California Needs a Housing-First Agenda: My 2018 Housing Package

Last year, California began a pivot from a housing-last policy to a housing-first policy. After a half century of bad housing policy—policy designed to make it incredibly hard and expensive to create housing—we began the long process of righting the ship and recognizing that housing must be a top priority.

Yet, even with last year’s fantastic housing package— 15 strong pro-housing bills, including my housing streamlining bill, SB 35 — much work remains, and we must continue our momentum toward a better housing future for the residents of our state. Whether in transit-rich city centers, suburbs, or rural areas, people throughout California need better access to housing. California’s housing shortage is statewide — with far too many people struggling with housing costs — and we need statewide housing solutions.

At the signing ceremony for the 2017 housing package, I joined various other members of the Legislature in declaring that the package was the beginning, not the end, of our work. Today, I’m announcing three new proposals to continue down the path of putting housing first.

These three bills (1) mandate denser and taller zoning near transit; (2) create a more data-driven and less political Regional Housing Needs Assessment process (RHNA provides local communities with numerical housing goals) and require communities to address past RHNA shortfalls; and (3) make it easier to build farmworker housing while maintaining strong worker protections. California must continue to reform its housing policies and create more opportunities for housing, whether in transit-rich city centers or in rural areas where workers need a place to live.

SB 827— Mandating Denser & Taller Zoning Near Transit

California has a number of communities with strong access to transit, and we continue to invest in public transportation. Too often, however, the areas around transit lines and stops are zoned at very low densities, even limiting housing to single family homes around major transit hubs like BART, Caltrain, Muni, and LA Metro stations.

Mandating low-density housing around transit makes no sense. It pushes more people to drive by leading to sprawl, thus undermining our economy and environment. It also leads to significant inequities, as limited density around transit spikes the prices of transit-accessible housing, meaning lower income and working class people struggle to live there and are pushed out into non-transit areas.

Transit-rich areas are *exactly* where we should be putting dense housing. We must build more housing near transit so that we can reduce reliance on cars and so that more people can access the benefits of transit.

Increasing housing density around transit is also one of California’s most promising sources of new housing, according to a recent California analysis by the consulting firm McKinsey, creating up to three million new transit-accessible homes:

SB 827 creates density and height zoning minimums near transit. Under SB 827, parcels within a half-mile of high-connectivity transit hub — like BART, Muni, Caltrain, and LA Metro stations — will be required to have no density maximums (such as single family home mandates), no parking minimums, and a minimum height limit of between 45 and 85 feet, depending on various factors, such as whether the parcel is on a larger corridor and whether it is immediately adjacent to the station. (Developers can, of course, decide to build below that height.) A local ordinance can increase that height but not go below it. SB 827 allows for many more smaller apartment buildings, described as the “missing middle” between high-rise steel construction and single family homes.

SB 827 is a strong step toward denser housing near transit and a more sustainable development patterns. I’m proud to be working with California YIMBY and other advocates on this bill.

SB 828— RHNA Reform: Relying on Data, Not Politics, in Projecting Housing Needs

The Regional Housing Needs Assessment (RHNA), which is how California determines how much housing each local community should build, is based on a flawed methodology that significantly underestimates population growth and how much housing will be needed. In addition, the current RHNA allocation process is non-standardized, insufficiently connected to actual data, and highly politicized, thus giving some communities advantages when assigning state housing goalsToo often wealthier and more politically connected areas are able to pressure for lower housing allocations, while lower-income areas receive higher housing allocations. This pushes a disproportionate amount of development into lower-income communities.

Graph from a study by the Haas Institute For a Fair and Inclusive Society at UC Berkeley showing problems with current RHNA process

SB 828 creates a clearer, fairer, more data-driven, and more equitable process for how the state and regional bodies assign RHNA numbers to local communities. It does so by requiring a more data-focused, objective process and by creating stronger guardrails, thus reducing the wiggle room jurisdictions use to lower their RHNA allocations. SB 828 also requires communities to begin making up for past RHNA deficits. California has a huge housing deficit due to years of under-production, and we need to dig out of that hole.

SB 829— Expanding Farmworker Housing While Maintaining Strong Worker Protections

The state’s housing shortage isn’t just an urban problem — it affects rural areas, particularly those that depend on agriculture. Many farms have surplus land that could be used to build safe and secure housing for farmworkers, but the land needs to be rezoned. Unfortunately, this rezoning is often blocked by communities that don’t want housing for farmworkers. This leads farmworkers to be housed in unsafe and crowded conditions, like in distant motels or in their cars, and hurts our ability to draw workers to California’s farms.

