Transcript
Speaker: Hello and welcome once again to John Nerds Out on California Housing Legislation. I am John back with you on March 31st, 2026, and I am finally ready to get to what is on the slate for 2026.
Speaker: There are, as it turns out, a lot of interesting new bill ideas and bill progress since last year, even though, as I mentioned, the nature of the leadership in the legislature this year means that we're probably not going to get big, ambitious zoning reforms, but there are so many other things in need of reform, and there seems to be some creativity being applied in a way we don't always see this year, in my opinion.
Speaker: So let's get right into it. I have a grab bag of bills that I find interesting and that may have legs. And I'm going to start with the ones that are new ideas, but then I have three things at the end that are topics I have already discussed, but which are making new progress.
Speaker: The first is a bill by Assemblymember Haney, and that is AB 2074. And that is called Regional Transit Hub Districts, Downtown Housing Developments.
Speaker: This is a rather novel change to zoning because it is the first, as far as I'm aware, zoning reform that is sort of like Senate Bill 79, but for high rises.
Speaker: You know, opponents of housing often talk about a high rise as anything more than two stories, maybe even anything more than one story. But high-rise has a particular definition.
Speaker: Most of the new buildings that you see, even if they're six stories, are probably not considered high-rise in building terms. In the International Building Code, high-rise means there's an occupied floor more than 75 feet up, so seven, eight stories.
Speaker: The definition varies by the context, but we are basically talking about eight, 10, 12, and higher is a high-rise. AB 2074 talks a lot about downtown revitalization.
Speaker: because it is focused on really just some downtowns and relatively small portions of downtowns. It says that cities that are defined as major transit cities have to zone one or more regional transit hub districts around some of their rail transit stations, so, you know, BART, Metro, rail, commuter rail, heavy rail or light rail, the Regional Transit Hub District has to allow 150 feet or more in a land area of at least 0.25 square miles, so one quarter of a square mile.
Speaker: It has other zoning standards that also are supposed to align with the goal of building high-rises. how big is a quarter of a square mile? As it turns out, if you do the math, a quarter mile, if you draw it out in a quarter mile radius of a particular point and draw a circle around that point, the area that you get from a quarter mile radius will be a quarter of a square mile.
Speaker: Just happens to work out that way. So remember going back to Senate Bill 79, that designated a half mile radius around transit stations. for mid-rise developments around six stories.
Speaker: So essentially what this does is say even closer in, the bigger cities should allow high-rises in at least some of their transit station vicinities.
Speaker: Now, which cities? It's basically just the biggest cities. It defines it by population of the city, the incorporated area, not the urban area or not the metro area.
Speaker: And it distinguishes cities with more than 2 million, which really just means Los Angeles, cities with more than 1 million, which is San Diego and San Jose, and finally cities of more than 400,000, which are San Francisco, Sacramento, Long Beach, and Oakland.
Speaker: It would also count Fresno and Bakersfield if it were just 400,000 population or more. But a city also needs at least two rail stops, heavy rail, light rail, commuter rail.
Speaker: Those cities might have one Amtrak station, but they don't have more than one, I believe. So I think it's just the ones I mentioned. And to go back to how much area do they have to zone?
Speaker: Basically, Los Angeles has to zone 1.5 square miles in this way, with each hub still being at least a quarter of a square mile, so they could have six, but total area 1.5 square miles over six areas or fewer.
Speaker: One to two million, once again, San Jose and San Diego, they need to designate one square mile. so up to four regional transit hubs around different stations, and the smallest category, 400 to 100,000, they have to designate at least one regional transit hub district with a total area of at least 0.5 square miles. So one or two, one big one or two smaller ones.
Speaker: Other cities can voluntarily zone such districts, and they could do as little as a quarter square mile in one area around a transit station. It's not radius-driven the way that SB 79 was. It just has to be a contiguous area, including the station, with that area, that land area of a quarter square mile.
Speaker: It's not just to be zoned to 150 feet height. They also have to designate a quarter of that quarter square mile, so a sixteenth of a square mile, to allow 450 So basically, extremely high.
Speaker: so basically extremely high And this still allows these projects to use the density bonus so they could get some of the other requirements loosened to the extent they need it if they add more affordable units. This does have some basic affordability requirements, and it has some basic environmental requirements, but it gets ministerial approval, gets relatively automatic approval if it checks all the building boxes.
