All 190 of the proposed units will be reserved for people making under $100,000, which in Los Angeles makes this an “affordable housing” project.

But unlike the vast majority of affordable developments that have been proposed in California in recent memory, no taxpayer dollars are allotted to build the thing. Especially in the state’s expensive coastal cities, the term “unsubsidized 100% affordable project” is an oxymoron, but Los Angeles is now approving them by the hundreds.

That’s thanks to an executive order Los Angeles Mayor Karen Bass, signed in December 2022, shortly after being sworn into office. In the year and change since, the city’s planning department has received plans for more than 16,150 affordable units, according to filings gathered by the real estate data company, ATC Research, and analyzed by CalMatters. That’s more than the total number of approved affordable units in Los Angeles in 2020, 2021 and 2022 combined.

The city has also been the subject of at least two lawsuits and a multi-front political battle over whether and how to turn the mayoral decree — which is only in effect as long as Bass wants it to be and barring a court’s decision to end it — into a permanent fixture of Los Angeles housing policy.

The policy was designed to fast-track the approval process for 100% affordable projects. What it perhaps was not designed to do — but has done at a scale that few anticipated — is allow private developers, who rarely dabble in affordable housing and simply look to make as much money as humanly possible from building new homes, to take a second look at a set of state laws that give added benefits to entirely affordable projects.

Throw those two policies together and building new apartments for working class Angelenos is suddenly a booming business.

A ‘monumental shift’ in affordable housing policy

Andrew Slocum and Terry Harris, the developer pair behind the seven-story project on West Court Street, represent the type of developer suddenly wading into Los Angeles’ affordable housing market. They aren’t leading nonprofits or charities. They don’t run websites with feel-good mission statements. Both come from the proudly profit-seeking world of “luxury” housing development.

“We are mission driven in the sense that we want to provide housing,” said Slocum. But he’s pursuing this affordable project, along with two others, because it “made more financial sense.”

Harris, a former college basketball player pursuing a post-athletic career in Southern California real estate, put it more bluntly.

“I’m just trying to be as greedy as possible,” he said.

Though publicly available data on financing is sparse, an early analysis of the program by the pro-housing advocacy group Abundant Housing LA estimated that roughly three-fourths of affordable units proposed through the policy are doing so without any public money. In some cases, developers, including Harris, are opting to scrap proposed “luxury” apartment projects entirely, re-submitting those plans as 100% affordable.

It’s hard to overstate just how weird all of this is.

“I don’t think anybody saw this coming,” said Scott Epstein, policy director at Abundant Housing LA and one of the authors of that analysis. “When it comes to 100% privately invested projects…I don’t think we’ve ever seen anything close to the magnitude that that has been unleashed.”

Between the extraordinary cost of building new apartment buildings in coastal California and the money that a developer can recoup through legally capped rents, traditional affordable housing projects almost inevitably run a sizable financing gap. That gap is almost always filled by public subsidy. A large project might require half a dozen loans, grants and tax bill write-offs from local, state and federal housing agencies. Most of these sources of public finance come with strings attached, which can saddle projects with yet higher costs and further delays.

Los Angeles’ new breed of affordable housing circumvents all of that — at least on paper. None of these units have actually been built yet. But talk to supportive policy advocates and industry players in Los Angeles and you quickly run out of new synonyms for “unprecedented.”

“This is clearly a monumental shift in how affordable housing is developed in the state,” said Mahdi Manji, policy director at Inner City Law Center, a legal service provider and affordable housing advocacy group in Los Angeles’ Skid Row. “We just haven’t seen this before.”

Building affordable housing in two steps

Privately funded developers hoping to crack Los Angeles’ affordable housing market tend to follow a familiar pattern.

First, they evoke Bass’ order — “Executive Directive 1” — to guarantee and speed up the process.

The order sets a shot-clock of 60 days for the city’s planning department to approve or reject a submitted project. As long as that project meets a basic set of criteria, it must be approved. That means no city council hearings, no neighborhood outreach meetings and no environmental impact studies required.

It also means less time getting a project green-lit.

“To go from acquiring a lot to putting a shovel in the ground in less than a year is kind of unheard of,” said Steven Scheibe, a small-scale developer working on his first entirely affordable project through Executive Directive 1.

Less time spent paying off debt, making payroll and ensuring skittish investors that the project is a sure thing saves projects on the front end.

Then comes the next step. Most so-called “ED1 projects” also make use of a hodgepodge of statewide “density bonus” laws that allow developers of 100% affordable housing projects to pack far more units and floors onto a given lot than would otherwise be allowed under local zoning rules. These laws also let affordable developers pick and choose from a wide range of goodies and freebies that cut costs further and allow for yet denser development. That means no parking spots, limited open space, smaller rooms and fewer trees.

All those added units mean developers can set the rents lower and still pay themselves back for the cost of construction and then some.

Together the executive directive and the density bonus form a necessary “one-two punch” to make these projects work, said Charly Ligety, a director of research and development at Housing On Merit, a nonprofit that invests in affordable housing projects. “It’s, one, ‘Oh, I can put 80 units on a single family plot…’ and then, two, ‘…and I can get it approved quickly.”

And while Bass’ order and the state’s density bonus laws are pulling privately funded developers into the suddenly profitable world of affordable housing development, other economic forces are pushing them out of the high-end luxury market: High interest rates have made waiting around on municipal approvals that may never come an especially costly proposition. Los Angeles’ recently enacted tax on multimillion-dollar real estate transactions, the so-called mansion tax, has also slowed the fancy apartment building business, said Ligety.

As a result, he said, “market rate developers are discovering affordable housing for the first time.”

How affordable is affordable housing?

Just because something is “affordable” in Los Angeles doesn’t mean it’s cheap.

To qualify as a 100% affordable housing project under the city of Los Angeles’ streamlined treatment, a studio can go for roughly $1,800. Compare that to a traditional publicly subsidized project which could charge as little at $650 for the same unit.

And you can bet this studio doesn’t have a parking spot.

Developers flocking to the city’s new program are essentially “making a bet,” said Gary Benjamin, a land-use consultant who advises developers on how to navigate the city’s planning and permitting bureaucracies. The bet is that housing costs are so astronomically out of reach in Los Angeles that even someone making north of $70,000 per year would jump at the chance to rent “a more bare bones product without all the bells and whistles” for what could amount to a modest rent reduction.

That bet is still very much in play. It will be months before the first of the apartments approved under Executive Directive 1 are tenant-ready.

“This is just a whole new product specifically catering to the middle-lower end of the market. That just wasn’t a thing that people were doing before,” said Benjamin.

In the meantime, the rush of planned development has promised the demolition of existing buildings across the city. In many cases, those are commercial buildings or unoccupied single family homes and both city and state law require developers to pay displaced tenants’ relocation costs and to offer them a right to return to the new building. Even so, the planning blitz has at least some low-income Angelenos worried that they will be evicted to make way for “affordable” units that they themselves might not be able to easily afford.

In many parts of the country — and even once upon a time in Los Angeles — the mere fact that a developer could successfully build an apartment building within the price range of someone earning just under the area’s typical income would not be cause for celebration — and wouldn’t need an emergency declaration to bring about.

“It shouldn’t be odd” that a developer might choose to build an $1,800 per month studio without taxpayer support, said Manji with the Inner City Law Center. “It’s only odd because we’ve made it odd.”

Though his organization principally advocates for unhoused Angelenos, Manji said he supports the policy, even if units being proposed are “not housing for homeless folks.”

Allowing private developers to serve lower- to middle-income renters frees up scant financial subsidies and rental vouchers for people who most desperately need the help, he said. That’s especially important this year when the governor is proposing cuts in state affordable housing funding.

Affordable housing incentives

Los Angeles’ city council is currently mulling a permanent ordinance that would codify the mayor’s signature affordable housing policy and put it on a firmer legal footing. The council’s Planning and Land Use Management Committee is expected to take it up in the coming weeks.

Timing may be of the essence.

Bass’ order is the target of two lawsuits from Fix The City, a local nonprofit that has regularly contested the city’s land use decisions going on two decades. In both suits, the group disputes the legal validity of a sweeping 13-month-long housing policy passed by mayoral edict.

“To give emergency powers reserved for earthquakes and horrible storms and true catastrophic emergencies to apply that to housing to override community plans and zoning for an indefinite period of time — it’s just not good government and it decimates due process,” said Michael Everoff, one of the group’s co-founders.

Translating the mayor’s order into permanent city law and ending the emergency declaration could weaken Fix The City’s legal challenge, at least as it applies to future projects, though Everoff disputed that point. But whether a majority on the city’s council will agree to do so — and how much of the mayor’s original policy they will opt to rewrite, soften or jettison in the process — is an open question.

Still up for debate: Just how many incentives and waivers the city is willing to grant 100% affordable developers as they make use of the state’s density bonus program. So far that decision has been left to the planning department’s discretion. That unlimited economizing and supersizing has resulted in projects that are “substantially out of scale” with their surrounding neighborhoods, according to a planning department assessment. The most recent version of the ordinance caps the number of developer freebies at five.

Slocum, the developer of the proposed Echo Park apartment building, said most of his projects would “no longer work” if subject to such a cap. He said he needs eleven or twelve.

‘A declaration of war on single-family neighborhoods’

But the biggest debate over the breadth of the city policy may have already come and gone. Though the first version of the executive order seemed to apply to all housing sites in the city, Bass later came back with an amended order to exempt all of the city’s single family neighborhoods. That clarification cut out more than 70% of the city’s residentially zoned land and the lion’s share of its well-to-do neighborhoods, but not before a handful of projects were approved.

The city has since tried to revoke the approvals of some of those projects. Their fate is now the subject of yet another series of lawsuits, these brought by the pro-housing development legal group YIMBY Law, who argue that the city has to let those developments go ahead. In its first suit on behalf of a proposed 7-story project in the west San Fernando Valley, the group denounced the city for having “buckled to political pressure from ‘Not In My Back Yard’ constituents.”

Councilmember Bob Blumenfield, whose district includes the southwest San Fernando Valley and who opposed approving these under-the-wire affordable projects in single family areas said there’s virtually no chance that the council will decide to re-expand the policy to every part of the city. Doing so might have a limited effect anyway: The number of single family parcels that can be turbo-developed under the state’s density bonus law is limited.

