“Many U.S. cities suffer from a serious lack of affordable housing, forcing lower-income workers into substandard housing and requiring them to drive long distances to get to work, exacerbating already serious traffic and air quality problems.” That is according to Tom Muller, co-chair of the real estate and land use practice group at Manatt, Phelps & Phillips LLP along with Hana Hong, an associate at the firm. The pair points out that The Associated Press reports that California alone “lacks an estimated 1.5 million affordable housing units compared to demand.” The L.A. Times notes that developers need to build about 100,000 new homes each year—above what's already planned—to keep pace with California's population growth.

The views expressed in the commentary below are the authors' own.

The California legislature has recently passed a housing package of related measures to address this problem that could be of interest to other states, including a new fee on recordation of real estate transaction documents, a $4 billion housing bond, and a bill that streamlines some building regulations for affordable housing.

One bill imposes a new $75 fee to be paid to country recorders at the time of recording of every real estate instrument or notice. Recordings filed in connection with commercial and residential property transfers are excluded from this new requirement. This additional recording fee is intended to be a permanent, ongoing source of funding dedicated to affordable housing development.

Another measure proposes a $4-billion bond to fund affordable housing and veterans home ownerships programs. The bond proposal, which will appear on the November 2018 statewide ballot, is structured to leverage private money into the affordable housing market—potentially creating the opportunity to build $15 billion in affordable housing. This bond money, together with the new recording fees, are expected to raise about $200-300 million annually, financing the development of more than 14,000 additional homes per a year.

Typically, highly urbanized areas have complex, expensive and time-consuming land use approval requirements that inevitably—and sometimes purposely—impede real estate development. Another measure forces cities that are not meeting their affordable housing construction goals to streamline the approval of “[d]evelopments that comply with existing land-use rules and that include affordable units,” and allow the “bypass….[of] often lengthy and sometimes unnecessary environmental reviews and City Council votes.” This kind of expedited processing may encourage more rapid developments in areas that need it, although in localities that are adamantly opposed to increasing their affordable housing it remains to be seen whether such a measure will prove to be ultimately helpful to developers.

Instant Insights /

CA Tries Some New Affordable Housing Approaches

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