Speaker: It has a number of things that it can't do, like demolish landmark property. But here is the clincher. You remember all the back and forth about labor standards. Skilled and trained, meaning basically unionized labor,
Speaker: versus labor standards that are short of actually being already organized, such as prevailing wage. So that was, of course, a big fight. It always is a big fight with the unions, especially the building trades unions, because they somewhat sometimes have this idea that they can get themselves used more if they require it from the outset, even though those requirements do not seem to have borne a lot of fruit in the past.
Speaker: But when SB 79 came, it ended up requiring skilled and trained for essentially high-rise buildings if they happened to be doable using SB 79 because those kinds of buildings require labor that is particularly skilled, particularly in high demand, and therefore is usually already in a union.
Speaker: So it was deemed that it wasn't much of a concession to require union workers for high-rise buildings because they were going to need them anyway for market reasons.
Speaker: Well, what it seems like happened is at some point, the building trade started thinking in a more productive direction, not about exercising a veto over everything that didn't use them, but how can we encourage more construction that needs us to be built?
Speaker: If we're good at high-rises, if our workers are especially in demand for high-rises, shouldn't we be getting more high-rises built? So they sat down with Matt Haney, who's San Francisco, and they and others put together this idea to require the biggest cities to have some high-rise areas.
Speaker: I don't have a good sense. I know that a lot of cities do already have a high-rise area. I don't know if they already meet the standards or if this would significantly increase what can be done.
Speaker: Adding ministerial approval might do a lot, especially for Los Angeles, but it is pretty novel direction to strike out in, and it really makes me think about the political potential of getting unions not just grudgingly or partially, but fully on board with the cause of housing, because they are very powerful in California.
Speaker: And if they start to see how fully their interests are served, including the building trades interest, not just all the teachers and so forth, the building trades interest to have a lot more construction of all kinds, turning that political machine to the cause of housing could be extraordinarily powerful in California.
Speaker: This is in the assembly, and it has not moved forward yet, but a lot of things will be moving pretty quickly in April and May and June. So let me move on to something entirely on the opposite end of the spectrum from high-rises, and that is lot splits and duplexes.
Speaker: That is taking single-family zoned areas and making it easier to build one or two more homes on them that are not eighty years As you may recall, Senate Bill 9 passed several years ago now, theoretically ended single-family zoning in California by requiring all cities to allow a lot split to make one single-family lot into two or build a duplex on one lot or both, split a lot and build two duplexes in most of its single-family zoned areas.
Speaker: However, this had what was effectively a poison pill, and that was owner-occupancy. It said, to apply for this lot split, you have to certify that you, the applicant, are going to live in this house for three years.
Speaker: There has been some use of this law, but it has not been nearly at the scale that its supporters were hoping for, especially not nearly at the scale of accessory dwelling units, which, by the way, have little to no owner-occupancy requirements.
Speaker: There are other things limiting the duplexes under SB9 that do not exist for ADUs, but that is the basic dilemma that SB9 has had some reforms over the last few years. in Some things that cities were doing to tamp them down have been banned, but owner occupancy was a hard-fought compromise in the process, and I believe it was 2022.
Speaker: And the legislature may not be ready yet to go back on that, even though they have been wiping away the last vestiges of city owner occupancy requirements when it comes to ADUs.
Speaker: So AB 2005 is an interesting elaboration in that political context because it doesn't eliminate the owner occupancy requirement.
Speaker: What it does is instead of just requiring owner occupancy as a condition of approval, and it's for a period, again, of three years from the approval, it allows for the applicant to instead of being the owner occupant themselves to promise under penalty of law that everyone they sell to, both parcels will be owner-occupied.
Speaker: So you can have someone who's not living there, who is just you know a builder. who this is that This is what they do. This is their business. They're not going to live there. They get a lot. They build two homes on it, or they take a lot with one home and build a second one on it. These are separate lots. They can be sold separately.
Speaker: They have to sell both of them to someone who pledges to live in it as well and not rent it out. So in some ways, it is possible that this could open up the floodgates because there are a lot of home builders that work on a small scale that have the ability to do this kind of small scale investment.