“While that may be something for the future, right now we’re piloting (Executive Directive 1) the way it is,” he said. “And as it is, it’s a major step forward. To go that extra step…would be a declaration of war with our single family neighborhoods.”

That war may be coming to Los Angeles before long. Just as cities across the San Francisco Bay Area were required by state law to redraw their zoning maps to accommodate a massive increase in allowable housing development, the City of Los Angeles has until mid-October to plan for 250,000 new homes.

At issue is just how far cities and counties have to go to justify “impact fees”: fees slapped on new construction projects in order to offset the toll new developments take on local infrastructure.

The stakes are especially high in California, where impact fees can tack on hundreds of thousands of dollars to new housing projects that are already among the most expensive to build in the nation.

The plaintiff in this case wants to put new guardrails on those fees. But that would come at a sharp cost: Local governments, restricted by California law from raising property taxes and borrowing funds, disproportionately rely on impact fees to pay for infrastructure like roads and sewer lines.

The justices waded deep into the legal weeds of the case during oral arguments today and seemed alternately frustrated and bemused as they grappled with whether El Dorado County’s fee should be treated like the government were seizing a homeowner’s property, a simple tax or something in between.

The legal saga began in 2016 when George Sheetz, a retired engineering consultant, built a small manufactured home on a vacant tract in the Sierra foothill city of Placerville. The county stuck Sheetz with the five-figure “impact fee” to fund local roads, highways and bridges. Sheetz paid up, but then sued.

With the backing of a conservative legal nonprofit, the Pacific Legal Foundation, he argued that, contrary to a four-decade old Supreme Court precedent, the county had failed to prove that the fee accurately reflected the wear and tear his small project would likely leave on local roads.

“Everyone loves good roads and schools and public infrastructure, so the government certainly has many tools at its disposal, including taxes to pay for those,” said Paul Beard, Sheetz’s attorney, in presenting his case before the court today. “What we’re saying is that the government can’t select a few…property owners who happen to need a permit at any given time — to select them to bear the burdens of paying for that public infrastructure.”

The lawyer representing the county countered that officials had done the legally required due diligence to justify the fee. But even if they hadn’t, they added, fees passed by local elected bodies that apply equally to all applicants — as opposed to one-off exactions levied on a specific development — don’t warrant such close judicial scrutiny.

Requiring cities and counties to enact fees only after they’ve done a thorough, property-specific analysis of the impact a proposed development would have on local roads, for example, “would disrupt if not destroy their ability to fund capital intensive infrastructure necessary to serve new development, bringing such development to a grinding halt,” said Aileen Marie McGrath, the attorney for El Dorado.

With so much potentially at stake, the case has drawn the attention of a wide array of competing interests. Building industry groups, conservative property right defenders and Yes In My Backyard advocates have all filed briefs pleading with the court to force local governments to clear a higher bar before charging for the right to build.

A decision against Sheetz would only encourage “unconstrained exactions on new development, further adding to the crushing costs of housing in California and other jurisdictions that refuse to require governments to show any proportionality between the amount of fees demanded and the alleged impacts of new development,” the California Building Industry Association wrote in its brief from June.

City and county government groups, along with the governments of both the state of California and the United States, have come to El Dorado County’s defense.

Many court watchers expect the court’s conservative majority to side with the burdened property owner and require the cities and counties to work a bit harder to justify the fees they impose on new home construction. It remains unclear for now just how far such a ruling could go and whether it might place fresh limits on other widely used housing and revenue-raising policies.

“It seems kind of like a nightmare to figure out where the line should be drawn,” Justice Amy Coney Barrett said.

A uniquely California case

Though today’s debate took place in the ethereal clouds of abstract constitutional consideration, for California developers, the issue at hand is plenty concrete. As a group, they’ve spent a generation griping about impact fees.

As of 2015, the average impact fee on a single family home in California was more than quadruple what it was in other states, according to a survey. While such fees were found in a “minority” of jurisdictions outside of California, they were “virtually universal” here.

In a 2018 study from UC Berkeley’s Terner Center, impact fees in a survey of California cities ranged from between 6% to 18% of the local median home price.

It’s not especially surprising that California cities and counties have come to rely so heavily upon this particular form of financing.

During the high-growth decades of the 1950s and ’60s, local governments could easily assume that new development would pay for its own added toll on publicly funded roads and pipes through increased property tax revenue. That changed in 1978, when voters passed Proposition 13, capping local property taxes and muzzling the ability of local governments to borrow or raise new taxes.

That’s led to some frustration from El Dorado County and its defenders. If impact fees are intolerable, some have asked, what are the alternatives?

“Unless you want a dirt road and like, you know, bandits out there because we don’t have a sheriff, we need to have some level of an assessment done,” said Mark Neuburger, a legislative advocate for the California State Association of Counties. “It’s unfortunate when it’s a noticeable size of your project, but we live in a modern society and this is just part of the expense of paying for it.”

Sheetz and his supporters contend that these fees aren’t justified solely on meeting specific, related infrastructure costs and point to the wide variability in fees from one city to the next — even between neighboring jurisdictions.

As the city of Oakland noted in a recent report, its typical fee on large apartment projects comes out to $39,264 per unit. The neighboring city of Berkeley, sets the tab at $66,594. Across the Bay in San Francisco, the fee is $74,597.

At the more extreme end, the 2018 Terner Center study found that the city of Fremont imposed a single-family home impact fee of $157,000.

“You look at places like Fremont and they have these immaculate parks that are funded very significantly by impact fees,” said David Garcia, the center’s policy director. “There’s a question whether it’s reasonable to want to have top notch services and infrastructure, but for that to come on the backs of new residents.”

A fee or “out-and-out” extortion

The origins of this particular debate date back to another legal dispute brought by Californians trying to build a new house.

In the early 1980s, James and Marilyn Nollan, a Ventura County couple, decided to convert their coastal bungalow into a two-story home. The California Coastal Commission, which regulates land use along the state’s coastline, issued a construction permit, but only on the condition that the couple give up a slice of their property to allow for a public walkway to the beach.

In 1987, the U.S. Supreme Court ruled that the Coastal Commission had overstepped. If the government wants to take someone’s private property in exchange for granting them a land-use permit, there has to be some obvious connection between the property being seized (in this case, a slice of land for a walking path) and the government’s purpose in restricting development in the first place (capping a building for the preservation of ocean views), the court held. Because there was no “essential nexus” between the two in this case, Justice Antonin Scalia wrote in his majority opinion, taking the Nollans’ property was “not a valid regulation of land use,” but amounted to “an out-and-out plan of extortion.”

In subsequent rulings, the Supreme Court laid out further limits on this kind of public-sector “extortion.” In the 1990s, the court found that the cost of getting a permit also has to be roughly proportionate to the impact a development is likely to have on the public. In 2013, the court ruled that these “nexus” and “proportionality” standards don’t just apply to the taking of physical property, but monetary fees made in lieu of giving up land, too.

Sheetz and his legal supporters argue that it’s time for the court to apply the “nexus” and “proportionality” rules to El Dorado — and to local impact fees across the country.

The California exemption

In response, El Dorado County and its cavalcade of legal allies put up a double-barreled defense.

First, California courts, along with those in many other blue states, have carved out a major exception to the Supreme Court’s rules. Fees slapped on individuals on an ad hoc basis — by say, by the Coastal Commission in adjudicating a single permit — might lack transparency, political accountability and be ripe for abuse. But fee schedules — voted upon by city councils or county boards of supervisors and that apply to all applicants across the board — don’t deserve such special treatment, the state’s courts have found.

The logic for that distinction, in part, comes down to political accountability.

“A city council that charged extortionate fees for all property development, unjustifiable by mitigation needs, would likely face widespread and well-financed opposition at the next election,” the California Court of Appeal noted when it ruled against Sheetz in 2022.

The fee that El Dorado County levied on Sheetz was passed as part of a general road and highway funding program. Sheetz’s specific fee was based on the size and location of his single family project, as listed on a menu of such fees on the county’s website.

In bringing the case, Sheetz’ legal team asked the U.S. Supreme Court to do away with this “California’s judicially-created exemption.” Some members of the court’s conservative majority appeared ready to do exactly that.

“There’s just no categorical exemption from legislative enactments — what would be wrong with that holding today?” said Justice Neil Gorsuch.

Treating such a set of fees as comparable to the seizing of an individual’s private property could open a whole can of constitutional worms, said UC Davis law professor Chris Elmendorf.

“Why is a fee attached to a development any different from any other kind of tax? No one has a good explanation for that,” he said. He also pointed to local inclusionary zoning rules, in which cities permit new housing projects in exchange for a developer making a certain share of the units affordable, as another policy that could find itself on the chopping block if Sheetz succeeds at the Supreme Court.

Another local policy that could find itself ensnared in a ruling for Sheetz: Requirements that large developments set aside space for public art or pay a fee if they don’t.

Many of the justices, especially the court’s three-member liberal minority, seemed to have a hard time identifying a distinction between across-the-board impact fees and other types of taxation that don’t require a court’s fine-toothed once-over.

Justice Sonia Sotomayor likened El Dorado County’s impact fee system to a set of user fees, building permits or even a road toll.

“If you’re going to start saying, as you did, that you’re reserving the right to say that a toll could be an unconstitutional taking, I bet New York City is going to be sued very soon on that toll to come down into Lower Manhattan,” Sotomayor, who was born in the Bronx, told Sheetz’s counsel. “At what point do we stop interfering?”

Already complying

If the court doesn’t buy that particular argument, the county put up a second one: It is already abiding by the court’s prior rulings.

A state law, known as the Mitigation Fee Act from 1987, requires local governments to justify the fees that they impose with detailed studies that show a connection between the fee levied on a new development and the financial impact that development is likely to impose on local infrastructure.

In conducting those analyses, they argue, California counties are already complying with the Supreme Court’s standards.

For Sheetz’s proponents, those “nexus studies” are a paltry substitute for heightened judicial scrutiny.

These studies often amount to “high-level black boxes” that can justify a wide range of potential charges, said the Terner Center’s Garcia. In California, state courts have historically been reluctant to second-guess those analyses.