SB 829 creates a by-right process where farm owners and operators can dedicate agricultural land for employee housing. The owner of the housing will finance and develop it by-right, provided it meets certain objective standards. The housing must to be operated and managed by an independent non-profit to ensure that the worker-tenants have protections from employer intimidation, and workers will receive strict tenant, labor, and immigration protections.

No one bill or package of bills will end California’s massive housing shortage. Yet, we are making progress by setting stronger standards to stop our downward housing spiral, which threatens our state’s diversity, economy, environment, health, and quality of life. These three bills continue our move in a positive direction for housing in California.

Bay Area home prices rise further as Santa Clara County joins $1 million club

Broker Manuel Macias tours an open house on McKinley Ave. in Sunnyvale. Median home prices in Santa Clara County rose an extraordinary 27.8 percent in February from a year earlier, according to CoreLogic.

Broker Manuel Macias tours an open house on McKinley Avenue in Sunnyvale. The median number of days that existing single-family homes in Santa Clara County spend on the market fell to just eight days, the Realtors association reported this week. That’s far less than the median for the state, or even for the Bay Area as a whole

An advertisement for a home in Sunnyvale. For the nine-county Bay Area, the median price paid for a new or existing home or condo rose to $750,000 last month.

Broker Angela Tu tours a house on South Sage Court in Sunnyvale. Half of the homes sold in Santa Clara County last month were on the market for one week or less.

Realtor Douglas Larson walks into an open house on South Sage Court in Sunnyvale.

A broker tours an open house on South Sage Court in Sunnyvale. Santa Clara County’s median home price jumped to a record $1,080,000 in February, a rise of 12.5 percent from January.

 

Rising mortgage rates and skimpier tax benefits haven’t slowed Bay Area home prices yet, especially in Santa Clara County, where the median price surpassed $1 million for the first time last month.

For the nine-county region as a whole, the median price paid for a home or condo rose to $750,000 last month, up 5.6 percent from January and 12.5 percent from February 2017, CoreLogic reported Thursday.

The Bay Area’s “greatest strength is also your greatest weakness,” said Jordan Levine, senior economist with the California Association of Realtors. “You are firing on all cylinders, but the housing supply isn’t there. That’s what’s resulting in the high prices and the market conditions where (buyers) are having to move so quickly.”

The association predicted that the federal tax bill passed in December would curb demand for homes because some people would see their mortgage interest and property tax reductions reduced starting this year. Higher mortgage rates also were expected to reduce demand. Freddie Mac said Thursday that the average rate on a 30-year fixed-rate mortgage rose to 4.45 percent from 4.44 percent last week and 4.23 percent a year ago. Rates averaged less than 4 percent last year.

The rate increase hasn’t had an impact yet because it only started in mid-January and may have encouraged some buyers who were on the fence to jump in before rates go even higher, Levine said. And even though homeowners “don’t have as many of the tax advantages they used to have, California has such a chronically undersupplied market and heavy demand that there is still upward pressure on the market.”

Santa Clara County remained the region’s hottest spot. Its median price jumped to a record $1,080,000, up 12.5 percent from January and up a whopping 27.8 percent year over year. That marked the third straight month that prices in the heart of Silicon Valley rose more than 20 percent year over year. The county’s previous peak was $1 million in December.

The median price in San Francisco and San Mateo counties topped $1 million in November 2014 and May 2015, respectively, according to CoreLogic.

For existing single-family homes, the median days on market fell to just eight in Santa Clara County in February, the Realtors association reported this week. That compares with 21.1 days for the entire Bay Area and 26.1 days for the state.

The median days on market is the time between when a home is listed and when an offer is accepted. Eight days means that half of the homes sold in Santa Clara County last month were on the market for that amount of time or less.

That sounds hard to believe, but “I think eight days is inflated to be honest,” said Doug Goss, broker associate with Keller Williams Bay Area Estates in Los Gatos. For most homes in Santa Clara County, “We could sell them on day one. Most brokers will purposely hold off looking for offers” for five to seven days to generate multiple bids.