Speaker: And they would probably mostly, when they finish the homes, be selling them to people who plan to live there. It probably impacts what they can sell it for a little bit because they can't sell it to investors, but it probably doesn't affect it too much. And this is probably pretty similar to eliminating the owner occupancy requirement.
Speaker: This is from Ahrens, who I don't know much about, but I know he's an assembly member from Santa Clara County. One of the issues in it that I find a little confusing is it actually says that the applicant for the lot split shall require as a condition of sale to a home buyer that all of the units on both parcels of an urban lot split remain owner occupied.
Speaker: And i don't know if this is intending to include if you build two homes and then also two ADUs, because you can do that under Senate Bill 9.
Speaker: And first, you get a bit of a gap with the state policy that has basically eliminated owner occupancy for ADUs. But second, how do you even enforce owner occupancy if you're selling a lot that has one home and one ADU on it?
Speaker: Like, can you only sell it to a family that's big enough that members of the extended family, for example, are going to live in the ADU? Or are you going to sell it to a rich family that's going to sprawl out and use the ADU as an office or studio or man cave or whatever?
Speaker: doesn't really make sense. ADUs are supposed to be typically smaller units. They don't have to be, but they typically are. And they are often suitable for renting out or letting family members use or friends or something.
Speaker: So I hope that this can be clarified because it does say all units and that seems pretty clear. All units on both lots. Maybe they intend this, but I don't know how they intend it if so.
Speaker: So hopefully this will move forward and that will be clarified. Now, I've been talking about ADUs. There is another interesting ADU reform called Senate Bill 1117 by Senator Cervantes.
Speaker: Generally, in terms of zoning standards, it is now very easy and very straightforward to get an ADU approved as a matter of entitlements, which is to say zoning approvals.
Speaker: But what hasn't gone away is that there are impact fees. you know, charging, you know, $5,000 a unit for this, $10,000 for that. I've talked about it in the past. The way cities assess impact fees is much more derived from their wanting revenue and from their using the law to its maximum extent to use what they can get rather than to actually maximize housing or even revenue.
Speaker: You know, they like the idea, some of them, of getting $50,000 for a unit, and they don't really care if that means that there will be, you know, 90% fewer units. Okay, that's that rant over.
Speaker: There has, for a while, been some mitigation of impact fees for ADUs. First, anything less than 750 square feet of living space is not allowed to have impact fees, except, I think, school impact fees.
Speaker: So that's been pretty a pretty popular option for a while. And then there has been a requirement that if it has more than 750 square feet, then impact fees have to be charged in proportion to its ratio of living space to the primary house.
Speaker: So for example, if your impact fee is 10,000 and there's an existing house of 2,000 square feet and you're going to build an ADU of 1,000 square feet, then that ratio is 50%. So you can only charge 50% of the impact fees.
Speaker: Once again, I think school fees are exempted here. If you have a particularly small older house, you know, they built them smaller in the 50s, and then you build an ADU that's bigger than that, does that mean that the city gets to charge more than 100% of its impact fees? Probably not, because the city has only established this much impact fee under the law.
Speaker: Anyway, we still know that the impact fees are kind of too high to begin with in a lot of places. Not everywhere, but a lot of places, and especially the most desirable places like, say, Palo Alto.
Speaker: And often they are made high in bad faith, not even just thinking about the revenue on the page, but really trying to keep this stuff from being built at all.
Speaker: What SB 1117 by Cervantes does is instead of charging for over 750 in proportion to the primary home,
Speaker: It says, and only on the area in excess of 750 square feet. So go back to our example where you have the 2,000 square foot primary home, 1,000 square foot ADU.
Speaker: Before, the ratio would be 50%, 1,000 to 2,000 square feet. one thousand to two thousand square feet But now you do the same math, but you do it with 250 because that's how much it's in excess of 750. So now the ratio of that to is I think so this adu would only have to pay twelve percent of the impact fees And this would probably make it a lot easier to build ADUs in general and also to build ADUs in SB9 projects like lot splits, where you split the lot, you build one home and one ADU on each resulting lot.
Speaker: I do think personally that although ADUs are good, this seems like a good bill to pass, it's kind of only the thing you would come up with if you were pretty confident that the impact fees tended to be outrageous to begin with.
Speaker: And at some point, we're going to have to come to terms with that, you know, saying we should only charge the impact fee on a fraction of the ADU cost. If the fees were just, you wouldn't chop it down like that.
