Introduction
Senate Bill 9, as you may have heard, contains no affordability requirements.
It’s a point that local lawmakers and homeowners across California refer to again and again. They point to it as evidence that SB 9 wasn’t designed to expand affordable housing, but to line developers’ pockets. Opponents of the bill claim that without affordability requirements, Senate Bill 9 will only create more homes that lower income families can’t afford.
As cities throughout the state adopt local ordinances on SB 9, some are choosing to include affordability requirements of their own. This may sound like a good addition: who can argue with reserving new residences for those who need them the most? However, it’s not that simple.
In the following blog post, we’ll dive into SB 9 affordability requirements: what they are, why the state law chose not to include them, and how some cities are using them as a means to discourage SB 9 development.
What are affordability requirements?
In the context of SB 9, affordability requirements refer to cost limits placed on a rental unit. In most cases, affordability requirements stipulate that a home must be deemed affordable for renters who make below a certain percentage of the area’s median income level.
What kinds of affordability measures are cities requiring?
Different cities are choosing to implement affordability requirements in different ways. Some cities, like Millbrae and Redondo Beach, require that at least one unit per lot be reserved for low-income renters. Los Altos Hills goes a step further: in their ordinance, all new units created on a new lot (resulting from an SB 9 lot split) must be affordable for low- and very low-income renters.
“We think any restriction on what these units can be rented for is going to impact the ability to build any units under SB 9.” — Adam Wolff, Corte Madera Planning Director
How are the requirements enforced?
Affordability requirements often require a deed restriction to ensure that the properties are reserved as low-income rentals. These deed restrictions sometimes last for decades — in some cases, as long as 55 years — and transfer with the sale of a property.
Why aren’t there affordability requirements in SB 9?
Affordability requirements weren’t included in the state law because they don’t work. That is to say, affordability requirements don’t correlate to an increase in affordable units being built. Instead, imposing affordability requirements ensures that no units will be built.
As a case study, consider the city of Santa Monica.
Santa Monica performed an affordability feasibility study and determined that it was infeasible (as it is in most cities) to place affordability restrictions on SB 9 units. The research indicated that a development would need to include a minimum of six units total in order to offset the cost of a single low-income rental.
Because SB 9 projects are usually limited to four housing units, they could not support mandated low-income rentals. As a result of these findings, Santa Monica City Council chose not to impose affordability requirements for SB 9 projects.
Housing units are generally very expensive to build. Without government subsidies to help lower construction costs, it is nearly impossible to build low income rentals without suffering significant financial loss. If SB 9 units are limited to low- and very low-income renters only, the people who build them will never recoup their construction costs. Therefore, they likely won’t build them in the first place.
In the words of Corte Madera Planning Director Adam Wolff, when you impose affordability requirements, ”you’re making it more financially challenging to recoup the cost of development, because that money has to come out of somewhere. We think any restriction on what these units can be rented for is going to impact the ability to build any units under SB 9.”
Why are cities implementing affordability requirements if they don’t work?
Sadly, cities implement affordability requirements because they don’t work. Some cities are strategically using affordability requirements as a means to discourage SB 9 development. Furthermore, it allows them to do so under the guise of concern for the low-income community.
Of course, this may not be the case for every city that imposes rental income restrictions. Some areas do care deeply about low-income housing accessibility and place affordability requirements on all new housing constructions. However, many cities are choosing to impose affordability requirements on SB 9 projects in particular, without implementing them for other types of development. When this occurs, it is clear that SB 9 in particular is being targeted.
If affordability requirements don’t create more affordable housing, what does?
There are many factors that contribute to the housing crisis, and people often tend to focus on symptoms rather than the root causes. Homelessness and affordable housing shortages will never be fully solved without taking direct actions to address wealth inequality, systemic racism, and many other complex issues.
Like all nuanced social problems, there are no clear-cut solutions. It will take more than a few new state-level zoning laws to permanently solve the housing crisis. However, there are some actions that can work together to help alleviate it.
Government subsidies and incentives
Affordable housing development is made feasible by money from the government, not government mandates without any financial support.
Construction costs — which have always been higher in California than the national average — have continued to rise in recent years. According to a Terner Center study in March 2020, average construction costs in California went up by $68 per square foot in just five years. Since that time, supply chain delays and Covid restrictions have have only increased the price of development.
With construction costs so high, development companies are incentivized to build larger, more upscale homes that sell or rent for higher prices. However, government subsidies can help bridge this gap. Public housing and Section 8 vouchers can help low-income individuals find affordable rental housing, but these programs lack the funding to accommodate everyone who needs support. Applicants often linger on waiting lists for years before being matched with an available unit.
Increased housing stock
Building more homes in general — regardless of income restrictions — is another way to expand affordable housing options.
A recent study from Helsinki found that new market-rate housing initiates “moving chains” that make older units available for lower-income families. The positive effects are shown to impact the whole region, not just the immediate vicinity of the new housing units.
The housing market, like any other financial market, operates on the principle of supply and demand. More housing options means less competition, which will prevent home prices from creeping ever upward. The kind of urban infill housing that SB 9 can create — like duplexes, ADUs, and smaller houses on smaller lots — will be less expensive than large single family homes. This type of housing fills a crucial need for young couples, small families, and retirees who don’t need as much space and lack the time, energy, or money to maintain a big house.
Creating more housing options in the middle income range will in turn open up more options in the lower range. If cities across California embrace SB 9 rather than trying to deter it with endless restrictions, the law will do what it was designed to do: create more housing units for people who need them.
For more information, read our article on SB 9 occupancy requirements.
