Senate Passes SB 5 to Provide Sustainable, Ongoing Funding to Build Affordable Housing

May 29, 2019

Senate Bill 5 (Beall, McGuire, Portantino) will institute a state-local partnership to assist local governments in subsidizing up to 86,000 housing units affordable to working class families over the next 10 years

Sacramento – The State Senate today passed SB 5 (Beall, McGuire, Portantino) by a bipartisan vote of 31 to 4. SB 5 establishes a state partnership with cities and counties to provide an ongoing, sustainable and accountable source of funding to support construction of affordable housing and help address the affordable housing shortage for working families.

“SB 5 will immediately address the shortage of affordable units by providing an ongoing and sustainable funding source to build tens of thousands of affordable units for working families,” said State Senator Jim Beall. “What’s important to me and to everyone who voted yes on this bill, is to ramp up the housing stock and get families into homes where they can thrive. SB 5 will us help do that.”

“All across our state, from the rural cities of the North Coast to the bustling suburbs of greater Los Angeles, every community is facing an affordable housing crisis,” Senator Mike McGuire said. “Hard-working families and seniors are being priced out of California and we need 1.5 million affordable units through 2025 to keep up with demand. SB 5 is a critical step to help Californians thrive in the communities they call home by providing permanent affordable housing funding throughout the Golden State.”

When the state abolished redevelopment agencies in 2011, it wiped out the only source of ongoing funding available to local governments to build affordable housing and its supporting infrastructure. SB 5 is not redevelopment, but it will provide cities and counties with ongoing funding to support the construction of housing and critical infrastructure.

“California has a 3.5 million home shortage, and we need more tools to end that shortage at all income levels,” said Senator Scott Wiener (D-San Francisco), co-author of SB 5. “When California eliminated redevelopment, it deprived cities of a critical tool to fund affordable housing. SB 5 provides cities with a new and powerful way to do what we all agree needs to happen: create more affordable housing for the millions of low income Californians who need it.”

“When I opposed the dissolution of Redevelopment in 2011, I stated that we should not end our dedicated affordable housing funding program without a replacement.  Today, we take a big step forward to recreating that effort. We need all parties to work together to ensure we make progress on building the affordable housing units we need throughout California and our efforts need a significant investment to achieve success. SB5 contains that investment,” said Senator Anthony J. Portantino (D–La Cañada Flintridge).

SB 5 establishes a new program that provides cities and counties the resources they need to subsidize affordable housing, invest in infrastructure needed to support housing, invest in housing near job centers to reduce long driving commutes and bring the state closer to its goals of reducing greenhouse gas emissions and addressing climate change.

“California local governments are on the front lines of both the housing crisis and the climate emergency,” said Senator Henry Stern (D-Calabasas). “SB 5 empowers communities to fight back against climate disasters like sea level rise, flooding and wildfires, and tackle housing affordability without undermining local control.  I’m proud to partner with my colleagues on this critical measure. “

“Cities are proud to support SB 5, because it will create a much-needed partnership between the state and locals to help us meet our affordable housing challenge,” said Carolyn Coleman, executive director of the League of California Cities. “Every day, city officials see first-hand the devastating toll that a lack of affordable housing has on our residents. Too many Californians are homeless, or one paycheck away from losing shelter. SB 5 is an important commitment toward housing those most in need.”

 “SB 5 is crucial for building the homes we need right now. More than 2.2 million extremely low-income and very low-income renter households are competing for only 664,000 rental homes they can afford. That leaves more than 1.5 million of California’s lowest-income families without available housing, forcing many into homelessness. SB 5 is one of several tools to add to our toolbox that will immediately help,” added Lisa Hershey, Executive Director of Housing California.

Specifically, SB 5 allows cities and counties to utilize property tax to develop priority projects listed in state-approved plans. SB 5 commits to local governments $200 million in funding annually beginning in 2020, eventually capping at $2 billion annually. Local governments can use the revenue for the following state priorities:

  • The construction of affordable housing available to very low, low- and moderate-income families. SB 5 is estimated to create 86,000 new and rehabilitated housing units over the next 10 years. A minimum of 50 percent of funds must be dedicated to housing.
  • Transit-oriented development in priority locations that maximize density and transit use and contribute to a reduction in vehicle miles traveled and greenhouse gas emissions.
  • Infill development by rehabilitating and improving infrastructure and through the revitalization of previously developed, underutilized land in the urban core.
  • Revitalizing and restoring existing neighborhoods.
  • Climate adaptation

SB 5 contains strong accountability provisions to ensure funds are only spent on state-approved projects, including:

  • SB 5 creates the Affordable Housing and Community Development Investment Committee empowered with strong state oversight to approve or reject all projects proposed by local governments.
    • Cities must use the funding to help build affordable housing; promote infill, transit-oriented development; and address climate change. Cities have discretion for developing plans to use funding for these priorities.
    • Cities and counties must submit annual spending reports to the Legislature.
    • SB 5 creates a cap on funds available with $2 billion annually when the program is fully implemented.
    • The Legislature can suspend funding new plans during fiscal downturns. 
    • SB 5 also ensures funding for schools and community colleges are not impacted. SB 5 requires that at least one member of the Affordable Housing and Community Development Investment Committee have an education finance background.

While the Governor and Legislature have proposed one-time funding, there is a significant need for ongoing and sustainable funding dedicated to affordable housing, community revitalization and related infrastructure.

SB 5 is supported by a broad coalition of business, labor, local governments, housing advocates and community leaders.