Speaker: But in fact, the fees are not just. And hopefully we'll be able to do something more about that at a grand scale if the legislature agrees with this. Going back to the Starter Home Revitalization Act, this is something I've talked about on multiple occasions on this podcast, and that's the legislation that has been updated a few different times now that allows you to build up to 10 units on multifamily and single-family lots as long as it is ownership housing, meaning it is being built for sale, whether detached units or condos.
Speaker: This was originally Senate Bill 684. Then it was amended to go to single family lots if they're vacant under Senate Bill 1123. So now it's most often, I think, called 1123. That was further amended by another bill last year, although in smaller ways.
Speaker: Well, this is another reform, and it is called SB 1116. And it is tinkering with it a bit. It is not the biggest bill at the moment, but I have the impression that there may be more coming down the pike.
Speaker: It does a few things. Right now, under what I'll keep calling 1123, the existing legislation, cities can continue to regulate the height. You know, if the height limit is 20 feet, then your 10-unit development has to respect that height limit.
Speaker: This says that that's just the height, but the city can't restrict the number of floors. So for example, I don't know that this would happen, but if your height limit is 25 feet and someone wants to do three floors that are eight feet each, you know, that's not very standard.
Speaker: That might not be a great thing to market, but this would allow them to do it. or they could do 10, 10 and send like a loft, for example. So that's another slight bit of flexibility.
Speaker: In current law, these starter home projects, the city cannot require side or rear setbacks of more than four feet. That's already the law. But what this does is the city cannot impose a front setback greater than 10 feet.
Speaker: So they can require 10, they can require five, they don't have to require any front setbacks, but they can't require more than 10. So rewinding a bit to the current law, Current law, you can divide the parcel, but there is a minimum lot size.
Speaker: And specifically for multifamily areas, the lots that you make can be no smaller than 600 square feet. For single family areas, no smaller than 1,200 square feet. So you imagine if it's a 6,000 square foot lot and it's a multifamily site,
Speaker: Then you divide that by 10, you get 600. That's as small as you can go. But what this bill, 1116, does is that it says the city cannot make zoning requirements or design requirements that prevent you from constructing the number of units allowed for by the minimum lot sizes.
Speaker: So that means that if you have 6,000 square foot lot, then the city is further limited in having other zoning standards that are not specifically preempted, but if they prevent you from building that 10 units, then the city will have trouble enforcing that existing standard, even if it's objective.
Speaker: Similar for physically preclude units from realizing the floor area ratios that are allowed. So right now the law says that the city has to let you build up to 1.0 floor area ratio.
Speaker: So build as much floor area as there is lot area. if you're building three to seven units. And then if you're building eight to 10 units, you can get a floor area ratio of up to 1.25.
Speaker: So if you have a 4,000 square foot lot, then you can build 5,000 square feet of living space on it in some configuration. So this further preempts and makes it hard for cities to disallow that.
Speaker: I believe that in the past, there was just the preemption of what allowed you to get up to a density of usually 30 units per acre. But it didn't actually say how much you could build.
Speaker: Like, how big could those units be? you know, if you're allowed to build five units by the standard density, does it matter if those five units have to be 600 square feet? Because I'll tell you, you're not going to easily sell a new home that's 600 square feet, no matter whether this is the Starter Home Revitalization Act. Those still are not going to be very popular, even if you call them starter.
Speaker: Another small change is that this allows... the minimum lot sizes to vary a little more than they do. They still have to average to that 600 and 1200 that I mentioned before.
Speaker: But if it's supposed to average 600, that's no longer the minimum. Now the minimum is 480 as long as the average is still 600. So if you want to do it a little differently, you want to make some smaller lots and some bigger lots, then some of them can be as small as 480.
Speaker: And then the same kind of variation on a single family zoned lot, the average still has to be 1,200 square feet. That's no longer the minimum. Now the minimum is 960 square feet.
Speaker: So it's basically a 20% downward variation. So maybe a little more flexibility and I don't know, oddly shaped sites where you can't just split it out geometrically. It also allows enclosed bicycle parking space and stair space to not count toward the maximum of livable square feet that's existing in the law right now.
