Key Points

• In addition to five key victories for housing advocates discussed in an earlier alert, the California Senate passed many additional housing bills not included in their “Building Opportunities for All” Housing Package.
• Bills from the Housing Package that would have approved an affordable housing bond (SB 5), residential housing on certain commercial sites (SB 6), and local housing data reporting requirements (SB 477) all failed to win approval.

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2021 California Legislative Session

Despite the failure of SB 5, SB 6, and SB 477, many new housing laws were approved during the most recent legislative session. In addition to the bills passed as part of the Senate Housing Package discussed here, the following bills also passed and were signed into law:

• AB 1304 clarifies that the requirement for local governments to act affirmatively in furtherance of fair housing is mandatory, and also requires local governments to analyze racial segregation patterns when assessing and addressing an area’s fair housing needs. Local governments must analyze the patterns, disparities, and needs of the jurisdiction not in a vacuum but in comparison to the region it is located in, and assess how both historical and current policies and practices have contributed to those patterns, disparities, and needs. Agencies must consider such information, and how to overcome patterns of segregation, in preparing their housing elements, including the identification of potential housing sites. AB 1304 was signed into law on September 28, 2021.
• AB 1466 makes it easier to remove discriminatory language from deeds and covenants. While racist and other discriminatory covenants have been unenforceable since Shelley v. Kramer (1948), this law encourages the removal of that language where it still exists by waiving fees, streamlining the recording process, and expanding who can file removal requests from owners alone to any person who knows about the covenant. Popular from the 1920s to 1948, these covenants were used to maintain racial segregation not only in the American South, but also in California, and played a significant part in creating racial wealth gaps. AB 1466 was signed into law on September 28, 2021.
• AB 491 clarifies requirements for the placement of affordable units in a building. While current practice sometimes groups affordable housing units together on one floor or within a specific area within a building, the new law specifies the units must be spread throughout the building, with the same access to common entrances, common areas, and amenities as the market-rate units. AB 491 was signed into law on September 28, 2021.
• AB 803, the Starter Home Revitalization Act of 2021, allows lots zoned for multifamily residential development to be subdivided in order to create multiple small lots for separate houses, creating more entry-level home ownership opportunities. Development projects must result in at least as many units as the maximum allowable residential density permitted by applicable zoning standards, and the homes must have an average total floor-space of 1,750 square feet or less. AB 803 was signed into law on September 28, 2021.
• SB 791 creates the California Surplus Land Unit within the Department of Housing and Community Development to facilitate agreements between local agencies with surplus land and developers that seek to develop housing on that surplus land. The Unit will provide advice and technical assistance to both local agencies with surplus land and developers seeking to develop housing there, and will also assist with obtaining financing. SB 791 was signed into law on September 28, 2021. 
• SB 60 increases the maximum allowable fine for violations of laws prohibiting permanent housing from being converted into short-term vacation rentals. Existing law caps the fines at $500 for each continued violation, but will now allow for fines of up to $5000. SB 60 was signed into law on September 24, 2021.
• AB 838 requires local governments to investigate substandard buildings and advise the building owner or operator of each violation, the steps that must be taken to remedy the violation, and to schedule a re-inspection. The bill is especially concerned with lead hazard violations. ABA 838 was signed into law on September 28, 2021.
• Finally, AB 787 allows cities and counties to count conversions of existing market-rate units to affordable housing units in its annual report of new housing that was created in the jurisdiction. Cities and counties can use the converted units to satisfy up to 25% of the jurisdiction’s annual moderate-income housing need allocation. AB 787 was signed into law on September 28, 2021.

The Three Bills that Failed

During their most recent session, the California Legislature passed more than a dozen housing bills, including most of the bills from the Senate’s "Building Opportunities for All" Housing Package, as discussed in detail here. Three bills from that Package, however, failed to move forward. SB 5 and SB 6 both died in committee, having never reached Governor Newsom’s desk, and Newsome vetoed SB 477.

• SB 5 would have placed a $6.5 billion affordable housing bond on the November 2022 ballot, the proceeds of which would have been used to fund affordable rental housing and homeownership programs.
• SB 6, the Neighborhood Homes Act, would have required cities to authorize some amount of residential development on commercial sites by establishing that housing development projects are allowed in commercial zones that previously only allowed office and retail development, as long as the parcel is not adjacent to an industrial site. The bill was drafted in response to growing commercial vacancies stemming from online shopping and the COVID-19 Pandemic.
• SB 477, which passed both houses and was sent to the Governor for signature, was vetoed on October 5. This bill aimed to improve the public’s understanding of both the progress of regional housing goals and the impact of state housing laws by expanding what data cities and counties must include in their annual Housing Element progress report. Governor Newsom explained in a statement that he vetoed SB 477 because it would have created a new requirement while HCD is in the process of developing a data strategy as part of a broader, state-wide housing plan. Instead, Newsome has directed the HCD to consider the data laid out in SB 477 when they produce their recommendations this upcoming January.

What Happens Next?

The 2021 Legislative Session has been lauded as a breakthrough year for California housing, with a budget surplus funding zoning reforms as well as new tools and streamlined processes for residential housing development. The bills that Governor Newsom has signed will take effect January 1, 2022, and Hanson Bridgett is tracking how these new laws will impact proposed housing projects.

For more information about this legislation or other land use issues, please contact the authors or the Hanson Bridgett Land Use Group.