have detailed, the law's unit yield numbers are in the hundreds.

Advocates say the legislation's effectiveness was limited by regulations on the size of new lots created by S.B. 9 and a provision that required property owners to live on-site if they wanted to do a lot split.

Local governments also piled fees, affordability requirements, and impractical design mandates to prevent S.B. 9 projects.

"It's an all-you-can-eat buffet of local subversions with the law," Nolan Gray, legislative director of California YIMBY (and occasional Reason contributor), told Reason back in February.

S.B. 677, written by state Sen. Scott Wiener (D–San Francisco), attempts to fix these loopholes by ending owner-occupancy and lot-size requirements. It also limits local government fees and design requirements.

Housing Near Transit

Another longtime priority of California's YIMBY reformers has been allowing larger apartment buildings near transit stops.

In 2018 and 2019, Wiener had introduced ambitious bills to do just that. Both failed in the Legislature, but those bills served as a conversation starter that's informed much of the subsequent debates around policy in the state.

This year, Wiener is trying again with S.B. 79. The bill would establish state zoning standards that allow for up to seven-story apartment buildings within half a mile of train stations and major bus stations.

The bill would also allow public transit agencies to develop housing on land that they control.

Because current state law does not require housing built near transit stops to include parking spaces, housing allowed under S.B. 79 would effectively be exempt from minimum parking requirements.

An Uncertain Future

In the run-up to today's hearing, a wide range of interest groups issued letters opposing S.B. 677 and S.B. 79.

Some of this opposition is unsurprising. The California League of Cities, which typically opposes any state preemption of local zoning powers, has come out against S.B. 677.

In a letter to Wiener, the League says that the bill does too much to limit local governments' "flexibility" in regulating duplexes and lot splits. By limiting impact fees, the bill prevents local governments from recouping the costs of new development, the League says.

More novel is the opposition of affordable housing developers to S.B. 79.

In a letter sent last week to Wiener, a coalition of nonprofit builders registered their "strong concerns" with the bill.

By not mandating that new developments near transit include affordable units, the bill "will lead to the production of market-rate housing near transit at the expense of affordable housing, rather than to the development of both in tandem," they wrote.

Stacking the deck even more against S.B. 79 and S.B. 677 is the apparent hostility of Senate Housing Chair Aisha Wahab (D–Hayward).

Wahab, as the San Francisco Chronicle reported earlier this month, has derided past state streamlining bills as "giveaways to developers." The state senator has frequently criticized efforts to exempt new housing projects from minimum parking requirements.

Pro-housing lawmakers could try to "roll" Wahab by convincing other Democrats on the housing committee to vote in favor of housing bills over her objections. But as Politico notes, this is considered a confrontational move in the Legislature.

If S.B. 79 and S.B. 677 do die in the Housing Committee, there's a chance that they could still be revived in another committee or brought directly to the floor by the Senate president pro tempore. Those would also be extreme measures.

---

Quick Links

• The Trump administration is reportedly considering cuts to the federal government's Section 8 housing voucher program.
• Also, the administration's rollback of fair housing regulations continues apace.
• A California housing bill that would exempt urban infill housing from the state's environmental review law passed out of a crucial Assembly committee yesterday.
• Tariffs continue to weigh heavily on U.S. homebuilders.
• Rising insurance costs and special assessments are making Florida's condo owners desperate to sell, reports The Wall Street Journal.