Speaker: They can't be bigger than 1750. but they have exceptions. And in the past, that included unfinished basements and garages, but it did include stairs. Well, this now excludes stairs, so makes it possible to build a little more and leave a little more living space left over outside the stairs, outside the bike parking.
Speaker: So we will see if more comes out of this. Right now, it's sort of another advance. I believe it is the same author who has authored every version of this. That is Caballero. Yes, pretty sure. 684, 1123, 1116 are all Caballero.
Speaker: So hopefully this will make it easier for some of these projects to start taking shape. Now I'm going to talk about something that is not quite as much what I'm expert on, but it is pretty interesting and it is definitely about housing construction.
Speaker: And that is Buffy Wicks from Berkeley has been doing a lot of work on trying to figure out what can be done to modernize housing construction. Because you know we have had a lot of technical innovation in so much of industry and science over the past hundred years.
Speaker: But we build homes pretty similarly to how we built homes in the 50s. And this is one of the areas where labor productivity is very much lagging.
Speaker: And it seems like other countries are doing more stuff in terms of panelized construction, factory construction, modular construction. things that make all housing construction a lot simpler, more straightforward, and even more customizable.
Speaker: So Buffy Wicks was doing a lot of research to, quote, help modern and innovative methods of construction scale across California to bring down the cost of construction and make housing more affordable.
Speaker: There has been a long history of trying to do factory built housing, to not build housing on site, but to do most of the hard work at a specialized site and then bring it and snap it all together. And this was in the book by Connor Dougherty called Golden Gates that talked about the history of zoning and the housing battles.
Speaker: And it pointed out that there have been many startups over the decades that have tried to start factory-built housing. And the thing is, our system is not fully designed for it, is one issue.
Speaker: But another is that it is very capital-intensive. Building a factory that builds homes, that has to be a pretty darn big factory. takes a lot of investment capital, and if stuff dries up, then you're losing that capital pretty quickly. That has happened in my memory.
Speaker: with startups that were trying to do this for the Bay. So Buffy Wicks, who also had a select committee on housing construction innovation, came up with a lot of ideas and turned it into a package of six bills And I'm just going to go off the summaries of the main ones.
Speaker: One is to create a process for there to be binding statewide interpretations of the building code so that new technologies can scale across jurisdictions. So the building code is a state thing, but interpreting the building code is done by city officials.
Speaker: And that does mean that you can get interpretations that are not necessarily predictable, and that work out different ways in different cities. But if you're trying to make a factory model work, you have to have standardization.
Speaker: So this would allow for there to be a standardized interpretation, at least for the factory-built housing. Second is a bill that would prohibit local jurisdictions from imposing or enforcing standards that exceed minimum state-building standards on a factory-built housing project. So this is pretty similar, that you have to have the one statewide building code and not have city elaborations on it.
Speaker: There is a smaller one, which is about making it easier to take pieces of these homes on the highways, reduce costs for it. Number four is really interesting. AB 2058 gives developers the option to utilize statewide building inspectors for on-site inspection of factory-built housing projects.
Speaker: Buffy comments, because local governments have not yet seen much factory-built housing, processes for inspections are not aligned with the specific nature of these projects. I will come back to that. Then AB 2166 directs a state entity to provide a financial backstop to make projects whole in case of factory failure.
Speaker: So the idea is that maybe you can get more of these startups and more developers using them if there are financial contingencies in place for if they go bankrupt, as they have in memory.
Speaker: And finally, is a bill to systematically review and revise state funding programs so that they work for these projects. So it's interesting that it was across a big stream. You know, every one of these has, almost every one of these, I think, has Buffy Wicks as a co-sponsor and then someone else, except maybe 2185. She is not a co-sponsor.
Speaker: the last one. But there are several components of it, and maybe they get some of it passed and not others. But what's really interesting here is that this also does honestly speak to problems with the building code and with it being split out across municipalities in ways that you can't necessarily predict.
Speaker: It has been seeming for a while like better standardizing across the state would make it a lot easier to do things right and to do things in a standard way than our current system where a whole lot of your business in building is up to not necessarily accountable decisions by building departments, building officials.
Speaker: you know They will be very sure that they're right, and then the city next door, their building official, will also be very sure that they're right. And then everything has to be different in every city in a way that makes it difficult to identify a model and then build more of that model.
