California Lawmakers Tout Tax Break for Subsidized Housing Landlords

SACRAMENTO, Calif. (CN) – In wake of the recent failure of a zoning proposal meant to spur new apartments near transit centers, California lawmakers are turning to landlords to help stem the state’s housing crisis.

Hoping to protect the state’s paltry affordable housing stock, Assemblyman Jesse Gabriel announced a $500 million tax credit Tuesday that would reward landlords for keeping their properties in subsidized housing programs. Gabriel says the five-year program could prevent up to 25,000 currently subsidized units from being offered up in the state’s booming rental market at higher rates.

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“Even as we work to increase our affordable housing stock, it is essential that we preserve existing units. A smart front-end investment by the state will help keep tens of thousands of vulnerable Californians housed, all at a small fraction of the cost that otherwise would be required to build new units from scratch,” said Gabriel, D-San Fernando Valley.

California’s housing shortage continues to dominate the legislative agenda, particularly after state senators last week rejected a high-profile measure for the third straight year.

Senate Bill 50 would have allowed developers to bypass certain local zoning laws on high-density projects built near job and transit centers. Supporters, including the mayors of Oakland and San Francisco, said it had the potential to green-light long-delayed projects and make a significant dent in the state’s estimated 3.5 million-unit housing deficit.

During two-plus hours of debate, lawmakers from both sides of the aisle said they were worried the bill could have the adverse effect of removing control over housing decisions from local governments. In the end, SB 50 author Scott Wiener, D-San Francisco, fell three votes short after failing to convince a collection of Southern California Democratic senators to vote for the bill.

Following the vote, state Senate President Toni Atkins, D-San Diego, directed lawmakers to come back with solutions and “get ready to come to the table.” Meanwhile Gov. Gavin Newsom – who didn’t officially endorse SB 50 – echoed the need for lawmakers to send him a “historic housing production bill.”

Gabriel’s proposal, Assembly Bill 2058, aims to prevent landlords and property managers enrolled in state or federal subsidized programs from converting to the open market. He estimates it will cost around $20,000 per unit to preserve 25,000 units over the next five years.

According to the California Housing Partnership, nearly 35,000 affordable units – 8% of the state’s subsidized stock – are eligible to be converted over the next five years. The partnership also says the state lost over 15,000 subsidized units between 1997 and 2018.

“The Affordable Housing Preservation Tax Credit provides a creative and innovative tool that will significantly slow the loss of existing affordable housing in California and make it possible for thousands of lower income households to remain in their homes and avoid displacement,” said partnership president Matt Schwartz in a statement.

Gabriel, a Harvard Law School graduate, has already gathered 17 co-authors for the bill, including two Assembly Republicans.

Lawmakers attempted to crack down on unscrupulous rent hikes in 2019 with a proposal that prevents landlords from increasing rents more than 5%, plus local inflation, annually. Newsom signed the rent-control bill into law along with another requiring landlords to provide tenants notices before rent increases.

Despite the new tenant protections, it remains increasingly expensive to rent in the Golden State.

Four California cities are on the top 10 list of highest rents according to according to the latest Zumper National Rent Report. San Francisco remains the most expensive U.S. city with a median monthly price tag of $3,520 for a one-bedroom apartment, followed by Oakland at $2,470, San Jose at $2,440 and Los Angeles at $2,260.

As they did in 2018, voters will have the chance to enact even tighter rent controls under a proposal that qualified for the November ballot Monday.

The measure by AIDS Healthcare Foundation president Michael Weinstein would expand local governments’ ability to enact rent controls on older homes. The looming rent control proposal figures to be another expensive fight, as parties poured $100 million into Proposition 10 in 2018.

Backers of that initiative – including Weinstein – were outspent nearly 3 to 1 by a coalition of apartment building owners and real estate companies. In the end, voters overwhelmingly rejected Proposition 10.

Gabriel, 38, says the 2019 rent control bills need to be supplemented to keep low-income Californians off the street.

“Last year, the Legislature passed historic tenant protection bills, but these new laws did not address the imminent loss of tens of thousands of affordable units. It is now time for California to step up and confront this threat, especially since we know that keeping vulnerable families housed is essential to solving our homelessness crisis,” Gabriel added.

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