If the high court does ultimately decide that a more rigorous, project-by-project analysis is required, the implications could be dramatic — and not in the way that plaintiffs either imagine or hope, warned Jennifer Henning, a lawyer with the California State Association of Counties.

“I don’t think it’s going to result in zero fees,” she said of a possible Sheetz victory.

What it would almost certainly do is “really slow down and make more expensive the process of pulling permits and doing other kinds of development projects,” she said. “We’re just concerned, particularly in the middle of a housing crisis.”

Even Trump-appointed Justice Brett Kavanaugh worried about the practical workability of that requirement in his back-and-forth with Beard, Sheetz’s lawyer.

“Your way is going to be more time consuming (and) administratively burdensome,” he said.

“It very well may be,” said Beard. “But this is a constitutional standard.”

If California wants to build its way out of its long term housing shortage, plenty of things stand in its way in 2024: high interest rates, sluggish local approval processes and a persistent shortage of skilled construction workers, among others.

But a slew of housing bills from the 2023 legislative session went into effect on Jan. 1, promising to ease or eliminate some of the other burdens.

Among the batch of fresh housing laws are an especially high profile set by San Francisco Democratic Sen. Scott Wiener: Senate Bill 423 re-ups and expands a law that speeds up the approval of apartment buildings in which some units are set aside for lower income Californians, while SB 4 does something similar for affordable housing on property owned by religious institutions and non-profit colleges.

See also: See what’s behind California’s push to adopt more housing laws

Wiener’s two new laws set the tone of housing legislation in 2023, where ripping out barriers and boosting incentives for housing construction emerged as the dominant theme.

“The era of saying no to housing is coming to an end,” Wiener said in a statement after the two bills were signed.

That was especially true for developers of purpose-built affordable housing, per policy analysts at UC Berkeley’s Terner Center for Housing Innovation in an end-of-year legislative summary.  Lawmakers, the analysts wrote, in the continuation of a “remarkable run over the last several years,” gave “more flexibility to exceed or override local zoning, greater certainty on the timing and likelihood of planning approvals, and substantial relief from (environmental) review and litigation.”

“I’ve never seen this type of consensus in the Legislature before,” said Michael Lane, state policy director for the San Francisco-based urban planning think-tank SPUR.

Or as Politico put it succinctly in a headline from late summer: “YIMBYs” — short for so-called yes in my backyard activists who push for more building — “are winning.”

Other notable victories from that camp include AB 1287, a bill by San Diego Democratic Assemblymember David Alvarez, that will give developers permission to build denser, taller buildings if they set aside additional units for middle-income earners, and SB 684, which will make it easier to divide up large parcels of land for modest clusters of townhomes and cottages.

See also: A detailed look at 12 new laws looking to boost affordable home construction

It wasn’t entirely smooth sailing for the pro-development caucus. That second bill, by Merced Democratic Sen. Anna Caballero, will only apply to parts of the state already zoned for multifamily housing. Historic single family home neighborhoods got a last minute carve out, leading one of the bill’s sponsors to take the unusual step of asking Gov. Gavin Newsom to veto their own bill (he didn’t). That eleventh hour switcheroo demonstrated that though the political coalition opposed to state pro-density policies are on the back foot, they are still a force to contend with.

That coalition of local governments, certain organized labor groups and environmental justice advocates also prevented housing supply boosters from entirely rewriting the state’s signature environmental law, as some advocates had hoped earlier this year.

But a host of new laws will make it more difficult for opponents of proposed housing projects to use the California Environmental Quality Act to delay certain types of housing projects. Oakland Democratic Assemblymember Buffy Wicks wrote a bill that instructs judges not to consider the noise of future residents as a pollutant in need of environmental mitigation, a response to one of the most headline grabbing California court decisions of the year.

Wicks’ bill, which went into effect in September, may have gotten much of the media attention, but other, similarly intentioned bills that will become law in 2024 may prove more consequential. One, SB 439, by Berkeley Democratic Sen. Nancy Skinner will make it easier for courts to slap down “frivolous” environmental lawsuits, a second, AB 1449, by Alvarez will shield many affordable housing projects from environmental review and a third, AB 1633, by San Francisco Democratic Assemblymember Phil Ting will force cities to either approve or deny a project’s environmental review within a set time limit.

“This just points out the reason we need to continue to have this fight at the state level,” said Ting in a recent webinar touting the new policy. “We know we have these two million homes to get built and they’re not getting built fast enough…Local governments just aren’t getting the job done.”

That’s largely thanks to a suite of recent state laws that make it increasingly difficult for local governments to say no to these developments or to tack on costly requirements. Starting in 2024, a new bill by Ting may help to reshape the existing ADU market. AB 1033 will let homeowners spin off their ADUs as separate for-sale condos, so long as local governments opt in.

That’s a big “if,” but the condoization law has many backyard cottage builders optimistic about the future, even at a time when California’s residential construction industry appears to be slowing.

“I am deeply concerned about the market and how few young buyers can actually afford to get into the game anymore,” said Seth Phillips, founder of the Los Angeles-based development and consulting firm ADU Gold. “If they do it right, if they really get the processes right…young homebuyers could have a whole bunch of new stuff to pick from, which basically doesn’t exist right now.”

In March 2021, the Los Angeles film industry was just beginning to roar back to life after a prolonged COVID-induced slump, but Michael Addis, a freelance filmmaker, was still deep in the hole. For more than a year he’d been racking up IOUs to his landlord and the tab stood at $43,792.

So Addis turned to an emergency state program designed to help people like him pay down rental debt accumulated during the pandemic.

Later, in the summer of 2021, Gov. Gavin Newsom himself had touted the program, Housing Is Key, as the largest of its kind in the nation. “We’re laser-focused on getting this assistance out the door as quickly as possible,” he said at the time.

Addis heard back 20 months after he applied.

On June 5, 2023 — his 61st birthday — he received an email, which he shared with CalMatters, notifying him that a payment had been approved in full.

But by then it was too late. Addis had already downsized, moving out of his apartment a few blocks from the Marina Del Rey harbor to a smaller spot in the San Fernando Valley. He had also borrowed money from members of his family to pay his old landlord back, hoping that he’d be able to write off the new debt with the relief funds from the state.

But once the company that owns his apartment complex, Equity Residential, received a check from the state, they sent it back, citing program guidelines that deemed Addis no longer eligible for assistance.

“It’s just painful to think that the money that was allocated to solve my problem was sent back and I’m still in debt and now I have to downsize again,” he said, explaining that he’s about to move to Simi Valley, even further from his teenage son, who lives with Addis’ ex-wife. “I’m not in any way leaning on the state but I had a bad year — a bad couple years — and there was a program to help. And they helped me in the worst possible way.”

Addis’ long wait for California’s emergency rental relief program isn’t unusual. Though the application window closed in March 2022, more than 70,000 households still have applications pending on the eve of 2024.

California lawmakers created Housing Is Key with billions of dollars in federal relief money, initially guaranteeing everyone who applied in time and was approved would get paid. The ultimate goal of the program was to stem a flood of evictions, as state and local emergency eviction bans came to an end.

For many Californians, it’s been a vital lifeline. The program has sent more than $4.7 billion to nearly 370,000 lower-income households, according to data from the state’s Department of Housing and Community Development.

But a sizable, unlucky minority of applicants — tenants and landlords alike — have had to wait…and wait and wait.

In the meantime, many have borrowed money from friends and relatives, pleaded and haggled with impatient creditors, missed monthly payments and turned to online support groups for tips on how to sidestep the program’s red tape.

Still others have been evicted, though the state doesn’t maintain records on how many.

Tenant rights advocates and anti-poverty groups accuse the state of perpetuating a cruel bait-and-switch on some of the state’s neediest. The state’s housing department blames some of those same advocates for the delay, pointing to a lawsuit that slowed down the application review process.

For those still waiting, the hold-up has taken on a new degree of urgency. Housing Is Key might soon be out of cash. Though California’s Housing and Community Development department, which oversees the program, recently “identified additional funding,” it’s unclear whether that will be enough to pay out every last valid claim.

How much is left?

The state’s housing department declined to estimate when the program will run out of money or how many people are likely to get help before that happens. That figure depends on two unknowns: How many of the as-yet unprocessed applications will ultimately be approved and, of those, how much rental debt each applicant is owed.

“Given this inherent uncertainty, we remain focused on assisting as many eligible households as possible with the funding we have available,” said Pablo Espinoza, the department’s deputy communications director.

But the available figures offer a few hints.

As of early November, there were at least 33,658 initial applications still pending, according to data published by the housing department. Another 39,401 applicants were initially denied, but awaiting an appeal review. That’s a total of 73,059 applications.

Though CalMatters reported in early October that the department projected the program would soon be out of money, program administrators were able to dig up some more. According to Espinoza, because the program is in its “final wind-down” phase, money initially set aside to pay administrative overhead or leftover from locally-run programs is now available to help renters. That’s left a new projected balance of roughly $171 million.

But that’s “not nearly enough,” said Anya Svanoe, a spokesperson for Alliance of Californians for Community Empowerment, one of a handful of organizations that sued the department last year over its administration of the rent relief program. “Tens of thousands of people are at risk of being evicted or made homeless, not because they were ineligible, but because the state ran out of money.”

Svanoe points to the average pay out, published on the program’s online data dashboard: $12,018.

Assuming that same average payment, the program’s current funding would only be able to cover a little more than 14,000 people. That would leave the remaining 58,830 applicants, or 80% of the total pool, out of luck.

Such a high denial rate wouldn’t be consistent with the history of the program. Housing Is Key administrators only denied 29% of completed applications through mid-2022, according to data provided by the department and shared with a coalition of legal aid groups as part of a court settlement reached earlier this year.

The denial rate seems to be ticking up as the program draws to a close. In early October, a mere 17% of the remaining applicants had been denied. A month later, the figure was up to 38%.

That high denial rate could reflect the fact that applications that have been pending this long are disproportionately complicated and more likely to be rejected.

Asked in October about the possibility that many qualified applicants would not ultimately receive help due to a lack of funds, Espinoza said the program funding was “not infinite” and was never intended to serve all eligible applicants, though he acknowledged that the department and other Newsom administration officials had falsely said otherwise in the past.