Speaker: So we've been thinking about, should the state just take over zoning, take over building, take over building approval, that is, take over a lot of these things or at least create an option for the state to do these things when a city is falling on its face.
Speaker: So it's interesting that we're seeing this now specifically for factory built housing. So good for Buffy for developing this and look forward to that achieving more.
Speaker: A new thing that is somewhat in the vein of other exemptions and expansions bills that we've seen in the past, Assembly Bill 1732. This is basically for student housing once again.
Speaker: And this goes back to last year where you had the wholesale CEQA reform, the California Environmental Quality Act. This was reformed away for infill housing in existing built-up areas.
Speaker: They mostly became exempt from CEQA as long as they were consistent with the existing city zoning. This eliminated something that had been a barrier to the pro-environmental cause of building housing where people already live.
Speaker: That was, of course, a fight, but Gavin Newsom was the one who went to bat for it last year. But there is an expansion being proposed here. there So 1732, proposed this year by Alvarez and Wicks, Buffy Wicks,
Speaker: is to expand this to university housing. So University of California, California State University, and the community colleges, they often have housing projects that are infill but are not consistent with city zoning.
Speaker: but they are consistent with a plan that has been developed by the university in great detail and with great process. So 1732 would basically add to the CEQA exemptions housing that is consistent with an education land use plan. So once again,
Speaker: the California higher education system. And I've seen from the sponsors, they said that just for the UCs from 2018 to 2023, SQL litigation blocked or delayed seven UC student housing projects.
Speaker: And that's not considering how much there might come from CSU and CCC. And this is not just student housing. It could also include faculty and staff housing. And often faculty and staff housing is first opening up to the faculty and staff.
Speaker: And then if all of them have had a chance to apply and they're still units free, then they open it up to the community. So that's 1732 from the Student Homes Coalition. Now I'm going to give some updates on some things that we've I've talked about before.
Speaker: The first of these is building code for the missing middle. So this is going to the point that building code gets a lot more over-designed when you go from two units to three or from three floors to four, and that maybe it would make as much sense for yeah under 10 units to use the International Residential Code to make the cutoff, you know, 10 instead of two or maybe five, who knows.
Speaker: but also generally studying the building code and understanding how it can be improved to reduce construction cost pressures. So this is kind of a study bill. It's directing certain examinations of the code, certain reforms that we could do.
Speaker: And I already talked about that. It was submitted last year. i know that there was a bill like this in 2025. It may not have moved forward. So this may be a new version of it.
Speaker: I think it may have been AB6 last time, and now it's AB1070. It is still Assemblymember Ward, who I remember being the the driver behind it last time. And this is the same session, but it can make sense to take a bill and give it a new life in the second year of the same session.
Speaker: So the news is that it did pass the Assembly floor, 75 5 not voting. So it was not a consent bill. It was not deemed to be completely uncontroversial.
Speaker: But in fact, everyone was fine with it. It is a study bill. Who's to say what it's going to result in? The single stair bill became a study bill and the fire marshal came back with a very skeptical report.
Speaker: So hard to say, but it is some level of progress. Now, there are two kinds of reforms that I've talked about in the past relating to condos.
Speaker: First is deposit reform. This is Assembly Bill 1406. So new condos in a lot of places are built by taking deposits from people who want to buy the homes when they're built.
Speaker: And one of the things that when they look at why does California have so much fewer condos than other places as opposed to for rent housing is that we have a consumer protection law that says that you cannot have the deposit or the amount of the home price that can be liquidated damages it is capped at 3% of the purchase price, which is pretty low.
Speaker: Most places are something more like 10%, and that makes it harder to finance your condo project if you have a condo project. And the idea is that you know this is an amount that you put down, and if you pull out without a good enough reason as an investor, then this is the amount you might forfeit.
Speaker: If you're planning to spend, $800,000 on this new build condo, then right now the law says that you can effectively make your deposit no more than $24,000. So the proposal was to align up more with other states and bump it up to 10%, which in this case would be $80,000. So there are some very influential opponents of this, and that is may's basically the California Association of Realtors,
Speaker: They are together with some escrow and land title industry representatives. And they argue that what we currently have is an important consumer protection that otherwise people will lose these deposits at the hands of scummy developers.
Speaker: And I don't want to discount that possibility. You know, I think that building condos is a ah dicey thing and often a project can go bad. And yeah, developers are not inherently trustworthy.
