Housing crisis: California bill aims to help the ‘missing middle’
The ever increasing concern with the State of California is the housing crisis that prevents those with moderate incomes from affording a residence near their job sources. The crisis is attributed to the State’s overly inflated housing market in elevating rental levels within and near to City corporate business districts where most of the middle income job professions are located. Because of the increased rental levels, middle income job seekers are unable to relocate near their workplaces, and therefore, have to resort to longer driving commutes from areas where rental housing is affordable to their income. This in turn creates a negative impact by increasing vehicle miles traveled (VMT) and increasing congestion on our roadways. This dilemma tends to affect what is known as the “missing middle” housing sector, which refers to housing of anywhere from two to 50 dwelling units that are missing and/or hard to find and would normally meet a middle income tenant’s affordability for rental housing. Ideally, “missing middle housing would consist of medium to high density residential development consisting of duplexes, triplexes and fourplexes, courtyard apartments, bungalow courts, townhouses, multiplex and live/work residences (see conceptual below).
In acknowledging this housing crisis, legislation recently drafted and now being carried by California State Assemblyman David Chiu may hold promise in relieving this crisis. Known as Assembly Bill 3152, the Bill would give nonprofit housing developers property tax exemptions on residential homes situated within elevated, high-cost areas, if rental rates are discounted to those with moderate incomes. The discount would require at least a ten percent reduction in the fair market rental rate for a county as determined by the federal Department of Housing and Urban Development (HUD) and thus would increase the eligibility for moderate income households (80 to 120 percent of median income). For instance, a current median income of $97,400 for a family of four residing within Contra Costa County, but with an earning potential of up to $116,900 could be eligible for moderate income housing built under AB 3152. The Bill will focus on “qualified properties” located in “high cost” counties with rental housing space suitable for five or more units for which construction commences on or after January 1, 2019.
The Bill also allows for a City, county, or third party to provide a market study that establishes a higher fair market rent for the county than what was established by HUD. Nonetheless, the market study would require California Housing Finance Agency to review and certify the validity of the market study.
Currently, non-profit developers of affordable housing do not have a remedy solution (i.e., incentives, tax credits, etc.) to present to municipal governments that would otherwise assist in attracting those with middle income status. Regardless, if AB 3152 were to be adopted, the Bill would serve as a starting point (catalyst) for encouraging municipal governments to engage in actively pursuing for development of “missing middle” housing within areas near to City corporate business districts. Currently, AB 3152 was recently approved by the Assembly Housing and Community Development Committee and has now been referred to the Committee on Appropriations.
AB 3152 is a an important milestone for urban development that will determine whether “missing middle” housing sectors will finally be addressed through increased development of housing assistance for middle income tenants. Nonetheless, Altum will carefully monitor the outcome of this decision from the Committee as soon as it is available and will provide a follow-up update.
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