That realization has started to dawn on some long-waiting applicants. Cassandra Smith, a graphic designer and single mother who lives in Westmorland south of the Salton Sea, said she applied in February 2021.

“I’m trying to find a way to freelance or do whatever I can do to get the money to just pay it myself because I really don’t think they’re going to have enough money to pay people,” she said. “I can’t sit and depend on it and wait because it’s been two years.”

Unintended consequences?

Anti-poverty organizations have been pressuring the state to speed up the approval process.

“These people have been literally waiting for years for a program that is supposed to be an emergency rental program,” said Madeline Howard, a staff attorney at the Western Center on Law & Poverty.

The Western Center and the Alliance of Californians for Community Empowerment were two of the groups that sued the housing department in June 2022 over what they called an “opaque” application review process that harmed lower income renters and people of color.

A month later, a superior court judge in Alameda County ordered the department to stop denying applications until the court had time to give the program’s review process a once-over. That pause lasted until January 2023, at which point the department was once again allowed to start sending out denials, so long as it explained why each request for assistance was being rejected.

The state ultimately settled the case, agreeing to audit its past denials and to make the application process more user-friendly.

The housing department now lays some of the blame for the sluggish administration of the program on that court ruling, which prevented it from issuing full or partial denials.

By early 2023, the program had “approved just about all of the applications we could identify as approvable” and “ had let go most of the program staff,” Espinoza said. Getting the program up and running after the legal hold was lifted added more time. An amended contract from March 2023 between the state and the Mississippi-based accounting firm Horne LLP that administers the program tacked an additional year to the agreement.

Jackie Zaneri, an attorney with Alliance of Californians for Community Empowerment, dismissed the suggestion that the lawsuit is to blame for the program’s tardiness. Nothing in the legal order halting denials prevented the program from processing applications internally and paying out partial awards.

“They chose not to do that,” she said.

The worst kind of help

For renters who do ultimately get help so long after they applied, it may come too late.

Angela Okimoto, a 66-year-old former caregiver in Covina, has been waiting on her application since August 2021. In the meantime, she said she was evicted from the garage she was renting. Now she said she has no permanent home.

The rental debt listed in her application, which she shared with CalMatters, adds up to $15,270.  But even if she wins her appeal, that check would go to her former landlord. That might improve her credit history, but it wouldn’t secure her a new place to live. 

Okimoto said she checks the online portal and calls the hotline nearly every day anyway.

“All they tell me is, ‘Yeah, they’re working on it…just be patient.’” she said. “I say, ‘I’m as patient as can be. It’s been two years. You can’t get any more patient than that.’”

Landlords are also among those waiting.

Cindy, who lives near Yuba City north of Sacramento and who asked that her surname not be published so as not to jeopardize her pending payment, said she bought her three-bedroom home in early 2020 and took on two tenants to help her with the mortgage. In late 2021, one of her tenants was unable to pay his rent, so she encouraged him to apply to Housing Is Key.

Without his payments, she said she used credit cards to pay her mortgage. “That money is going to come so I’ll just use this to pay this bill,” she said she told herself.

Her payment for $13,600 wasn’t approved for nearly two years. She said she’s still waiting on the check in the mail.

Had she known at the outset how long the approval process would take, “I would have probably made different arrangements — I don’t know, maybe borrowed money from my parents,” she said. “When I moved in, I had great credit,” she said. As in the case with Addis, the Simi Valley renter, Housing Is Key has a policy of not reimbursing so-called shadow debt, loans taken out to pay down rental debt. Cindy now says she has $20,000 in credit card debt.

Last month, she said she unexpectedly lost her job of eight years.

Turning to strangers for help

Leslie Pollock, a private chef in Santa Monica, wonders how she’ll ever be able to move out of her apartment.

Living in a rent-controlled unit in Santa Monica, Pollock said she initially applied for help while recuperating from cancer treatment after the pandemic shuttered her business. Even so, she considers herself one of the lucky ones. She’s working again, cancer-free and only owes three-and-a-half month’s rent. No one has threatened her with eviction yet.

But she still feels stuck. Her landlord is reluctant to do upkeep with the debt outstanding, she said, and she worries about being able to rent anywhere else with so much red ink on her record. Most frustrating of all, she said her application was approved a year ago, but the check was sent to the wrong address. She said she regularly calls the hotline to try to explain the situation, but can never get someone with decision-making power on the phone.

“I say, ‘Can I email?’ and they say ‘No, we don’t have capacity to get email,’” Pollock recalled. “They would just say ‘We can’t tell you anything,’ ‘We can’t tell you when that was approved,’ ‘We can’t tell you when that check was cut,’ ‘We can’t tell you…’”

Many of the applicants fed up with the program’s hotline or web portal have wound up in a Facebook group created by Bella Allen.

The owner of a property management company in Long Beach, Allen set up the private group in 2021 to help a friend who was trying to navigate the new state program.

Two years later the Facebook group’s membership has swelled to more than 3,000. Posts include triumphant screenshots of approval letters and despondent post-denial missives. There are requests for help translating the program’s bureaucratese, as well as rants about the state’s housing department or, more frequently, about Horne, the company hired by the state to administer the program. There’s an occasional meme and no shortage of theories that verge on conspiratorial.

As the months have dragged on, the tenor of the posts have grown more desperate and irate. Allen said she has reached out to lawmakers, lawyers, journalists and legal aid groups, all to no avail. She said she spends hours after work and late into the night moderating the group and fielding questions as best she can. But she acknowledged that she isn’t an expert and has no inside knowledge of how the program works.

“I don’t know what to tell these people,” she said. “And I’m gutted.”

None of which describe the side-by-side ADU duplexes on E Street.

Perched at the edge of San Diego’s desirable Golden Hill neighborhood, there’s nothing dainty or diminutive about these three-story structures. “Backyard cottage” is another term used to describe accessory dwelling units, but these are out front, practically hiding the five-unit multiplex to which they are technically “accessory.”

Like dozens of small and not-so-small apartment buildings across San Diego, the structures on E Street are ADUs in only one way: They were permitted under the city’s ADU Bonus Program.

The city’s one-of-a-kind ordinance offers landlords a one-for-one deal. If they agree to construct an ADU and keep the rent low enough for San Diegans making under a certain income, they’re automatically permitted to build a second “bonus” unit, which they can rent at whatever price they like.

In parts of the city far from public transit, the 2021 city program offers a one-off: Alongside the main house and the two ADUs already permitted under state law, the city allows for a maximum of five units on one property.

But in bus-and train-adjacent “transit priority” areas — a designation that covers much of San Diego’s urban core — a landlord can alternate affordable and bonus units again and again and again. Technically, there are limits. City zoning sets a maximum height on buildings, and a more complicated regulatory formula caps how much constructed floorspace can dominate a parcel.

But you can squeeze in an awful lot of ADUs within those parameters. Hence, the project on E Street: A single-family lot with nine apartment units on it, four of them ADUs, two of them affordable. And that’s not an especially extravagant use of the program.

A typical ADU bonus project application includes between four and seven additional units, according to data provided by San Diego’s Development Services Department. Projects with a dozen or more units are not unheard of. The largest proposed project to date, planned for the city’s gentrifying majority Black and Latino Encanto neighborhood, is 148 units.

David Pearson, whose design shop, PALO, designed the E Street duplexes, said his largest permitted project, located behind an existing 76-unit apartment building, comes with 36 “ADUs.”

There’s a word for 36 units stacked in a row on top of one another. Even Pearson can’t help but grin and use scare quotes when he uses the term “ADU.” The city’s “crafty little maneuver” allows developers to “effectively build an apartment building out of ADUs.”

“It’s really ADUs only in name,” he said.

Depending on your perspective, San Diego’s “crafty little maneuver” is either an ingeniously clever use of state law to provide a much-needed boost to the local housing supply or a sneak effort to foist an intolerable degree of construction and density upon unsuspecting residents while only providing a token degree of affordability.

The program is just beginning to take off. A total of 159 projects with 1,200 units have been submitted to the city, as of October. Less than half of the projects have actually been permitted. Far fewer have broken ground. Even so, supporters, detractors, researchers and policymakers are sitting up and taking note.

“San Diego may have stumbled on to the quickest solution to producing a lot of ‘missing middle’ housing,” said Andrew Wofford, a graduate student researcher at the UC Berkeley Center for Community Innovation who has been evaluating the program for the state’s housing department.

“Missing middle” describes an approachable (and, one hopes, more affordable) scale of development that occupies a middle ground between uber-dense highrises and sprawling single-family homes. Adding an ADU behind an existing home represents the mildest housing of this type. The novelty of San Diego’s program is in redefining “ADU” from a specific building type to a broad privileged regulatory chute into which developers are now encouraged to throw small apartment buildings.

Meanwhile, local critics of the program have already begun to mobilize.

Signs inveighing against “granny towers” and “backyard apartments” are common lawn ornaments in many of the city’s residential neighborhoods. The local backlash has already spilled over to other areas of local housing policy and now threatens Mayor Todd Gloria’s broader “Yes In My Backyard” vision.

Even some supporters are surprised by the program’s ambition. Denise Pinkston said her experience with local housing politics would have led her to rule out anything quite so far-reaching. A San Francisco real estate developer and the go-to ADU whisperer for state lawmakers hoping to hop aboard the “backyard revolution,” Pinkston is also founder and board president of the Casita Coalition, a nonprofit that advocates for ADU-friendly policy.

But looking at the results so far in San Diego, she paraphrases Shakespeare: “What’s in a name?”

“Actually, it doesn’t really matter what you call it,” said Pinkston. “What you get is more housing.”

San Diego: ‘Above and beyond’

California legislators have spent the last half-decade passing bill after bill to encourage homeowners to build backyard cottages.

Now, anywhere in California, city permit review is limited to 60 days. Development fees and construction-cramping setback requirements are capped. Public hearings and design reviews are banned. In many cases, so are the impositions of costly parking, landscaping and storage requirements.

As a result, California has experienced an ADU boom. While other, more ambitious and controversial pro-housing policies have flamed out in the state Capitol or made it through the legislative gauntlet only to produce less impressive results in the real world, ADUs now make roughly one-in-six of all new units permitted.

Some cities have found ways to quietly obstruct those efforts. Others have rolled along with them. None have gone quite so far as San Diego with its bonus program.

