Redevelopment Legislation Marked by Flaws, Benefits

Timothy L. Coyle
Consultant specializing in housing issues

Assembly Bill 11 isn’t about housing, yet.  It isn’t about building much in the way of infrastructure, either.  What’s more, the long-promised revival of redevelopment in California, it isn’t.  Instead, the pending legislation – which co-author Todd Gloria (D-San Diego) touts is “a more robust funding source to construct more affordable homes” – is really about combating climate change and not reviving some of the state’s forgotten and overlooked job centers.

But, it’s a beginning; a conversation starter.  The legislation does indeed reflect an attitude – albeit a crooked one – among elected leaders in Sacramento that something needs to be done to restore an important urban-revitalization program, shamefully cast aside by the former governor and his friends in the Legislature, that builds housing and infrastructure.  Redevelopment is California’s own local, self-sustaining strategy to accomplish economic development.

Unfortunately, AB 11, introduced last December, just as a new legislative session began – and as the first term of newly elected Governor Newsom was about to commence – has all the  trappings of “smart growth” but isn’t about growth at all. At least not the overdue and much-needed kind that California’s dormant private markets, if unleashed, can be expected to deliver.

Instead, it’s a political statement, with spoils going to winners of a state-sponsored greenhouse gas (GHG) beauty contest.  It is legislation seemingly guided by two masters – one dealing, appropriately, with the complicated financing structure of community redevelopment and another that creates a politically charged sweepstakes based on how well the redevelopment plan meets the state’s climate-change goals.

In fact, the bill says no project gets approved unless the underlying plan is first okayed by state bureaucrats – namely the Strategic Growth Council (“the Council”), only one of its eight members of whom has any exposure to local development at all.  To that extent it is sham legislation, requiring all residential construction in California be viewed through a prism of climate change.

Still, setting aside the bureaucratic and climate-change hurdles the legislation calls for, the bill does focus on how tax-increment financing is to work for communities.  While it comes dangerously close to killing the economic golden goose it creates, AB 11 does get around to authorizing new housing – even the market-rate kind. For example, it establishes that 30 percent of all the proceeds that a local agency earns be reserved for the construction, rehabilitation or acquisition of housing affordable to households with low and moderate incomes.

It also calls for a one-for-one obligation on developers – meaning if a redevelopment activity causes an existing low- or moderate-income housing unit to be lost it must be replaced with a unit of like or greater affordability.  This will help beat back the criticism that redevelopment gentrifies neighborhoods.

But, AB 11, among its other limitations, gets all tangled up worrying about passing through to the state and to local agencies – mainly school districts – a local redevelopment agency’s earnings.  The bill can make compensation to the state a lot cleaner and no local school district should be entitled to any new money generated by a redevelopment agency.

Moreover, the bill says all housing needs to remain affordable to low- and moderate-income households for at least 45 years.  That’s just plain wrong. Imagine being an upwardly mobile, lower-income individual who wants to sell his or her home – acquired seven years earlier with a loan from the newly formed redevelopment agency – and being forced through a covenant to sell it below the market, so that it’s “affordable” to another lower-income individual?

Even after the owner kept up the home for seven years and made improvements to it?  Where does the owner’s equity go? If it doesn’t stay with the owner, why bother maintaining the property in good shape?  Or, improving it?

Hopefully, as AB 11 is only a start, these and other problems with the bill will get ironed out.  The legislation’s author should expect more, perfected proposals to restore redevelopment to be forthcoming and that, ultimately, a better bill will be sent to the Governor.

But, the legislative session is short and time is wasting.  If California is to begin generating the housing it needs, redevelopment must be re-authorized this year.

 

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