Speaker: I mean, you know, who builds new condos in other states includes the Trump family. And I don't trust them very well. But the thing is, first, someone who puts down a deposit on a new condo is a relatively high net worth person who is probably more sophisticated than the average person.
Speaker: There is still a lot of a lot of legality, a lot of agreements, a lot of money going around here. so there's the ability to pursue when you're treated badly. And frankly, there are a lot of other consumer protections that this does not change.
Speaker: One thing that is being proposed to change but was taken out of this bill is there is a prohibition for actually using the deposit money for construction, which I guess means you just have to put it in a bank account or maybe you can use it for other non-construction costs.
Speaker: And Apparently, there were a number of things other than the change to the deposit cap, other than the change from 3% to 10%, that were taken out in hopes of winning over more of the opponents of this bill. And it seems like that did not happen.
Speaker: In the process of this bill being developed, it was further amended. Most of the changes other than the 3% cap were taken out. And then the new 10% cap was negotiated down to 6%. So they basically split the difference.
Speaker: And even then, that didn't bring the realtors around. That didn't bring any association around, any trade association around. But the supporters just went to bat for it and they fought it out onto the assembly floor.
Speaker: And the news here is that it prevailed in the assembly with 41 votes. Exactly the number of votes it needed to pass out of the assembly and move on to the Senate. 41 favor, 15 against, not voting.
Speaker: So, you know, I understand the realtors were really pulling out the stops here. They are not liking this idea. And I still don't really understand it because you would think that they would want more condos because that's more units for them to sell.
Speaker: Granted, they do not sell new build condos. That's the developer who sells them and they don't necessarily need realtors, but they would be selling them down the line. So you'd think they would want to grow the housing stock.
Speaker: But they called it a consumer protection thing. That's not usually their line, but there we have it. And in this case, it failed. The bill succeeded. Their efforts to stop it failed.
Speaker: And we'll see where it goes in the Senate. I did take a look at how this broke down along partisan lines and found it rather interesting. I found that, as usual, more Democrats than Republicans voted for it.
Speaker: It was 65% of Democrats, but 10% of Republicans voted for it. The Democrats who didn't support it mostly avoided casting a no vote. So out of Democrats, it was 39 yes, 1 no.
Speaker: and 20 not voting. Not voting being the same as opposing it, but a little more cowardly. Out of Republicans, two voted yes, 14 voted no, and only four failed to vote. So the Republicans were basically saying,
Speaker: We don't care what if it looks bad. We hate this and we want this to fail. And then when I broke it down by region, i found that the Bay Area, 15 assembly members out of the Bay Area, all 15 voted yes.
Speaker: Like this is a block. This is something like I haven't seen before. Like the Bay Area was pretty lopsidedly in favor of Senate Bill 79, the upzoning bill, but not unanimously.
Speaker: And then Los Angeles was sort of split down the middle, whereas for SB 79, Los Angeles was the most skeptical. And then for deposit reform, Orange County, san Inland Empire were less supportive than LA was, and the Central Valley was extremely unsupportive.
Speaker: And San Diego, Sacramento, the coast, those were moderately supportive. But it does feel like this breaks down into more partisan lines. As I said, there are Republicans who are more more uniformly against and more uniformly declaring their hatred. And I feel like it's not so much who is listening to the realtors, because realtors are very powerful for both parties.
Speaker: But I think that there is a level of fear and dislike of the idea of more condos being built that was being tapped into here among Republicans, is my is my thinking. So then that is one kind of reform that would help us build more condos and a better mix with the for rent new developments.
Speaker: But then the really big thing that keeps being talked about that failed very badly last time is the concept of construction defect reform. And I've had whole episodes on this, that right now it is very, very easy to sue a developer of a new condo as long as you do it within 10 years,
Speaker: for construction defects or supposed it to construction defects. And this has become a cottage industry among lawyers, among the tort lawyers, and it greatly increases the risk of building condos as your new apartment building to be condos as opposed to rental units.
Speaker: and therefore we get less and less of it. Well, construction defect reform is back, and it is thanks to Buffy Wicks. Co-authors include Becker, Harbedian, Erwin Schultz, and Ward, but it was introduced by Buffy Wicks.