Leaning in on development-friendly housing policy is on brand for San Diego. The city has a history of serving as a laboratory of YIMBYism for California.

Earlier this year, Gov. Gavin Newsom signed a bill ramping up the added density afforded to apartment projects in exchange for additional affordable units. It was modeled on a San Diego ordinance. When state lawmakers passed a law banning local parking requirements for many new housing projects, they were following San Diego’s lead. And as California rolled out its various laws greasing the skids for ADUs, San Diego passed its own rules that greased them further.

“In a lot of cities, the only reforms they’re doing on housing are those that are triggered by the state,” said Colin Parent, a state Assembly candidate and CEO of Circulate San Diego, a nonprofit that advocates for public transit and dense housing. “San Diego has done a bunch of things that go above and beyond what the state reforms require.”

The ADU bonus program is the latest example.

In 2019, state lawmakers passed a bill requiring local governments to “incentivize and promote” the building of more affordable ADUs. City planners in San Diego took this directive to heart in a way that no other city did.

To fans of the program, San Diego offers a policy lesson that goes far beyond backyard cottages. Cities don’t “have to reinvent the wheel to build more housing,” said Muhammad Alameldin, a researcher at the Terner Center for Housing Innovation, who wrote an overview on San Diego’s ADU program earlier this year. The promise of nearly unlimited density is an irresistible perk for many developers. Cities that want more of a particular type of housing — or more housing in general — can tack on an uncapped density bonus and watch the permit applications flood in, he said.

“They found the formula.”

But there are reasons to believe that this particular formula might not work quite so well in other parts of the state. Even by the standards of auto-oriented Southern California cities, San Diego’s lots are on the big side, making it easier for developers to pack more onto the average parcel while staying beneath other zoning limits.

Local economics play a role, too. In San Diego, the median apartment rent (roughly $2,700 a month, according to Zillow) is less than $400 over the maximum allowable rent for a state-designated affordable apartment in San Diego County. That’s good news for landlords, who don’t have to take quite so large a hit when they set aside certain units for lower-income renters. In places where that gap is larger, the incentive to participate is smaller.

Jake Wegmann, a professor of urban planning at University of Texas at Austin, said he thinks the same “slam dunk economics” of the program in San Diego would likely apply in “other very high rent regions, like the Bay Area,” though perhaps not so much in lower cost metro areas, such as Sacramento or Fresno.

Even within San Diego, there are only so many parcels where it makes sense to pack in a cluster of multiplexes: Some lots are just weirdly shaped or lack  access to water and power, for example. “We should be cautious in assuming it’s going to run rampant over the whole city like kudzu,” said Wegmann.

Waiting for copycats

Jared Basler, an ADU architect and the Casita Coalition’s policy director, said “There are a lot of people who are already looking into how to take it up to the state level” — though none of the state legislators interviewed for this story would confirm as much.

But even a program booster like Basler isn’t quite so sure going statewide with the idea would be a good thing: “When we take these really successful local programs statewide, they do get watered down.”

A “watered-down” version of the program might include higher affordability requirements or some of the stringent labor standards that have been tacked onto other high-profile housing bills. Those added requirements would raise costs and result in fewer overall units. That’s a trade-off proponents aren’t willing to make.

Other places — and even the state as a whole — are welcome to take a look at the program, said Gary Geiler, assistant director of Development Services Department. But they should proceed with caution.

“Other jurisdictions might have a different geography and topography and built environment,” he said. Instead of opting for the “unlimited option,” allowing for as many affordable-bonus pairs as can fit on the lot, a single bonus allowance “could always be the starting point,” he said.

Pushing that “unlimited” option also carries a broader political risk.

One of the reasons ADUs have been such a political success in California is that backyard cottages are, generally speaking, human-scale. Grandma’s backyard bungalow will not cast unsightly shadows on nearby parks or jam the nearby side streets with cars. Unlike large apartment complexes that might be railed against as the work of faceless, greedy developers, ADUs are generally paid for by, and stand to financially benefit, a neighbor.

Turning ADU policy into a backdoor apartment program threatens to bring those faceless developers back into the debate, upending a tried and true strategy, said Parent of Circulate San Diego.

“Most people who own a house — the vast majority of them — are never going to build an apartment building,” he said. Under the San Diego program, “there are some projects that are really, really big, because there are an unlimited number of allowable units,” he said.

“That word ‘unlimited’ is going to be challenging for some people.”

Backlash begins

From the roundabout at Adams and 49th, in San Diego’s historic Talmadge neighborhood, the two ADU duplexes peek over the single-story house out front like a pair of peeping Toms. To Geoffrey Hueter, they’re about as welcome here.

These are the first ADUs built under the San Diego bonus program and the reason that Hueter got into housing activism. They’re the reason he rallied his friends and co-founded Neighbors for a Better San Diego. They’re the reason that just a few houses down, a front yard sports a sign calling for “No Backyard Apartment Buildings.”

Hueter is the soft-spoken, bespectacled face of the political backlash that housing advocates like Parent worry about. With a retired software engineer’s mind for detail, Hueter will respond to a simple question (“What do you think of the city’s bonus ADU program?”) with a seeking verbal essay on the history of Southern California automobile culture, the rate of local land turnover, social housing in Vienna, and optimal property tax rates for small businesses.

But eventually, he will reply: “It’s bad policy.”

Before developers got their hands on the 49th Street site, it was a single home. Now there are six: Four new one-bedroom units, plus a new studio carved off from the main house’s garage. When it wrapped up in the late summer of 2022, Mayor Gloria showcased the project as an example of “gentle density” even as some neighbors started to complain. Their chief sources of angst were a decline in privacy and the prospect of noisy college kids renting out the units.

Standing a few houses down from the 49th street project, Hueter acknowledged that the buildings aren’t especially imposing or out of character. “It’s not horrible horrible,” he said, though he still worries about the lack of parking and the sheer number of trash cans required to service the new tenants.

More than the details, it’s what he sees as the duplicity of the program that encroaches on “lawlessness” that bothers him most. “Don’t call them ‘accessory’ if they’re dominant,” he said. “If you say something is ‘gentle density,’ it should be gentle.”

In a weekly newsletter published just after his visit to the site last year, Gloria also noted that the project was “a huge improvement aesthetically from what it was before.”

For Hueter, who has helped fundraise to beautify  Talmadge and who is married to the president of neighborhood historical society, that was an unforgivable insult.

“Don’t tell people they live in a s–t neighborhood,” he said. “Be smarter about who you pick a fight with. This is a very politically active neighborhood.”

The mayor’s administration has learned that the hard way. Earlier this year, Gloria introduced a collection of housing proposals, which he branded “Housing Package 2.0.” One of the proposals would have adopted a 2021 state law that allows small apartment projects of as many as 10 units to skip environmental review if they’re close to transit — so long as a city opts in.

That proposal was swatted down by the city’s planning commission after hundreds of residents, many under the banner of Neighbors for a Better San Diego, led a months-long protest movement against it.

“A lot of the reason [that law] got beaten here is because there was a lot of experience from the bonus ADU law,” said Hueter. “People were already sensitized to what was going on.”

Earlier this month, the city council rejected the mayor’s entire housing package. Gloria has said he plans to reintroduce a revised version next year, but Neighbors for a Better San Diego were happy to consider it a feather in their cap.

Technically affordable vs. truly affordable

Hueter stressed that the group isn’t anti-ADU. The group’s membership leans propertied and graying, so more than a few have backyard units of their own.

Like most local groups pushing back on new housing laws, the members of Neighbors for a Better San Diego have an easier time rallying around what they oppose than what they would like to see instead. At public hearings and protests, historic preservation, a lack of parking, the unseemly prospect of developer profits, an influx of rental apartments — or a more naked condemnation of lower-income renters, themselves — all motivate opposition to new city housing policy.

Maybe the most popular argument of all against the city’s ADU program is the claim that the resulting units aren’t “truly” affordable.

In College Area, the residential neighborhood anchored around San Diego State University, a newly built ADU may rent for a little more than $3,000. The “affordable” units are cheaper, but not much. In order to qualify for the program, rent can’t exceed 30% of the monthly paycheck of someone earning 110% of the county’s median income. That works out to $2,249 per month for a studio.

And unlike traditional affordable housing, which has to be set aside at those lower rates for 55 years, the bonus ADU program only requires a 15-year commitment. If a landlord lowers the rent further to someone earning 80% of the typical area income, the commitment is only 10 years.

That second option remains a hypothetical. So far, each of the 159 projects submitted to the city has targeted the highest “affordable” income level.

Asked about the bonus program as an affordable housing solution, city planning director Heidi Vonblum confessed that the question made her nervous.

“We have a lot of neighborhood opposition groups that will go on Zillow, and find the most outrageously expensive ADU and then use it to oppose any kind of ADU incentive program,” she said in a Zoom interview.

But even if the program isn’t serving the most desperate, making it easier to build modest duplexes provides an escape valve for young professionals, essential workers and other middle class San Diegans who would otherwise be competing for the region’s scarce rentals, she said.

“Maybe an ADU that comes online might have really high rents, but then that frees up housing within the housing ecosystem for people to live in,” Vonblum said. “That’s really hard to explain to, you know, an average community member, because everybody wants us to solve everything with some silver bullet right now.”

Pitching the program

On a Saturday morning in early November, Mayor Gloria dropped by a conference center in San Diego’s master-planned Liberty Station neighborhood to meet up with the builders, housing financiers, politicians and academics gathered at the Casita Coalition’s annual convention.

If any of the efforts by Hueter and his fellow activists have shaken his confidence, the mayor doesn’t show it. He recalls his visit to that first ADU bonus project on 49th Street. “It’s no surprise that new developments typically get a lot of notice and a lot of signage,” he said. “But the people I met that live there are service members and college students. And where are they gonna go?”

On paper, the conference is a celebration of the ADU-ification of the California housing market and an industry meeting of the minds. But much of the programming serves as an unofficial advertisement for the host city’s out-there ADU program.

After Gloria departs, the conference attendees line up outside for a morning bus tour of the city’s built up backyards. The tour passes by the 49th Street site, but does not stop in Talmadge. In College Area, outside a seven-unit project, bus riders are advised to keep their voices down, lest an already irate neighbor grow more irate. The ADU tourists disembark at each site to pad around the stacked in-law units on display, cooing with giddy disbelief and inquiring about square footage.

