Cities and counties in California will soon be able to count conversions of middle-income apartments into their affordable housing quotas under a bill signed by Governor Gavin Newsom on Tuesday, September 28.

The “workforce housing” legislation was one of 28 housing bills signed by Newsom on Tuesday, the governor’s office said.

The measure, House Bill 787, is expected to prompt local governments to adopt an innovative “missing link” program that converts complexes at market rates into middle-income housing in exchange for land tax breaks.

“Too many communities across California have become unaffordable for ordinary people,” Bill author, Assembly Member Jesse Gabriel, D-Woodland Hills, said in a statement. “This legislation will help ensure that workers – including nurses, teachers, firefighters and grocers who have helped us through the pandemic – can afford to live in the communities where they work and serve.”

While most affordable housing programs target poor and extremely poor households, middle income workers such as office workers, restaurant, theme park and retail workers are often forced to travel long distances because they cannot afford housing closer to their workplace. .

Under the new program, a quasi-public entity called a joint authority issues tax-free bonds to buy apartment buildings, then limits future tenants to middle- and low-income residents and charges rent based on their income.

In most programs, two-thirds of units are reserved for renters earning 80 to 120% of the median income, or $ 94,600 to $ 96,000 per year for a family of four in Los Angeles County and $ 107,550. at $ 128,050 per year for four people. household in Orange County. The remaining third is reserved for residents earning less than 80% of the median income.

On average, the rent amounts to 35% of the gross income of the tenant.

The buildings are freed from all property taxes during the life of the bonds, which allows operators to lower rents. The city or county becomes the owner of the building once the debt is paid off.

The program has been very popular with some cities in the Bay Area, Los Angeles and Orange counties. So far, 30 relatively new apartment buildings have been converted into labor housing. Twenty-six of these conversions have taken place in the past 10 months.

Affordable housing advocates, city housing staff and at least one consultant have criticized the program as risky, questioning whether the rent will cover management and maintenance costs and whether cities will acquire dilapidated buildings at the end of the program. Some critics have also questioned whether the rent cuts were enough to justify the cost to taxpayers.

But allowing cities to claim conversions in their annual housing reports to the state could be a strong incentive to adopt such programs. Faced with a housing shortage, homelessness and rampant housing costs, state housing officials have significantly increased housing quotas for the next eight-year cycle.

Under the half-century-old Regional Housing Needs Assessment Program, or RHNA, local authorities are required to plan for adequate housing at all income levels. The RHNA quota for the six-county region of Southern California tripled to 1.3 million new homes. Of these, nearly 224,000 must be affordable for middle-income households.

Local leaders protested the new RHNA quotas, and in June a coalition of Orange County towns sued the state over their state-mandated housing goals.

Only conversions to low and very low income homes can count towards a community’s RHNA quota under current law.

AB 787 allows average income conversions to be counted up to 25% of the moderate income housing quota. The measure comes into force in January.

“Finding ways to convert existing multi-family properties is essential to enable affordable long-term rents for low- and moderate-income households in the long term,” said Ben Metcalf, former director of state housing and currently UC Berkeley’s general manager. Terner Center for Housing Innovation. “I am happy to see Assembly Bill 787 enacted.”

Orange County Affordable Housing Advocate Cesar Covarrubias, Executive Director of the Kennedy Commission, questioned whether workforce housing programs go far enough to provide affordable rents for most families .

“In general I think these are good programs,” said Covarrubias. “But I don’t think it meets the most critical need, which is the low and very low income groups.”

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