New state bill could fund affordable housing near transit in California cities

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A new bill working its way through the state legislature could provide California cities with more funding for affordable housing and public transit projects.

Senate Bill 961, drafted by state Sen. Ben Allen (D-Santa Monica), has already cleared two legislative committees without a single no-vote. It would allow a portion of tax revenue from businesses and properties around rail stops and major bus lines to pay for affordable housing, parks, new stations, and streetscape improvements.

The measure wouldn’t raise taxes, but would allow cities and counties to use a portion of future tax revenue collected in designated transit zones for specific types of projects.

The bill ensures, for instance, that 40 percent of the money be spent on low-income housing. Of that, half would be set aside for developments geared toward homeless residents.

In Los Angeles, the bill could have a big impact due to the city’s growing rail network and severe shortage of affordable housing.

In 2016, voters approved ballot measures HHH and JJJ, creating new funding sources and incentives for affordable developments, but much bringing down the cost of housing for many residents won’t be easy. A recent analysis from the California Housing Partnership Corporation found that the LA area is short more than 500,000 units of affordable housing.

Denny Zane, director of Move LA, which helped to write the bill, tells Curbed it would give cities like Los Angeles new ways to fund these projects.

“If you’re a city or a county and you’re eager to see affordable housing built near transit, this is a tool for that,” Zane says.

The remaining 60 percent of available tax revenue in transit zones could also be spent on housing, but cities would have the option to put it toward a menu of transit-related projects as well. Those include construction of new stations (including those for water transit), pedestrian improvements, bike infrastructure, parks near transit stops, and even offsite parking garages for new developments.

The transit-oriented zones created by the bill—officially called Neighborhood Infill Finance and Transit Improvement districts—would be similar to those proposed in Senate Bill 827, which would have overridden local zoning rules in areas well-served by trains and buses (the bill died in committee after pushback from neighborhood groups and city officials).

But SB 931 does not require cities to allow certain projects or slash restrictions for new development projects. Instead, cities and counties would be able to decide how and when to begin using new tax revenue in these areas, which would then be used to fund bonds for new development.

It also offers a way for communities to tap into tax revenue without obtaining voter approval—a necessary step in California, since the 1978 passage of Proposition 13. That’s because the money collected in transit zones wouldn’t require a percentage increase in sales or property tax. Instead, as revenue from these sources rises (due to inflation, annual increases, or the arrival of new businesses), local governments would be able to access some of the extra money.

It’s a complex arrangement, but it’s similar to the system used to finance California’s Community Redevelopment Agencies, until they were dissolved in 2012.

Zane explains that the bill would return to local officials many of the tools that the redevelopment agencies provided, and lessen the need to fund affordable housing through complicated ballot initiatives.

“The need for affordable housing is so great,” says Zane, “the need to do it near transit is so great … cities should be relieved of the need for voter approval.”

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