Getting off the bus back at the convention center, Analise Ortiz, a Democratic Arizona state representative marvels at what San Diego has done. Phoenix legalized backyard “casitas” this fall, though without the other developer-friendly goodies that San Diego offers. Recent efforts to permit ADUs statewide and to otherwise make it easier to build dense housing have failed in the Arizona Legislature. The debate there is a familiar one, said Ortiz: Concerns about affordability, neighborhood character and parking dominated.

“I think this shows that a lot of those concerns are exaggerated…We’re going to try again next year and I think putting a visualization of what it can look like will hopefully help move some of our colleagues along,” she said. “We’re hoping we can have the same thing in Arizona.”

Now, it might be at risk of running out of money.

That could leave the more than 100,000 renters who are still awaiting assistance from a program that stopped taking new applications more than a year ago officially out of luck.

The first warning sign came in the form of an email a staffer with the state Housing and Community Development Department sent out in early September to lawyers representing many of those same anti-poverty groups, which entered into a legal settlement with the department over the program earlier this year.

“As of July 31, 2023, the program had $128,940,473 in funding left for disbursement to applicants,” the staffer wrote in the email shared with CalMatters. The next round of payments would provide assistance to an estimated 5,521 households. But any money leftover “is unlikely to add enough funds to the remaining balance to support more than one additional” payment, the letter stated.

In other words, the program may soon be out of cash, though it’s impossible to say when.

In a statement, department spokesperson Pablo Espinoza did not dispute the contents of the email, but insisted that the program still has cash available for now.

“We have not run out of funds and we continue to evaluate applications that are eligible for funding,” he wrote. “The fact is that this was always meant to be a temporary emergency program, and funding is not infinite.  It is unclear whether there will be sufficient funding to pay all eligible applicants,” he added in a subsequent statement.

That contradicts prior assertions made by the department.

In March 2022, Nur Kausar, then a spokesperson for the state housing department, told CalMatters that the program would “continue to operate until all complete applications received are processed and all eligible applicants have been paid.”

A statement on the program website, since removed but stored on Internet Archive’s Wayback Machine, included a similar claim: “All eligible applications received on or before March 31, 2022, for rent or utilities owed between April 1, 2020 through March 31, 2022, will be paid.”

The program was created to help struggling tenants cover rental debt accrued between the beginning of the pandemic and March 2022. The housing department has struggled to work through a backlog of unaddressed applicants and unresolved rejection appeals in the 19 months since.

Espinoza acknowledged those prior statements in his statement.

“This is an error that has been addressed and corrected with all stakeholders for some time now. We embrace this renewed opportunity to reiterate the information accurately,” Espinoza said.

According to the housing department, 92,713 Californians are still awaiting an initial decision on their request for financial assistance. Another 34,751 appealed a prior rejection. It’s impossible to say how many of these nearly 130,000 applications will ultimately be rejected.

The prospect of the state’s COVID relief fund closing out its accounts comes just as the last COVID-era moratoriums on evictions expire across the state. In Los Angeles and Alameda County, that’s led to a spike in eviction proceedings.

Lawmakers have vowed to zero out the state’s carbon emissions by 2045, build 2.5 million new homes by the end of the decade and swap gas-burning appliances with electric ones in 7 million homes over the next 12 years.

On Oct. 12, the California Public Utilities Commission will vote on whether to reduce the payments that owners of solar panel-equipped apartment buildings receive for the electricity they generate on their rooftops.

The decision could mirror an overhaul that the commission adopted late last year for sun-powered single-family homes and is part of a larger battle among environmentalists and energy policymakers over the role that individually-owned solar panels should play in the state’s planned divorce from fossil fuel-derived energy.

In both cases, the new rules only apply to new customers.

Supporters of the rule change — the state’s major electric utilities chief among them — argue that the new proposed rates, which vary over the course of a day, better reflect the actual value that rooftop solar panels provide to the electrical grid while offering a fairer shake to customers who don’t have the luxury of living beneath solar panels.

The new pricing system is also designed to encourage property owners to pair solar panels with batteries, which can store up solar energy in the middle of the day when it’s abundant and cheap and dispatch it when the grid needs it most after the sun sets and when the CPUC’s proposed adjusted rates are higher.

But a notably diverse coalition of California interest groups have banded together to argue otherwise. Landlords, tenant rights organizations, affordable housing advocates, environmental nonprofits and the building industry — which rarely all agree — now say that the policy would only “eviscerate” the multifamily solar market.

What’s more, they argue, the proposed change runs counter to a host of ambitious policy goals that California lawmakers have set out to combat climate change, air pollution and the affordable housing crisis.

“This proposed decision seems to go right in the opposite direction,” said Bob Raymer, technical director at the California Building Industry Association, a lobbying group that opposes the regulatory overhaul. “It’s nuts. I’ve been doing this stuff for over 40 years and this one is just baffling.”

Solar policy déjà vu

If this argument sounds familiar, a version has played out in public once before.

In December, the commission cut the payments that homeowners with rooftop solar arrays receive by roughly 75%. The decision came after months of debate, with both sides claiming to speak in the interest of clean energy and economic justice.

Previously, utilities were required to pay homeowners roughly the retail rate for electricity produced by a photovoltaic array and exported back to the grid. Utilities have long chafed at that arrangement, joining organized utility workers and even some environmental groups, in arguing that the more cost-effective way to supercharge clean energy production is to focus on utility-scale (read: big) projects. That’s opposed to the disaggregated fleet of photovoltaic arrays, found disproportionately on the homes of the well-to-do, who were able to skimp on the costs of grid maintenance and upgrades, effectively shunting that onto everyone else’s monthly bills.

The CPUC agreed with that argument and replaced that retail tariff with a much lower, adjustable fee.

That’s more or less what is being considered this time around for apartment building owners, but with one highly contested difference.

Even with these lower payments, single-family homeowners with solar can still boost the benefit of their array by using the electricity they generate on site. Every kilowatt hour “self-consumed” is a kilowatt hour that the homeowner doesn’t have to pay in high retail prices. That can add up to significant savings.

But under the proposed overhaul for apartment dwellers, no such savings would be allowed. All of the electricity generated would count as an “export” to the grid and get compensated at the lower wholesale rate. Likewise, all electricity used by the residents of that apartment building would need to be purchased from the utility at retail. For accounting purposes, there would be no“self-consumption” allowed.

For rooftop solar companies, the lack of a “self-consumption” provision for apartment buildings amounts to an existential threat.

Ivy Energy, a San Diego company that sells software to multifamily landlords hoping to offer their tenants solar power, argued to the CPUC that the rule, if adopted as proposed in August, “would eviscerate the economic value proposition” for multifamily solar “rendering all new projects infeasible and unfinanceable, and effectively result in a collapse of the multifamily solar market.”

Both the state’s major investor-owned utilities and the CPUC say that coming up with a way to account for self-consumption to apartment buildings, where different residents are using different amounts of electricity at different times and would require different levels of compensation, would be a technical nightmare to administer. They argue that it would be costly to build out, raises potential privacy concerns between renters and their landlords and would result in billing so convoluted that no resident could possibly use it to predict the cheapest time to run their dishwasher.

“Illogical and convoluted” is the term used in a joint letter to the CPUC by Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric.

But just because such a system would be hard to implement doesn’t warrant upending the entire industry that has built itself up around the old system, said Bernadette Del Chiaro, executive director of the California Solar & Storage Association.

She pointed to the single-family solar market as a telling example. Since the new policy went into effect, she said, the number of residential solar projects in the pipeline has dropped at least 40%.

“But we’ve gotten ourselves in this situation where we’re almost touting the single family version” of the policy, she said. “It’s still not going to be a great thing, but at least it’s not sudden death. Which is what this is.”

In opposition: A big tent

As the CPUC mulled the decision over the summer, a disparate collection of interest groups flocked to the rooftop solar industry’s defense, but for different reasons.

Builders oppose anything that makes solar less financially attractive because the California Energy Commission, another state agency, now requires virtually all new residential construction to come equipped with solar panels.

Throwing a wrench into the economics of rooftop solar also complicates the statewide push to go electric, to the chagrin of property owners and the entire electrification industry.

“Solar is one of the biggest revenue streams for a landlord asking ‘Why should I invest all this money in a heat hump, a new hot water system?’ said David Chanin, co-founder of FutureFit Partners, a company that helps house and apartment owners make those investments. “Under these new rules I have pretty serious concerns that entire building electrification projects just won’t pencil out anymore.”

And while the overhaul for single-family solar users mostly directly affected homeowners, it’s apartment-dwelling renters who are likely to be most affected by the current decision.

The current system “really is the only mechanism we have for a lot of low-income people living in multifamily housing to get solar and clean energy,” said Andrew Dawson, a lobbyist with the California Housing Partnership, a nonprofit that advocates for affordable housing. “For electrification purposes, solar is really important to make sure that people’s bills don’t increase significantly.”

Other programs do exist to help lower-income Californians go green. The state’s Solar on Multifamily Affordable Housing program provides financial incentives for property owners to invest in new panels and is funded under a different formula. But that program’s coverage is patchy across the state, said Dawson.

Andrea Barnier with Self-Help Enterprises, a low-income housing provider in Visalia, said only 15 of the organization’s 40 multifamily projects will be insulated from the policy change through that state program. For the remaining sites, and all future apartment projects, she called the new rule a potential “deterrent to all-electric design.”

In a filing with the CPUC, the state’s three investor-owned utilities note that multifamily solar is still a relatively rare phenomenon in California. At last count, just 217 residential facilities across the state make use of the program, along with 513 other mixed residential and commercial sites.

But with the state vowing to simultaneously turbocharge apartment construction, electrical vehicle purchases and the jettisoning of gas stoves and hot water heaters, critics say that while supporting distributed solar may not be vital now, it will be in the near-future.

“As climate impacts like rising heat continue to increase, there is an ongoing need for grid independence and alternate energy solutions from batteries during rolling blackouts and emergencies, so this also impacts our ability to develop resilient communities,” said Barnier.

A coming political dust-up?

It may only be a matter of time before this argument gets dragged out of the highly-technical and mostly overlooked corridors of the CPUC and into the broader realm of partisan politics.