Typically, agents list a home midweek, have an open house for agents and another for the public over the weekend and set an offer deadline for Tuesday or Wednesday of the next week, said Sandy Jamison, a broker with Tuscana Properties in San Jose. “We review offers. They come in so strong we don’t even spend a day negotiating. We just pick one … usually the one with the highest price and very few if no contingencies.”

This month’s poster child for market insanity was 1062 Plymouth Drive in Sunnyvale. The 848-square-foot home was listed at $1.45 million and sold in two days for $2 million, said Kevin Swartz, a Realtor with the Sereno Group in Saratoga.

“It’s very rare that homes are taking longer than two weeks to sell,” Swartz said. “If it’s more than 14 days, you question if it’s overpriced or termswise there is something strange they are asking.”

Prices often spike in February and March and “mellow out through the summer,” Jamison said. That’s because buyers come out in force after the holidays, but sellers “aren’t quite ready to put their homes on the market. They start trickling out after the Super Bowl. Guys say, ‘Football’s over, now I can get out and work on the house,’” to prepare it for sale.

At the end of last year, there were only 271 homes and condos on the Multiple Listing Service in Santa Clara County. Now there are 659, which is still a smidgen for a county with nearly 2 million people.

“Our inventory is the lowest it’s ever been,” Jamison said.

The same is true in many parts of the Bay Area and other U.S. cities.

One reason demand exceeds supply is that new-home creation has not kept up with population growth and demographic changes. But the existing-home market is also not as fluid as it used to be.

Many people who bought entry-level homes in the Bay Area would love to move up, but are afraid to sell because they might not be able to buy another home, agents say. And many long-term Bay Area homeowners would like to downsize, but won’t for tax reasons. If their home is worth more than they paid and put into improvements, they’d generally owe capital gains tax on the amount that exceeds $500,000 (married) or $250,000 (single).

And their property taxes might go up, even if they buy a smaller house. In California, under Proposition 13, property is reassessed only when it changes hands, with certain exceptions. In between transfers, its assessed value can’t go up by more than 2 percent a year.

Many longtime homeowners are paying a fraction of what they would pay in property tax if they sold their house and bought another of equal or even lesser value in a different county.

California homeowners who are 55 or older get a once-in-a-lifetime chance to sell their primary residence and buy another of equal or lesser value and transfer the assessed value of their current home to the replacement house, thereby preventing a property tax increase. However, the new home must be in the same county or in one of 11 counties that accept transfers of property tax values.

The California Realtors Association levied a $100 assessment on its members to finance a ballot initiative that would let homeowners 55 or older transfer their existing property tax to any California county an unlimited number of times. It also would let them transfer it to a more expensive home, although in this case the difference in market value between the old and new homes would be added to the property tax assessment. If they bought a less expensive home, their property tax base would actually be reduced.

The association expects to announce Monday that it has gathered enough signatures to qualify the Property Tax Fairness Initiative for the November ballot. If approved by voters, the law would take effect in January.

The Legislative Analyst’s Office estimated that in the first few years, the initiative would cut property taxes by a few hundred million dollars per year, split between schools and local governments. “Over time these losses would grow, likely reaching between $1 billion to a few billion dollars per year (in today’s dollars) in the long term,” it said.

The April 2016 Market Report is Now Available!

MAYREPORT

The housing market is being predictable, and that’s a good thing. At the beginning of the year, it was anticipated that the prevailing trends of the past year would continue into and through 2016, and that has largely been the case. The number of homes for sale has generally remained lower compared to a year ago, and prices have been steadily rising in desirable communities  here
homes show well.

New Listings were down 2.4 percent for single family homes and 10.2 percent for Condo/TIC/Coop properties. Pending Sales decreased 8.0 percent for single family homes and 14.6 percent for Condo/TIC/Coop properties. The Median Sales Price was up 7.1 percent to $1,400,000 for single family homes and 6.6 percent to $1,149,000 for Condo/TIC/Coop properties. Months
Supply of Inventory increased 16.7 percent for single family units and 36.8 percent for Condo/TIC/Coop units.

There have been no striking changes to curtail what should be a decent run of home sales over the next several months. Mortgage rates have remained stubbornly and wonderfully low, the unemployment rate has remained at or near 5.0 percent for eight straight months and wages have increased for a great many people. New construction has been slow, and that may be a damper on sales, but the general outlook remains strong.

CLICK HERE TO DOWNLOAD THE FULL REPORT