Speaker: And this is after the last time it came in, it was dead in the water because not only the the realtors opposed it for, I guess, I feel like similar reasons of being hostile to condos,
Speaker: But in that case, the developers opposed it. The California Building Industry Association came out against the trial balloon for construction defect reform the last time it came up. Well, work has been done. And according to the California YIMBY fact sheet, this the new version is now Assembly Bill 1903.
Speaker: and has just been submitted. We just got the text a few weeks ago. And its official sp supporters include California YIMBY, the Council of Infill Builders, Bay Area Council, that's an industry group,
Speaker: and the California Building Industry Association. So the developers have come around. There's a few other sponsors, Habitat for Humanity, Housing Action California, and SPUR. And i have to say that compared to the trial balloon I saw before, what I see in the description of this law is a lot easier to understand. So like a big big a big example of you know what is wrong with the law now that needs to be changed.
Speaker: One is that right now, and I have seen the law, the existing law that says this, you can make a claim under the construction defect law for California to get you know to go to court and try to get damages or a settlement just by showing that something is not built to the standard.
Speaker: you don't actually need to prove damages. You just need to show that it wasn't built to a standard. So even if it's perfectly fine, perfectly livable, perfectly safe, you don't have to prove damages to get your claim going and start trying to get something out of the developer.
Speaker: There is also currently a law that says that a builder that does repairs in lieu of you know spending of paying the owner's money, the builder is not allowed to conclude a contract releasing them from further liability.
Speaker: So that means that you can get the builder to come in and do repairs, and then you can still sue them. There are also issues with the right to repair, where the claimants can say, you know, we have found problems, we want you to repair this, but then they don't have to give the builder a lot of access to actually figure out What is the defect? What happened? What needs to be done?
Speaker: So that can drag it out and make it easier to settle. So this law does things like restore the principle that a defect claim must involve damage beyond the component itself, requires completion of the pre-litigation repair process before a lawsuit can be filed, requires claimants to identify the location and observable evidence of defects that they allege, but also does more to try to push developers and owners to do a repair as a settlement instead of litigation.
Speaker: Specifically, it it establishes, it doesn't change how the current system works except for those process improvements I mentioned, but it allows a new process to exist where a developer gets a third-party enhanced quality control inspection during the original construction. And they, if they've had that third-party inspection,
Speaker: that higher inspection and ah and that third party certifies them that they were built to proper standards, then they can be called on to do repairs later and then they can get a release of further liability based on completion of the repairs.
Speaker: There is another thing which, in my opinion, is a little closer to actual just making this a little harder, which is requires HOA members to be informed and vote before an association files construction defect litigation.
Speaker: That is kind of friction. I mean, there's a lot of stuff HOAs do that doesn't require a member vote, but, you know, it is addressing the imbalance. And I am hoping to talk to one of the brains behind this bill in a future episode.
Speaker: So I'm sure we'll get into the details more. i will give one more update, and that's about SB 79 cleanup. So Los Angeles was very mad about SB 79.
Speaker: Mayor Karen Bass wrote a letter opposing it. I believe the whole city council, maybe not every member, but most voted to oppose it. And there was chatter about somehow getting it repealed.
Speaker: And of course, it was a big fight. That's not going to happen. But the current legislative leadership is maybe not quite as pro-housing as it was last year. And there may have been some risks of something or other cropping up and being, you know, maybe seeing seeming like it was a reasonable restriction to SB 79, like SB 79 went too far accidentally.
Speaker: But possibly relating to that, there is no longer an SB 79 cleanup bill. The state housing department, HCD, did put out a memo interpreting a lot of stuff about SB 79, about how it was going to work. For example, what kind of train stations count for what.
Speaker: And California YIMBY put out a post about this that said that based on this HCD memo, we don't think a cleanup bill is needed. I don't think that includes expanding it to ferries. Maybe we're still trying to expand it to ferries. I haven't checked on that.
Speaker: But I've been talking for an hour. I'm sure it'll be less after editing, but I think that is a good indicator of the many things that could be very impactful that are not just about zoning that are coming up this year that if you're in a position to, perhaps you can come out and support.
Speaker: i will keep following the progress of these laws and others and bring more to your attention and hopefully bring on a guest to talk about construction defect reform. So thank you for listening. I hope you enjoyed.
Speaker: And until next time, as always, keep on learning.