In July, the California Democratic Renters Council, a coalition of tenant rights, pro-housing and environmental justice advocacy groups, sent a letter to the CPUC’s five commissioners. It decried the proposed regulatory change that “would force renters to buy all of their power from the utility even when it is generated on their own rooftop” and “discriminate against renters by not giving them the same fair treatment as single-family homeowners.”

Though many observers expect the CPUC to ultimately vote for the overhaul next week, the breadth of the coalition that has mobilized against it might be difficult for other state lawmakers to overlook, said Raymer with the building industry.

“From a political standpoint, if this gets passed the way it’s proposed, I think the Legislature will be right back in 2024 addressing this,” he said.

That’s not because of a single bill, but a patchwork of current and former legislation that, taken together, “basically covers any flavor of affordable housing you could possibly want to build,” said Linda Mandolini, president of Eden Housing, an affordable housing development nonprofit.

Homes designated for low-income occupants, like all housing projects, face a gauntlet of potential challenges and hold-ups that add to the already exorbitant cost of affordable housing in California. Those hurdles include lawsuits filed under the wide-ranging California Environmental Quality Act, extensive public hearings and other forms of opposition from local government.

Now, affordable housing projects — in most places and most of the time — may soon be exempt from all that, fitted out in a suit of procedural armor made up of some half a dozen bills and laws.

A bill now sitting on the governor’s desk would cover up one of the last chinks in that armor. Assembly Bill 1449, authored by two Democratic Assemblymembers, David Alvarez of San Diego and Buffy Wicks of Oakland, would exempt certain affordable apartment developments from review under CEQA. To qualify, projects would have to be located in dense urban areas, set aside each unit for someone earning less than 80% of the area median income and abide by stricter labor standards, among other requirements.

Though modest and technical-sounding, that’s unusually broad for new construction in California.

“I do think it’s gonna be very consequential but it’s kind of flown under the radar,” Alvarez said. His explanation why: “The politics of where Californians are and certainly where the Legislature is — we want to see results. We want to see housing being produced.”

Taken together with a handful of other bills and current laws, said Mark Stivers, a lobbyist with the California Housing Partnership, which co-sponsored AB 1449, the new legislation “effectively make it possible for affordable housing providers to develop nearly all viable sites in California by-right and exempt from CEQA review.”

Speeding up approval for these projects comes with a trade-off. Environmental justice organizations, labor unions and various opponents of new development see CEQA as a vital tool to weigh in on what gets built, where and under what terms.

“Our communities rely heavily on CEQA to be able to get more information about proposed developments that might be contributing to further pollution,” said Grecia Orozco, a staff attorney with the nonprofit Center on Race, Poverty and the Environment.

Local activists also often flood the public meetings of city councils and planning boards to pressure elected officials to block unpopular projects or extract concessions from developers.

Whether AB 1449 and a handful of similar bills become law is now up to Gov. Gavin Newsom. Supporters have reason to be optimistic. The Newsom administration is pushing local governments to approve an unprecedented 2.5 million additional homes by 2030, he called the CEQA process “broken” and in the spring he rolled out a package of bills aimed at speeding up environmental challenges to projects — though housing was not included.

He has until Oct. 14 to sign or veto the bills now sitting on his desk.

A patchwork of carve-outs

The Alvarez-Wicks bill isn’t the first legislative effort to grease the skids for new affordable housing.

Two others, both authored by San Francisco Democratic Sen. Scott Wiener, would force local governments to automatically approve apartment buildings in housing-strapped parts of the state and most affordable housing projects on the properties of houses of worship and nonprofit colleges, so long as they comply with a list zoning, affordability and labor requirements.

A third piece of legislation by San Jose Democratic Sen. Dave Cortese exempts the decision by local governments to fund affordable housing projects from environmental challenges, too. Newsom already signed it.

Still awaiting the governor’s pen are a handful of bills that make it more difficult to stall housing projects though environmental lawsuits in general. That includes a bill by Sen. Nancy Skinner, a Berkeley Democrat, that would make it easier for courts to toss out environmental challenges they deem “frivolous” or “solely intended to cause unnecessary delay.” Another by Assemblymember Phil Ting, a San Francisco Democrat, would give local officials a deadline by which to approve or deny a project’s environmental review.

The Ting proposal was fiercely opposed by many environmental activists and the State Building and Construction Trades Council, an umbrella group that represents many unionized construction workers. The bill would also make it more difficult for courts to award legal fees to groups that sue to block projects through CEQA.

J.P. Rose, a staff attorney with the Center for Biological Diversity, which regularly brings such suits, called that provision “the largest weakening of CEQA in recent history.”

The fact that this long list of bills passed the Legislature — some by healthy margins — amounts to a notable political shift, said Christopher Elmendorf, a law professor at UC Davis who advised Ting on the bill.

“I think it illustrates that a sea change is underfoot in how people are starting to think about these environmental review laws,” he said, though he noted that the shift in California is still modest compared to those underway in other states.

Earlier this year, the Washington legislature nearly unanimously passed a law to exempt virtually all new urban housing from that state’s environmental protection law.

The grand bargain continued

Many of the California bills build on a law passed last year that streamlines affordable housing construction along commercial corridors.

In cobbling together the law, its author, Wicks, struck a compromise: In exempting certain housing projects from environmental challenges and other local hurdles, developers would pay workers a higher minimum wage, provide them with health care benefits and abide by other stricter labor standards. That trade was the key to winning the support of the state carpenters’ union and breaking up a legislative logjam that had stymied housing production bills for years.

It also provided a template for Wiener’s two streamlining bills this year, along with the Alvarez-Wicks CEQA exemption proposal.

“That really laid the foundation for those of us who did work in the housing space this year,” said Alvarez.

Not every pro-housing advocate or CEQA critic is so content with the bargain.

“A lot of these bills help a little,” said Jennifer Hernandez, a land use attorney at the law firm Holland & Knight, who has cataloged CEQA challenges to housing projects for years. However, she notes that swapping out the threat of environmental litigation with higher payroll expenses just replaces one cost with another.

In practice, she said, these exemptions are only likely to clear the way for substantial new housing construction in higher-cost areas where developers can make up the difference by charging higher rents to non-subsidized residents. “You really need premium rentals to pay for those higher labor standards,” she said.

But for many affordable housing developers, it’s still a trade worth making.

“You’ve got really strong laws, clear exemptions, and an attorney general who’s willing to step up and say you got to build it,” said Mandolini with Eden Housing, who has been working on housing in the state for more than two decades. “This is the best it has been in California…If this had all existed 20 years ago, we might have built a lot more housing a lot faster.”

In case you forgot, your new noisy neighbors are still considered a source of harmful pollution in California.

Earlier this year, a state appellate court blocked a proposed housing development for some 1,100 UC Berkeley students, partly on the grounds that the state’s marquee environmental protection law requires the university to study and mitigate the potential “noise impacts from loud student parties.”

That was a new interpretation, and an expansion, of the California Environmental Quality Act, also known as CEQA.

Now, that logic is being applied to a second housing development, this one in Los Angeles, creating a fresh clash between defenders of the environmental law and housing advocates who see it as an impediment in battling California’s severe housing shortage

The Los Angeles case may also put new pressure on state lawmakers, who are considering a bill to override the UC Berkeley “people as pollution” ruling.

“It’s infuriating,” the bill’s author Assemblymember Buffy Wicks, an Oakland Democrat, said of the latest court opinion out of Los Angeles, in a phone interview. “We have so many hurdles to building housing in California. We don’t need yet another one in the form of ‘human noises.’”

Gov. Gavin Newson in February lambasted the UC Berkeley ruling, saying it allowed affordable student housing to be “held hostage” by groups opposed to more housing near them and called for sweeping changes to CEQA. His administration filed a legal brief in April arguing that the court ruling would limit housing development in California.

Meanwhile, the California Supreme Court agreed in May to take up UC Berkeley’s appeal of the February decision, though judges on the high court haven’t heard oral arguments yet. But whether Wicks’ bill, if signed into law, would allow UC Berkeley to build its planned dorms is still an open question. That’s because the State supreme Court could declare that UC Berkeley’s case must proceed anyway, said Dan Mogulof, a senior spokesperson for UC Berkeley, in a phone interview Wednesday.

The latest case

In the recent ruling, California’s Second District Court of Appeal swatted down a City of Los Angeles decision to fast-track the construction of a private developer’s housing project with 100 five-bedroom units near the University of Southern California. The project is unaffiliated with the school.

The court sided with neighborhood groups who argued the student tenants they expect to occupy the project would likely party on the rooftop decks, creating “significant noise impacts” and thus required careful study under the state’s signature environmental law.

Both Kyndra Joy Casper, a partner at DLA Piper, the firm representing the developer in the case, Champion Real Estate Company, and a spokesperson for the City Attorney’s office refused to comment on the ruling when asked.

The Los Angeles court decision cited the earlier UC Berkeley ruling, noting that state environmental regulations must take into account “crowds of people talking, laughing, shouting, and playing music that disturbs neighboring residents.”

The California environmental law has long considered “noise” a potentially significant environmental impact. Amy Minteer, a partner at Carstens, Black & Minteer and one of the lawyers challenging the Los Angeles development, noted that a 2015 court held that human noise and music generated by a wedding venue “may have significant noise impacts on surrounding residents” that require environmental review, as the judges wrote then.

The February UC Berkeley ruling cited that wedding venue case in its argument that human noise of future tenants is a kind of pollution that campuses and cities must remedy.

“The noise generated during a wedding is human-generated noise as well,” Minteer said. Noise has been “an impact under CEQA for as long as CEQA has been around.”

But though state environmental law has long applied to the booms, thwacks and rumbles emitted from industrial machinery, large air conditioning units or concert-grade sound systems, the UC Berkeley ruling went a step further, said Chris Elmendorf, a UC Davis law professor and one of the law’s sharpest critics.

“The normal noises that human beings make when going about their lives had not been considered potentially significant effects that required analysis or mitigation,” he said. “Then the UC Berkeley decision comes down in which it says, ‘You know, the sound of students as they carouse around the residential neighborhood, that’s an annoying sound, so it better be analyzed in that environmental review document.”

The two CEQA cases, side by side

The UC Berkeley and Los Angeles court opinions differ in a few significant ways. In Berkeley, the university had already conducted an environmental review and was told to re-do it, in part to take noise into account. In Los Angeles, the city was hoping to evoke a state regulation that exempts dense urban apartment developments from environmental review altogether — and was told that it can’t because the noise from the project’s occupants merits closer study.

And whereas the ruling against UC Berkeley raised a general concern that college students, by their very nature, might be noxiously noisy, the Los Angeles case was more narrowly focused on the project’s proposed roof decks, from which so much noise might emanate.

Another complicating wrinkle: In making the decision to exempt the Los Angeles project, the city simultaneously decreed that the project would have no significant environmental impact, warranting an exemption from the law, while also demanding the developer relocate its potentially noisy rooftop decks. The court found that the city can’t have it both ways.

But for those who worry about the role that the state’s environmental law plays in slowing development, those technical details are less important than the general outcome: The ruling from February, that potentially rowdy college kids might be considered environmental harm, is already having consequences far from Berkeley.

Elmendorf warned that if that precedent remains, more and more courts will delay or halt housing developments because of social noise.

“It just becomes one more part of the CEQA Hydra,” he said. “Once you find a judge who accepts an argument on one occasion, if they’re a judge on the Court of Appeal, well, then you get a published decision making new law.”

But other legal minds said UC Berkeley lost its appellate case largely because it “didn’t do its homework.” The campus itself previously conceded that its students make a lot of noise, yet didn’t address that point in its environmental review.

Looking ahead

The Legislature appears intent on making sure that the UC Berkeley precedent does not remain on the books.

Wicks’ bill would simply remove potential noise made by human occupants and their guests from the list of potential environmental harms that need to be weighed and minimized under state law. Her Assembly Bill 1307 was recently amended to further help UC Berkeley by limiting the instances in which a campus must consider an alternative location for its housing development. Beyond the noise issue, the appellate court ruled that UC Berkeley should have considered a different site for its dorms.

Echoing the arguments lawyers for UC made in the UC Berkeley case, Wicks said that allowing neighbors to delay projects based on the presumed noisiness of its future residents could provide cover for more nefarious forms of discrimination.

“This could be used as a tool to keep communities of color out, to keep multifamily housing out, to keep young people locked out of housing,” she told CalMatters. “Those that fight it will just say, ‘Oh, they’re going to be too loud, can’t have them in our neighborhood!’”

As it’s currently written, Wicks’ bill would become law immediately upon being signed by the governor — as opposed to pending until the beginning of next year, as is generally the case — and so requires the support of two-thirds of the Legislature to pass.

It appears likely to get that.

Though bills that tinker with the California Environmental Quality Act are almost always deeply contentious in the Legislature, Wicks’ bill has traced an uncharacteristically smooth path so far. Through the Assembly and two Senate committees, it hasn’t received a single “no” vote.

If signed into law, the bill would undo the UC Berkeley precedent and, as Elmendorf put it in describing the Los Angeles ruling, “make this case go away.”

Still, the fate of UC Berkeley’s original bid to build affordable housing for 1,100 students is less clear. “Our hope is that we will be able to proceed with our urgently needed student housing program if the bill becomes law, but the Supreme Court case will remain to be resolved,” said Mogulof.

Last November, 59% of voters in Berkeley wanted to give the city permission to borrow $650 million to fund affordable housing.

Two years earlier, 58% of San Diego voters supported a $900 million housing bond.

Two years before that, in 2018, commanding majorities in San Jose (64%), Santa Rosa (62%) and Santa Cruz County (just over 55%) turned out to back housing bonds worth hundreds of millions of dollars.

All five measures failed.

The California Constitution doesn’t make it easy for local governments to issue IOUs. Not only are most types of municipal and county borrowing plans required to go before the electorate, once on the ballot they also have to win support from at least two-thirds of the voters to pass.

Now, as state lawmakers scramble to put a lid on ever-increasing housing costs, a persistent homelessness crisis and growing public ire over both, a coalition of housing developers, unions, local governments and pro-housing groups want to lower that electoral bar for bonds and taxes that fund affordable housing and a wide array of public infrastructure projects.

The new proposed threshold: 55%. Had that standard been in place in 2018, Berkeley, San Diego, San Jose, Santa Rosa and Santa Cruz County would have been granted the power to borrow a total of $2.26 billion.

Spearheading the effort to amend the state constitution is Assemblymember Cecilia Aguiar-Curry — and not for the first time. The Davis Democrat has introduced a version of the bill every session since joining the Legislature in 2017. It’s never made it out of the Assembly.

But proponents think this year could be different. The Assembly’s new speaker, Robert Rivas, has named housing a top priority and has shown an early willingness to push his preferred housing bills, even over the objections of powerful committee chairpersons. Rivas is a co-author of Aguiar-Curry’s bill, along with roughly half the Assembly.

Aguiar-Curry may also have a bit more negotiating weight to throw around this time, too. Rivas named her speaker pro tem, his second in command, upon assuming the leadership role this summer.

Meanwhile, public concern about housing has not gone away.

If the proposed constitutional amendment makes it through the Legislature, where it would require (what else?) two-thirds of the vote to pass, it would then go before voters statewide on the November 2024 ballot.

It would be in good company. Alongside initiatives and referenda proposed by private citizens and interest groups, the Legislature is considering a handful of other proposed constitutional changes and as many as 10 statewide bonds, including a $10 billion affordable housing measure.

Aguiar-Curry, who used to be the mayor of semi-rural town of Winters, said her measure may help cure some of the defects she sees with those colossal statewide bonds that often most benefit bigger cities.

“When you pass some of these big time bonds, we don’t see the money,” she said in an interview. “Every community has different needs, but for a lot of us in rural communities, it’s hard to get bonds passed.”

Making it easier for local governments to raise funds for affordable housing will also make it easier for those governments to compete for matching state and federal cash, said Abram Diaz, policy director for the Non-Profit Housing Association of Northern California, which supports the amendment.

“If we’re gonna do these big statewide efforts, ensuring the locals also do their piece and have the tools they need to meet us halfway is really important,” he said.

Many of the state’s business groups and the California Association of Realtors oppose the measure, reluctant to take any steps that would make it easier for local governments to hike taxes or run up their debts. Most bonds issued by local governments are paid out of increased property taxes.

For many defenders of California’s long-time restrictions on local taxation — namely, Proposition 13 from 1978 — Aguiar-Curry’s measure represents a fiscal Pandora’s box.

“It’s a slippery slope,” said Newport Beach Assemblymember Diane Dixon, a Republican, at a recent Assembly hearing. “There are always attempts to undo Prop. 13 and the two-thirds vote, and it’s just a pincer attack.”

Learning from schools

The space between 55% and two-thirds of the vote is where many ballot measures go to die.

In 2022, cities, counties, schools and special districts put a total of 59 revenue-raisers requiring two-thirds of the vote to pass on local ballots across California, according to data compiled by local government fiscal analyst Michael Coleman. Only 29 of those measures cleared that threshold. Of the 30 that failed, 16 received more than 55% of the vote.

“Why should one-third of the local voters have the power to overrule fiscal decisions in your community?” Aguiar-Curry said.

That’s been a major source of fiscal frustration for cities and counties. But for the last two decades, school districts have been the exception. Thanks to Proposition 39, a constitutional amendment passed by voters in 2000, local school bond measures only need to hit a 55% cut off to pass, so long as they’re used to fund facility construction and upgrades and don’t exceed a certain amount.

That’s been “a real game changer for schools,” said Coleman.

You can see that in the election results. Over the last two decades, local governments have turned to the voters more than 5,000 times, begging permission to raise taxes or borrow money, according to Coleman’s database.

Since 2001, city and county bond and tax measures that have been required to get two-thirds of the vote have succeeded just more than half the time. School bonds with a 55% threshold have cleared that requirement 80% of the time.

No surprise, then, that affordable housing developers want in on some of that special treatment.

So, too, do organizations representing firefighters, librarians and school employees, public sector workers and construction unions. Alongside affordable housing projects, Aguiar-Curry’s proposal would lower the voter requirement for bonds and taxes that fund all manner of “public infrastructure” projects, including road, highway and transit improvements; water and flood control upgrades; hospital, police station and library construction; and the purchase of firefighting equipment.

And going further than Prop. 39, Aguiar-Curry’s measure sets no limits on the amount of borrowing. Nor is it just restricted to bonds, which are frequently paid back through property tax increases, but would free local governments to propose new parcel tax increases and sales tax hikes.

Opponents of the measure, led by the nonprofit California Taxpayers Association, have seized on that final detail.

“The taxes this measure would make it easier to pass are regressive,” said Peter Blocker, the organization’s lobbyist, at the recent hearing. “And while one of the goals of the measure is to make it easier to raise revenue for housing, the two taxes this measure applies to — sales taxes and parcel taxes — are both taxes that make housing less affordable.”

Tacking on these other areas of infrastructure spending and giving local governments more financial flexibility to use the measure has helped Aguiar-Curry build a coalition. Proponents insist it’s also sensible policy.

“This thought that we can do this for housing and not infrastructure doesn’t work,” said Assemblymember Lori Wilson, a Suisun City Democrat, at the hearing. “You can’t build housing without infrastructure.”

Proponents also insist, over the objections of anti-tax advocates, that the measure would do nothing to directly increase debt or raise taxes. If voters pass the measure in 2024, it would simply provide local governments with new tools to combat the housing crisis.

But voters could put those tools to work immediately in some parts of the state.

As currently written, the Aguiar-Curry amendment would apply to any local revenue-raiser passed “on or after” the amendment itself is passed — meaning, to any other measure also on the November 2024 ballot.

That’s a pertinent detail for voters across the Bay Area, who are likely to be presented with a regional affordable housing bond as large as $20 billion next November. If Aguiar-Curry’s measure makes the ballot, too, that would give millions of Northern California voters the opportunity not only to vote on the largest housing-related IOU in recent California memory, but also on a provision to ease its passage.

“If this passes in November, the lower threshold applicability will apply to other housing bonds that are also on the ballot so that they can really harness this new tool,” said Diaz with the Non-Profit Housing Association. “We don’t have a day to waste as we try to address the homeless crisis.”